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Fox O'Mahony, Lorna; Devenney, James --- "Undue Influence, the Elderly and Equity Release Schemes" [2008] ElderLawRw 8; (2008) 5 Elder Law Review, Article 8

UNDUE INFLUENCE, THE ELDERLY AND EQUITY RELEASE SCHEMES

By Dr Lorna Fox O’Mahony and Dr James Devenney[*]

(1) INTRODUCTION

Issues relating to the elderly, their homes and the transactions they enter into have attracted considerable attention, both in England and Wales and elsewhere, in recent years.[1]

One central concern has related to the dramatic increase in the use of equity release schemes in recent years. This article explores the social, economic, political and legal contexts in which this growth in the market for equity release products has taken place. It also considers the arguments for constructing elderly homeowners as ‘vulnerable’ in the context of equity release, and reviews the legal mechanisms currently available in English law to address these issues. In particular, this paper maintains that the equitable doctrine of undue influence has an important role to play in providing a measure of legal protection for elderly homeowners who engage in these financial transactions.

(2) FINANCIAL TRANSACTIONS AND THE ELDERLY

Recent statistics from the Office for National Statistics have highlighted the importance of ensuring that governmental and legal policy-makers are sensitive to the issues affecting Britain’s aging population. With increasing numbers of people living into very old age, and birth rates falling, the proportion of the population of England aged over 65 years of age is likely to grow from 15.6% in 2000 to 19.2% by 2021.[2]

Social, economic, and political trends in recent decades have also ensured that this elderly population will face a specific set of risks in relation to financial transactions. Furthermore, as Kutty has noted in the US context, the growth in the elderly population is, in itself, a strong justification for the proposition that: ‘[t]he economic and social wellbeing of the growing elderly population is, therefore, an important issue for society in general and for policy-makers in particular.’[3]

The financial transactions of elderly homeowners raise several specific issues linked to the factors which drive the market for equity release - patterns of income (including the growth of the ‘pension gap’ between pensioners’ incomes and their cost of living),[4] the financial management strategies adopted by elderly homeowners,[5]

and attitudes towards indebtedness, inheritance and use of equity in the owned home[6] - as well as a range of political issues including pensions, health care in old age and housing and welfare support for the elderly.[7] This article sets out to consider whether these demographic and socio-economic developments, alongside a growing population of elders (thus creating a large cohort of fixed income citizens of moderate means), demand a re-analysis of law’s approach to protecting vulnerable elders in the context of financial transactions.

Although the expansion of home ownership amongst the baby boomers has meant that a high proportion of the elderly population in the UK are now home owners,[8]

there is a notable bifurcation between assets and income within this demographic group. Although it is generally accepted that in most rich countries, including the UK and the USA, considerable progress has been made in reducing elder poverty,[9] the increase in uptake on equity release products is indicative of a pattern by which elderly home owners may be ‘asset-rich’ (or ‘house-rich’) but cash poor. Meanwhile, British government policy (following the more established practice in the USA) increasingly expects elderly homeowners to ‘use’ their homes as a repository of capital to fund expenses, particularly healthcare, in their old age: wealth tied up in the home is currently regarded as: ‘…more ‘spendable’ now than it will be ever again.’[10] The traditional idea of ‘home ownership as a repository of financial value’ focused on retaining the asset wealth represented by the property[11] has been superseded by a new expectation - which has emerged as a direct consequence of political discourse to this effect - that: ‘…housing wealth [should be used] to meet a range of household expenditures, in particular to meet the costs of care in older age, and to supplement pensions.’[12]

The equity release sector is now big business in Britain, with the market share of SHIP (Safe Home Income Plan) members reaching £1.279 billion in 2007, an 11% increase on full year figures for 2006.[13]

Indeed, a recent survey of SHIP members has predicted that their total market share for 2010 could reach £2.19 billion.[14] There is also evidence to indicate that the equity release sector is bucking credit market trends in the current mortgage crisis, with 14% growth in equity release transactions in 2008, Quarter 2 against Quarter 1,[15]

with a further 10% growth in Quarter 3.[16]

The reasons for this increase, according to industry research, is linked to increased costs for general day-to-day living, with 10% more applicants stating they simply want a better everyday life. In addition, however, equity release mortgages and home reversion plans have also been taken out by elderly homeowners to help relatives in trouble as a result of the credit crunch, either to make improvements to their property to accommodate family members moving back into the family home,[17] or to make the capital available to family members with one survey reporting that 20% of those taking out plans are using some of the money to help out family or friends at a time when they see this as being more beneficial.[18]

In some respects, elderly homeowners are facing a ‘Catch 22’: the Council of Mortgage Lenders has highlighted the potentially negative consequences of releasing capital and income through equity release for both welfare benefits and management of tax liabilities.[19]

Yet, the elderly population contains fewer wage earners, who are more likely to be reliant on public or private pensions or other private income streams. With potential costs including financial difficulties stemming from personal or spousal illness, and the effect of inflation for fixed income groups, the expectation that they will fund the costs of old age through private means rather than relying on social welfare: that is, that private means must be exhausted before public funds become available; emphasises their financial exposure. The increasing use of equity release products to cover this exposure highlights the need for closer analysis of the financial transactions that elderly home owners enter into, and the way in which law responds (or doesn’t respond) to the potential vulnerabilities of the elderly in entering into contracts which affect, or potentially affect, their owner-occupied home.

(3) THE GROWTH OF THE EQUITY RELEASE MARKET

Equity release schemes are generally marketed as products to enable elderly home owners to tap into the value of their homes – their ‘equity’ – without having to sell up altogether and move out. Although the terms of equity release products will vary, the general idea is that the homeowner receives a payment of capital, the ‘loan’, which is not scheduled for repayment by instalments, but which is secured against the equity which the borrower holds clear of any other secured debt in the owner-occupied home, and which accumulates until the property becomes ‘available’, when the elderly homeowner dies or decides to sell, at which point the creditor is entitled to execute its claim against the capital. There are as many equity release products on the market as the imaginations of credit suppliers can create, but two principal types of scheme have tended to dominate the UK market in recent years: (1) home reversion plans and (2) lifetime mortgages.

Home reversion plans involve the sale of a portion of the total value of the property to the product provider in exchange for a lump sum payment, or an income for life, or, in some cases, a combination of lump sum and income. In land law terms, this type of scheme utilises a form of co-ownership, since the ‘vendor’ continues to own a portion of the property as tenant in common with the ‘purchaser’ company. Both co-owners will benefit from any increase in value, proportionate to their shares, and the elderly occupier’s share continues to be an inheritable asset for the purposes of his or her estate. These arrangements typically include an agreement as to occupation between the co-owners (the vendor-occupier and the purchaser-credit company) that allows the occupier to continue to live in the property, paying a peppercorn ‘occupation rent’, until they die or until the house is sold.[20] A ‘lifetime mortgage’, in contrast, is more readily comparable to a standard interest-only mortgage against equity in the property, although the ‘borrower’ does not make any repayments of interest during their lifetime; rather, the ‘repayments’ due are ‘rolled up’ – or added to the mortgage capital, with the whole debt paid off when the borrower dies or when the property is sold.

