Ridge, Pauline --- "The Equitable Doctrine of Undue Influence Considered in the Context of Spiritual Influence and Religious Faith: Allcard v Skinner Revisited in Australia" [2003] UNSWLawJl 3; (2003) 26(1) UNSW Law Journal 66
[*] BA/LLB (Hons) (Australian National University); BCL (Oxford); Lecturer in Law, Australian National University. I thank my colleague, Dr Joachim Dietrich, and the two anonymous reviewers for their constructive comments on earlier drafts.
[1] The probate doctrine of undue influence has different requirements and is not discussed in this article. See generally Matthew Tyson, ‘An Analysis of the Differences between the Doctrine of Undue Influence with Respect to Testamentary and Inter Vivos Dispositions’ (1997) 5 Australian Property Law Journal 38.
[2] ‘[T]here has been 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’: Allcard v Skinner [1887] UKLawRpCh 151; (1887) 36 ChD 145, 181. Actual undue influence does not depend upon a pre-existing relationship: Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113, 134.
[3] The House of Lords in Royal Bank of Scotland Plc v Etridge (No 2) [2001] UKHL 44; (2002) 2 AC 773 (‘Etridge’) sought to assimilate the two limbs of undue influence into one doctrine more closely resembling actual undue influence. Their Lordships did this by emphasising that the presumption of undue influence was merely a ‘forensic tool’ by which a finding of actual undue influence could be made despite the lack of direct evidence: 797. Further, some members of the House of Lords cast doubt on the utility of the second category of presumed undue influence by which a relationship of influence to which the presumption applies is proved on the facts: 822, 842–3. A critical evaluation of the judgments in Etridge is outside the scope of this article, however, it is hoped that this aspect of the case is not followed in Australia. See Roderick Meagher, Dyson Heydon and Mark Leeming, Equity: Doctrines and Remedies (4th ed, 2002) [15-105].
[4] In Australia, see, eg, Watkins v Combes [1922] HCA 3; (1922) 30 CLR 180, 193–4; Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649, 675. In England, see, eg, Allcard v Skinner [1887] UKLawRpCh 151; (1887) 36 ChD 145, 185 recently affirmed in Royal Bank of Scotland Plc v Etridge (No 2) [2001] UKHL 44; (2002) 2 AC 773, 798–800. See also Meagher, Heydon and Leeming, above n 3, [15-030]; Rick Bigwood, ‘Undue Influence in the House of Lords: Principles and Proof’ (2002) 65(3) Modern Law Review 435, 445. For the view that it is the relationship alone that activates the presumption, see Paul Desmond Finn, Fiduciary Obligations (1977) [179] and Barclays Bank Plc v O’Brien [1993] UKHL 6; (1994) 1 AC 180, 189–90.
[5] Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113, 135; Union Fidelity Trustee Co of Aust Ltd v Gibson [1971] VicRp 69; [1971] VR 573, 575.
[6] See National Westminster Bank Plc v Morgan [1985] UKHL 2; [1985] AC 686, 709.
[7] Union Fidelity Trustee Co of Aust Ltd v Gibson [1971] VicRp 69; [1971] VR 573, 575. See also Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113, 135.
[8] Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113, 135; Union Fidelity Trustee Co of Aust Ltd v Gibson [1971] VicRp 69; [1971] VR 573, 575. Some commentators query the fiduciary analysis and I will discuss this further below.
[9] Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649, 675.
[10] ‘Few areas of law have struggled so unsuccessfully for satisfactory doctrinal exposition and analysis as the equitable jurisdiction to relieve against undue influence in the procurement of an inter vivos transaction’: Bigwood, ‘Undue Influence in the House of Lords: Principles and Proof’, above n 4, 435.
[11] Although in principle the doctrine applies to contracts as well as gifts, the case law primarily concerns gifts. Cf Tufton v Sperni (1952) 2 TLR 516. The issue of ‘manifest disadvantage’ arising in relation to contracts will not be addressed.
[12] Allcard v Skinner [1887] UKLawRpCh 151; (1887) LR 36 ChD 145, 183.
[13] There is a good argument that the automatic categories should be abolished. See Bigwood, ‘Undue Influence in the House of Lords’, above n 4, 439 at n 24. Contra Royal Bank of Scotland Plc v Etridge (No 2) [2001] UKHL 44; (2002) 2 AC 773.
