Since the doctrine of undue influence is under the court of equity , it derives from different other doctrines that gives it's classification a wide variation from case to case. Thus , it shouldn't be limited a scope of criteria. The criteria shown is only to describe the possibilities of the decisions and distinguishing the doctrine from others , but shouldn't be a consistent set of rules that defines what it exactly it should be in every case and how it should be applied in every case. operates to release parties from contracts that they have entered into as a result of being 'influenced' by the other party. - 754 - Lord Nicholls of Birkenhead : ' If the intention was produced by an unacceptable means , the law will permit the transaction to stand. The means used is regarded as exercise of improper or 'undue' influence, and hence unacceptable whenever the consent thus procured ought not fairly to be treated as the expression of a person's free will. It is impossible to be more precise or definitive. The circumstances in which one person acquires influence over another , and the manner in which influence may be exercised , vary too widely to permit of any more specific criterion' - 770 ' Even this test is not comprehensive. The principle is not confined to cases of abuse of trust and confidence. It also includes, for instance, cases where a vulnerable person has been exploited. Indeed, there is no single touchstone for determining whether the principle is applicable. Several expressions have been used in an endeavor to encapsulate the essence: trust and confidence , reliance , dependence or vulnerability on the one hand and a ascendancy domination or control on the other. None of these descriptions is perfect . None is all embracing . Each has it's proper place.” - 771 main book white * Although undue influence is a well-worn phrase , it's precise meaning is unclear. - 363 green handwriting * focus of Etridge maybe be to reduce the practical significance of the presumption of undue influence and to focus the attention of lawyers on the need for the claimant to prove his case. - green handwriting 368 * The courts have generally been reluctant to attempt a comprehensive definition of undue influence. They tend to emphasize the facts and circumstances of the individual case. Thus relationships are ' infinitely various' and no description of the relevant factors is 'perfect' or all embracing'. The emphasis is not only on 'influence but on the 'abuse' or the 'misuse of that influence. In this sense undue influence has been said to have a connotation of impropriety. But it may be improperly in an attempted form , in that it can apparently take reform of failing to provide a claimant with access to independent advice . ' - 753 Contract Law – Text , Cases , and Materials 2nd Edition – Ewan Mckendrick – Oxford University Press – 2005 * Moreover it is possible to identify at a very general level , different factual situation where undue influence might be found. - Unconscionability and the taxonomy of undue influence * The ability to influence another is not, per se, objectionable.194 One of the key requirements of the doctrine of undue influence is that the influence must have been, to adopt the terminology of Birks and Chin, “excessive”. This begs the difficult question: at what point does influence become “excessive” or “undue” (in the sense of too much). In many cases it is clear that there need not be loss of autonomy,195 but beyond this the issue remains hazy. As James Munby Q.C., sitting as a deputy judge of the High Court, said in Bank of Scotland v Bennett 196 : * “It is impossible to define, and difficult even to describe, at what point influence becomes, in the eye of the law, undue.”197 - Unconscionability and the taxonomy of undue influence * In Morgan , Lord Scarman stated that, pursuant to Allcard , in cases of presumed undue influence the courts would require evidence that the transaction 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.”18 – one the articles *There is a fundamental difficulty underlying the doctrine of undue influence. If it is treated as a flexible equitable doctrine used to do justice in the particular case, then it may achieve that end in cases decided by the courts, but at the price of commercial uncertainty on the taking of security. If, on the other hand, undue influence is explained as a set of rules to be followed for security to be unimpeachable, then this will produce commercial certainty for lenders, but at the price of injustice in particular cases where the rules are followed, and the transaction is actually flawed. - one of the articles *The word “undue” is ambiguous. To say of a mother that she is unduly protective of her children or of a father that he is unduly anxious about their success means no more than in American English is signified by “overly”. There may be a grain of criticism but the emphasis is on quantum: too much protection and too much anxiety. In other contexts “undue” begins to indicate impropriety, even improbity. To say of a man that he shows an undue interest in children would be to voice a serious and damaging suspicion. - one of the articles &ollock on Contracts. 24 They argued that the word “undue”, which fades into the background in Pollock's discussion, as in that of many others, is fundamentally unstable.25 They also emphasised that it is always difficult to find the right language and always dangerous to make too much of any single word or phrase.26
The ambiguousness of the doctrine of undue influence was reflected by Lindley L.J. in Allcard v Skinner 27 who stressed:
