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Topic 5- Rescission Undue Influence (Rebutting the Presumption of Undue…
Topic 5- Rescission
Undue Influence
Undue Influence
If X transfers property to Y as result of someone's undue influence, the transfer may be rescinded
Allcard v Skinner:
The court may rescind a transaction on ground of undue influence
not because it is right and expendient to save persons from teh consequences of their own folly
but rather it is right and expedient to save them from being victimised by other people
To protect people from being forced, tricked or misled in any way bu others into paring with heir property is one if the most legitimate objects of all laws
Two Classes
Actual undue influence
Presumed undue influence
Allcard v Skinner
Facts: P used ot be a nun
Made a will in favour of the Mother Superior and made inter vivos transfers of property to her as well
Issue: Left covenant and recovked will
Made no claim re inter vivos transfers until 6 years later
Instituted proceedings under undue influence
Held: Couldnt due to delay
Cotton LJ: Transaction may be rescinded if it was the result of influence expressly used by the donee for he purpose= actual undue influence
Also made reference to presumed undue influence- a transaction may be rescinded if the relations between the donor and donee have at or shortly before the execution of the gift been such as to raise presumption the donnee had influence over donor
1.Actual Undue Infuence
Actual undue influence is undue influence that was
in fact
i.e. actually existed before or at time of impugned transaction
Barclays Bank plc v O'Brien
: Lord Browne-Wilkinson: It is necessary for the claimant to prove affirmatively that the wrongdoer exerted undue influence on the complainant to enter into the particular transaction which is impugned
Carroll v Carooll:
HC stated actual undue influence arises where no relationship gives rise to any presumption of undue influence, but the parties so alleging undue influence adduce evidence which satisfies the court on the balance of probabilities the transaction was not the result of the free exercise of the will of the donor
Bank of Scotland v Bennett:
Facts: D guaranteed her husband's business debts by a mortgage on the family home which was registered in her sole name
H threatned that if she would not sign the neceessary documentation, the family would be broken up
Also confronted her outside the family home on a number of occassions, again stating if she did not sign she would lose the home and children would have nowhere to live
Held; Actual undue influence exercised
Presumed undue influence
If a presumption of undue influence arises there is an onus of D to prove when the P entered into impugned transaction, he was exercising his own free, independent will
Class A Presumption of Undue Influence (Specific Relationship)
Arises in respect of the following transactions
+
the transaction is manifestly to the disadvantage of the transferor or confers a substantial benefit on the transferee
Transfer of property by
Child to his parent
A ward to his guardian
3 .A pupul to his religious advisor
Patient to his doctor
Beneficiary to his trustee
Well established that the transfer of property bu one spouse to another does not give rise to class-2A presumption
Irish Bank Resolution Corporation v Quinn
Kelly J 'I am satisfied that there is no presumption of undue influence at law arising simply because of the relationship of husband and wife
That has been clear since at least 1750'
Child to parent:
McMakin v Hibernian Bank
When a child is living with or under the control of the parent or guardian such influence is presumed
The burden of proof is thrown upon the person who has obtained the gift or security through the parent's influence to displace that presumption
Manifest Disadvantage/ Substantial Benefit
It is not just the relationshio between the parties which raises class 2A presumption
Relationship + Mainfest disadvantage/Substantial benefit
Roya Bank of Scotland v Etridge
:
Something more is needed before the law reverses the burden of proof, something which calls for an explanation
When that something more is present, the greater the disadvantage to the vulnerable person, the more cogent must be the explanation before the presumption will be regarded as rebutted
Note- no need to prove manifest disadvantage/substantial benefit re actual undue influence
Requirement stems from
Allcard v Skinner
:
If undue inflience is to be presumed, the impugned transaction must not be readily explicable on a basis other than undue influence
The more disadvantageous to the donor the transaction was, the more likely it is that the impugned transaction is not so explicable
Crossfield v Jackson
: Test for whether a transaction set out by Allcard v Skinner and Approved by H of Ls in Etridge:
Whether the gift is so large as not to be accounted for on the ground of friendship, charity or other ordinary motives on which ordinary men act
Class B Presumption of Undue Influence (Any relationship)
Presumption of undue influence arises in respect of transfer of property if
The transferor reposed trust and confidence in the transferee and
The transaction was manifestly to the disadvantage of the transferor
Any two people
- provided the above two conditions satisfied
Gregg v Kidd
: Class 2B presumption arose re a transfer of property by a man to his sister and her son
relationship of trust and confidence existed
Gregg suffered a serious stroke and entirely dependent on his siter
Evidence he was fearful for his future should sister cease caring for him
Sister= forceful and determined character
Court Noted:
Courts ahve never confined the application of the principle to any stated forms of relationship.