[14] See also Clark v The Corporation of the Trustees of the Roman Catholic Archdiocese of Brisbane (1998) 1 Qd R 26. This was an unsuccessful claim for equitable compensation for breach of an alleged fiduciary duty to protect the plaintiff from a foreseeable risk of harm by providing false theological advice. It was held that the relationships of Church and communicant, or Bishop and communicant, did not in themselves give rise to fiduciary duties of the type alleged.
[15] See, eg, Nel v Kean [2003] EWHC 190 (Unreported, Simon J, 14 February 2003). In this case the stronger party gave emotional and practical support to a group of women, including the weaker party. Spiritual guidance was also given to some members of the group.
[16] Huguenin v Baseley (1807) 14 Ves Jr 273, 288; [1764] EngR 89; 33 ER 526, 532 (Sir Samuel Romilly, during argument).
[17] (1990) 5 BPR [97405] 11,761.
[18] Ibid 11,766.
[19] See generally Michael Nash, ‘Undue Influence in Contract’ (1988) 85 Law Society’s Gazette 29. Nash points out that the case is important for three reasons: it was decided shortly after the fusion of the courts of law and equity by a bench of eminent lawyers; it illustrates the development of the doctrine of undue influence during the 1 9th century; and ‘it brought to a head the controversies over the direction the Church of England was taking, and whether ritualism and the monastic life could have any part in the established church’.
[20] Allcard v Skinner [1887] UKLawRpCh 151; (1887) 36 ChD 145, 179.
[21] Ibid 172. One of the rules of the Sisterhood was: ‘when thou are reproved, remember that the voice of thy Superior [Miss Skinner] is the voice of God. Listen on thy knees in perfect silence and defend not thyself’: at 147.
[22] Ibid 159.
[23] There do not appear to be Australian cases prior to 1986. Conversely, in England, the last successful reported decision was Tufton v Sperni [1952] 2 TLR 516. Cf Nel v Kean [2003] EWHC 190 (Unreported, Simon J, 14 February 2003). This case was not decided on the basis of a relationship of spiritual influence although the relationship did have spiritual aspects. There have been actions in which spiritual influence was alleged but these were decided on procedural points without consideration of the substantive issues. See, eg, Roche v Sherrington [1982] 1 WLR 599; Catt v Church of Scientology Religious Education College Inc [2001] CP Rep 41. In Scotland, see Anderson v The Beacon Fellowship [1992] SLT 111.
[25] See also Illuzzi v Christian Outreach Centre (1997) Q ConvR 54-490. This case concerned whether a church could be vicariously liable for the undue influence of one of its ‘salvation counsellors’ who persuaded a member of his bible study group to provide a guarantee for his bank loan.
[26] (1986) ASC 55-483, 56,602.
[27] [2001] NSWSC 406 (Unreported, Palmer J, 28 May 2001).
[28] See also Norton v Relly (1764) 2 Eden 286; 28 ER 908; Huguenin v Baseley [1764] EngR 89; (1807) 14 Ves Jr 273; 33 ER 526; Nottidge v Prince [1860] EngR 1048; (1860) 2 Giff 246; 66 ER 103; Lyon v Home [1868] UKLawRpEq 94; (1868) LR 6 Eq 655; Morley v Loughnan [1893] 1 Ch 763; Chennells v Bruce (1939) 55 TLR 422.
[29] [2002] NSWSC 810 (Unreported, Bryson J, 6 September 2002).
[30] Ibid [37].
[31] This was because she had young children: Hartigan [2002] NSWSC 810 (Unreported, Bryson J, 6 September 2002) [36], [94].
[32] Hartigan [2002] NSWSC 810 (Unreported, Bryson J, 6 September 2002) [93].
[33] For cases involving male plaintiffs see Morley v Loughnan (1893) 1 Ch 763; Tufton v Sperni [1952] 2 TLR 516; Roche v Sherrington [1982] 1 WLR 599.
[34] This debate has been largely generated by unjust enrichment theorists. See, eg, Peter Birks and Chin Nyuk Yin, ‘On the Nature of Undue Influence’ in Jack Beatson and Daniel Friedmann (eds), Good Faith and Fault in Contract Law (1998) 57.