“As no Court has ever attempted to define fraud, so no Court has ever attempted to define undue influence, which includes one of its many varieties.” The above reluctance28 to define undue influence has been echoed in numerous subsequent cases29 including in the recent landmark case of Royal Bank of Scotland Plc v Etridge (No.2 ).30 Lord Guthrie in Forbes v Forbes Trustees (No.2) 31 for example, had firmly stated that it was not desirable or possible to frame a comprehensive statement of what does and what does not amount to undue influence. Lord Chelmsford L.C. in Tate v Williamson 32 said: “The courts have always been careful not to fetter this useful jurisdiction by defining the exact limits of its exercise.” In Royal Bank of Scotland Plc v Etridge (No. 2 ),33 Lord Clyde stated that the concept is not easy to define in any event and supported the observation made by Lindley J. above.34 Lord Clyde in Etridge 35 further added that undue influence can be more easily recognised when found than exhaustively analysed in the abstract. In the earlier case of Bank of Scotland v Bennett, 36 James Munby Q.C. affirmatively stressed that he did not propose to define the doctrine as the attempt was not merely futile; it would (following the observation made by Lord Scarman in National Westminster Bank Plc v Morgan )37 be most undesirable. He added that:” It is impossible to define, and difficult even to describe, at what point at which the influence becomes, in the eye of law, undue.”38 - *Even though the words of Lord Browne-Wilkinson in Barclays Bank Plc v O'Brien, 44 “… those cases which still occur where the wife relies in all financia1 matters on her husband and simply does what he suggests …” seem to suggest what establishes undue influence, Neuberger J. in Turner v Barclays Bank Plc 45 observed that that passage was concerned not with the definition of undue influence, but with a state of affairs which would give rise to “a *J.I.B.L.R. 396 presumption of undue influence … without proof of actual undue influence.” In the recent case of Etridge, the difficult characteristic of undue influence was confirmed by Lord Nicholls: “It is impossible to be more precise or definitive. The circumstances in which one person acquires influence over another, and the manner in which influence may be exercised, vary too widely to permit of any more specific criterion.”46 one of the articles *Lord Nicholls emphasised that it is necessary to go back to first principles, that undue influence is one of the grounds of relief developed by the courts of equity as a court of conscience with the objective to ensure that the influence of one person over another is not abused. * Limits should be set to distinguish undue influence from other doctrines , but unconsionabilility and duress. It's relation to duress and unconscionably The claimant's approach is whether the influence is “overbearing and too high” where it causes the influenced to lose autonomy in deciding whether to enter the contact. It is used to distinguish the doctrine from unconscionability. Deane J : the equitable principles relating to relief against undue unconscionable dealing and the principle relating to undue influence are closely related. The two doctrines are,however, distinct. Undue Influence, like common law duress looks at the quality of the consent or assent of the weaker party... Unconscionable dealing ;looks to the conduct of the stronger party in attempting to enforce , or retain the benefit of , a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so” Birks , P and Chin , NY , 'On the nature of undue influence “, in Beatson , J and Friedmann, D (eds_ , Good Faith and Fault in Contract Law , 1995 , pg 95 , Oxford : Clarendson. “ Some jurists will still be attracted by the simplicity of the defendant- sided analysis , and they will point out , correctly , that the number of cases in which there is no unconscionable behavior is very small. However , the rationality of the law cannot tolerate abbreviations or approximations. If there are two doctrines , there are two doctrines ; and the fact that one might do perhaps 95% of the work is no reason for pretending that the other one doesn't exist. The correct approach will be to treat both undue influence and duress as plaintiff-sided factors which ground relief based on a degree of impairment of the plaintiff's capacity to make decisions. In every case we should accept not a dogma of priority or subsidiarity, but a voluntary intellectual discipline of exhausting the plaintiff-sided analysis before proceeding to the question of whether relief might be rested on unconsciousness behavior on the part of the defendant . That discipline will serve to protect all plaintiff-sided grounds for relief – spontaneous and innocently induced mistake no less than undue influence and duress , not to mention other – and will avert the unnecessary injustice which happens when plaintiffs lose cases because lawyers fail to see their winning arguments.” The defendant's approach is whether is “illegitimate” or “unconscionable” - main book white R v. Attorney-General for England and Wales [2003] UK PC Lord Hoffman states : 'Like duress at common law , undue influenve is based upon the principle that a transaction to which the consent has been obtained by unacceptable means should not be allowed to stand. Undue influence has concentrated in particular upon the unfair exploitation by one patyu pf a relationship which gives him ascendancy or intense over the other “ The comination on the anlogy drawn with duress and the emphasis on the need for 'unaccptable