Undue influence has been developed as a concept in the courts of equity to prevent one person abusing his influence over another to coerce him improperly to enter into a certain transaction. Undue influence can take different forms and the following are only examples - bullying, emotional blackmail, threats to withhold support or assistance, frightening the vulnerable with misrepresentation of the facts and implications of failing to transact in the way proposed.
Historically, the courts have scrutinised (amongst others) the following transactions for undue influence - contracts, lifetime gifts, testamentary gifts, loans, sales of shares and giving of security. The beneficiary of the transaction can be the influencing party or a third party.

Undue influence in relation to testamentary gifts is dealt with separately below. Undue influence in other circumstances is classified in two categories but there may be overlap between them.

1 Actual or express undue influence -the complaining party will be required to prove that he did not enter into the transaction fully informed and of his own free will but that he only did so as a consequence of undue influence exerted upon him.

2 Presumed undue influence - the complaining party will be required to demonstrate that the transaction under scrutiny appears so suspicious that it requires some explanation. In circumstances where there is a relationship of trust and confidence between him and the influencing party of such a nature that it is fair to presume that the influencing party procured him to enter into the transaction, the burden of proof shifts to the influencing party to demonstrate that the complaining party entered into the transaction of his own free will and fully informed.

Until fairly recently, there were considered to be two classes of this type of relationship:

2.A Certain well-known relationships which are presumed at law to be relationships of trust and confidence, for example, solicitor and client, trustee and beneficiary.

2.B Individual cases considered on their facts where the complaining party shows by reference to evidence that he was accustomed to repose trust and confidence in or perhaps was totally dependent upon the influencing party, for example, husband and wife.

In recent cases however the classification above has not been adopted and so the current position appears to be that there are relationships of trust and confidence that cannot be rebutted at law like solicitor and client, and others which can be established only in specific circumstances by affirmative evidence.

Notice
If a party is induced by the undue influence of a party to enter into a transaction with a third party, the complaining party may be able to set aside the transaction if the third party had actual or constructive notice of the undue influence. For example, if a wife agrees to provide security for the debts of her husband by allowing a charge to be taken over her share of the equity in the matrimonial home, a bank should make reasonable enquiries to satisfy itself that the wife's agreement to this transaction has been properly obtained, usually by the wife obtaining independent legal advice, otherwise the bank may be considered on constructive notice of undue influence.

Testamentary Gifts
The concept of undue influence in probate is a narrower concept. In probate claims, undue influence will never be presumed. There is only actual or express undue influence and the burden of proof will be on the complaining party. Accordingly, a complaining party must provide clear evidence of such undue influence in order to prove the complaint.

This note is intended to provide general information and is not intended to be comprehensive nor to provide specific legal advice and should not be acted or relied upon as doing so. For further information, please contact any member of the Trusts & Fiduciary Disputes Team.