Until relatively recently, British consumers approached the prospect of equity release with some trepidation, particularly in light of the negative publicity that followed the upsurge in reverse mortgages during a period of ‘boom and bust’ in the British housing market in the late 1980s and early 1990s, when many households lost their homes through repossession.[21] However, recent years have seen a major growth in the equity release market in Britain, which is attributable to several factors. The first is the rise in self-regulation amongst equity release providers in Britain, the majority of whom (approximately 90%) are members of Safe Home Income Plans (SHIP). SHIP, which was launched in 1991, describes itself as ‘dedicated entirely to the protection of planholders and promotion of safe home income and equity release plans.’[22]

All participating companies pledge to observe the SHIP Code of Practice, which binds the companies to provide a fair, easy-to-understand and full presentation of their plans, and these providers also give their customers a ‘no negative equity guarantee’, which means that they are assured that they will never owe more than the value of their homes.[23] Founded with four member companies, there are now 21 member companies, estimated to supply about 90% of equity release funds by volume in the UK.[24]

In addition to and alongside self-regulation, considerable attention has recently been focused on the government’s regulation of equity release, particularly for lenders who have not signed-up to SHIP’s Code of Practice. The ‘lifetime mortgage’ or ‘reverse mortgage’ sector has been regulated by the Financial Services Authority (FSA)[25] since it took over responsibility for regulation of the mortgage industry in October 2004,[26] and in April 2007 the FSA umbrella extended to cover home reversion plans through the Regulation of Financial Services (Land Transactions) Act 2005,[27] with a view to filling a gap that existed in the regulation of equity release products. It is interesting to note that in considering this legislation, the government recognised that purchasing an equity release product is a major decision, with tax, inheritance and long-term financial planning implications,[28] and also, crucially, that the function of regulation in this context is specifically targeted at providing information and advice. On introducing the second reading of the Bill, Lord McKenzie stated that:

“Regulation is not designed to discourage people from purchasing these products, but to help them make informed choices, offer valuable consumer protection and ensure there is a level playing field in the equity release market, most of which already falls within the scope of the FSA mortgage regulation…these are not simple products to understand, hence the need to ensure that potential purchasers receive an appropriate level of advice.”[29]

The touchstone of the legislative policy of this Act was emphasised once again in Lord McKenzie’s closing comments when he claimed that the Bill would: “…open the door to important consumer protections to be extended to vulnerable and minority consumers, level the playing field in mortgage regulation, ensure that no artificial distortions go forward, bolster consumer confidence in those products and thus help to ensure that the markets continue to develop.”[30]

As Lord McKenzie acknowledged in his speech, equity release products are generally both complex and expensive, and the provision of clearer information and advice for consumers - especially elderly consumers - to ensure that they are able to make informed decisions, is undoubtedly welcome. In addition, the requirements concerning the quality of information supplied by the equity release provider are copper-fastened by giving borrowers greater recourse to apply to the Financial Ombudsman Service to claim compensation if they believe they have been mis-sold a product.[31]

Yet, while this shift to a stronger regulatory framework for equity release products will go a long way to addressing many of the (sometimes catastrophic) difficulties encountered by British consumers who purchased these products in the 1980s and 1990s, the central thrust of this policy response has been consumer protection through regulation – that is, through measures which are targeted at the conduct of the equity release provider and the content of the products, including the clarity of the information made available in advance of the transaction. One key limitation on the statutory regulation set out in the Financial Services and Market Regulation Act 2000 is that: ‘[n]o…contravention [of the regulatory regime] makes any transaction void or unenforceable.’[32] In addition to this important constraint on the remedies available in the event of a provider acting in breach of the regulations, it is important to recognise that even where an equity release provider acts within the regulatory framework, the social and economic factors at work in the context of elderly homeowners and the release of capital from their properties, sometimes coupled with relational pressures, may still leave an informed elder in a vulnerable position, against both financial advisers and family members.

This article therefore focuses on the wider protection afforded to the elderly in connection with equity release schemes. Indeed, the suggestion that the FSA is enjoying some considerable success in improving consumer confidence[33]

makes this task particularly apposite. In this paper we will explore the nature, and extent, of the protection given to the elderly by the doctrine of undue influence in equity release schemes. In particular, we will seek to support an unconscionability-based view of undue influence. On such a view the protection afforded by the doctrine of undue influence is sensitive to the terms of the transaction, the effectiveness of any independent advice, informational inequalities and the vulnerabilities of the parties; and so can operate to fill the gap between the limits of the regulatory approach and protecting vulnerable elders against adverse equity release transactions.

(4) UNDUE INFLUENCE AND THE PROTECTION OF ELDERS IN EQUITY RELEASE SCHEMES

The doctrine of undue influence may afford the elderly some protection in relation to financial transactions involving their home.[34] Much will, of course, depend on the jurisprudential basis, and hence the essence, of the doctrine of undue influence.[35] For example, the protection provided by the doctrine of undue influence in such situations is likely to be limited[36] if the doctrine undue influence focuses solely on the capacity of the elderly person.[37] Before examining the jurisprudential basis of undue influence, it will therefore be useful to explore the parameters of the doctrine of undue influence.

(a) The Cartography of the Doctrine of Undue Influence[38]

The parameters of the doctrine of undue influence are notoriously difficult to ascertain. Indeed in Tate v Williamson[39] Lord Chelmsford L.C. famously observed that “…the Courts have always been careful not to fetter this useful jurisdiction by defining the exact limits of its exercise.”[40] Nevertheless, it is possible to sketch the contours of the doctrine of undue influence.[41] A useful starting point is the House of Lords’ decision in Royal Bank of Scotland v Etridge (No.2)[42] where Lord Nicholls stated:

“Equity identified broadly two forms of unacceptable conduct. The first comprises overt acts of improper pressure or coercion such as unlawful threats … The second form arises out of a relationship between two persons where one has acquired over another a measure of influence, or ascendancy, of which the ascendant person takes unfair advantage. An example from the nineteenth century, when much of this law developed, is a case where an impoverished father prevailed upon his inexperienced children to charge their reversionary interests under their parents’ marriage settlement with payment of his mortgage debts (see Bainbridge v Browne (1881) 18 Ch D 188).”[43]

In that case Lord Nicholls made a distinction between what might be termed non-relational undue influence, on the one hand, and what might be termed relational undue influence on the other.[44] The former finds resonance with the common law doctrine of duress, although it would appear that this aspect of the doctrine of undue influence is wider than the doctrine of duress.[45] The latter might accurately be described as the mainstay of undue influence and the relevant relationship may[46] or may not[47] be familial in nature. Of particular relevance in the present context is that the relationship might arise between an elder and their offspring,[48] carer[49] or (possibly) financial adviser.[50] In such cases undue influence may, again, take a myriad of forms. For example,[51] there may be cases where a pre-existing relationship makes one person more vulnerable to pressure from the other, or where the pressure would not be objectionable outside of a particular relationship.[52] Thus in Langton v Langton,[53] the Court noted that:

“…the defendants exerted such pressure and influence on the plaintiff that he was pressured into entering into the deed of gift and did so because of such pressure and felt that he had no other option if he was to keep the defendants happy…the plaintiff was concerned that if he did not keep the defendants happy by complying with their wishes they might cease to look after him.”[54]

Alternatively[55] undue influence may be found where one person defers their will to another[56] or where there is no “routine dependence or submissiveness…”[57] nor “unpleasantness”[58] but, nevertheless, the complainant can show that:

“…(a) the other party to the transaction (or someone who induced the transaction for his own benefit) had the capacity to influence the complainant; (b) the influence was exercised; (c) its exercise was undue; (d) its exercise brought about the transaction.”[59]

