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undue influence :warning: (Diduck, 'Commentary on Royal Bank of…
undue influence :warning:
a mortgage can be set aside or terms modified where there is evidence of undue influence
equity has always sought to protect the weaker of two parties from oppression and exploitation
in a mortgage, equity will seek to intervene where the mortgage terms are oppressive
in order for the defence to arise, 2 key issues must be considered:
i. is there undue influence on the facts?
ii. when is the lender put on inquiry, i.e. affected by the borrower's conduct
Bank of Credit and Commerce International SA v. Aboody [1990]
two different classes of undue influence
class 1 actual undue influence
- claimant must prove that undue influence was exerted by wrongdoer. no necessity to show transaction operated to the claimants manifest disadvantage. (this requirement was removed by
CICB Mortgages v. Pitt [1994]
) however, it would add weight to mortgagor's case if it were shown that the transaction was manifestly disadvantageous to claimant
class 2 presumed undue influence
- claimant can show that there was a relationship of trust and confidence between the parties of such a nature that it is fair to presume that the trust and confidence of the claimant were abused. once established, burden of proof shifts to alleged wrongdoer to rebut presumption of undue influence, and to prove that the transaction was entered into freely
ANALYSIS
:!:
Etridge
remains the leading case on undue influence law and has been followed subsequently
Mujih, 'Over ten years after Royal Bank of Scotland v. Etridge (no 2): is the law on undue influence in guarantee cases any clearer?" (2013)
although in stating the guidelines that banks should follow when taking a guarantee, the House of Lords distinguished between past and future transactions, that is, transactions that were concluded before October 11, 2001 and those that were concluded after that date, it is debatable how much impact the dates of the transactions had on the minds of the judges in the appeal cases after Etridge, almost all of which involved transactions concluded before October 2001.
It is clear that the steps that a bank should take once it is put on inquiry are important in determining whether it can enforce the guarantee or not. Despite some views that have been ventilated to the contrary, there seems to have been, on the whole, a consistent application of the principles enunciated by the House of Lords in Etridge.
Banks and solicitors did not have the benefit of the Etridge guidelines in pre-Etridge transactions. While they may have had the benefit of the O'Brien guidelines, these were reformulated in Etridge. The question is whether courts have always taken this into account in applying the Etridge guidelines in transactions that were concluded before Etridge.
Fehlberg, 'Money and Marriage: Sexually transmitted debt in England' (1997)
Barclays Bank v. O'Brien : although the House of Lords considered that in many families, the wife follows her husband's advice, the approach taken by judges usually involves little more than flagging the social problem before getting on w the task of identifying the legal issues and deciding the winner of the case
judges tend to take an objective, commercial view which down plays other factors which constrain the exercise of 'free choice' e.g. judges are reluctant to hold banks responsible for subtle emotional pressure brought to bear by husbands on their wives.
fundamental problem : lack of choice facing many sureties due to the existence of economic dependence and emotional commitment, in the end changing public attitudes rather than legal change may prove an effective and appropriate way of assisting sureties.
not always female who is victim of undue influence
Curtis v. Curtis [2011]
: Mrs. Denton persuaded Curtis to sign over his matrimonial home to her charitable trust that was a spiritual centre.
in 2008 Curtis left property due to problems w wife
he claimed that his consent to transfer had been obtained through undue influence
presumption was engaged bc the relationship was one of trust and confidence
whilst accepted that Curtis reasonable man, the judge found that the relationship between him and Mrs Denton and her coterie was such that the presumption was not displaced - consequently CA dismissed appeal
amount of post Etridge case law shows that the guidelines are not perfect
Hewitt v. First Plus Financial Group plc [2010]
: it was held that failure of husband to disclose to his wife that he was having an affair when he was requesting that she agree to grant a mortgage over the family home amounted to undue influence and was a breach of his duty of fairness and candour to her
Thompson v Foy [2009]
"A claim to set aside a deed of family arrangement and deed of gift transferring a property from a mother to her daughter based on undue influence failed where the kind of trust in play between the parties was no more than a trust that a daughter would keep her promise to her mother to pay her a sum to buy out her share, and there had been no actual undue influence and the mother had accepted that she was taking a risk."
Diduck, 'Commentary on Royal Bank of Scotland v. Etridge', (2010)
The House was not concerned w the family law or social implications of a family losing its home as a result of husbands taking advantage of their relationships with their wives - primarily focused on protecting the interests of business
rather than taking on ideological and material realities of the marital relationships before them, framed its decision to apply to all 'non-commercial relationships'
many wives acting as guarantors value their relationship over and above any concerns they may have about the transaction, or feel they have no choice but to sign bc of economic dependence, trust in husband, fear of violence an overwhelming sense of obligation or feeling a pressure to protect domestic harmony