Actual undue influence

Question 1

Williams v Bayley [1866]

father agreed to pay bank where his son had forged signature

Answer 1

In the past, the scope of the doctrine of undue influence extended to overt threats, but in the modern law, the such claims would now fall under the doctrine of duress

Question 2

Mutual Finance Ltd v John Wetton & Sons Ltd [1937]

family members gave guarantee where relative was at risk of prosecution for forged document

Answer 2

• guarantee is voidable because it was obtained by duress or by undue influence
• actual undue influence -> threat

Question 3

Bank of Credit and Commerce International v Aboody [1990]

guarantor wife

Answer 3

• The husband had exerted actual undue influence on the wife
• However, the transaction was not to the manifest disadvantage of the wife since she owned shares in the company
• In considering whether a transaction was to the manifest disadvantage the court was to have regard to any benefits received in addition to the risks undertaken. Therefore the bank were granted possession.

no longer necessary to establish manifest disadvantage

Question 4

CIBC Mortgages v Pitt [1994]

actual undue influence does not require disadvantage

Answer 4

A third party creditor is not put on inquiry and thus not fixed with constructive notice where the transaction is to the joint benefit of the party that was induced by undue influence and the party exercising such undue influence

Question 5

Bank of Scotland v Bennett [1997]

insulting language, moral blackmail of wife guarantor

Answer 5

• The charge was procured by actual undue influence although the trial judge erred in finding constructive notice
• “The correct approach, in cases of this nature, is to look at the transaction through the eyes of the lender and to ask whether, in the light of all the facts which the lender does know, it is put on inquiry that there is a real risk that the wife’s apparent consent to the transaction may have been obtained by some improper conduct