Following the House of Lords’ decision in Barclays Bank v O’Brien,[60] it became customary[61] to draw a distinction between cases of actual undue influence and cases of presumed undue influence. The concept of actual undue influence was relatively clear; it referred to situations where undue influence could be affirmatively proved.[62] By contrast, the concept of presumed undue influence was much more enigmatic, particularly as the nature and rationale(s) behind the presumption was far from clear;[63] and it appears that difficulties persist despite Lord Nicholls’ efforts, in Royal Bank of Scotland v Etridge,[64] to recast the so-called presumption of undue influence in terms of an inference of undue influence.[65]

The House of Lords in Barclays Bank v O’Brien were also of the opinion that undue influence would be presumed where (a) there was a relationship of trust and confidence between the parties, and (b) the parties entered into a transaction which was manifestly disadvantageous to the complainant.[66] The latter requirement caused difficulties particularly in the context of suretyship transactions[67] and, accordingly, in Royal Bank of Scotland v Etridge the House of Lords abandoned the ‘manifest disadvantage’ label in favour of a test based upon whether the transaction, “failing proof to the contrary, is explicable only on the basis that it has been procured by the exercise of undue influence.”[68]

In relation to the requirement that the relationship was one of ‘trust and confidence’, there were some relationships which were deemed, as a matter of law, to be such relationships and this is unaffected by the House of Lords’ decision in Royal Bank of Scotland v Etridge. These relationships, often known as ‘2A relationships’, include the relationship between a parent and an unemancipated child,[69] and the relationship between a medical adviser and advisee.[70] However, it does not include the relationship between an elder and their offspring,[71] their financial adviser or (probably) their carer.[72] Yet, if the law is to recognise a category of ‘2A relationships’,[73] there are cogent arguments to suggest that the relationships between an elder and their adult offspring, an elder and their financial adviser and an elder and their carer should be, for the reasons outlined in sections 2 and 3, included in such a category, at least in the current context.

In cases not involving a ‘2A relationship’ – formerly known as ‘2B relationships’ – the relationship has to be shown to be a relationship of trust and confidence before undue influence will be recognised by the court. Yet, the requirement that the relationship must be one of ‘trust and confidence’ is apt to mislead[74] and has been held to apply to situations where the relationship was not really one of ‘trust and confidence’. For example, it has been applied to relationships of ascendancy and dependence[75] such as existed Allcard v Skinner and Re Craig (decd).[76] Indeed in Royal Bank of Scotland v Etridge the House of Lords adopted quite a flexible approach to this requirement:

“…there is no single touchstone for determining whether the principle is applicable. Several expressions have been used in an endeavour to encapsulate the essence: trust and confidence, reliance, dependence or vulnerability on the one hand and ascendency, domination or control on the other. None of these descriptions is perfect. None is all embracing. Each has its proper place.”[77]

Such an approach finds resonance in the case of Investors Compensation Scheme v West Bromwich Building Society,[78] a case with particular significance in the context of equity release schemes, as it involved ‘Home Income Plans’ executed with elderly consumers. The Court noted that:

“…although able to understand concepts such as the borrowing of money on security and the payment of interest, the claimants were not financially sophisticated people and not in a position, without the advice of persons more expert than themselves, properly to judge the risks involved in embarking on a Home Income Plan…each of the individual claimants gave unchallenged evidence that they had confidence in and placed reliance upon the advice of FPA…”[79]

Indeed where a de facto relationship of trust and confidence, or equivalent, needs to be shown, it will be fascinating to observe how, if at all, the underlying relationship between an elder and their offspring, an elder and their financial adviser and an elder and their carer influences the way in which a court approaches the issue.[80] Burns has, for example, noted ostensible differences in the case law in respect of the court’s approach to establishing a relationship of trust and confidence between an elder and their offspring.[81] In particular, Burns observes that in some cases an elderly parent-child relationship was sufficient to establish a relationship of trust and confidence,[82] whereas in other cases more was required.[83]

(b) The Jurisprudential Basis of the Doctrine of Undue Influence

The search for the true jurisprudential basis, and hence the essence, of the doctrine of undue influence has generated a Brobdingnagian amount of academic literature.[84] Nevertheless, the jurisprudential basis of the doctrine of undue influence remains elusive.[85] Indeed in Niersmans v. Pesticcio[86] Mummery LJ stated:

“The striking feature of this appeal is that fundamental misconceptions [about the doctrine of undue influence] persist, even though the doctrine is over 200 years old and its basis and scope were examined by the House of Lords in depth…less than 3 years ago in the well known case of Royal Bank of Scotland Plc v Etridge (No.2) [2002] 2 AC 773. The continuing confusions matter. Aspects of the instant case demonstrate the need for a wider understanding, both in and outside the legal profession, of the circumstances in which the court will intervene to protect the dependant and the vulnerable in dealings with their property.”[87]

A convenient starting point for exploring the jurisprudential basis of the doctrine of undue influence is the seminal paper on the topic by Professors Birks and Chin.[88] Birks and Chin argued that “the doctrine of undue influence is about impaired consent, not about wicked exploitation.”[89] They classified the latter as defendant-sided and the former as claimant-sided, arguing that where a claimant-sided analysis is adopted “[I]t is not necessary for the party claiming relief to point to fraud or unconscionable behaviour on the part of the other.”[90] Although such a view has gained some support in the case law,[91] it is not unproblematic. For example, it tends towards a pathological view of ‘trust’,[92] and it arguably takes an unduly restrictive view of undue influence.[93] It also[94] sits uncomfortably with the language employed both by the House of Lords in its landmark decisions of National Westminster Bank plc v Morgan,[95] Barclays Bank plc v O’Brien[96] and Royal Bank of Scotland v Etridge (No 2),[97] and with recent opinions of the Judicial Committee of the Privy Council which adopt an unconscionability-based perspective of undue influence.[98]

Birks and Chin couple the concept of unconscionability to a notion of ‘wicked exploitation’.[99] However, unconscionability is a delicate concept and although few would argue that unconscionability requires malign intent, it is (perhaps) less obvious, given the connotations of conscience, that relief on the grounds of unconscionability can be claimant-sided relief.[100] Nevertheless, relief on the ground of unconscionability can be claimant-sided relief, and this can be demonstrated by reference to the unconscionable bargain doctrine, a doctrine which has both contextual and historical links with the doctrine of undue influence.[101] Many of the leading cases on that doctrine adopt a clear claimant-sided orientation. For example, in Baker v Monk,[102] in setting aside a conveyance on the ground that it was an unconscionable bargain, Turner LJ took a strongly claimant-sided approach:

I say nothing about improper conduct on the part of the Appellant; I do not wish to enter into the question of conduct. In cases of this description there is usually exaggeration on both sides, and I am content to believe that in this case there has been no actual moral fraud on the part of the Appellant in the transaction; but, for all that, in my judgment an improvident contract has been entered into.” [103]

Therefore even if, as Professors Birks and Chin argued, undue influence is based exclusively on the claimant acting under ‘excessive’ influence, it is still possible to characterise undue influence as unconscionability-based.[104] Indeed in Allcard v Skinner[105] – a case upon which Professors Birks and Chin heavily relied in support of their thesis – Bowen LJ chose to frame his judgment in the following terms:

