undue influence full

• Undue influence


  When a contract has been procured through undue influence, be it actual or presumed, equity will allow the contract to be set aside on the basis that if a party is operating under undue influence, he or she cannot be said to be exercising his or her free will
• The courts do not intervene to absolve persons from foolish or unwise transactions
• The intervention of the courts under the doctrine of undue influence is to prevent the enforcement of a transaction where a person's free will has been overcome by another person exercising dominion over them
• Lindley L.J. in Allcard v Skinner (1887): 'It would obviously be to encourage folly, recklessness, extravagance and vice if persons could get back property which they foolishly made away with, whether by giving it to charitable institutions or by bestowing it on less worthy objects. On the other hand, to protect people from being forced, tricked or misled in any way by others into parting with their property is one of the most legitimate objects of all laws; and the equitable doctrine of undue influence has grown out of and been developed by the necessity of grappling with insidious forms of spiritual tyranny and with the infinite varieties of fraud'
• The courts have shied away from defining "undue influence"
• Undue influence


  An unfair advantage has been gained by an unconscientious use of power in the form of some unfair and improper conduct, some coercion from outside, some over reaching, some form of cheating
• To ground a successful claim of undue influence

  • The claimant must demonstrate either actual or presumed undue influence, at which stage the onus of proof transfers to the defendant to rebut the undue influence. The most common way of doing so is for the defendant to prove that the claimant received adequate and impartial legal advice.
• Actual undue influence


  Requires proof that the other party had positively exercised undue influence which had induced the party to enter into the transaction
• Presumed undue influence


  Does not require positive proof of undue influence—rather, undue influence can arise from proof of a relationship of trust and confidence between the parties
• The division of undue influence into two categories (actual and presumed) was recognised by Costello J in O'Flanagan v Ray-Ger Ltd (1983)
• Presumed undue influence


  There are two forms: Class 2A arises where certain relationships exist which automatically give rise to the presumption that undue influence has been exercised, and Class 2B which requires proof of a relationship of trust and confidence between the parties
• The House of Lords in Royal Bank of Scotland v Etridge (No 2) (2002) took issue with the Class 2A and 2B subdivision, finding it misleading</b>
• This jurisdiction and England still recognise class 2B undue influence in the case of a husband and wife
• To establish presumed undue influence

  • A relationship (either a relationship which gives rise to the presumption or one where it is necessary to prove that the relationship was one of trust and confidence) which gives rise to the presumption, and 2) That a substantial benefit has been obtained. If these are proven, then the onus shifts to the party seeking that the transaction be upheld to prove that the transaction resulted from the "free exercise of the donor's will".
• Relationships giving rise to presumed undue influence (Class 2A)


  • Parent and child
  • Guardian and ward
  • Trustee and beneficiary
  • Solicitor and client
  • Medical advisor and patient
• The courts have not fettered the types of relationship giving rise to presumed undue influence
• The presumption of undue influence of a parent over a child cannot continue indefinitely
• The relationship of husband and wife does not give rise to a presumption of undue influence
• Proving a relationship of trust and confidence


  This will generally arise in the case of a husband and wife. As there is no automatic presumption, the onus is on the party claiming undue influence was exerted over him or her by his or her spouse to prove there was a relationship of trust and confidence between the parties.
• Mere proof of a relationship of trust and confidence, either presumed automatically or proven, is not sufficient to shift the onus of proof. The complainant must demonstrate that the transaction is one which calls for further explanation, i.e. some form of substantial benefit to the stronger party
• Undue influence


  When a person's free will is overborne by the influence of another, so that the act does not represent the independent volition of the donor
• In Ulster Bank Ltd v Fitzgerald (2001), O'Donovan J reiterated the principle that the relationship of husband and wife of itself does not give rise to a Class 2A presumption of undue influence
• Substantial benefit/transaction calling for explanation


  When either a Class 2A or 2B relationship has been demonstrated, the complainant must demonstrate that the transaction is one which calls for further explanation
• Mere proof of a relationship of trust and confidence, either presumed automatically or proven, is not sufficient to shift the onus of proof
• Some form of substantial benefit to the stronger party must be established to shift the onus of proof
• Examples of substantial benefit


  • Large sums of money transferred
  • Entire farm devised in a will
  • Public house with residential accommodation obtained
• In England, the notion of presumed undue influence being raised where the transaction was to the "manifest disadvantage" of the weaker party was developed in National Westminster Bank v Morgan (1985)
• The Irish courts are more concerned with the substantial benefit obtained by the stronger party, rather than the "manifest disadvantage" to the weaker party
• Mere proof of undue influence is not sufficient, the transaction must be one which calls for further explanation
• In this jurisdiction, the focus is on substantial benefit obtained by the stronger party
• In England, the law has come back around to examining the nature of the transaction from the point of view of the weaker party and requiring some form of explanation for the transaction
• Rebutting the presumption of undue influence

  Once a relationship giving rise to undue influence has been proved, and a substantial benefit obtained by one party to the transaction, the onus shifts to the party in receipt of the benefit to rebut the presumed undue influence
• Ways to rebut the presumption of undue influence

  • Proving that independent legal advice was obtained
  • Showing that the decision to enter into the transaction was a "spontaneous and independent act" or that the donee acted of his "own free will"
• If a donor received independent legal advice, it is likely that the presumption of undue influence will be rebutted
• Even where the donor is in a particularly weak position and is very vulnerable, the proof of receipt of independent legal advice can be crucial
• Examples of cases where independent legal advice rebutted the presumption of undue influence

  • Leonard v Leonard (1988)
  • Noonan v O'Connell (1987)
• In Carroll v Carroll (2000), the Supreme Court held that the presumption of undue influence was not rebutted given the lack of receipt by the donor of independent legal advice
• If a solicitor is advised by both parties, he or she should advise the weaker party to instruct another legal advisor
• In England, it is clear that the independent advice need not be legal in nature or be given by a lawyer
• In the Irish case, Elliot v Stamp (2006), independent legal advice received from an experienced legal executive was sufficient to rebut the presumption of undue influence