Originally as to overpower the volition without

Originally
established as a fundamental principle in ‘Allcard’1
1885, undue influence is an equitable doctrine
that involves an individual using their position of power to unfairly procure
another person. In ‘Hall v Hall’1868,
J P Wilde distinguished between persuasion and duress stating that, “Persuasion is not unlawful, but pressure of
whatever character if so exerted as to overpower the volition without
convincing the judgment …, will constitute undue influence…”2
Thus, a claim of undue influence will be struck down on the grounds that it was
‘obtained by the mortgagee directly, or by the undue influence of a third party
that is attributable to the mortgagee. Despite this, undue influence has been
regarded as a ‘favourable defence’ for mortgagor’s attempting to resist claims
for possession by the mortgagee.3

Ultimately, ‘a mortgage will be set aside for undue influence
in so far as it binds the ‘victim’ when either there is ‘actual undue
influence’ or ‘presumed undue influence’.’4
Actual undue influence arises where the claimant proves affirmatively that
undue influence has been exerted.5
In principle, something must be “done to twist the mind of the doner.6
Thus, it is enough that the victim was persuaded to enter into a transaction
that they would have not otherwise entered into.7
Proving actual undue influence is relatively simple, providing the plaintiff
can also prove the absence of consent. ‘Steeples v Lea 1998 confirms this as
it emphasises that if the plaintiff can prove that s/he were prevented from
making a ‘free’ choice, they will be protected from possession.8
Arguably, the ease of a plaintiff to prove the presence of actual undue
influence restricts the capacity of a mortgagee because they cannot recover for
possession in cases of evident coercion or indirect pressure9
by the husband or wife.

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The house of lords in ‘Stevens v Leeder’ 2005 highlighted a critical
point, arguing that if actual undue influence is proved, it is not necessary
for the “victim’ to establish that the transaction was to their ‘manifest’
disadvantage”.10 The
principle of a manifest disadvantage was defined as “a disadvantage
sufficiently serious to require evidence to rebut the presumption that in the
circumstances of the relationship between the parties it was procured by the
exercise of undue influence.”11
However, this was later overruled in ‘CIBC Mortgages plc v Pitt, to the
mortgagee’s detriment because a plaintiff can prove actual undue influence,
without establishing a manifest disadvantage, leaving the mortgagee unable to
secure possession.

 

 The conventional
example of a man placing a shotgun to his wife’s head unless she signs the mortgage12
underlines the limitations for a mortgagee because any wrongdoing by the
husband is not compensated at all. Although, it can be argued that some protection
is given to the mortgagee as the legal burden of proving undue influence
always rests on the person alleging it.13
If the claimant cannot prove actual undue influence occurred, the mortgagee
would be entitled to possession of the property. This is supported by Lord
Scott’s judgement in ‘Etridge’, stating that “Equity does not protect people
from their own folly, lack of understanding or hastiness.”14
His comments can be seen as encouraging to mortgagee’s because he suggests that
those who are responsible for their loss should not remain protected by the
law.

 It can also be argued that
distinguishing between what is deemed acceptable influence and what isn’t is
difficult to establish given the subjective nature of the doctrine. This is
supported by the fact that there aren’t any legislative acts which specifically
outline conduct that constitutes actual undue influence. This acts as a
detriment to both the mortgagee and mortgagor as both parties are not fully
informed of the type of pressure and the level of pressure required to prove
actual undue influence.15

Alternatively, undue influence may be presumed16,
‘irrebutably’.17 Originally,
‘In Bank of Credit and Commerce International SA v Aboody’ Slade LJ
adopted the classification class 1 for actual undue influence, and class 2 for
presumed undue influence.18
This was subdivided into class 2A which addresses the presumption that X
exerted pressure over Y because of the nature of the relationship.19
Relationships including doctor/patient and solicitor/clients fell within this
class, where the law presumed undue influence had been exercised. Contrastingly,
class 2B asks whether X can show that he or she placed trust and confidence in
Y, leaving Y to prove the contrary.20
The ease for a plaintiff to prove class 2B is underlined by the fact that they
would succeed by ‘merely proving the relationship’, unless ‘there was evidence
disproving the undue influence’.21
In principle, class 2B mainly addresses husband/wife scenarios, with the
presumption that undue influence will arise so long as ‘one person placed so
much confidence in the other’.22
Essentially, the initial onus lies with the claimant having to prove solid
grounds as to why the charge of possession should not be executed.  If this can be established, there may be a
shift in the burden of proof, ‘so that the responsibility then falls on the
bank to explain why the transaction entered was one-sided.’23
Should the burden transfer onto the mortgagee, the presumption is that undue
influence will only exist if the ‘wrongdoer cannot prove the transaction’.24