“Passing next to the duties of the donee, it seems to me that, although his power of perfect disposition remains in the donor under circumstances like the present, it is plain that equity will not allow a person who exercises or enjoys a dominant religious influence over another to benefit directly or indirectly by the gifts which the donor makes under or in consequence of such influence, unless it is shewn that the donor, at the time of making the gift, was allowed full and free opportunity for counsel and advice outside – the means of considering his or her worldly position and exercising an independent will about it. This is not a limitation placed on the action of the donor; it is a fetter placed upon the conscience of the recipient of the gift, and one which arises out of public policy and fair play.”[106]

Professor Bigwood describes this phenomenon as: “Gestalt shifts: subtle variations in the perception of the same legal doctrine or closely related legal doctrines.”[107]

Returning to the cases on the unconscionable bargain doctrine which adopt a clear claimant-sided orientation, further analysis reveals, at least, two different approaches within them: the ‘causal-connection’ approach and the ‘status’ approach.[108] The essence of the causal-connection approach is that the resultant bargain is causally linked to the claimant’s position.[109] By contrast, the essence of the status approach is, perhaps surprisingly, that a court has the power to relieve particular sections of society from some forms of bad bargain despite the fact that there is no causal connection between the resultant bargain and the claimant’s position.[110] Whichever of these approaches is adopted, it is clear that the courts are using the components of the unconscionable bargain doctrine, and the degree to which these components exist, to form a view on whether or not the dealing was conscionable.[111]

In a similar vein, one of the current authors has argued[112] that the doctrine of undue influence is based on a notion of unconscionability which has clear parallels with the unconscionable bargain doctrine as exemplified in cases such as Evans v Llewellin,[113] Fry v Lane,[114] Baker v Monk[115] and Cresswell v Potter.[116] In particular,[117] although there is an (often overlooked) overriding unconscionability requirement to the doctrine of undue influence,[118] the existing requirements of undue influence serve as a covert means of distinguishing between conscionable and unconscionable dealings. In the remaining part of this section, we will examine some of those requirements.

(c) The degree of trust and confidence, reliance, dependency or vulnerability

We have already suggested that a finding of trust and confidence, reliance, dependency or vulnerability may be relevant to a finding of undue influence. Yet this begs a question: how much trust and confidence, reliance, dependency or vulnerability is required? Professors Birks and Chin argued that the influence needs to be “excessive”[119] and it seems that they were adopting a high threshold.[120] However, it is not at all clear that the relevant case law does adopt such a high threshold.[121] Certainly, it seems that it would usually be unnecessary to advance evidence that there has been a complete loss of autonomy.[122] Yet the issue remains hazy;[123] as James Munby Q.C., sitting as a Deputy Judge of the High Court, stated in Bank of Scotland v Bennett:[124] “It is impossible to define, and difficult even to describe, at what point influence becomes, in the eye of the law, undue.”[125]

Indeed it can be argued that this (quantitative) aspect of undue influence is used by the courts to covertly distinguish between conduct which they believe to be acceptable and conduct which they believe to be unacceptable.[126] Such a conclusion is made more tempting when it is remembered that this quantitative enquiry is a question of law,[127] the answer is dependent on the prevailing context,[128] and the answer is said to be informed by ‘public policy’.[129] Furthermore, support for this view can be found in Bank of Scotland v Bennett:[130]

“At the end of the day the question of whether or not there has, in any particular case, been actual undue influence involves a value judgment.”[131]

Therefore the degree of trust and confidence, reliance, dependency or vulnerability - together with the nature of the relationship between an elder and their adult offspring, an elder and their financial adviser or an elder and their carer – will be relevant to determining whether or not there has been undue influence.

(d) The former ‘manifest disadvantage’ requirement

The manner in which the courts approached the ‘manifest disadvantage’ requirement in cases of presumed undue influence impacted upon the practical scope of the doctrine of undue influence.[132] Likewise the manner in which the courts approach the contemporary requirement that the transaction, “failing proof to the contrary, is explicable only on the basis that it has been procured by the exercise of undue influence”[133] will have a profound effect on the scope of the doctrine of undue influence.[134] Yet it would be wrong to view transactional outcomes as merely evidential in nature. As Chen-Wishart[135] notes:

“If we diminish the importance of the unfair outcome in the story of undue influence, we run the risk of distorting the judicial decisional process, and losing (rather than gaining) a degree of consistency.”[136]

Transactional outcomes are relevant to determining whether or not there has been undue influence[137] and it is for this reason that one of the current authors[138] has argued that the House of Lords in CIBC Mortgages Plc v Pitt,[139] were wrong to say that the then requirement of a manifestly disadvantageous transaction was never relevant to actual undue influence. Thus in Dunbar Bank plc v Nadeem[140] Millett LJ concluded:

“however the present case is analysed, whether as a case of actual or presumed influence, the influence was not undue. It is impossible, in my judgment, to criticize Mr. Nadeem’s conduct as unconscionable.”[141]

Although Mrs Nadeem was a ‘mere channel’[142] for the wishes of Mr Nadeem, the latter’s conduct was not, in the opinion of Millett LJ, unconscionable as he “was not exploiting the trust reposed in him for his own benefit but seeking to turn an opportunity of his own, at least in part, to his wife’s advantage.”[143]

Furthermore, it is clear that the notion of a transaction, “failing proof to the contrary, is explicable only on the basis that it has been procured by the exercise of undue influence” is a flexible concept[144] which is, arguably, informed by a court’s normative assumptions.[145] If the latter point is correct, it will be intriguing to observe how some of the ideas discussed above - such as the idea that the homes of the elderly are repositories of capital to fund their expenses in old age – impact on the application of the doctrine of undue influence in this context.[146] Likewise, in situations where an elderly parent attempts to assist adult offspring onto the housing ladder, it will be intriguing to observe how ideas, such as the advancement of the interests of offspring, impact on the application of the doctrine of undue influence in this context. A glimpse of these socio-cultural contextual issues can be seen in Portman Building Society v Dusangh.[147] In that case an old, illiterate man mortgaged his home to support the business ventures of his son and central to the Court of Appeal’s refusal to utilise the unconscionable bargain doctrine was the view that the transaction was not to the manifest disadvantage of the father. Simon Brown LJ stated:

“…it was not manifestly disadvantageous to this appellant that he should be able to raise money…so as to benefit his son…I would agree... But I simply cannot accept that building societies are required to police transactions of this nature to ensure that parents… are wise in seeking to assist their children…In short, the conscience of the court is not shocked.”[148]

This was echoed by Ward LJ, who added that:

“…it was a case of father coming to the assistance of the son. True it is that it was a financially unwise venture…and the father’s home was at risk. But there was nothing…which comes close to morally reprehensible conduct or impropriety. No unconscientious advantage has been taken of the father’s…paternal generosity…The family wanted to raise money: the building society was prepared to lend it. One shakes one’s head, but with sadness…alas not with moral outrage.” [149]

(e) ‘Protected relationships’

In section 4(a) we made a distinction between, what might be termed, non-relational undue influence and, what might be termed, relational undue influence. For present purposes, it is sufficient to remark that the distinction between relational and non-relational influence appears to form part of the matrix through which the courts determine whether or not there has been undue influence.[150] As Chen Wishart[151] notes:

“It should be no surprise that a doctrine regulating transactions between parties in a relationship of trust and confidence should be concerned with the conduct and motivation of both participants and with the outcome of the transaction, all judged against the norms of the relationship between the parties.”[152]

Thus the relationship that exists between an elder and their adult offspring, an elder and their financial adviser or an elder and their carer is very relevant to determining whether or not there has been undue influence.

