Undue Influence Flashcards
(24 cards)
Undue influence
Undue influence is an equitable doctrine while exists where a contract has been entered into where one party has been exploited by the other to gain an unfair advantage
Actual undue influence
Where a claimant can prove they entered the transaction as a result of undue influence
Allcard v Skinner - class 1 "Some unfair and improper conduct,some coercion from outside...and generally though not always some personal advantage for the guilty party"
“Gift must be so large it cannot reasonable be accounted for”
Presumed
May be presumed where there is a pre existing relationship of confidence between the two parties - fiduciary relationship
Eg/ parent and child -class 2a ~>lloyds bank v bundy- banked with lloyds many years and placed trust in their advice
2b- no special relationship but trust was placed in the wrong doer
Pre o’brien
Special equity theory
Turnbull and co v Duvall 1902
Wives shouldn’t be allowed to make these decisions
Yerkey v Jones 1939 pre o’brien
Creditors should prove the wife understands the transactions she’s entering into
Pre o’brien
Agency theory
Leaving everything to the husband might be tainted by any undue influence by husband over his wife
~>Barclays bank v Kennedy
Chen wishart
Pre o’brien fortunes of Husband and wife are bound up together
BCCI v Aboody
Due to husbands hysterics at a joint meeting law lords suggested husband and wife should be interviewed separately
Coldunell Ltd v gallon and midland bank Plc v shepherd
Notice is pivotal to determination of creditors liability
Tainted by impropriety if creditor should have realised the possibility of husbands undue influence
This approach was adopted by o’brien
Barclays Bank v O’brien 1994
Mr O’brien wanted to put jointly owned home as security for business debts
Told her it would guarantee an overdraft of £60,000 when real amount was £135,000
11 cases on simile facts in previous 8 years
Lords decided bank had constructive notice of undue influence
Had to take steps to show it did not have notice of undue influence
To avoid constructive notice a bank must take reasonable steps to ensure agreement was freely given, advise wife separately, and explain implications including her potential liability and advise her to get independent advice I
Two types of transactions in o’brien
1) creditor put on notice if transaction was financially disadvantageous
2) joint response eg loan to buy a joint family car then not out on notice unless special circumstancesy known to creditors
CIBC mortgages Plc v Pitt
Manifestly disadvantageous
Creditors believed his an and wife were making a joint advance for a holiday home and both seemed to benefit equally
O’brien and aftermath
Never intended to offer an definite exposition of the law applicable in every conceivable situation
Represented a framework of principles which lower courts would need to adopt and modify
Unpredictability of subsequent case law meant greater clarity was required
O’brien subsequent case law
Goode Durrant administration v biddupth
Creditor put on notice in a single joint advanced transaction because of significant disparity between wife’s potential gain and her liability
Creditor did nothing to advise the wife
Thai broad approach isn’t beneficial to the wronged wife
O’brien subsequent case law
Bank of baroda v rayerel
Acceptable for a wife to be advised by husbands solicited
O’brien subsequent case law
Midland bank Plc v Massey
Once advice given by solicitor the bank was relieved of any further responsibility
Best policy was for banks to else everything to the solicited as it exonerated them of any culpability
Undue influence Gregory Mitchell- ‘likely to be an increase in the amount of claims against solicitors in respect of advice
Royal bank of Scotland v etridge
Laid down guidelines for avoiding constructive notice and disregarded disadvantageous transaction
Combined appeal of 8 different cases which raised similar issues
In 7 of the cases wife had allowed matrimonial home as surety for husbands debts
Eighth appeal claim against solicited who acted for her
Five appeals allowed 3 dismissed
To avoid constructive notice a bank had to take reasonable steps to satisfy itself the wife had been informed of the practical implications of proposed transaction
Bank can rely on solicitor but if creditor withheld info or knew no solicitor could advise wife to enter transaction then it’s insufficient for a creditor to avoid constructive notice
Extended principle to encorportate all non commercial debtor/surety relationships
Lord Nichols in etridge on manifestly disadvantageous
Inappropriate label for giving rise to ambiguity and courts should abandon the label and adhere to the rest outlined in allcard
Etridge steps a solicitor should take
Explain the nature of the documents and explain practical consequences
Point out the seriousness of the risks
State clearly the wife has a choice
Check whether the wife wishes to proceed
Should not give any confirmation to the bank without the wife’s authority
Obtain any info from the bank he needs
First national bank Plc v achampong
Reaffirmed etridge
Creditor must confirm independent advisor covered all essential points
Pesticcio v huet and ors
Court of appeal concluded the solicitor has not in fact advised his client appropriately
Involvement of a solicitor did not guarantee a contract would be free from undue influence on the face that the advice given by solicitor was inadequate
Fair balance?
Courts need to ensure wealth in matrimonial homes does not become economically sterile
Law cannot operate in a social vacuum~> wife may not be subservient to husband in managing family funds
Important that a clear legal safety net exists
HoL decisions show transaction may be unenforceable if proper procedure isn’t followed but a wife acting as surety does not mean there’s been undue influence more evidence is needed
Wife will struggle unless clear evidence of disparity between husbands gain and her potential loss is disproportionately large
Approach swings unfairly towards protection of creditors
Mckendrick
Etridge makes it harder for wives and places a larger burden on solicitors f
Undue influence - where the disadvantage? - Georgina Andrews
Decision I etridge clarified the precise nature and extent of the obligations of banks
Maid eat disadvantage is controversial- presumes so claimant must prove this or it be ‘sufficiently clear and obvious’
~> origins of this in allcard v skinner- doctrine only applies to transactions ‘not to be reasonable accounted for on the grounds of…ordinary motives
