Undue Influence O Undue influence o Equitable doctrine. O Involves "undue" pressure on one contracting party by the other. O Current approach is based on · Evidence of "actual" pressure · "Presumptions" from relationships O Definition Improper pressure, falling short of duress (as duress requires a specific threat), which makes a person enter a contract that they would not otherwise have entered. O Andy owns his own business. Example O The business gets into financial difficulty. Andy needs to raise money. He persuades his wife, Belle, to let him use their matrimonial home (joint ownership) as security for a loan. O The business fails. The bank (lender) seeks possession of the home. Did Andy "unduly influence" Belle? The Leading Case Royal Bank of Scotland v Etridge (No 2) [2001] 4 All ER 449 Categories of Undue Influence • Actual Undue Influence • Presumed Influence (not necessarily undue) from • One of specified relationships • Nature of actual relationship In category 2, if the transaction in question is one that needs explanation, undue influence will be presumed. C Note O In Barclays Bank Plc v O'Brien [1994] 1 AC 180, Lord Browne-Wilkinson adopted the analysis in BCCI v Aboody [1992] 4 All ER 955 which provided the 2 categories of influence. O This classification had category 2 as presumed undue influence. This was modified by the court in Royal Bank of Scotland v Etridge to presumed influence (not necessarily undue). o Actual Undue Influence-category 1 O Here, the claimant must prove, on a balance of probabilities, that in relation to a particular transaction, undue influence occurred. O There does not have to be any previous history of such influence. . BCCI v Aboody [1992] 4 All ER 955
O CIBC Mortgages Plc v Pitt (CA) [1993] 4 All ER 433 Presumed Influence- category 2 a Relationships of presumed influence ie where one party is legally presumed to repose trust and confidence in the other party . Parent/minor child, doctor/patient, solicitor/client, religious leader/disciple · Allcard v Skinner(1887) 36 Ch D 145 O Presumed Influence- category 2 b O Influence is presumed from the actual relationship ie the relationship has developed in a way that has created "trust and confidence" O Examples- Bank/customer, Husband/wife, Employer/employee Lloyds Bank v Bundy [1974] 3 All ER 757 Goldsworth v Brickell [1987] 1 All ER 853 O Credit Lyonnais v Burch [1997] 1 All ER 144 "Need for explanation" Solicitor buys a house from a client at an undervalue. O Husband persuades Wife to use house as guarantee to obtain a loan to be used for his business. O If explanation is not provided - undue influence will be presumed. O Rebutting the presumption You need to provide evidence that the "influenced person" received independent legal advice before acting. O Undue Influence and 3rd Parties C Husband persuades Wife to use house for loan; bank grants loan; business fails; Wife resists repossession on basis of undue influence (or misrepresentation) by Husband O Barclays Bank v O'Brien [1993]