means' and unfair exploitation” gives the analysis of undue influence a very strong defendant focus. - Contract Law – ewan mCkendrick - 6th edition – 2005 NOT AGREE WITH THIS Indeed most of the leading cases on the doctrine display a clear claimant-sided orientation. In such cases a transaction is classified as unconscionable because there is either a causal connection between a “special disadvantage” suffered by the claimant and the resultant bargain (the “causal-connection” approach), or, perhaps, because the claimant is a member of a particular section of society who has entered into an improvident bargain (the “status” approach). In either case, the nature and extent of the “special disadvantage”, the terms of the transaction, and the presence or absence of independent advice are key components in identifying, so-called, unconscionable bargains. Furthermore, the conduct of the defendant is largely irrelevant. OR THIS In support of these propositions we will argue that: (i) even if the doctrine of undue influence focuses exclusively on the fact that the claimant acted under “excessive influence”, it is still possible to identify the respondent's conduct (or lack thereof) as “unconscionable”173 ; (ii) the existing requirements of undue influence serve as a covert means of distinguishing between conscionable and unconscionable dealings; and (iii) there is an overriding requirement of unconscionability in the doctrine of undue influence which is sometimes overlooked.174 - Unconscionability and the taxonomy of undue influence undue influence is both 'excessive' and being used in improper or unconsionable manner, It can appear in some situation to be claimant focused and can appear in some situations to be defendant focused. But we can't say that courts follow this or this , because it's under the court of equity. – notes We would therefore support Professors Birks and Chin's argument that “[i]i is time that in this field we would overcame the old jurisdictional duality” - Unconscionability and the taxonomy of undue influence In cases of relational actual undue influence the overriding unconscionability requirement is often overlooked. We tentatively suggest that this might be explained on the ground that the unconscionability requirement will usually be satisfied as a matter of course if the other elements of the doctrine are present. - - Unconscionability and the taxonomy of undue influence
Similarly in Lloyds Bank Plc v Lucken 243 the Court of Appeal refused to grant relief on the ground, inter alia, that the pressure exerted by Mr Lucken was not unconscionable. In that case Mr Lucken put pressure on Mrs Lucken, from whom he was separated, to obtain a loan, secured on her home, from the plaintiff bank. This money would then be lent to one of Mr Lucken's failing businesses. Eventually Mrs Lucken agreed the scheme but she later claimed that the charge was impeachable due to the undue influence of her husband. The Court of Appeal disagreed on the ground that this pressure was not “undue or, if it was, sufficiently causative.”244 Unfortunately, very little guidance was given by the Court of Appeal as to the meaning of “undue”: “[i]nfluence which is undue must be recognized when it occurs for it cannot be further defined in advance.”245 Notwithstanding this, the Court of Appeal was of the opinion that the pressure exerted on Mrs Lucken was essentially external and that: *J.B.L. 569 “the doctrine of undue influence should not be applied so as to shield persons from the consequences of external forces in the absence of some sort of fraud.”246 - Unconscionability and the taxonomy of undue influence Intention - The flaws within the scopes and criteria . Why their shouldn't be a specific criteria that is applied. a) problems with Presumed undue influence and actual undue influence . - Bank of Credit and Commerce International SA v. Aboody [1990] - Actual Undue Influence : necessary for client to prove affirmatively that the wrongdoer exerted undue influence on the complainant to enter into the particular transaction which is impugned. - Presumed Undue Influence : a) the claimant had to show a relation of trust and confidence to adopt presumption of 'influence' b) had to show a transaction that calls for explanation to develop ' undue' - 2(a) – certain relationships as a matter of law raise the presumption that undue influence had been exercised. - 2(b) – the complainant proves the existence of a relationship under which the complainant generally reposed trust and confidence in the wrongdoer. - 758 main book white - Problems with actual undue influence : a) overlap with common law duress. Lord Nicholls observed in Etridge, actual undue influence 'compromises overt acts of improper pressure over or in such as unlawful threats' and thus there is today 'much overlap with the principle of duress as this principle has subsequently developed.' b) can take a form other than the application illegitimate pressure. Lord Habhouse Etridge – AUI definition : 'an equitable wrong committed by the dominant party against the other which makes it unconscionable for the dominant party to enforce his legal rights against the other.' - Problems with presumed undue Influence : Skepticism – in relation utility of the presumption : (a) Lord Clyde : ' there is room for uncertainty whether the presumption is of the existence of an inference or of its quality as being undue! b) Lord Nicholls – proof that the complain placed trust and confidence in the other party in relation to the management of the complainant financial affairs , coupled with a transaction which