(5) CONCLUSION

In recent years there has been a greater consciousness of issues relating to the elderly, their homes and the transactions into which they enter. In particular, there has been some concern in relation to the dramatic increase in the use of equity release schemes in recent years and, given the social and economic factors at work here, a elder may be vulnerable in this context. For this reason, statutory regulation of this area is to be welcomed. However, the function of regulation in this context is specifically targeted at providing information and advice; yet it is crucial to recognise that the social and economic factors at work here, sometimes coupled with relational pressures, may still leave an informed elder in a vulnerable position. It is here that the equitable doctrine of undue influence has an important role to play in providing a measure of legal protection for elderly homeowners who engage in these financial transactions. Much will, of course, depend on the jurisprudential basis, and hence the essence, of the doctrine of undue influence and we have sought to support the view that the doctrine of undue influence is, in fact, based on a notion of unconscionability. An unconscionability-based view of undue influence may be particularly sensitive to the terms of the transaction,[153] the effectiveness of any independent advice, informational inequalities and the vulnerabilities of the parties; and as such it potentially provides an important measure of protection to the elderly in this context. However, the precise protection afforded by the doctrine of undue influence in this context will, for example, depend on the application of the normative assumptions underpinning the former manifest disadvantage requirement; and these may be informed by ideas such the contemporary political idea that the homes of the elderly are repositories of capital to fund their expenses in old age.


[*] School of Law, University of Durham. This paper develops work which was presented at the 7th Biennial Conference on Property Law (Queen’s College, Cambridge, 2008) and which will be published in Modern Studies in Property Law - Volume 5 (Hart Publishing, Oxford, 2009). We are grateful for the constructive comments of the anonymous referee.

[1] Much of the policy discussion in England and Wales has focused on regulation of the financial services market targeted at the elderly, as discussed in section 2. In Ireland, the Law Reform Commission has published a consultation paper on Law and the Elderly which included a section on ‘Protection against Financial Abuse’ in relation to both products aimed at elderly people, and issues relating to undue influence and unconscionable transactions in other contracts involving property. Although these aspects of the Law Reform Commission’s work on vulnerable adults have not yet been implemented, further work in this area is clearly identified in the Commission’s recently published ‘Third Programme of Work (2007-2014)’. The second programme of law reform identified by the Irish Law Reform Commission (2000-2007) identified, under ‘Vulnerable Groups and the Law’ consideration of “law and the elderly, including the legal protection of older persons transferring assets and ‘advance care directives’”; this item was asterisked as a priority for the Commission in this period. See Second Programme for Examination of Certain Branches of the Law with a View to their Reform: 2000 – 2007, available online at http://www.lawreform.ie/lawunderreview/secondproglawreform.htm. The Commission published a consultation paper, Consultation Paper on Law and the Elderly (LRC CP 23 – 2003), in 2003. Although the Report on Vulnerable Adults and the Law (LRC 83 – 2006) was published in 2006, this focused primarily on issues relating to capacity and assisted-decision making amongst vulnerable adults, and did not specifically address issues of financial abuse. A recent upsurge in the use of equity release products in Australia also prompted the Australian Securities and Investments Commission to publish a report in 2005 to highlight the risk associated with trading-in the equity in one’s owner-occupied home; Australian Securities and Investment Commission, Equity release products (Report 59, November 2005), available online at

http://www.asic.gov.au/fido/fido.nsf/lkuppdf/FIDO+PDFW?opendocument&key=Equity_release_report_pdf; while in the US, considerable academic attention has focused on the use of reverse mortgage products, and other forms of equity release amongst the elderly; see for example, Nandinee K. Kutty, ‘The Scope for Poverty Alleviation among Elderly Home-owners in the United States through Reverse Mortgages’, (1998) 35 Urban Studies 113-129; Isaac F. Megbolugbe, Jarjisu Sa-Aadu, and James D. Shilling, ‘Oh, Yes, the Elderly Will Reduce Housing Equity under the Right Circumstances’, (1999) 9 Journal of Housing Research 53; Roberto G. Quercia, ‘House Value Appreciation among Older Homeowners: Implications for Reverse Mortgage Programs’ (1999) 9 Journal of Housing Research 201; S Merrill, M Finkel & N Kutty, ‘Beneficiaries from reverse mortgage products for elderly home-owners: an analysis of American housing survey data’, (1994) 22 Journal of the American Real Estate and Urban Economics Association 257; U. S. Department of Housing and Urban Development, ‘No Place Like Home: A Report to Congress on FHA’s Home Equity Conversion Mortgage Program’, (Washington, DC, 2000). Although the overriding impetus in US policy since the enactment of the FHA Reverse Mortgage Legislation, the Housing and Community Development Act of 1987, (s. 825) has been to facilitate equity release through reverse mortgages to elderly homeowners, following the recent crash in the sub-prime mortgage lending business in the US, consumer advocates are calling for Congress to investigate the degree of legal protection afforded to elderly consumers by unscrupulous lenders; see US Senate Special Committee on Aging December hearing on ‘Foreclosure Aftermath: Preying on Senior Homeowners’, available online at http://aging.senate.gov/hearing_detail.cfm?id=292791&

[2] Statistics available online at http://www.statistics.gov.uk/cci/nugget.asp?id=949

[3] NK Kutty, ‘The Scope for Poverty Alleviation among Elderly Home-owners in the United States through Reverse Mortgages’ (1998) 35 Urban Studies 113.

[4] Simon Moon, ‘Thousands use equity release to beat debt’, This is Money, 18 January 2008, available online at http://www.thisismoney.co.uk/mortgages/article.html?in_article_id=429524&in_page_id=8

[5] See for example, B Turner & Z Yang, ‘Security of Home Ownership - Using Equity or Benefiting From Low Debt?’, (2006) 6 European Journal of Housing Policy 279; R Disney, A Henley & G Stears, ‘Housing costs, house price shocks and savings behaviour among older households in Britain’ (2002) 32 Regional Science and Urban Economics 607.

[6] A Dupuis & DC Thorns, ‘Meanings of Home for Older Home Owners’ (1996)11 Housing Studies 485; A Dupuis & DC Thorns, ‘Home, Home Ownership and the Search for Ontological Security’ (1998)46 The Sociological Review 24.

[7] See SJ Smith, Banking on Housing: Speculating on the role and relevance of housing wealth in Britain (Paper prepared for the Joseph Rowntree Foundation Inquiry into Home Ownership 2010 and Beyond, 2005).

[8] Leading ‘The Sun’ newspaper to announce in 2007 that ‘OAPs are property trillionaires’; The Sun 23 January 2007; available online at

http://www.thesun.co.uk/sol/homepage/news/money/article29263.ece. This report followed a survey by Economic Lifestyle (a retirement housing and finance company) which claimed that homeowners aged over 65 in the UK had collectively profited to the tune of £103 billion from rises in the property market in 2006.

