Rescission Flashcards
(43 cards)
When is it ordered, what is its effect and what is its aim?
When is it ordered? When there’s a defect vitiating a person’s decision to enter a transaction.
Effect? The transaction is void ab initio: all future obligations cancelled and all benefits restored.
Aim? To restore the parties to the position they were in before they entered the transaction.
Undue Influence
AIB plc v Rostaff Property [2017]: - Shied away - Henchy J
Barrett J noted courts have shied away from defining UI, but Henchy J
described the concept as embracing ‘unfair, undue and unreasonable mental control over another’.
Undue Influence - Actual UI
O’Flanagan v Ray-Ger Ltd [1983]
recognised the categories of UI as set out in Allcard v Skinner [1887]:
(1) Actual Undue Influence (Class 1): where it can be expressly proved that undue influence was exercised over the donor by the donee.
(2) Presumed Undue Influence (Class 2): where relations bw donor and donee have at or shortly before
the execution of a gift been such as to raise a presumption that the donee had influence over the donor
Undue Influence - Actual UI
O’Flanagan v Ray-Ger Ltd [1983]
- A + B only shareholders in co. A terminally ill. B aware. B more dominant personality. Brought A to pub and proposed agreement that when one dies, their shares will pass to the other.
- Not to A’s best interests as always unlikely he’d survive B. Set aside as B exercised UI over him.
Undue Influence - Presumed UI
Barclays Bank v O’Brien [1993]
identified two sub-categories of presumed undue influence:
(a) Class 2A: Presumption arises automatically based on their confidential relationship and the transaction was to their manifest disadvantage.
(b) Class 2B: Presumption arises when a relationship is proven to be one of trust and confidence and the
transaction was to their manifest disadvantage.
Undue Influence - Presumed UI - Class 2A: Presumed Relationship + Proof of Manifest Disadvantage
Give examples of presumed relationships and cases?
(i) The transfer of property by a child to his parent
McMackin v Hibernian Bank [1840]
M signed guarantee in favour of mum who had debts. M lived with mum. Just turned 18. Despite transaction being explained to her, held she’d got no independent advice thus rescinded.
(ii) The transfer of property by a client to his solicitor: Lawless v Mansfield [1841]
(iii) The transfer of property by a pupil to his religious advise: Allcard v Skinner [1887]: nun + mother sup
(iv) The transfer of property by a patient to his doctor
(v) The transfer of property by a beneficiary to his trustee
Irish Bank Resolution Corp v Quinn [2011] Confirmed husband and wife do NOT fall under class 2A.
Undue Influence - Presumed UI - Class 2A: Proof of Manifest Disadvantage
Allcard v Skinner [1887]: - readily explicable
If undue influence is to be presumed, the transaction must not be readily explicable on a basis other than undue influence. more disadvantageous the transaction, more likely it’s not so explicable.
Undue Influence - Presumed UI - Class 2A: Proof of Manifest Disadvantage
Cheese v Thomas [1994]
Old man paid neph life savings for right to live in house he’d just sold him.
Undue Influence - Presumed UI - Class 2B: Must Prove Relationship of Trust and Confidence + Manifest Disadvantage
General rule?
Class 2B presumption of UI arises in respect of a transfer of property but only if:
(i) The transferor had trust and confidence in the transferee; and
(ii) The transaction was manifestly to the disadvantage of the transferor.
Undue Influence - Presumed UI - Class 2B: Must Prove Relationship of Trust and Confidence + Manifest Disadvantage
Gregg v Kidd [1956] - stroke
- Presumption arose in respect of transfer of property by a man to his sister and her son.
- G had serious stroke, entirely dependent on sister. Feared his future if his sister stopped caring for him
Undue Influence - Presumed UI - Class 2B: Must Prove Relationship of Trust and Confidence + Manifest Disadvantage
Carroll v Carroll [1998]:
Presumption arose in respect of a transfer of property by a man to his son.
Undue Influence - Presumed UI - Class 2B: Must Prove Relationship of Trust and Confidence + Manifest Disadvantage
Prendergast v Joyce [2009] - Widow - Alzheimers
- Presumption arose in respect of transfer of property by woman (now deceased) to nephew-in-law (D)
- Less than a week after her husband’s death, D brought her to two banks where , at D’s request, accounts previously held in joint names of her + husband were transferred into joint name of her + D
- 3 weeks later, she was admitted into a respite home for people with Alzheimers. Held presumption not
rebutted: as hadn’t got independent legal advice, didn’t understand the nature +effect of the transaction
Undue Influence - Spouses
Barclay’s Bank v O’Brien [1994]
- H + W execute second mortgage over family home as security for H’s company (W no interest in it)
- Court suggested that it is easier to raise the 2B presumption if there’s an emotional or sexual relationship between transferor and transferee i.e. easier to prove trust and confidence reposed in H/W
Undue Influence - Spouses
Bank of Nova Scotia v Hogan [1996]: - women’s capabilities.
Criticised in Ireland in the SC here (women’s capabilities).
