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Undue Influence

Previous: Privity of contract

A contract may be vitiated where someone in a dominant position makes use of such a position to attain benefits. This equitable concept is known as undue influence. It involves abuse or exploitation of those whose consent has been impaired.

Historic undue influence

In 1887, and the case of Allcard v Skinner [1887], the claimant joined a religious group, and subsequently transferred all of her assets to the group. Some time after leaving the group, the claimant attempted to regain ownership of the assets. It was said that as such a gift could not be reasonably accounted for, undue influence could be present. However, on the facts, such a lapse of time barred the claim.

More recently, National Westminster Bank v Morgan [1985] required that a manifest disadvantage must exist for a claim of undue influence claim to succeed. The case of Barclays Bank Plc v O’Brien [1994] attempted to define the concept clearly and set a detailed precedent. In Barclay’s Bank v O’Brien [1994], undue influence was divided into 2 categories: actual undue influence, where conduct of a stronger party must be shown, and presumed undue influence, where an influencing relationship could be presumed as a matter of law, or proved on the facts of the case. Finally, CIBC Mortgages v Pitt [1994] ruled that a manifest disadvantage requirement only applied in cases of presumed undue influence. However, a new precedent has now been set.

Today’s law on undue influence

The case of Royal Bank of Scotland v Etridge [2001] is now the leading case in undue influence and has cleared up much confusion over what does an does not amount to undue influence. A number of points were made.

Firstly, the aforementioned categories of actual and presumed undue influence are no different, in law, but they must be proved differently. Rather than the categories, Lord Nicholls suggested that to show undue influence, one must either have actual proof of conduct of a stronger party which amounts to undue influence, or an evidential inference can be made to help prove that there is undue influence.

Secondly, where proof is by an evidential inference, there are three elements to the claim. The claimant must prove that they had a relationship of trust and confidence with the strong party. Then there must be a transaction which calls for an explanation. Finally, this transaction (and evidential assumption) must be rebutted by the stronger party. The legal burden always remains on the claimant to prove that they acted under undue influence; but an evidential assumption may be made in the process. The more serious the transaction, the better the rebutting explanation must be.

Thirdly and finally, there need not be any manifest disadvantage to the claimant.

Rebutting the evidential assumption

A transaction which calls for an explanation can often be rebutted, if it even exists in the first place. In ASB Bank v Harlick [1996, New Zealand] (before Etridge), it was said that parents making a guarantee for their children did not constitute a relationship which could give rise to undue influence as it was simply a family transaction. The evidential assumption was successfully rebutted in Re Brocklehurst [1978], where Sir Brocklehurst was said to be a “strong-minded, autocratic and eccentric” individual. In Hewitt v First Plus National Group [2010], the assumption was not rebutted as a husband having an affair successfully vitiated a wife’s mortgage.

Etridge appears to consider only the perspective of the stronger person, and not the state of the individual claiming undue influence. In Hammond v Osborn [2002], some of the Etridge criteria were rejected, as a £300,000 transaction was considered with regards to the conduct of the donor. The donee could not rebut the presumption by simply doing nothing wrong however, so the gifts were set aside.

Suretyship transactions

Many claims for undue influence, including those in Barclays Bank v O’Brien [1994] and Royal Bank of Scotland v Etridge [2001], are by agents carrying out transactions under the undue influence of another. In such a case, liability for undue influence may be passed on, or imputed, to another party such as a bank. Common suretyship transactions involved a wife taking out a mortgage or guarantee for her husband, unaware of the dangers such a commitment may give rise to. As such, the law has attempted to provide special precautions which banks (or other creditors) must take when they believe a transaction could be consented to under undue influence. This in turn helps the banks avoid having to lose money by setting aside such transactions.


Firstly, the law attempts to define when a bank should be put on notice. That is, when should a bank become suspicious that a transaction may occur under undue influence. Concerning cohabitees, Barclays Bank v O’Brien [1994] ruled that a bank is put on notice where a cohabitee is going to carry out a transaction which the bank  thinks may not be to the cohabitee’s advantage and where the bank may suspect that other cohabitee may be committing either a legal or an equitable wrong. Furthermore, in Credit Lyonnais Bank v Burch [1997], a bank was ruled to be put on notice whenever a transaction is very serious, irrespective of the relationship between the surety and the potential source of undue influence. CIBC Mortgages v Pitt [1994] added to the confusion of when a bank should be put on notice, also requiring that it was when the transaction was disadvantageous to the wife.

Again, the case of Royal Bank of Scotland v Etridge [2001] cleared up the situation. It was here ruled that a bank is put on notice whenever there is a non-commercial surety-debtor transaction, unless the transaction is being carried out jointly by 2 partners.

Once on notice, it is common ground between Barclays Bank v O’Brien [1994] and Royal Bank of Scotland be Etridge [2001] that a bank must then take reasonable steps to satisfy itself that the risk of the transaction are bought home to the surety.

Reasonable steps

The steps which a bank must take when put on notice were outlined in Etridge by Lord Nicholls, with general agreement. It was firstly suggested that the bank need not enquire into the life of the surety; this would be inefficient since such claims were in a significant minority. However, a bank on notice must ensure that a private meeting has taken place with the surety only, where the nature of documents, the risks of the transaction and other options must be discussed. The surety must also be given the option whether to proceed or not.

If this duty is delegated, the solicitor must certify to the bank that such advice has been given, while also assuring the surety that they are acting for them. If the bank knows that a solicitor’s advice is deficient, irrespective of any certification, it will not be said to have taken reasonable steps to satisfy itself that there is no undue influence.

In National Westminster Bank v Amin [2002], it was said that a bank must take care to provide extra precautions when dealing with an extra-vulnerable surety (in this case, one who does not speak English); and in Yorkshire Bank v Tinsley [2004], following a divorce it was ruled that a consequential mortgage can be subject to undue influence.

Next: Unconscionable bargains

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