A fundamental issue arises with mortgagee’s in tripartite contractual
relationships, where the wife acts as a guarantor to her husband, who uses their
home as security to the bank. Whenever this occurs, the mortgagee is subject to
the risk that the wife did not freely consent to the transaction, so it is
essential that the bank takes reasonable steps to ensure consent. In ‘Etridge’, the court stated that “The
furthest a bank can be expected to go is to take reasonable steps to satisfy
itself that the wife has had brought home to her, in a meaningful way, the
practical implications of the proposed transaction”.25
These ‘reasonable steps’ can be obtained once the wife obtains ‘independent
legal advice’ from a solicitor. They recognise that although this doesn’t
completely rule out undue influence, “it does mean that a wife enters into a
transaction with her eyes open, even if the transaction is considered
“financially unwise”.26
In principle, the general rule implies that
“the solicitor should not be acting in the same transaction for the person who,
if there is any undue influence, is the source of that influence.”27
However, the absence of legal advice is not decisive in any case of undue
influence28 as
‘Gold v Rosenberg’ illustrates that a
mortgagee may not even have to take reasonable steps to give ‘independent legal
advice’ if two factors are met: do they understand the transaction that is
proposed to them, and are they free to decide in accordance with their own
will.29
 Thus, providing the mortgagee has
lawfully taken ‘reasonable steps’, they are entitled to cease the matrimonial
home from the plaintiff.

In
conclusion, the mortgagee’s capacity is majorly restricted because they are
unable to secure the matrimonial home if actual undue influence is proved.
However, their ability to rebut the presumption in cases dealing with presumed
undue influence contradicts the statement, instead highlighting how they can
secure the home by taking ‘reasonable steps’ such as the providence of ‘independent
legal advice’.

 

1 ‘Allcard v Skinner’ 1887

2 ‘Hall v Hall’ 1868

3 Martin
Dixon and Gerwyn Griffiths ‘Land law 2009-2010’ (6th Edn, Routledge-Cavendish
2009) p.201.

4 Martin
Dixon, ‘Modern land law’ (10th Edn, Routledge 2016) p.423.

5 Ibid.

6 ‘Daniel v Drew’ 2005

7 ‘Barclays Bank v O’Brian’ 1992

8 ‘Steeples v Lea’ 1998

9 N
Enonchong, Duress, Undue Influence and Unconscionable Dealing (2006),
para 8-013.

10 ‘Stevens v Leeder’ 2005

11 ‘Royal Bank of Sctoland plc v Etridge’ 2001

12 See footnote 36.

13 Tina Yee, ‘THE
ETRIDGE INFLUENCE ON UNDUE INFLUENCE’:’ “ATTEMPTS AT FUSION WITH DURESS
AND UNCONSCIONABILITY” 2008 PL 1

14 Ibid.

15 See footnote 30.

16 ‘BCCI v Amoody’ 1990

17 see footnote 36.

18 See footnote 34.

19 See footnote 36.

20 Dov Ohreinstein, ‘UNDUE
INFLUENCE AND DURESS’ (Radcliffechambers.com)  accessed
15 January 2018

21 Ibid.

22 See footnote 34.

23  Peter Sparkes, ‘A new land law’: Undue Influence and any other equitable
misconduct (2nd Edn, Hart Publishing Ltd, 2003) p.685

24 Fiona Burns, ‘Undue
Influence Inter Vivos And The Elderly’ (Austlii.ed.uau,2002)  accessed
15 January 2018

25 See footnote 34.

26 Ibid

27 Ibid.

28 See footnote 39.

29 ‘Gold v Rosenberg’
1997