Undue Influence Cases(question n answers)2023

Undue Influence CasesBank of Credit and Commerce International SA v Aboody 1992 - correct answer A husband exerted actual undue influence over his wife in order to get her to sign a charge securing the family home on the debts owed by the company in which the husband and wife owned shares. The couple were unable to repay the mortgage and the bank sought to repossess the home. The wife sought to have the mortgage set aside on the grounds that it was procured by actual undue influence of the husband. An example of actual undue influence. This case failed because of the need to establish a 'manifest disadvantage'. Slade LJ set out requirements of actual undue influence (a) the other party to the transaction had the capacity to influence the complainant (b) the influence was exercised (c) its exercise was undue (d) its exercise brought about the transaction (The need to establish a 'manifest disadvantage' is no longer required. (CIBC Mortgages v Pitt)) CIBC Mortgages plc v Pitt and Another 1993 - correct answer A husband pressured his wife into remortgaging their home in order to buy shares. The wife did not read the documents that she signed. The husband was unable to keep up payments and the mortgage company sought possession of the house. The wife claimed undue influence. the wife had no independant advice. Court established the principle that the question is whether the bank had actual or constructive notice (which would occur where the creditor failed to take reasonable steps once put on enquiry.) The Bank would be put on enquiry were there was an "emotional tie" between the debtor and guarantor and the transaction was not of financial advantage to the guarantor. In this case the bank weren't put on enquiry a it was a straightforward loan for purchase of property and wife seemed to be joint applicant not guarantor as such. In a case where actual undue influence can be established it is not necessary to prove any manifest disadvantage. Lloyds Bank ltd v Bundy 1975 - correct answer C was asked by his bank to guarantee his son's overdraft by putting up his farm as security. The son was unable to pay his debts and the bank sought to repossess the farm. C claimed undue influence. He had been a long term customer of the bank (whom he trusted) and they had not warned him of the risks attached to the guarantee. the bank could not discharge the burden of giving independent advice itself because of its financial interest and therefore it was incumbent on them to recommend to the father to seek further advice. Though there is not a presumption of a relationship of trust between banker and customer, there was in this case a de facto relationship of trust due to evidence provided.