[9] See, for example, A Epstein, Facing Old Age (New York: Alfred A Knopf, 1922); A Epstein, The Challenge of the Aged (New York, Vanguard Press, 1928), Economic Insecurity in Old Age: Social and Economic Factors Contributing to Old-Age Dependency (Washington DC: US Social Security Board, 1937); for a criticism of the historical approach to impoverishment theory, including the argument that urbanisation and industrialisation undermined the economic well-being of the elderly, see B Gratton, ‘The Poverty of Impoverishment Theory: The Economic Well-Being of the Elderly, 1890-1950’ (1996) 56 Journal of Economic History 39. Hurd has claimed that: ‘…during most of history, to be old was to be poor’; Michael D Hurd, ‘The Economic Status of the Elderly’ (1989) 244 Science 659 at 663; see also TM Smeeding & S Sandstrom, ‘Poverty and Income Maintenance in Old Age: A Cross-National View of Low Income Older Women’ (Center for Retirement Research Working Papers, Boston College, 2004).

[10] Smith, op cit, p2.

[11] That is, that: “…the asset value of housing…accumulates over the life course, provides a cushion (in the form of low housing costs) for old age, and flows on to the next generation through inheritance.”; ibid, p11.

[12] This has led Smith to conclude that: “…the scene is set for more, rather than less, use to be made of the opportunity to use housing equity across the life-course. It may not, for long, remain a resource for old age, much less a component of inheritance. Rather it may be viewed as a store of wealth which can be made available to spend on other things.”; ibid, p12.

[13] See SHIP Press Release, 8 December 2007, available online at http://www.ship-ltd.org/bm~doc/08-dec-2007a.pdf

[14] ibid.

[15] SHIP Press Release, 16 July 2008, ‘SHIP equity release providers buck the Credit crunch with a 14% increase in Business’; available online at http://www.ship-ltd.org/bm~doc/16-jul-08.pdf

[16] SHIP Press Release, 21 October 2008, ‘SHIP reports a 10% increase in equity

Release business’; available online at http://www.ship-ltd.org/bm~doc/21-october-2008.pdf

[17] http://www.prlog.org/10139844-statistics-show-equity-release-is-here-to-stay.html

[18] Key Retirement Solutions, UK Equity Release Market Monitor Q2 2008; available online at http://www.keyrs.co.uk/files/market_monitor_report_q2_2008.pdf

[19] “There are likely to be a number of situations where benefit entitlement may be lost or sharply reduced by the receipt of income and/or capital from any form of equity release mechanism. In the worst possible cases, a small weekly rise in income will simply result in an identical amount of lost benefit income, or a rise in capital will result in the loss of benefit but no perceivable gain to the customer.”; Council of Mortgage Lenders, Equity release and the impact on benefits and tax (April 2007), p16. On the other hand, equity release may be seen as a method of reducing liability for inheritance tax: see for example, ‘Out of the Taxman’s Reach’, http://www.keyrs.co.uk/equity-release-schemes/happy-customers/out-of-the-taxmans-reach

[20] In some cases the property may be sold in order to release the remaining equity to fund further expenses, for example the costs of nursing care.

[21] ‘During the 1980s [in the UK], equity release came under scrutiny and suffered a bad reputation due to poorly designed and marketed products that led to several court cases.’; C Huan & J Mahoney, ‘Equity Release Mortgages’ (2002) 16 Housing Finance International 29 at 33. This analysis uses the examples of home income plans and interest roll-up loans to identify weaknesses in equity release products in the UK, which led to escalating debt, left consumers vulnerable to rising interest rates and falling house prices, and led to forced sale of their homes.

[22] See http://www.ship-ltd.org/about/index.shtml

[23] A worst case scenario which would leave homeowners exposed to not only repossession but further personal actions to recover additional outstanding debt.

[24] See http://www.ship-ltd.org/bm~doc/08-dec-2007a.pdf

[25] The FSA is an independent, non-government body, given statutory powers by the Financial Services and Markets Act 2000, to regulate the financial services industry in the UK and it has four objectives under the Financial Services and Markets Act (FSMA) 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.

[26] Brought under the FSMA 2000 by the Financial Services And Markets Act 2000 (Regulated Activities) Order 2001.

[27] Regulation of Financial Services (Land Transactions) Act 2005.

[28] “Buying a home reversion plan is a huge financial decision involving the most important and sometimes only significant asset of elderly people. It can have significant implications for tax, benefits, inheritance and long-term financial planning, which need to be considered very carefully.”; HL Deb 17 October 2005 c. 554 (Lord McKenzie).

[29] ibid.

[30] HL Deb 17 October 2005 c. 558 (Lord McKenzie).

[31] See Financial Services and Market Regulation Act 2000, Part XV.

[32] Financial Services and Market Regulation Act 2000, s151(2).

[33] ‘Equity release – time to grow?’ Mortgage Finance Gazette (May 2007), available online at http://www.mfgonline.co.uk/ccstory/20235/130/Equity_release_%E2%80%93_time_t

[34] See L Fox O’Mahony and J Devenney, ‘The Elderly, Their Homes and the Unconscionable Bargain Doctrine’, forthcoming in Modern Studies in Property Law – Volume 5 (Hart Publishing, Oxford, 2009) and FR Burns, ‘The elderly and undue influence inter vivos’ [2003] 23 Legal Studies 251.

[35] See Fox O’Mahony & Devenney, op cit.

[36] See Burns, op cit, pp253-255.

[37] cf. M Chen-Wishart, ‘Undue Influence: Beyond Impaired Consent and Wrongdoing towards a Relational Analysis’, in A Burrows and A Rodger (eds.), Mapping the Law: Essays in Memory of Peter Birks (OUP, Oxford, 2006) at pp 207-211.

[38] Where a transaction has been procured by undue influence on the part of the other party thereto, the party subject to the influence will, subject to certain bars, be entitled to have the transaction set aside. By contrast, where the transaction has been procured by the undue influence of a third party the position is more complex and may depend on the principles of notice as set out in Royal Bank of Scotland v Etridge [2001] UKHL 44. For an analysis of those principles in the context of transactions with the elderly see F.R. Burns, op. cit. See also J Devenney, L Fox O’Mahony & M Kenny ‘Standing Surety in England and Wales: the Sphinx of Procedural Protection’ [2008] Lloyds Maritime and Commercial Law Quarterly 527.

[39] [1866] UKLawRpCh 107; (1866) LR 2 Ch App 55.

[40] Ibid, at 61. In Allcard v Skinner [1887] UKLawRpCh 151; (1887) 36 ChD 145 at 183 Lindley LJ also noted that “...no Court has ever attempted to define undue influence.” However, Lindley LJ did note that undue influence involved “...some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating and generally, though not always, some personal advantage obtained by a donee placed in some close and confidential relation to the donor”: [1887] UKLawRpCh 151; (1887) 36 ChD 145 at 181.

[41] See J Devenney & A Chandler, ‘Unconscionability and the Taxonomy of Undue Influence’ [2007] Journal of Business Law 541 at pp552-553.

[42] [2001] UKHL 44.

[43] Ibid, at [8].

[44] See Devenney & Chandler, op cit, pp552-553.

[45] cf. Ormes v Beadel [1860] EngR 646; 2 Giff 166 at 174 where Stuart VC stated: “where an agreement, hard and inequitable in itself, has been exacted under circumstances of pressure on the part of the person who exacts it, this Court will set it aside.”

[46] Bainbridge v Browne (1881) ChD 188 (parent and child), Barclays Bank plc v O’Brien [1993] UKHL 6; [1994] 1 AC 180 (husband and wife) and Grosvenor v Sherratt [1860] EngR 1035; (1860) 28 Beav 659 (uncle and niece).