calls for an explanation will normally be sufficient , failing satisfactory evidence to the contrary , to discharged the burden of proof . - green handwriting pg365 * One common misconception is the idea that certain types of relationship (such as that between parent and child, guardian and ward, solicitor and client) automatically give rise to a presumption of undue influence. In other words, the relationship by itself gives rise to a presumption not only that one party had influence over another but that undue influence had been exercised. Prior to Etridge, this view had become widespread. Thus in Barclays Bank v O'Brien [1994] A.C. 180 at 189, Lord Browne-Wilkinson, adopting the classification of the Court of Appeal in Bank of Credit and Commerce International SA v Aboody [1990] 1 Q.B. 923 at 953, described *L.Q.R. 30 the traditional relationships as those which “as a matter of law raise the presumption that undue influence has been exercised ” (emphasis supplied). Academic commentators followed that view (e.g. P. Birks and N.-Y. Chin, “On the Nature of Undue Influence” in Good Faith and Fault in Contract (J. Beatson and D. Friedmann (eds), 1995), p.57 at p.68). But in Etridge the House of Lords made it clear that this was a misconception. It was explained in Etridge that those relationships give rise to a presumption of influence only. The only fact presumed is the existence of influence. The relationship alone, no matter what type of relationship, does not give rise to the presumption that undue influence has been exercised.- one of the articles *n the Pesticcio case Mummery L.J. identified (at [2]) “the need for a wider understanding, both in and outside the legal profession” of the doctrine of presumed undue influence. It is submitted that a wider understanding of the nature of the irrebuttable presumption of influence and how it differs from the rebuttable presumption of undue influence might be a small but significant step towards that goal. -one of the articles - This sentiment was also reflected in the recent case of Royal Bank of Scotland Plc v Etridge (No. 2 )71 where Stuart Smith L.J. emphasised that:
“Legitimate commercial pressure brought by a creditor, however strong, coupled with proper feelings of family loyalty and a laudable desire to help a husband or son in financial difficulty, may be difficult to resist … But they are not enough to justify the setting aside of the transaction unless they go beyond what is permissible and lead the complainant to execute the charge not because, however reluctantly, she is persuaded that it is the right thing to do, but because the wrongdoer's importunity has left her with no will of her own.”72
The court's reluctance to interfere to set aside the transaction unless there has been sufficient evidence of actual or presumed undue influence has also been echoed in recent cases. In Macklin v Dowsett, 73 it was held that the evidence did not establish either of the elements necessary to raise a presumption of undue influence and the equity could now rescue a person from his own folly.74 Similarly, in Johnson v EBS Pensioner Trustees Ltd 75 Parker J. stressed that:
“When one comes to examine allegations of undue influence (whether actual or presumed) it is important to keep in mind what is the basis for the intervention of equity in such cases. The court has no jurisdiction to interfere with transactions (whether gifts or contracts) simply on the basis that they were ill-advised or were entered into with an inadequate understanding of their economic or legal effects.” -One commentator has correctly pointed out that undue influence and duress involve one party exerting influence or putting pressure on the other party to persuade him to contract, and only one party on whom the pressure has been applied will be able to use it as a reason for obtaining remedy.76 It is then in the power of that pressurised party to decide whether or not to invoke the remedy.77 - one of the articles **J.I.B.L.R. 399 “The availability of this forensic tool in cases founded on abuse of influence arising from the parties' relationship has led to this type of case sometimes being labelled ‘presumed undue influence’. This is by way of contrast with cases involving actual pressure or the like, which are labelled ‘actual undue influence’: see Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923, 953, and Royal Bank of Scotland Plc v Etridge (No 2) [1998] 4 All ER 705, 711-712, paras 5-7. This usage can be a little confusing.”
Lord Hobhouse further stated that the Class 2B presumption should not be adopted. He said87 : “In agreement with what I understand to be the view of your Lordships, I consider that the so-called class 2(B) presumption should not be adopted. It is not a useful forensic tool.” - one of the articles * Lord Clyde viewed that the attempt to further classify the categories of undue influence may lead to confusion.89 He said90 :“Correspondingly the attempt to build up classes or categories may lead to confusion. The confusion is aggravated if the names used to identify the classes do not bear their actual meaning. Thus on the face of it a division into cases of ‘actual’ and ‘presumed’ undue influence appears illogical. It appears to confuse definition and proof. There is also room for uncertainty whether the presumption is of the existence of an influence or of its quality as being undue. I would also dispute the utility of the further sophistication of subdividing ‘presumed undue influence’ into further categories. All these classifications to my mind add mystery rather than illumination.”