[35] [1887] UKLawRpCh 151; (1887) 36 ChD 145, 185. The House of Lords has recently confirmed this test: Royal Bank of Scotland Plc v Etridge (No 2) [2001] UKHL 44; (2002) 2 AC 773.
[36] See, eg, Birks and Chin, above n 34, 57.
[37] Allcard v Skinner [1887] UKLawRpCh 151; (1887) 36 ChD 145, 171.
[38] ‘The consequential imposition of a fiduciary responsibility would seem to be informed by considerations of public policy aimed at preserving the integrity and utility of such relationships given the expectation that the community is expected to have of behaviour in them, and given the purposes they serve in society’: Paul Desmond Finn, ‘The Fiduciary Principle’ in Timothy G Youdan (ed), Equity, Fiduciaries and Trusts (1989) 42. See also, Finn, Fiduciary Obligations, above n 4, [173]; Rick Bigwood, ‘Undue Influence: “Impaired Consent or Wicked Exploitation”?’ (1996) 16 Oxford Journal of Legal Studies 503; Bigwood, ‘Undue Influence in the House of Lords’, above n 4, 435. Contra Birks and Chin, above n 34, 91. I have adopted an anonymous reviewer’s comment here. The reviewer asserted that to be consistent with wider fiduciary law, the presumption itself must be that there has been an actual abuse of the relationship of influence, rather than the risk of abuse. Nevertheless, the rationale for imposing a presumption of abuse is based on the risk of abuse in such circumstances, and the need to maintain high standards of behaviour in fiduciary relationships.
[39] Allcard v Skinner [1887] UKLawRpCh 151; (1887) 36 ChD 145, 179.
[40] [2002] NSWSC 810 (Unreported, Bryson J, 6 September 2002) [28].
[41] Bigwood, ‘Undue Influence: “Impaired Consent or Wicked Exploitation”?’, above n 38, 512. See also Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113, 134 (Dixon J); Finn, ‘The Fiduciary Principle’, above n 38, 44–5.
[42] See Finn, ‘The Fiduciary Principle’, above n 38, 43.
[43] Contra Finn, Fiduciary Obligations, above n 4, [173]; Finn, ‘The Fiduciary Principle’, above n 38, 43. It should also be acknowledged that the House of Lords in Royal Bank of Scotland Plc v Etridge (No 2) [2001] UKHL 44; (2002) 2 AC 773 has clearly answered my question in the negative. In their Lordships’ view, presumed undue influence and actual undue influence are alternative means to the same conclusion and should not be separated.
[44] [1936] HCA 41; (1936) 56 CLR 113.
[45] Ibid 134.
[46] However, independent advice is not an essential requirement. See Haskew v Equity Trustees, Executors and Agency Co Ltd [1919] HCA 53; (1919) 27 CLR 231, 235.
[47] See, eg, Brusewitz v Brown [1923] NZGazLawRp 219; [1923] NZLR 1106; Bester v Perpetual Trustee Co Ltd (1970) 3 NSWR 30.
[48] [1887] UKLawRpCh 151; (1887) 36 ChD 145, 159. Contra Allcard v Skinner, [1887] UKLawRpCh 151; (1887) 36 ChD 145, 184–5. According to Lindley LJ, it was impossible to know what Miss Allcard’s reaction to independent advice would have been.
[49] In fact, Kekewich J found that Miss Allcard had the benefit of sound advice from her family at the time of entry into the sisterhood and this validated the gift. This finding was overturned on appeal.
[50] Meagher, Heydon, and Leeming, above n 3, [15-135] citing Powell v Powell [1899] UKLawRpCh 167; [1900] 1 Ch 243, 246.
[51] Bigwood, ‘Undue Influence: “Impaired Consent or Wicked Exploitation”?’, above n 38, 512. An American example involving a will is Suagee v Cook (Re Estate of Maheras), 897 P 2d 268, 274 (Okla, 1995). ‘The gravamen of undue influence is legal harm from the wrongful exertion of power over the will’s maker rather than the receipt of personal benefit from the offending act of influence’.