[47] For example, Allcard v Skinner [1887] UKLawRpCh 151; (1887) 36 Ch. D 145 (spiritual advisor and advisee), Avon Finance v Bridger [1985] 2 All ER 281 (co-habiting couple) and Crédit Lyonnais Bank Nederland NV v Burch [1996] EWCA Civ 1292; [1997] 1 All ER 144 (employer and employee).

[48] See, for example, Portman Building Society v Dusangh [2000] 2 All E.R. (Comm) 221, Greene King plc v Stanley [2001] EWCA Civ 1966 and Wright v Cherrytree Finance Ltd [2001] EWCA Civ 449; [2001] 2 All ER (Comm) 877.

[49] See, for example, Hammond v Osborn [2002] EWCA Civ 885, Glanville v Glanville [2002] EWHC 1271 and Meredith v Lackschewitz [2002] EWHC 1462.

[50] See, for example, Lloyds Bank Ltd v Bundy [1974] EWCA Civ 8; [1975] QB 326.

[51] See Devenney & Chandler, op cit, pp552-553.

[52] See CTN Cash & Carry Ltd v Gallagher [1993] EWCA Civ 19; [1994] 4 All ER 714 at 719d per Steyn LJ; cf. Wingrove v Wingrove [1885] UKLawRpPro 46; 11 PD 81, Scott v Sebright [1886] UKLawRpPro 51; 12 PD 21 and Hampson v Guy 64 LT 778.

[53] [1995] 2 FLR 890.

[54] Ibid, at 902.

[55] See Devenney & Chandler, op cit, pp552-553.

[56] See Bank of Montreal v Stuart [1910] UKLawRpAC 53; [1911] AC 120 at 136-137 where Lord Macnaughton stated that Mrs Stuart: “…had no will of her own. Nor had she any means of forming an independent judgment even if she had desired to do so. She was ready to sign anything her husband asked her to sign and do anything he told her to do.”

[57] P Birks and Y Chin, ‘On the Nature of Undue Influence’, published in J Beatson & D Friedmann (eds), Good Faith and Fault in Contract Law, (1995, Clarendon, Oxford), at p78.

[58] Ibid.

[59] Bank of Credit & Commerce International S.A. v Aboody [1990] 1 QB 923 at 963 per Slade LJ (giving the judgment of the Court).

[60] [1993] UKHL 6; [1994] 1 AC 180.

[61] See Devenney, Fox O’Mahony & Kenny, op cit, p516.

[62] Ibid at 196.

[63] See Devenney & Chandler, op cit at p556.

[64] [2001] UKHL 44 at [16].

[65] cf. D Sim, ‘Burden of proof in undue influence: Common law and codes on collision course’ (2003) 7 International Journal of Evidence & Proof 221.

[66] See Devenney, Fox O’Mahony & Kenny, op cit, p516.

[67] B Fehlberg, ‘The Husband, the Bank, the Wife and Her Signature – the Sequel’ (1996) 59 Modern Law Review 675, particularly at 677.

[68] [2001] UKHL 44 at [30].

[69] Bainbridge v Browne (1881) ChD 188.

[70] Huguenin v Baseley (1807) 14 Ves 273.

[71] See Burns, op cit at 264.

[72] Although the relationship between a doctor and a patient has been held to be a 2A relationship: see Radcliffe v Price (1902) 18 TLR 466.

[73] It has been argued elsewhere that there are questions surrounding the legitimacy of this category of relationships, see Devenney & Chandler, op cit, pp556-558; cf. Burns, op cit, at pp264-265.

[74] See Devenney & Chandler, op cit at p558.

[75] See Royal Bank of Scotland v Etridge (No2) [1998] 4 All E.R. 705 at 712c per Stuart-Smith L.J. (giving the judgment of the Court).

[76] [1970] 2 All ER 390.

[77] [2001] UKHL 44 at [31].

[78] [1999] Lloyd’s Rep PN 496.

[79] Ibid, at 513.

[80] See Fox O’Mahony & Devenney, op cit.

[81] Burns, op cit, pp272-273.

[82] See, for example, Love v. Love (unreported, 11 March 1999, CA).

[83] See, for example, Davies v. Dobson (unreported, 7 July 2000, Ch. D). See Fox-O’Mahony & Devenney, op cit.

[84] See, for example, Birks & Chin, op cit; R Bigwood, ‘Undue Influence: ‘Impaired Consent’ or ‘Wicked Exploitation’ (1996) 16 OJLS 503, J O’Sullivan, ‘Undue Influence and Misrepresentation after O’Brien: Making Security Secure’, in F Rose (ed), Restitution and Banking Law, (Mansfield Press, Oxford, 1998) pp42-69, B Fehlberg, Sexually Transmitted Debt, (Clarendon, Oxford, 1997) pp24-25, S Smith, Atiyah’s Introduction to the Law of Contract, 6th edn, (Clarendon, Oxford, 2002) pp288-291, M Pawlowski & J Brown, Undue Influence and the Family Home, (Cavendish, London 2002) pp7-17, 27-30 and 205-212, M Oldham, ‘“Neither borrower nor lender be” – the life of O’Brien’ (1995) Child and Family Law Quarterly 104, at 108-109, M Chen-Wishart, ‘The O’Brien Principle and Substantive Unfairness’ [1997] CLJ 60, D Capper, ‘Undue Influence and Unconscionability: A Rationalisation’ (1998) 114 LQR 479, Price, ‘Undue Influence: finis litium’ (1999) 115 LQR 8, L McMurtry, ‘Unconscionability and Undue Influence: An Interaction?’ [2000] 64 Conveyancer and Property Lawyer 573, Chen-Wishart, op cit, and Devenney & Chandler, op cit.

[85] See, generally, J Elvin, ‘The Purpose of the Doctrine of Presumed Undue Influence’, in Giliker (ed), Re-examining Contract and Unjust Enrichment: Anglo-Canadian Perspectives (Martinus Nijhoff Publishers, Leiden, 2007). In Portman Building Society v Dusangh [2000] 2 All ER (Comm) 221 at 233 Ward LJ stated: “Professors Birks and Chin…see undue influence as being ‘plaintiff-sided’ and concerned with the weakness of the plaintiff's consent owing to an excessive dependence upon the defendant, and unconscionability as being ‘defendant-sided’ and concerned with the defendant’s exploitation of the plaintiff’s vulnerability. I do not find it necessary to resolve this debate.”

[86] [2004] EWCA Civ 372.

[87] Ibid. at [2].

[88] Birks and Chin, op cit.

[89] Ibid, at 126.

[90] Ibid. See Devenney & Chandler, op cit.

[91] See, for example, Hammond v Osborn [2004] EWCA Civ 885, Turkey v Awadh [2005] EWCA Civ 382 and Jennings v Cairns [2003] EWCA 1935. cf. Macklin v Dowsett [2004] EWCA Civ 904 and Dunbar Bank plc v Nadeem [1998] EWCA Civ 1027; [1998] 3 All E.R. 876 (discussed in A. Chandler, Manifest Disadvantage: Limits of Application (1999) 115 LQR 213).

[92] See Chen-Wishart, op cit, at p. 208.

[93] Ibid.

[94] See Devenney & Chandler, op cit, pp541-542.

[95] [1985] UKHL 2; [1985] A.C. 686.

[96] [1993] UKHL 6; [1994] A.C. 180.

