Undue Influence Notes

Undue Influence: Introduction

  • Equity allows contracts procured through undue influence to be set aside.
  • Courts intervene to prevent enforcement where free will is overcome.
  • The doctrine protects against being forced, tricked, or misled.

Nature of the Doctrine

  • Lowry LCJ in R (Proctor) v Hutton (1978) stated undue influence requires demonstrating an unfair advantage gained through unconscientious use of power.
  • Claimant must demonstrate actual or presumed undue influence.
  • Defendant can rebut by proving claimant received adequate and impartial legal advice.

Actual vs. Presumed Undue Influence

  • Actual Undue Influence (Class One): Requires proof of positive exercise of undue influence.
  • Presumed Undue Influence (Class Two): Arises from a relationship of trust and confidence.
  • Costello J in O’Flanagan v Ray-Ger Ltd recognized this division.

Actual Undue Influence

  • Rare; requires proof of direct pressure.
  • Example: Bank of Scotland v Bennett (1999) - wife guaranteed husband's debts under threat.

Presumed Undue Influence

  • Subdivision in England (Barclay’s Bank v O’Brien (1994)) into Class 2A (automatic presumption) and Class 2B (proof of trust needed).
  • Etridge (2002) reassessed this, questioning Class 2B.
  • In this jurisdiction and England, Class 2B is still recognized, especially in husband-wife cases.
  • Claimant must show relationship of trust/confidence and substantial benefit obtained.
  • Onus shifts to prove transaction resulted from free will (Gregg v Kidd [1956] IR 183).

Relationships Giving Rise to Presumed Undue Influence (Class 2A)

  • Law protects relationships where one party is vulnerable/dependent (Bank of Scotland v Etridge (No 2) (2002)).
  • Budd J in Gregg v Kidd (1956) urged courts not to limit categories.
  • Examples: parent/child, guardian/ward, trustee/beneficiary, solicitor/client, medical advisor/patient (Bank of Scotland v Etridge (No 2) (2002)).
  • Carroll v Carroll (2000): parent and child relationship creates presumption.
  • Allcard v Skinner (1887): spiritual advisor/individual relationship.

Proving a Relationship of Trust and Confidence

  • Often arises in husband-wife cases; no automatic presumption.
  • Onus on claimant to prove trust/confidence (Ulster Bank Ltd v Fitzgerald (2001)).
  • Inche Noriah v Shaik Allie Bin Omar (1929): aunt/nephew where aunt was dependent.
  • Gregg v Kidd (1956): siblings where one was dependent due to stroke.
  • Illness/dependency can create presumption (Simpson v Simpson (1992)).

Substantial Benefit / Transaction Calling for Explanation

  • Complainant must show transaction calls for explanation.
  • Mere proof of relationship insufficient (Allcard v Skinner (1887)).
  • Must show substantial benefit to stronger party.
  • Examples: Allcard v Skinner (money to Mother Superior), Gregg v Kidd (farm devised).
  • Carroll v Carroll (2000): Denham J found “substantial benefit” in the form of a pub.
  • Irish courts focus on substantial benefit to stronger party (Prendergast v Joyce (2009)).

Rebutting the Presumption

  • Onus shifts to prove:
    • Independent legal advice was obtained.
    • Decision was a “spontaneous and independent act” (Ffrench-O’Carroll v Ffrench-O’Carroll [2006] IEHC 220).
  • Independent legal advice is crucial (Leonard v Leonard (1988)).
  • Carroll v Carroll (2000) deals with independent legal advice extensively.
  • Solicitor acting for both parties should advise weaker party to get separate counsel (McCrystal v McKane (1986)).
  • Independent advice need not be legal; can be by qualified person (Inche Noriah v Shaik Allie Bin Omar (1929)).
  • Elliot v Stamp (2006): legal executive's advice sufficient.
  • McCormack v Bennett (1973): act of free will, despite advice, can rebut presumption.