[52] Lindley and Bowen LJJ held that the claim was barred due to Miss Allcard’s delay in commencing the action.
[53] [1887] UKLawRpCh 151; (1887) 36 ChD 145, 170–1.
[54] Ibid 186. In fact, Miss Allcard had limited her claim to this sum.
[55] But see Dusik v Newton (1985) 62 BCLR 1 (damages); Mahoney v Purcell (1996) 3 All ER 61 (equitable compensation); McCulloch v Fern [2001] NSWSC 406 (Unreported, Palmer J, 28 May 2001) (constructive trust remedy).
[56] O’Sullivan v Management Agency Ltd [1985] 1 QB 428, 466–7.
[57] Alati v Kruger [1955] HCA 64; (1955) 94 CLR 216, 223–4.
[58] Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218, 1278–9.
[59] Cheese v Thomas (1994) 1 WLR 129, 138.
[60] (1995) 184 CLR 102 (citing with approval Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218; Alati v Kruger [1955] HCA 64; (1955) 94 CLR 216; O’Sullivan v Management Agency Ltd (1985) 1 QB 428; Cheese v Thomas (1994) 1 WLR 129).
[61] Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102, 114.
[62] See, eg, John W Carter and Gregory Tolhurst, ‘Rescission, Equitable Adjustment and Restitution’ (1996) 10 Journal of Contract Law 167.
[63] Cheese v Thomas (1994) 1 WLR 129, 138.
[64] See Louis Proksche, ‘Rescission’ in Patrick Parkinson (ed), The Principles of Equity (2003) 923 at n 72: ‘Money paid which has been irretrievably spent for the purpose for which it was given may be irrecoverable [citing Allcard v Skinner (Cotton LJ) and Quek v Beggs] even though the defendant may indirectly have some benefit therefrom’.
[65] Quek v Beggs (1990) 5 BPR [97405] 11,761, 11,779.
[66] (1988) 164 CLR 662, 673-4
[67] Quek v Beggs (1990) 5 BPR [97405] 11,761, 11,779.
[68] The likelihood that equitable rescission may become only one possible remedy for undue influence chosen from a ‘basket of remedies’ raises the problem of protecting defendants such as Miss Skinner. It is conceivable that in the future, courts faced with the impossibility of rescission will choose to award equitable compensation instead. It is not clear whether this remedy would accommodate factors such as delay, bona fides and irretrievable expenditure etc to achieve a just outcome. It can also be asked whether the Court in Allcard v Skinner were able to lay down a strict prophylactic rule, comfortable in the knowledge that the limitations of rescission would mitigate harsh outcomes. See also Pauline Ridge, ‘McCulloch v Fern’ (2002) 18 Journal of Contract Law 138.
[69] Bigwood, ‘Undue Influence: “Impaired Consent or Wicked Exploitation”?’, above n 38, 510.
[70] See, eg, Nottidge v Prince [1860] EngR 1048; (1860) 2 Giff 246; 66 ER 103; McCulloch v Fern [2001] NSWSC 406 (Unreported, Palmer J, 28 May 2001).
[71] [1887] UKLawRpCh 151; (1887) 36 ChD 145, 183.
[73] Ibid 517.
[74] [1983] HCA 14; (1983) 151 CLR 447.
[75] Ibid 464. The facts could have been pleaded as a relationship of influence between the son and his parents with notice by the bank.
[76] Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621.
[77] See, eg, Amadio [1983] HCA 14; (1983) 151 CLR 447, 461, 474. In their separate, yet similar, judgments, Mason and Deane JJ drew a distinction between unconscionable dealings and undue influence. This favours the dichotomy proposed by Birks and Chin, above n 34, 57. Presumed undue influence is said to look to the plaintiff’s ‘overborne will’ (quality of consent), whereas unconscionable dealings look to the defendant’s conduct. With respect, this cannot be correct. A strong distinction does not exist between unconscionable dealings and undue influence – they blur into each other. See Bigwood, ‘Undue Influence: “Impaired Consent or Wicked Exploitation”?’, above n 38, 514.
