In Nature Resorts Ltd v First Citizens Bank Ltd [2022] UKPC 10 ('Nature Resort') on 4.4.22, Lord Briggs and Lord Burrows JJSC gave the judgment of the Board (Lord Kitchen and Lady Rose JJSC agreeing; Lady Arden dissenting). The judgment commences with:
'It is accepted that the law on undue influence in Trinidad and Tobago is the same as that in English law. This case therefore requires the Board to examine and apply the law on undue influence that was so rigorously and helpfully analysed by the House of Lords in the leading modern case of Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 (“Etridge”).' (paragraph 1)
Under the heading 'The law on undue influence', Lord Briggs and Lord Burrows JJSC said, at paragraphs 10 to 15:
'10. Putting to one side illegitimate threats (which are nowadays better viewed as falling within the doctrine of duress: see Times Travel (UK) Ltd v Pakistan International Airlines Corpn [2021] 3 WLR 727, paras 8–9 and 89–90) undue influence is concerned with a situation where, by reason of the relationship between them, one party (B) has such influence over the other (A) that A does not exercise a free judgment, independent of B, in relation to the making of a transaction between A and B (or, in a three-party situation, between A and a third party, C).
11. Ever since Allcard v Skinner (1887) 36 Ch D 145, it has been commonplace to divide undue influence into two categories: actual and presumed. But in Etridge the House of Lords made clear that undue influence is a single concept. It does not have two different forms. The correct analysis of the two categories is that they refer to different ways of proving undue influence. Presumed undue influence refers to where the person alleging undue influence relies on an evidential presumption. Actual undue influence refers to where the person alleging undue influence relies on direct proof (of A's conduct, within a relationship with B, which led to B not exercising a free and independent judgment).
12. As Etridge also made clear, there are two requirements for establishing the (rebuttable) presumption of undue influence. First, there must be a relationship of influence. This may be established on the facts. But in respect of some relationships there is what is commonly referred to as an irrebuttable legal presumption (but is more appropriately referred to as a legal rule) that the relationship is one of influence (but note not undue influence). Examples of such relationships are doctor and patient (Mitchell v Homfray (1881) 8 QBD 587), spiritual adviser and follower (Allcard v Skinner), parent and young child (Lancashire Loans Ltd v Black [1934] 1 KB 380) and, of direct relevance to the facts of this case, solicitor and client (Wright v Carter [1903] 1 Ch 27). The second requirement is that the transaction must not be readily explicable on ordinary motives. The House of Lords preferred this test, which uses the words of Lindley LJ in Allcard v Skinner, to a test of whether the transaction was manifestly disadvantageous which had been put forward by Lord Scarman in National Westminster Bank plc v Morgan [1985] AC 686, 703–707. The underlying idea behind the test is that the nature and/or contents of the transaction must make one conclude, in the context of the relationship of influence, that, absent evidence to the contrary, undue influence has been exercised. A contract between A and B which is substantively very unfair to A stands on one side of the line: a Christmas present by A to B stands on the other side of the line.
13. If those two requirements are satisfied, so that there is a presumption of undue influence, the burden of proof shifts and it is for the party seeking to uphold the transaction to rebut the presumption by showing that A was not acting under undue influence (ie that A exercised free and independent judgment) when entering into the transaction. Although neither necessary nor conclusive, the main method of rebuttal is to show that A obtained the fully informed and competent independent advice of a qualified person, most obviously a lawyer: see Inche Noriah v Shaik Allie Bin Omar [1929] AC 127 and Etridge.
14. In a three-party situation, where there is undue influence by B over A such that A enters into a transaction with C, the transaction will be voidable by A provided that C had notice of the undue influence or that B was acting as C's agent in procuring the transaction. The concept of notice, and how it applies in this context, was explained in detail in Etridge. That the law of agency has a role to play in the context of undue influence was accepted in cases such as Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923, 972 and Barclays Bank plc v O’Brien [1994] 1 AC 180, 191, 195; see also Chitty on Contracts, 34th ed (2021), para 10-139.
15. Finally, it should be pointed out that there is no need to classify undue influence as a civil wrong (as opposed to a factor vitiating a transaction) in order to explain why transactions are set aside for undue influence: see Birks and Chin, “On the Nature of Undue Influence” in Good Faith and Fault in Contract (eds Beatson and Friedmann) (1995), pp 57–97. This was clearly explained by Mummery LJ (with whom Pill and Jacob LJJ agreed) in Pesticcio v Huet [2004] WTLR 699 at para 20:
“Although undue influence is sometimes described as an ‘equitable wrong’ or even as a species of equitable fraud, the basis of the court's intervention is not the commission of a dishonest or wrongful act by the defendant, but that, as a matter of public policy, the presumed influence arising from the relationship of trust and confidence should not operate to the disadvantage of the victim, if the transaction is not satisfactorily explained by ordinary motives … A transaction may be set aside by the court, even though the actions and conduct of the person who benefits from it could not be criticised as wrongful.”'
In Nature Resorts, Lord Briggs and Lord Burrows JJSC refer to Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 as the leading modern authority in this area. It certaintly is that, and it could easily have been the authority selected as the Collatory Case. For an analysis of Etridge (No 2), Nature Resorts and a further authority, One Savings Bank plc v Waller-Edwards [2024] EWCA Civ 302, Court of Appeal (Sir Geoffrey Vos MR, Peter Jackson, Falk LJJ), see the following article.
Collatory Case Series
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