[97] [2001] UKHL 44. In that case Lord Nicholls, at [6-7], stated: “Undue influence is one of the grounds of relief developed by courts of equity as a court of conscience. The objective is to ensure that the influence of one person over another is not abused. In everyday life people constantly seek to influence the decisions of others. They seek to persuade those with whom they are dealing to enter transactions, whether great or small. The law has set limits to the means properly employable for this purpose… Equity extended the reach of the law to other unacceptable forms of persuasion. The law will investigate the manner in which the intention to enter into the transaction was secured: ‘how the intention was produced’, in the oft repeated words of Lord Eldon LC, from as long ago as 1807 (Huguenin v Basely (1807) 14 Ves. Jun. 273 at 300, [1803-1813] All E.R. Rep. 1 at 13). If the intention was produced by unacceptable means, the law will not permit the transaction to stand. The means used is regarded as an exercise of improper or ‘undue’ influence, and hence unacceptable, whenever the consent thus procured ought not fairly to be treated as the expression of a person’s free will.” (emphasis added). Lord Hobhouse added, at [103], that undue influence “is an equitable wrong committed by the dominant party against the other which makes it unconscionable for the dominant party to enforce his legal rights against the other.” Lord Bingham agreed with Lord Nicholls.

[98] See R v Attorney-General for England and Wales [2003] UKPC 22 and National Commercial Bank (Jamaica) Ltd v. Hew [2003] UKPC 51. The late Professor Birks noted the difficulties these decisions created for his and Chin’s thesis: see P Birks, ‘Undue Influence as Wrongful Exploitation’ (2004) 120 LQR 34.

[99] See Devenney & Chandler, op cit.

[100] Ibid.

[101] See Fox O’Mahony & Devenney, op cit, .and Evans v Llewellin [1787] EngR 59; (1787) 1 Cox CC 333.

[102] [1864] EngR 444; (1864) 4 De G.J. & S. 388; 46 E.R. 968. See also Evans v Llewellin [1787] EngR 59; (1787) 1 Cox CC 333 and Clark v Malpas [1862] EngR 604; (1862) 31 Beav 80; 54 E.R. 1067; affirmed on appeal[1862] EngR 876; , (1862) 4 De GF & J 401; 45 ER 1238.

[103] Ibid at 425 (emphasis added) although cf. Alec Lobb (Garages) Ltd v Total Oil GB Ltd [1985] 2 WLR 944.

[104] See Devenney & Chandler, op cit, pp561-562.

[105] [1887] UKLawRpCh 151; (1887) 36 ChD 145.

[106] Ibid at p189 (emphasis added).

[107] Bigwood, op cit, at p503.

[108] See J Devenney (2002) ‘A Pack of Unruly Dogs: Unconscionable Bargains, Lawful Act (Economic) Duress and Clogs on the Equity of Redemption’ [2002] JBL 539.

[109] See, for example, Multiservice Bookbinding Ltd v Marden [1979] 1 Ch 84.

[110] See, for example, Cresswell v Potter [1978] 1 WLR 255n and Evans v Llewellin [1787] EngR 59; (1787) 1 Cox CC 333.

[111] See Devenney, op cit, and Capper, op cit.

[112] See Devenney & Chandler, op cit.

[113] [1787] EngR 59; (1787) 1 Cox CC 333, 29 ER 1191.

[114] [1888] UKLawRpCh 178; (1888) 40 ChD 312.

[115] [1864] EngR 444; (1864) 4 De GJ & S 388; 46 ER 968.

[116] [1978] 1 WLR 255n.

[117] See Devenney & Chandler, op cit.

[118] See, for example, National Westminster Bank plc v Morgan [1985] UKHL 2; [1985] 1 AC 686 at 709F-H where Lord Scarman stated: “I would wish to give a warning. There is no precisely defined law setting the limits to the equitable jurisdiction of a court to relieve against undue influence. This is the world of doctrine, not of neat and tidy rules…A court in the exercise of this jurisdiction is a court of conscience. Definition is a poor instrument when used to determine whether a transaction is or is not unconscionable: this is a question of fact which depends on the facts of the case.” See also Dunbar Bank plc v Nadeem [1998] EWCA Civ 1027; [1998] 3 All ER 876 and Lloyds Bank plc v Lucken [1998] 4 All ER 738.

[119] Birks & Chin, op cit, p87.

[120] Chen-Wishart, op cit, p208.

[121] See, for example, Tate v Williamson [1866] UKLawRpCh 107; (1866) LR 2 Ch App 55.

[122] See, for example, Tufton v Sperni [1952] 2 TLR 516.

[123] See Devenney & Chandler, op cit.

[124] [1997] 3 F.C.R. 193.

[125] Ibid at 216C.

[126] Devenney & Chandler, op cit, p.562-564 and Fox-O’Mahony & Devenney, op cit.

[127] Re T (An Adult: Medical Treatment) [1992] 2 FCR 861, 883B per Staughton LJ.

[128] Mrs U v Centre for Reproductive Medicine [2002] EWCA Civ 565.

[129] Mutual Finance Ltd v John Wetton & Sons Ltd [1937] 2 KB 389 at 394-395 per Porter J. See also J Devenney & R Morgan, ‘Mrs U v Centre for Reproductive Medicine’ (2003) 25 Journal of Social Welfare and Family Law 74.

[130] [1997] 3 FCR 193. The judge, Mr James Munby QC, was sitting as a Deputy Judge of the High Court.

[131] Ibid at 220D (emphasis added).

[132] See Devenney & Chandler, op cit at pp564-566.

[133] Royal Bank of Scotland v Etridge [2001] UKHL 44 at [30].

[134] Burns, op cit at p270.

[135] Chen-Wishart, op cit.

[136] Ibid, at 212.

[137] See, for example, Portman Building Society v Dusangh [2000] 2 All ER (Comm) 221 and Crédit Lyonnais Bank Nederland NV v Burch [1996] EWCA Civ 1292; [1997] 1 All ER 144.

[138] See Devenney & Chandler, op cit, p555.

[139] [1993] UKHL 7; [1994] 1 AC 200.

[140] [1998] EWCA Civ 1027; [1998] 3 All ER 876.

[141] Ibid at 976. See also National Commercial Bank (Jamaica) Ltd v. Hew [2003] UKPC 51.

[142] See Tufton v Sperni [1952] 2 TLR 516.

[143] [1998] EWCA Civ 1027; [1998] 3 All ER 876 at 896 (emphasis added). See Devenney & Chandler, op cit.

[144] cf. Cheese v Thomas [1994] 1 WLR 129.

[145] Devenney & Chandler, op cit¸ at p564-566.

[146] See Burns, op cit, pp272-273. See also Fox-O’Mahony & Devenney, op cit.

[147] [2000] 2 All ER (Comm) 221. Discussed in Devenney, Fox-O’Mahony & Kenny, op cit, p. 521-522.

[148] Ibid, at 228-230.

[149] Ibid, at 234.

[150] See Devenney & Chandler, op cit, p566-567 and Lloyds Bank Ltd v Bundy [1974] EWCA Civ 8; [1975] QB 326. See also CTN Cash & Carry Ltd v Gallaher [1993] EWCA Civ 19; [1994] 4 All ER 714 at 719 per Steyn LJ.

[151] Chen-Wishart, op cit.

[152] Ibid, p203.

[153] Ibid, pp211-214.