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Law Notes Contract Law Notes

Undue Influence Pq Notes Notes

Updated Undue Influence Pq Notes Notes

Contract Law Notes

Contract Law

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Undue influence

Approach

In the past, actual and presumed undue influence used to be treated separately.

However, as was recently clarified, they are one and the same. The difference is simply evidential – if there is no actual evidence of undue influence, it can be presumed on the facts.

  • Royal Bank of Scotland v Etridge (No 2) at 93: “English law has identified certain relationships where the conclusion can prima facie be drawn so easily as to establish a presumption of undue influence. But this is simply a matter of evidence and proof.

Actual undue influence

In this rare category of cases, there is actual evidence of influence (usually in the form of bullying or pressurising), invariably in the context of a relationship, but there is no need to show that the transaction was suspicious.

The tactical advantage of showing actual undue influence is that the victim is entitled to rescission ‘as of right’ because there is no further need to show that the gift or transaction ‘calls for explanation’.

CIBC Mortgages v Pitt (1993): where there is evidence of actual undue influence, there is no need to show that the transaction was suspicious.

Drew v Daniel: “[I]n the case of actual undue influence something has to be done to twist the mind of a [contracting party] whereas in cases of presumed undue influence [where a relationship has been abused] is more a case of what has not been done, namely ensuring that independent advice is available to the donor.” Facts: D bullied his elderly aunt, C, into retiring as a trustee of the family trust and letting him take over, by taking advantage of her fragile and naïve personality. Later, C sued to get the contract rescinded. Verdict: Successful. There was actual evidence of D’s impropriety.

Presumed undue influence

In the absence of actual undue influence, the complainant must overcome three hurdles.

  1. Existence of a relationship of trust and confidence

  2. That the transaction calls for explanation

  3. However, this presumption can be rebutted.

  1. Relationship of trust and confidence

    1. Certain stereotypical relationships automatically give rise to presumption of influence

Royal Bank of Scotland v Etridge (No 2): “Examples of relationships within this special class are parent and child, guardian and ward, trustee and beneficiary, solicitor and client, and medical adviser and patient. In these cases the law presumes, irrebuttably, that one party had influence over the other. The complainant need not prove he actually reposed trust and confidence in the other party. It is sufficient for him to prove the existence of the type of relationship.”

Solicitor and client: Wright v Carter. In Markham v Karsten, the presumption of influence arose even between a solicitor and client who had entered into a relationship. There was no reason to confine the presumption of influence to their legal relationship, it extended to their domestic relationship as well.

Doctor and patient: Mitchell v Homfray

Spiritual adviser and novice? Allcard v Skinner: mother superior and novice nun, who bound herself to obey the rules of the order. Presumption of influence arose. Roche v Sherrington: P was a member of the ‘Opus Dei’, a Roman Catholic Institution. He transferred money to fellow members, C and D. Presumption between C and D, and P, arose.

NB. Marital relationships and ‘banker and customer’ relationships not in class of automatic presumptions

  1. Even if not stereotypical relationship, can show that their particular relationship was one of trust and confidence, on the facts

Barclays Bank plc v O’Brien: “Even if there is no relationship falling within Class 2(A), if the complainant proves the de facto existence of a relationship under which the complainant generally reposed trust and confidence in the wrongdoer, the existence of such relationship raises the presumption of undue influence.”

Apply the cases below analogously:

  • Re Craig [1970] 2 All ER 390 (elderly widower and housekeeper)

Facts: 84-year-old widower, who was gentle and kind and sheltered, employed M, a housekeeper, as a companion. She made gifts to M representing 75% of her husband’s estate. The husband’s family challenged these gifts.

Verdict: undue influence presumed, given the evidence.

  • O’Sullivan v Management Agency & Music [1985] QB 428 (young pop singer/songwriter and manager)

Facts: O, a young and unknown composer and performer of popular music wholly inexperienced in business matters, became closely acquainted and entered into an exclusive management agreement with a company. He did not have any legal advice before doing so.

Verdict: undue influence presumed.

  • Leeder v Stevens [2005] EWCA Civ 50 (divorced lady and her new gentleman-friend)

Facts: In the context of a long-term relationship with the respondent (S), L had agreed to put the property into their joint names in return for S discharging the mortgage outstanding on the property. S paid off the remaining mortgage to the value of GBP 5,000 (a small proportion of the value of the property) and had a deed of consent drawn up by his legal advisers. The deed of consent was sent to L with a letter advising her to obtain independent legal advice before signing the deed. The deed was in fact prejudicial to L's interests, in that inter alia it empowered S to force a sale, and she signed it without obtaining advice. S then sought to enforce the deed by selling the property and taking half of the profits thus depriving L of her property rights and home.

Verdict: L was in a position where she was putting her trust and confidence in S, Royal Bank of Scotland Plc v Etridge (No.2) [2001] UKHL 44, [2002] 2 A.C. 773, [2001] 10 WLUK 346 applied. The transaction was manifestly to the disadvantage of L and to the advantage of S. Theirs was a long-term relationship and L had allowed S to provide legal advice. There was no doubt that this was the sort of case where on the facts a situation of possible undue influence arose. The test was not whether L knew...

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