The above expressions by the learned Lords in Royal Bank of Scotland Plc v Etridge 91 indicate that the House of Lords has doubted the accuracy and utility of the classification of undue influence. One of the reasons, as noted by Lord Clyde above, was that the many categories confused definition with proof and do not bear their actual meaning.92 This is also clear from his other statements that93 :
“English law has identified certain relationships where the conclusion can prima facie be drawn so easily as to establish a presumption of undue influence. But this is simply a matter of evidence and proof.”
The same problem was also stipulated in the words of Lord Hobhouse94 : “It is a fallacy to argue from the terminology normally used, ‘presumed undue influence’ to the position, not of presuming that one party reposed trust and confidence in the other, but of presuming that an abuse of that relationship has occurred; factual inference, yes, once the issue has been properly raised, but not a presumption.”
Lord Scott also stated a further quandary of the Class 2B presumption. He said97 : “The presumption in Class 2B cases, however, is doing no more than recognising that evidence of the relationship between the dominant and subservient parties, coupled with whatever other evidence is for the time being available, may be sufficient to justify a finding of undue influence on the balance of probabilities. The onus shifts to the defendant. Unless the defendant introduces evidence to counteract the inference of undue influence that the complainant's evidence justifies, the complainant will succeed. In my opinion, the presumption of undue influence in Class 2B cases has the same function in undue influence cases as res ipsa loquitur has in negligence cases. It recognises an evidential state of affairs in which the onus has shifted.” - one of the articles b) the classification of in presumption 2(a) relationships - Lord Nicholls of Birkenhead(i think) the use of the term 'presumption' is descriptive of a shift in the evidential onus on a question of fact. When a plaintiff succeeds by this route he does , so because he has succeeded in establishing a case of undue influence. The court has drawn appropriate inferences of fact upon a balanced consideration on the whole of the evidence at the end of a trial in which the burden of proof rested upon the plaintiff. - 771 - Lord Nicholls of Birkenhead : “the law has recognized the need to prevent abuse of influence in these 'relationship' cases despite the absence of evidence of over the acts of persuasive conduct. The types of relationship , such as parent and child , in which this principle falls to be applied cannot be listed exhaustively. Relationships are infinitely various. Sir Geunter Treitel QC had rightly notes that the question is whether one party has reposed sufficient trust and confidence in the other , rather than whether the relationship between the parties belongs to a particular type. For example ,, the relationship of a banker and customer will not normally meet this criterion , but exceptionally it may. Like in (N.W.B v. Morgan)” .- 771 - “It would be absurd for the law to preserve that every gift by a child to a parent , or every transaction between a client and his solicitor or between a patient and his doctor , was brought about by undue influence unless the contrary is affirmati a particular relationship became classified as a class 2A relationship. However, social conditions can change and therefore what may have been good policy at one time may not be good policy today. Take, for example, the relationships of an engaged couple. At one time such a relationship (so far as concerned *J.B.L. 557 benefits obtained by the man) was, as a matter of law, one of trust and confidence.148 Indeed, even in cases where the relationship is still likely to be one of trust and confidence (perhaps a parent-child relationship), it is suggested that there is little justification in applying a “blanket-rule” to all relationships of that type. No two relationships are exactly the same. For example, how many different types of spiritual or medical relationships are there? Naturally we accept that the presumption can still be rebutted, but why should a person who, in fact, does not stand in a relationship of trust and confidence be compelled to rebut an erroneous presumption? Indeed, in the early part of Lord Nicholls's *J.B.L. 558 speech in Etridge (No.2) it appeared as if the House of Lords was preparing to abolish the class 2A presumption. His Lordship stated: -“The law has long recognized the need to prevely proved. So something more is needed before the law verses something which calls for explanation. When that something more is present , the greater the disadvantage to the vulnerable person , the more cogent must be the explanation before the presumption will be regarded as rebutted. “ 773-774 main book white Whilst there may be certain relationships which, as a matter of law, are clearly based on trust and confidence, others are not. For example, it is unclear whether or not an express trustee comes within this class.146 More importantly, it is legitimate to ask howvent abuse of influence in these ‘relationship’ cases despite the absence of evidence of overt acts of persuasive conduct … Relationships are infinitely various … the question is whether one party has reposed sufficient trust and confidence in the other, rather than whether the relationship between the parties belongs to a particular type … ”157 - Unconscionability and the taxonomy of undue influence c ) relation to manifestly disadvantages . 