3. UNDUE INFLUENCE
OVERALL SUMMARY AND EXAMINATION OUTLINE
Chloe T 14
, 1. DEFINITION
Undue influence is concerned with the situation in which one party either employs improper tactics or abuses his position
of trust or influence over the other in order to secure the other’s agreement to a contractual bargain.
Where undue influence is established, the agreement which was induced thereby is voidable at the election of the victim.
As a remedy in equity, rescission is subject to the usual bars to equitable relief and may be made subject to such
conditions as appear necessary to do ‘practical justice’ between the parties.
2. DETERMINING THE CLASS OF UNDUE INFLUENCE
There are two classes of undue influence: actual undue influence and presumed undue influence. According to Lord
Browne-Wilkinson in Barclays Bank plc v O’Brien:
Class 1: Actual Undue Influence
In these cases, it is necessary for the claimant to prove affirmatively that the wrongdoer exerted undue influence on
the complainant to enter into the particular transaction which is impugned.
Class 2: Presumed Undue Influence
In this cases, 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 it is fair to presume that the wrongdoer
abused the relationship in procuring the complainant into entering into the impugned transaction. In class 2 cases
therefore there is no need to produce evidence that actual undue influence was exerted in relation to the particular
transaction impugned: once a confidential relationship has been proved, the burden then shifts to the wrongdoer to
prove that the complainant entered into the impugned transaction freely, for example by showing that the
complainant had independent legal advice. Such a confidential relationship can be established in two ways:
Class 2A: Certain relationships
(for example solicitor and client, medical advisor and patient) as a matter of law raise the presumption that undue
influence has been exercised.
Class 2B:
Even if there is no relationship falling within 2A, if the complainant proves the de facto existence of a relationship
under which the complainant generally reposed trust and confidence in the wrongdoer, the existence of such
relationship raises the presumption of undue influence. In a class 2B case therefore, in the absence of evidence
disproving undue influence, the complainant will succeed in setting aside the impugned transaction merely by proof
that the complainant reposed trust and confidence in the wrongdoer without having to prove that the wrongdoer
exerted actual in undue influence or otherwise abused such trust and confidence in relation to the particular
transaction impugned.
2.1 ACTUAL UNDUE INFLUENCE (CLASS 1)
For this class, there are no circumstances in which undue influence may be presumed, so the party alleging undue
influence must prove that at the time of the contract, they were not able to exercise free will in entering into it.
Williams v Bayley (1866)
Facts A young man forged his father’s signature on some promissory notes and presented them to a bank, which discovered
the forgery. At a meeting between the bank, the father and the son, the bank threatened to prosecute the son unless
some satisfactory arrangement could be reached. As a result, the father entered into an agreement to mortgage his
property to pay for the notes.
Held The agreement was set aside on the grounds of UI since the father couldn’t have entered the agreement voluntarily.
Diners Club international (Hong Kong) v Ng Chi Sing and Ng Yan Kiang (1987)
Facts 3 employees of a credit card company confronted Ng by surprise at his home after 7:00 pm. Over a period of about 4
hours, they demanded that Ng signed guarantees of his son’s outstanding credit card debts. They threatened that unless
Ng did so as they demanded, they would report his son to the Commercial Crime Bureau of the Royal Hong Kong Police.
Ng was 60 years of age and partially deaf. He was given no opportunity to reflect, take advice or consult with his son.
Ng signed the guarantees.
Held The Hong Kong Court of Appeal held the guarantees were not applicable to the son’s existing debts as a matter of
construction but accepted that they would in any even have been voidable for undue influence.
Chloe T 15
OVERALL SUMMARY AND EXAMINATION OUTLINE
Chloe T 14
, 1. DEFINITION
Undue influence is concerned with the situation in which one party either employs improper tactics or abuses his position
of trust or influence over the other in order to secure the other’s agreement to a contractual bargain.
Where undue influence is established, the agreement which was induced thereby is voidable at the election of the victim.
As a remedy in equity, rescission is subject to the usual bars to equitable relief and may be made subject to such
conditions as appear necessary to do ‘practical justice’ between the parties.
2. DETERMINING THE CLASS OF UNDUE INFLUENCE
There are two classes of undue influence: actual undue influence and presumed undue influence. According to Lord
Browne-Wilkinson in Barclays Bank plc v O’Brien:
Class 1: Actual Undue Influence
In these cases, it is necessary for the claimant to prove affirmatively that the wrongdoer exerted undue influence on
the complainant to enter into the particular transaction which is impugned.
Class 2: Presumed Undue Influence
In this cases, 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 it is fair to presume that the wrongdoer
abused the relationship in procuring the complainant into entering into the impugned transaction. In class 2 cases
therefore there is no need to produce evidence that actual undue influence was exerted in relation to the particular
transaction impugned: once a confidential relationship has been proved, the burden then shifts to the wrongdoer to
prove that the complainant entered into the impugned transaction freely, for example by showing that the
complainant had independent legal advice. Such a confidential relationship can be established in two ways:
Class 2A: Certain relationships
(for example solicitor and client, medical advisor and patient) as a matter of law raise the presumption that undue
influence has been exercised.
Class 2B:
Even if there is no relationship falling within 2A, if the complainant proves the de facto existence of a relationship
under which the complainant generally reposed trust and confidence in the wrongdoer, the existence of such
relationship raises the presumption of undue influence. In a class 2B case therefore, in the absence of evidence
disproving undue influence, the complainant will succeed in setting aside the impugned transaction merely by proof
that the complainant reposed trust and confidence in the wrongdoer without having to prove that the wrongdoer
exerted actual in undue influence or otherwise abused such trust and confidence in relation to the particular
transaction impugned.
2.1 ACTUAL UNDUE INFLUENCE (CLASS 1)
For this class, there are no circumstances in which undue influence may be presumed, so the party alleging undue
influence must prove that at the time of the contract, they were not able to exercise free will in entering into it.
Williams v Bayley (1866)
Facts A young man forged his father’s signature on some promissory notes and presented them to a bank, which discovered
the forgery. At a meeting between the bank, the father and the son, the bank threatened to prosecute the son unless
some satisfactory arrangement could be reached. As a result, the father entered into an agreement to mortgage his
property to pay for the notes.
Held The agreement was set aside on the grounds of UI since the father couldn’t have entered the agreement voluntarily.
Diners Club international (Hong Kong) v Ng Chi Sing and Ng Yan Kiang (1987)
Facts 3 employees of a credit card company confronted Ng by surprise at his home after 7:00 pm. Over a period of about 4
hours, they demanded that Ng signed guarantees of his son’s outstanding credit card debts. They threatened that unless
Ng did so as they demanded, they would report his son to the Commercial Crime Bureau of the Royal Hong Kong Police.
Ng was 60 years of age and partially deaf. He was given no opportunity to reflect, take advice or consult with his son.
Ng signed the guarantees.
Held The Hong Kong Court of Appeal held the guarantees were not applicable to the son’s existing debts as a matter of
construction but accepted that they would in any even have been voidable for undue influence.
Chloe T 15