To do so would fetter the wide jurisdiction to relieve against all manner of constructive fraud which courts administering equitable principles have always exercised
Influence may arise as through
: disparity of age
: mental or physical incapacity of the donor
: Mere dependence upon the kindness and assistance of another
Where close fam relationship creates a situation where ifnluence is readily acquired, mere blood relationship is not sufficient of itself to call the pricniple into play
Must be show the actual relations between parties gave rise to presumption of influnence
Prendergast v Joyce
: Class 2B presumption arose in respect of a transfer of property by a woman, now deceased, to her nephew in law
Facts: Less than one week after deceased's husband's death, D brought her to two banks
Accounts that previously were in joint names of deceased and her husband, were at D's request, transferred into joint names of deceased and D
3 weeks later, the woman began attending a respite home for people suffering from Alzheimer's disease
Held: Class 2B presumption not rebutted
Decease did not receive adequate independent advise
Did not understand nature and effect of transaction into which she was entering
Spouses
Well established that the transfer of propery by one spouse to another does not give rise to class 2A presumption
However may give rise to class 2B presumption
Worthington:
Class 2B presumption = completely open ended
However in practice its reach is rather preditable
Often reaches H and W
A wife who wants to unwind an arrangement with her H will offer evidence to prove that her practice is to simply accept her H's decisions and subject herself to his domination
once this relationship of influence is accepted, the court will presume that any manifestly disadvantageous transaction bewteen the two was brought about by H's undue influence
Barclays Bank v O'Brien
Facts: H and W agreed to execute second mortgage over their matrimonial home as security for an overdraft extended by the bank to a company in which H had an interest
H had misrepresented the effect of transaction to her, stating it would be limited to £60,000 and would only last three weeks
Issue; Bank brought an order for possession when co fell into arrears
Held: Lord Browne-Wilkinson: Equity's special tenderness of treatment to wives is properly attributable to two factors
Many cases may well fall into Class2(b) category of undue influence because wife demonstrates she placed trust and confidence in her H re financial affairs and therefore raises a presumption of undue influence
The sexual and emotional ties between the parties provide a ready weapon for undue influence
a W's true wishes can easily be overborne because of her fear of destroying or damaging the wider relationship between her and H if she opposes his wishes
Same principles would apply to cases where there was an emotional or sexual relationship between unmarried partners
Held; Satisfied W transposed trust and confidence in H and that impugned transaction was manifestly disadvantageous to her
she did not own an interest in the co, the debts of which she secured
Class 2b presumption arose
Suggests easier to to raise class 2b presumption re a transfer of property if there is an emotional or sexual relationship- i.e.. it is easier to prove the repose of trust and confidence by one party in the other
Criticised by Murphy J for SC:
Bank of Nova Scotia v Hogan:
I do no find the conclusions of the H of L in this regard satisfying as a matter of legal logic or fully acceptable as an analysis of the rights or capabilities of women generally and married women in particular
Rebutting the Presumption of Undue Influence
Carroll v Carroll
:
Facts: Ps were daughters of deceased publican
D= widow of his son
Ps lived in Dublin, but had a v close relationship with their parens, returning home every weekend to help out in pub
Their bro also helped out in pub- he preferred to to work on certain farms given to him by his uncles
son became anxious about a VAT libility aggecting pub- encouraged his sisters to persuade their father to transfer business into his name so issue could be addressed
By this stage, mother had died, father devastated by loss but remained mentally alert
In his 70s, due to ill health largely dependent on his son
Father transferred pub to son, having been advised by solicitor who was also acting for son at time
: solicitor spoke to him for about 35 mins over 2 meetings, proposed transfer never read over to him, although certain elements were discussed
No right to maintenance was reserved out of the transfer, merely a rigth of residence
After father's death, the son married the D and was killed in RTA few years later
Issue; Became clear to Ps they had no interest in the pub
Parties fell out and P instituted proceedings claiming rescission of the transfer from father to son on the ground of undue influence
Held: Accepted this was a case of undue influence
: SC- Denham J accepted therefore feel to D (son's widow) to offer evidence to rebut the presumption
Quoted with approval the following passage from BIehler:
The manner in which this presumption may be rebutted relates to two main issues
1. the question of whether independent legal advise has been received
2. Whether it can be shown that the decision to make the gift or transfer was 'a spontaneous independent act' or that the donor 'acted of his own free will'
Held: This had not been done, having regard to unsatisfactory nature of the advice provided by solicitor
Provincial Bank of Ireland v McKeever:
Black J
In circumstances
where independent legal advise is given and it is rejected
then he fact of it being given may suffice to rebut the presumption OR
it may be asked whether the advise was rejected
because
of the undue influence which has been exerted
Credit Lyonnais Bank v Burch
:
Legal advice is neither always necessary nor sufficient and the result in the case does not depend mechanically on the presence or absence of legal advise
Advice need not be legal
HC Shanley J- Carroll v Carrol
Presumption may be rebutted by evidence which establishes the transaction= consequence of the exercise of the donor of his free will and not the result of undue influence
Such evidence may be evidence the donor had indpendent legal advise- or competent and honest lay advice