'A disadvantage was said to be manifest if it would have been obvious as such as to any individual and reasonable persons who considered the transaction at the time with knowledge of all relevant facts. (Bank of Credit and Commerce International SA v. Aboody [1990] QB 923). The distinction used to be one of considerable significance because a a 'manifest disadvantage' requirement applied in the case of presumed undue influence (National Westminster Bank plc v. Morgan [1985] AC 68)) but not in the case of actual undue influence. (CIBC Motgages plc v. Pitt [1994] 1 AC 200). - 363 green handwriting The label is being understood and applied in a way which doesn't accord with the meaning intended by Lord Scarman it's originator. The problem has arisen in the connect of wives guaranteeing payment of their husband's business debts. In recent years , judge after judge has grappled with this baffling question whether a wife's guarantee of her husband's bank overdraft, together with a charge on her share of the matrimonial house , was a transaction manifestly to her disadvantage. In a narrow sense, such a transaction plainly 'manifestly' is disadvantageous to the wife. She undertakes a serious financial obligation , and in return she personally receives nothing. But that would be to a relationship of solicitor and client or medical advisor and patient , in the case of husband and wife there are intent reasons why such a transaction may well be for her benefit. Ordinarily , the fortunes of husband and wife are bound up together... Which then , is the correct approach → the better approach is to adhere to the test outlined by Lindley LJ (Skinner Case) and adopted by Lord Scarman in (Morgan case) . Lord Nicholls said that the term “presumption” is merely descriptive of a shift in the evidential burden from the complainant to the alleged wrongdoer. It is thus misleading to describe the situation as one of presumed undue influence because undue influence is only established if the presumption incapable of being rebutted. - 787 main book white intention : It is sufficient for the purposes of the law of undue influence merely to point to the inability of a person to understand the nature of the transaction and its unfairness. What seems to be required as well is evidence of an intention by the stronger party to take advantage of the other's weakness. Prof of their intention may be found in all the circumstances of the transaction , and it seems likely that it will be sufficient to demonstrate that the stronger person should have been altered to the inability of the weaker party to handle his/her own affairs during the course of the discussion leading up to the contract . The manifestly disadvantageous nature of the transaction , of course , helps to prove that those conditions were present . - 48 (footnote 24 – have to refer back ) in 'The Law of Contract “ - Hugh Collins 4th edition Agree with this : Inevitably, however, when a court is called upon to put itself in the position of the parties, it will add, at least as a matter of evidence, an objective flavour. This can be seen in John Jarvis Q.C.'s conclusion:
“One can only put oneself in the position of being an independent person looking at this transaction at this stage, and I have no doubt that an independent person looking at it would have said to Mrs Markou: ‘This is wholly disadvantageous to you. You should not do it’.”229 Secondly, the question of whether or not a transaction is manifestly disadvantageous to the claimant cannot be approached solely on a mathematical basis: it involves a value judgment. Thus in Etridge (No.2) the Court of Appeal was careful to note that where:“[a] wife is asked to give a guarantee or collateral charge over the matrimonial home to support her husband's indebtedness, the transaction is not one which is necessarily to the wife's disadvantage … It may be a very difficult question in any particular case whether it is worth putting the roof over their heads at risk in order to continue to carry on the business. But if it is, then the transaction may be as much in the interest of the wife as of the husband; and if it is not, it may be as much against his interest as against hers.”230 However, on another level, Lord Nicholls did not exclude subjective considerations, as witnessed by his assumption that in many cases the new formulation would not result in different conclusions than had previously been reached. - Unconscionability and the taxonomy of undue influence *Lord Nicholls stated that the label “manifest disadvantage” attached by Lord Scarman in National Westminster Bank Plc v Morgan 112 to the second ingredient necessary to raise the presumption had been causing difficulty and given rise to misunderstanding.113 According to him, the requirement of manifest disadvantage may be apt enough when applied to straightforward transactions such as a substantial gift or a sale at an undervalue.114 He further stressed that the label was being understood and applied in a way which did not accord with the meaning intended by *J.I.B.L.R. 401 Lord Scarman.115 This view was supported by Lord Scott of Foscote when he said that the role of manifest disadvantage “demonstrates, in my opinion, the tangle that the case law in this area has got into”.116 Lord Scott of Foscote further described the function of manifest disadvantage in the following manner:
“As to manifest disadvantage, the expression is no more than shorthand for the proposition that the nature and ingredients of the impugned transaction are essential factors in deciding whether the evidential presumption has arisen and in determining the strength of that presumption. It is not a divining-rod by means of which the presence of undue influence in the procuring of a transaction can be identified. It is merely a description of a transaction which cannot be explained by reference to the ordinary motives by which people are accustomed to act.”
