Undue influence was alleged.
Held: Equity avoids dispositions of property procured by the improper or unconscientious use of the influence of one person over another, that cannot be explained on the grounds of friendship, charity or other ordinary motives on which people ordinarily act. It was not enough simply to show a relationship of dominance or influence, but also the parties needed to establish that the transaction constituted a manifest and unfair disadvantage to the person seeking.
The relationship of borrower and lender, or banker and customer, does not give rise, of itself, to any presumption of special disability on the part of the borrower or of undue influence, but exceptionally it may do. If the relationship of banker and customer becomes one in which the banker acquires a dominating influence, and a manifestly disadvantageous transaction is proved, ‘there would then be room’ for a court to presume that it resulted from the exercise of undue influence. ‘The Court of Appeal erred in law in holding that the presumption of undue influence can arise from the evidence of the relationship of the parties without also evidence that the transaction itself was wrongful in that it constituted an advantage taken of the person subjected to the influence which, failing proof to the contrary, was explicable only on the basis that undue influence had been exercised to procure it.’
Lord Scarman said that the determination of whether a relationship of undue influence exists is to be arrived by ‘a meticulous examination of the facts.’ and ‘the Court of Appeal erred in law in holding that the presumption of undue influence can arise from the evidence of the relationship of the parties without also evidence that the transaction itself was wrongful in that it constituted an advantage taken of the person subjected to the influence which, failing proof to the contrary, was explicable only on the basis that undue influence had been exercised to procure it.’ He continued with reference to Poosathurai: ‘The wrongfulness of the transaction must, therefore be shown: it must be one in which an unfair advantage has been taken of another . . the doctrine is not limited to transactions of gift. A commercial relationship can become a relationship in which one party assumes a role of dominating influence over the other.’
Judges:
Lord Scarman, Lord Keith of Kinkel, Lord Roskill, Lord Bridge of Harwich, Lord Brandon of Oakbrook
Citations:
[1985] AC 686, [1985] UKHL 2, [1985] 1 All ER 821, [1985] ANZ Conv R 251, [1985] 2 WLR 588
Links:
Jurisdiction:
England and Wales
Citing:
Cited – Poosathurai v Kannappa Chettiar and Others PC 18-Nov-1919
(Madras) . .
Cited by:
Cited – Royal Bank of Scotland v Etridge (No 2); Barclays Bank plc v Harris; Midland Bank plc v Wallace, etc HL 11-Oct-2001
Wives had charged the family homes to secure their husband’s business borrowings, and now resisted possession orders, claiming undue influence.
Held: Undue influence is an equitable protection created to undo the effect of excess influence of . .
Cited – CIBC Mortgages Plc v Pitt and Another HL 21-Oct-1993
Mrs Pitt resisted an order for possession of the house saying that she had signed the mortgage only after misrepresentations by and the undue infuence of her husband who was acting as the bank’s agent.
Held: A bank was not put on enquiry as to . .
Lists of cited by and citing cases may be incomplete.
Undue Influence, Contract, Banking, Equity
Updated: 27 June 2022; Ref: scu.219906