There has been no express statements made with respect to the elements of undue influence from my research so far, but from my readings I am of the view that two elements can be established:
Elements of Undue Influence
- Agreement
- Improper pressure without violence
Remedies available to an aggrieved person is to set agreement aside as the contract is voidable
Undue influence may be classified into Actual or Implied as held by the House of Lords in the case of Royal Bank of Scotland v Etridge (2001).
On Actual influence the court held in the case of Allcard v Skinner (1887) by Lindley LJ as some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating and generally, though not always, some personal disadvantage gained.
On Actual influence it must in fact be shown that the wrongdoer really acted with conscious effort to unduly influence the aggrieved party to the agreement.
On Actual influence, the House of Lords held in CIBC Mortgages v Pitt (1993) that there is no further requirement in cases of this kind that the transaction must be shown to be the manifest disadvantage of the party seeking to set it aside.
On Implied influence, the complainant only has to show, in the first instance, that there was a relationship of trust and confidence between the complainant and the wrongdoer of such a nature that is fair to presume that the wrongdoer abused the relationship in procuring the complainant to enter the impugned transaction. In addition it must be shown that the transaction was manifestly disadvantageous to the party alleged to be influenced as held in the case of National Westminster Bank v Morgan (1985).
Two ways trust and confidence may be established as a matter of law (Relationships such as parent-child, solicitor-client, doctor-patient, trustee-beneficiary, religious adviser-disciple, with the exception of husband-wife and employer-employee). The only requirement is to prove the relationship under which trust and confidence were generally reposed in the wrongdoer.
The relation of banker and customer will not normally give rise to a presumption of undue influence, but it can do so in exceptional cases if the customer has placed himself entirely in the hands of the bank and has not been given the opportunity to seek independent advice, as held in the cases of Lloyd’s Bank v Bundy (1974) and National Westminster Bank v Morgan (1985).
Unlike Actual influence, Implied influence pertaining to the above presumptions must be to manifest disadvantage of the part claiming undue influence as held in the cases of National Westminster Bank v Morgan (1985) and Barclays Bank v Coleman (2000).
The remedy in cases of undue influence is rescission. Damages are not available. Where rescission is ordered, the whole transaction will be set aside as held in the case of TSB Bank v Camfield (1995) and Dunbar Bank v Nadeem (1998)
I has been held that the fact that restitutio in integrum is impossible will not be a bar to rescission in the cases of Mahoney v Purnell (1996) and Cheese v Thomas (1994).
I am if the view that with respect to a bank and a micro finance institution, where the facts are such that one was acting as a customer of the other the principle of undue influence may arise in an implied form of undue influence, however where both were acting independent of the other in a contractual sense, actual undue influence may arise if the facts and circumstances so require.
In case of the former the case of Lloyd’s Bank v Bundy (supra) will be enough authority to support the proposition that there was an impliedly undue influence on the part of the customer of the plaintiff’s bank. The court held that in ordinary circumstances, a bank doesn’t incur the duty consequent upon a special relationship where it obtains a guarantee from a customer. But once it is possible for a bank to be under that duty, it is, as in the present case, simply a question for ‘meticulous examination’ of the particular facts to see whether that duty has arisen. On the special facts here it did arise and had been broken.
In the latter (Actual undue influence), the case of Barclays Bank v Caplan (supra) the chancery division held that at common law, where an instrument contained legally objectionable feature which were unenforceable against one party, they might be severed from the rest of the instrument if:
- The enforcement feature is capable of being removed by the exclusion of words, without the necessity of adding to or modifying the wording of what remained, and
- Its removal did not alter the character of the instrument or the balance of rights and obligations contained in it.