In the words of Lord Hobhouse the element of manifest disadvantage should properly be regarded as evidential117 :
“It will be appreciated that the relevance of the concept of ‘manifest disadvantage’ is evidential. It is relevant to the question whether there is any issue of abuse which can properly be raised. It is relevant to the determination whether in fact abuse did or did not occur.” *What matters therefore is that the above statements show that the role of manifest disadvantage has been clarified. They also show that, in general, the requirement of manifest disadvantage remains an important ingredient in establishing undue influence, as the House of Lords clearly refused to abolish this concept. What is apparent now is that the role of manifest disadvantage has been reduced in the sense that it is merely evidential in nature. - one of the articles
It may be reasonable to assume that in ordinary circumstances a wife will naturally wish to support her husband and further his business interests, but to suggest that this means that a transaction of this magnitude does not even call for explanation, would be inappropriate. This type of transaction cannot be equated with moderate gifts to spouses, or modest charitable donations, which were the species of transaction contemplated in Allcard when the test was formulated.
However, the Morgan test went much further than Allcard. Morgan created a prerequisite, which extended to all transactions involving undue influence.33 This test requires the courts to calibrate the degree of advantage taken over the claimant, even where the transaction is as substantial as the mortgaging of the family home. It is the application by Lord Nicholls of the Morgan prerequisite in the context of the spousal scenario referred to above, which has produced such disastrous consequences for wives. Regrettably, the rejection of the label “manifest disadvantage” by Lord Nicholls did not constitute a rejection of the requirement. On the contrary, declining an invitation to depart from the decision of the House in Morgan , Lord Nicholls declared that the Morgan prerequisite was justified on grounds of common sense. Lord Nicholls felt that the prerequisite constituted an essential constraint on the potential excesses of the doctrine of undue influence. Without the prerequisite, his Lordship suggested that the presumption of undue influence would be raised by every gift by a child to a parent, every transaction between a client and his solicitor, or between a patient and his doctor. - one of the articles 3) Limits to the equitable jurisdiction of a court to relief against undue influence 'Undue influence is one of the ground of relied developed by the courts of equity as a court of conscience. The objective is to ensure that the influence of one person over another is not abused. In everyday life people constantly seek to influence the decisions of others. They seek to persuaude those with whom they are dealing to enter into transactions , whether great or small. The law has set limits to the means properly employable for this purpose.” - Royal Bank of Scotland plc v Etridge [2002] 2 AC 773 , Lord Nicholls - 749 main white book The law will investigate the manner in which the intention to enter into the transaction was secured : ' how the intention was produced' , in the oft repeated word of Lord Eldan. If the intention was produced by an unacceptable means , the law will not permit the transaction to stand. The means used is regarded as an exercise of improper or 'undue' influence , and hence unacceptable , whenever the consent thus procured ought not fairly to be treated as the expression of a person's free will. The circumstances in which one person acquires influence over another , and the manner in which influence may be exercised , vary too widely to permit of anymore specific criterion. One of the main difficulties : ascertaining limits of legitimate persuasion – differs between contexts – 751 main white book
“If manifest disadvantage is viewed as a substantive requirement, its abolition with respect to Class 1 undue influence is wholly consistent with the approach adopted by the House in the instance case, which basically treats manifest disadvantage as an evidential trigger or catalyst. But this would mean that manifest disadvantage as an evidential presumption ought to be retained even with respect to Class 1 undue influence. If, however, manifest disadvantage is viewed as a merely evidential requirement, its abolition with regard to Class 1 undue influence would appear to suggest its abolition with regard to Class 2 undue influence as well: the more so as we have already argued that there is no real distinction between Class 1 and Class 2B undue influence and, perhaps, even with respect to Class 2A undue influence. One way to resolve this difficulty is to argue that the requirement of manifest disadvantage with regard to Class 1 undue influence is substantive and not evidential in character, particularly since the rationale is grounded (as stated in Pitt) in fraud.”