Undue Influence - Spouses
Royal Bank of Scotland v Etridge [2001]:
HOL thought a transaction where W agrees to guarantees H’s
business debts is not one calling for explanation as W’s interests often bound up inextricably w H’s fortunes
Undue Influence - Rebutting the Presumption of Undue Influence
Carroll v Carroll [1998] - 2 factors
- Son convinced dad to transfer pub into his name. Dad mentally alert but largely dependent on son. Only advice was solicitor that’d been acting for the son. Accepted presumed UI. Onus on D to rebut.
- Held the manner in which the presumption may be rebutted relates to two main issues:
(a) Whether independent legal advice has been received (noted need not be legal)
(b) Whether it can be shown the decision to make gift/transfer was a spontaneous and independent act or that donor acted of his own free will.
Undue Influence - Rebutting the Presumption of Undue Influence
MC v FC [2014]:
MacMenamin J said the onus can be discharged by evidence showing the gift was the independent and well understood act of a person in position to exercise free judgment.
Undue Influence - Third Parties/Banks
Barclays Bank v O’Brien [1994] UK - Idea of enquiry
- If B knows of certain facts that put him on enquiry to the possible existence of UI between H + W and it fails to make such enquiry or take reasonable steps, it has constructive notice of Ws right to rescind
- B’s put on enquiry of W’s right to rescind if transaction’s on its face not to financial advantage of W.
- Reasonable steps incl. insisting W hold a private meeting w B’s solicitor and explain the transaction.
Undue Influence - Third Parties/Banks
Royal Bank of Scotland v Etridge [2001] - Principles
] set out a number of principles for banks + solicitors:
(a) Bank is put on enquiry whenever a wife offers to stand as a surety for her husband’s debts
(b) No need to show bank was aware of the relationship giving rise to presumption of influence
(c) No absolute obligation on bank to have private meeting w her provided they take other steps to satisfy themselves that she’s been appropriately advised e.g. by confirmation from a solicitor
(d) Solicitor should, as a minimum: (1) Explain nature of doc + consequences i.e. can lose home, bound once you sign (2) point out risks incl. amt of liability (3) State clearly she’s a choice (4) Check if she wishes to proceed + if same solicitor as husband’s, ask if she wants a different one
Undue Influence - Third Parties/Banks - Irish Approach
.3(1) Family Home Protection Act 1976
Where a spouse, w/o consent of other, purports to convey any interest in the fam home to any person except the other spouse, the purported conveyance shall be void.
Undue Influence - Third Parties/Banks - Irish Approach
Bank of Ireland v Smyth [1993] - Misunderstood
- W signed consent form during meeting w bank manager (H present) lasting 15 mins.
- Bank manager failed to explain to W she could lose home if repayments not made + didn’t suggest she get independent legal advice. In fact, W thought it only affected the surrounding lands + not her home.
- SC upheld HC’s finding that her consent was not valid for s.3 i.e. it wasn’t fully informed consent.
(a) The validity of the consent is only dependent on the state of knowledge of the spouse not B
(b) B had constructive notice of her lack of knowledge as any reasonable inquiry would’ve discovered she misunderstood. - Rejected that there is a duty to explain the nature to W, just said it was in the B’s interest to do so.
Undue Influence - Third Parties/Banks - Irish Approach
Bank of Nova Scotia v Hogan [1996] - Need UI - Oddly LA was okay
- H borrowed money from B & as security took an equitable mortgage over a property owned by W
- Before transaction, solicitor explained to W that b would be able to sell her property if H defaulted.
- Solicitor happened to be one that acted for both H and W and the bank.
- SC held two things needed for s.3 consent: (a) B must in its own interest ensure the necessary statutory consent is forthcoming + (b) the consent is true consent (free exercise of the independent will)
- Held fatal flaw her was there was no UI exercised: notice irrelevant as if no UI exerted.
- Held the legal advice here was good and independent (odd)
Undue Influence - Third Parties/Banks - Irish Approach
Ulster Bank v Fitzgerald [2001] - UI Accepted - No notice
- W guaranteed debts of business her + fam dependent on. Told she could get advice, but signed on spot
- Accepted evidence of UI: W feared if she didn’t do it, existing marital probs would be aggravated.
- BUT held B not on notice as W had financial stake in H’s business (even though not a shareholder or director): no obligation on B to urge her to get advice.
- B only on inquiry if aware of info re parties’ relationship that’d increase likelihood of UI
Undue Influence - Third Parties/Banks - Irish Approach
Ulster Bank v Roche [2012] overruled Fitzgerald - Hairdresser Director - Psych UI - Non-commercail element
- 2nd D guaranteed debts of 1st D’s company. 2D director but not shareholder in the co. 2D a hairdresser in relationship w 1D. Psychologist’s evidence given that 2D under 1D’s UI: abusive relationship.
- Test: (1) Was D acting under UI of another? (2) Did B have actual/constructive notice of the UI?
- Held B put on inquiry where it’s aware of facts that suggest there may be a non-commercial element to a guarantee. Once on inquiry, B is obliged to take at least some measures to ensure the surety is openly and freely agreeing to provide the security. Not done here so had constructive notice of UI.
- Unfortunately, Clarke J didn’t say what the measures were, but in a 2009 case Moorview Developments he had said, obiter, he was prepared to accept Etridge applied here. But did not fully adopt it in this case.
