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Murdoch's Term of the Week: Undue Influence

To paraphrase Keane, equity does not exist to protect individuals from the consequences of their own folly, but where it can be proved that a particular transaction is a direct result of dominion exercised by one party over another, then it falls to the courts to intervene. This week's TOTW appears often in court pleadings and exam papers alike.

 

Undue Influence

The equitable doctrine under which a court will set aside an agreement or a disposition of property made by a person under circumstances which show, or give rise to the presumption, that the person has not been allowed to exercise a free and deliberate judgement in the matter.

A presumption of undue influence arises in transactions between parent and child, solicitor and client, trustee and beneficiary, guardian and ward, physician and patient, but not husband and wife.

Where the relationship between the donor and the donee is such as to give rise to the presumption of undue influence and it is shown that a substantial benefit has been obtained, the onus lies on the donee to establish that the gift or transaction resulted from the free exercise of the donor’s will: Carroll v Carroll [2000 SC] 1 ILRM 210; [1999 SC] 4 IR 241. The court interferes not on the ground that any wrongful act has been committed by the donee, but on public policy grounds, and to prevent the relations which existed between the parties and the influence arising therefrom, from being abused (ibid Carroll case).

Once a relationship giving rise to a presumption of undue influence is established, and where it has been shown in evidence that a donee has received a substantial benefit, the onus lies on the donee to establish that the gift or transaction resulted from the free exercise of the donor's will. That onus can be discharged by evidence showing that the gift was the independent and well understood act of a person in a position to exercise free judgment: MC (A ward of court) v FC, JH and JH trading as H Brothers [2013] IEHC 272; [2013] IESC 36; [2014 SC] 1 ILRM 1.

The presumption may be rebutted by evidence eg that the other party had independent legal advice and took it; it may also be rebutted by proof that the transaction was the result of the free exercise of independent will by the other party: Provincial Bank v McKeever [1941] IR 471.

A contract induced by undue influence is voidable at the option of the party influenced; however, conduct by that person after the undue influence has ceased may amount to an affirmation of the contract: Allcard v Skinner [1887] 36 Ch D 145.

A person dealing with his own property is not entitled to the same amount of protection as a person called upon to give a consent in relation to a dealing with other property eg under the Family Home Protection Act 1976 where there is another’s interest: Bank of Nova Scotia v Hogan [1997 SC] 1 ILRM 407; [1996 SC] 3 IR 239. See also Morley v Loughnan [1893] Ch 736; Leonard v Leonard [1988] ILRM 245; McGonigle v Black [1989] 7ILT Dig 103. The Law Society has recommended that to overcome any challenge to a voluntary transaction where a solicitor acts for the transferor and transferee, he should ensure (a) that independent advise, based on the full facts, is obtained, (b) that that advice is stored on the main transfer file, and (c) that the transferee is not present when the transferor is instructing the solicitor in relation to the proposed transaction: practice note in Law Society Gazette (Nov 2003) 43. See also Electoral Act 1992 s.136; Merchant Shipping (Salvage and Wreck) Act 1993 s.19. See DURESS; IMPROVIDENT TRANSACTION; INEQUALITY OF POSITION; INSTRUCT.

 

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