The above statements clearly show that the reformulation by the House of Lords in Etridge as to how the presumptions operate causes difficulties. As Professors Phang and Tjio pointed out above, the House *J.I.B.L.R. 402 in Etridge did not appear to distinguish between the substantive and evidential aspects of the concept of manifest disadvantage.130 We would like to add that the difficulties caused by the House were demonstrated in the statements of Lord Nicholls himself:
“I return to husband and wife cases. I do not think that, in the ordinary course, a guarantee of the character I have mentioned is to be regarded as a transaction which, failing proof to the contrary, is explicable only on the basis that it has been procured by the exercise of undue influence by the husband. Wives frequently enter into such transactions. There are good and sufficient reasons why they are willing to do so, despite the risks involved for them and their families. They may be enthusiastic. They may not. They may be less optimistic than their husbands about the prospects of the husbands' businesses. They may be anxious, perhaps exceedingly so. But this is a far cry from saying that such transactions as a class are to be regarded as prima facie evidence of the exercise of undue influence by husbands.”131
He later added:
“I have emphasised the phrase ‘in the ordinary course’. There will be cases where a wife's signature of a guarantee or a charge of her share in the matrimonial home does call for explanation. Nothing I have said above is directed at such a case.”132
The above statements of Lord Nicholls signify that the newly suggested terminology of “calling for an explanation” does not in the real sense remove the confusing or misleading features of manifest disadvantage. They also show that under the new test of “calling for an explanation”, one must still compare the financial disadvantage that the plaintiff suffered with the nature of the relationship between the parties, to determine whether it cannot be explained by reasons other than exertion of undue influence. The new terminology of “calling for explanation” is therefore not free from vagueness, since a wife's guarantee or surety over her matrimonial home to secure her husband's debts cannot be explained by the marital bond on the one hand, and on the other hand, because of the benefit that she may derive if by virtue of the loan offered by a bank, the husband succeeded in his business ventures.133 In short, the approach of Lord Nicholls in Etridge above can be summarised as follows: even thoughLord Nicholls expressed his discomfort with the label of manifest disadvantage for giving rise to ambiguity, he continued to accept the concept of manifest disadvantage. This became clear when he approved the test outlined by Lindley L.J. in Allcard v Skinner which was adopted by Lord Scarman in Morgan – one of the articles he label of “manifest disadvantage” was replaced by “transactions that call for explanation”. However, even as Lord Nicholls rejected the usage of the label of “manifest disadvantage”, he embraced the principle. The role of “manifest disadvantage” has been reduced in Class 2 undue influence as discussed above, merely performing a sifting function for the operation of the presumption of undue influence. As a result, the concept of manifest disadvantage has also been unnecessarily complicated since it has resulted a blurring between Class 1 and Class 2 undue influence. This article has examined the post-Etridge cases to see whether the position has been clarified. Unfortunately, the usage of the label of “manifest disadvantage” continues in the later decisions as discussed above. Therefore it is not extreme to state that the nature of undue influence in bank-lending transactions remains obscure. - one of the articles * The nature of the requirement for manifest disadvantage is in itself controversial. The suggestion is that in cases involving presumed undue influence, in order to invoke a shift in the burden of proof, it is not enough simply to establish a relationship of trust and confidence. The claimant must also satisfy the court that she has suffered a disadvantage as a result of the transaction. Moreover, the degree of disadvantage occasioned to the claimant, and the advantage taken, must be sufficiently clear and obvious (“manifest”) so as to raise the presumption that the transaction is explicable only on the basis that it has been procured by the exercise of undue influence. Lord Nicholls traces the origins of the requirement for manifest disadvantage to the case of Allcard v. Skinner. 15 In Allcard , Lindley L.J. stated that where a gift of a small amount is made, some proof of the exercise of undue influence is required which goes beyond merely establishing the existence of the influence. In other words, in cases involving minor, insubstantial gifts, the claimant must prove actual undue influence, and cannot simply rely on the presumption. This is because the doctrine of undue influence applies only to transactions “not to be reasonably accounted for on the ground of friendship, relationship, charity or other ordinary motives on which ordinary men act.”16 - one of the articles This is reflected in the cases on undue influence where claimant-sided causal-connection and status approaches are also evident. In most cases, relief is granted because the claimant is subject to excessive influence and there is a causal connection between this and the resultant transaction; whilst the defendant's conduct is largely irrelevant. However, as we have seen, this does not mean that undue influence is not based on unconscionability. Here again the constituent elements of undue influence serve, perhaps unwittingly, as a means of identifying “unconscionable” transactions. Furthermore, there is an overriding, explicit, unconscionability requirement in cases of undue influence, albeit often overlooked. We would suggest that the unconscionability-based nature of undue influence should be more openly recognised and that the unconscionable bargain doctrine, despite its inherent difficulties, may assist in this process. Such recognition would appear more conducive to the development of clear, coherent and rational rules.247 Moreover, transparency and the development of coherent rules are important ingredients in rebutting the, sometimes over-zealous,248 claim that unconscionability varies with the length of the Chancellor's foot. - one of the articles