[78] Union Fidelity Trustee Co v Gibson [1971] VicRp 69; [1971] VR 573, 575. ‘Extravagant liberality and immoderate folly do not of themselves provide a passport to equitable relief’: Tufton v Sperni (1952) 2 TLR 517, 519; ‘[O]ur laws, very unfortunately for the owners, leave them at liberty to dissipate their fortunes as they please, to the ruin of themselves and their families’ Bridgeman v Green [1757] EngR 92; (1757) Wilm 58; 97 ER 22, 23.
[79] [2002] NSWSC 810 (Unreported, Bryson J, 6 September 2002) [37].
[80] Cf Re Brocklehurst’s Estate (1978) 1 Ch 14. The majority of the Court of Appeal held that a very generous gift of shooting rights over the donor’s property could not be set aside for improvidence alone when no other element of undue influence was present. Contra Denning LJ in dissent.
[81] [1887] UKLawRpCh 151; (1887) 36 ChD 145, 185.
[82] Royal Bank of Scotland Plc v Etridge (No 2) [2001] UKHL 44; (2002) 2 AC 773, 798–800 (Lord Nicholls). Lord Nicholls preferred Lord Justice Lindley’s ‘ordinary motives’ formulation to Lord Scarman’s test of ‘manifest disadvantage’ in National Westminster Bank Plc v Morgan [1985] UKHL 2; [1985] AC 686. The application of the manifest disadvantage requirement had proved difficult. However, even the House of Lord’s clarification of the test in Etridge may be difficult to apply. See, eg, R v AG [2003] UKPC 22 (Unreported, Lord Bingham, Lord Steyn, Lord Hoffmann, Lord Millett and Lord Scott, 17 March 2003). The ‘manifest disadvantage’ requirement is not generally accepted in Australia: see Meagher, Heydon and Leeming, above n 3, [15-120].
[83] (1990) 5 BPR [97405] 11,761, 11,774, 11,778.
[84] Ibid 11,778.
[85] The benchmark ensures that ‘everyday and commonplace transactions are not caught by the rule’: Nel v Kean [2003] EWHC 190 (Unreported, Simon J, 14 February 2003) [82]. See also Royal Bank of Scotland Plc v Etridge (No 2) [2001] UKHL 44; (2002) 2 AC 773, 799.
[86] Allcard v Skinner [1887] UKLawRpCh 151; (1887) LR 36 ChD 145, 185.
[87] Anthony Bradney, ‘Faced by Faith’ in Peter Oliver, Sionadh Douglas Scott and Victor Tadros (eds), Faith in Law: Essays in Legal Theory (2000) 89.
[88] Ibid 90.
[89] Ibid.
[90] C v C (1991) 1 FLR 223, 230.
[91] Bradney, above n 87, 101 citing Thornton v Howe (1862) Beav 14.
[92] The facts of Allcard v Skinner can be distinguished because Anglican orders of nuns are rare.
[93] See McCulloch v Fern [2001] NSWSC 406 (Unreported, Palmer J, 28 May 2001).
[94] Anthony Bradney suggests that ‘obdurate believer’ litigants improve their chances of success when more evidence concerning the religious group in question is before the court. Rather than increasing the cost and length of individual hearings he suggests that judges receive greater training in religious studies: Bradney, above n 87, 100.
[95] Hartigan [2002] NSWSC 810 (Unreported, Bryson J, 6 September 2002) [74].
[96] Ibid [94].
[97] See, eg, Allcard v Skinner [1887] UKLawRpCh 151; (1887) 36 ChD 145, 183.
[98] (1764) 28 ER 908, 909.
[99] See also, Nottidge v Prince [1860] EngR 1048; (1860) 2 Giff 246; 66 ER 103; Lyon v Home (1868) LR 6 Eq 653; Morley v Loughnan [1893] 1 Ch 763; Chenells v Bruce (1939) 55 TLR 422. See the almost identical description given of the spiritual leader in Lufram (1986) ASC 55-483, 56,602.
[100] Nottidge v Prince [1860] EngR 1048; (1860) 66 ER 103.
[101] Ibid 113.
[102] [1887] UKLawRpCh 151; (1887) 36 ChD 145, 183.
[103] See, eg, Lufram (1986) ASC 55-483; Illuzzi v Christian Outreach Centre (1997) Q ConvR 54-490; McCulloch v Fern [2001] NSWSC 406 (Unreported, Palmer J, 28 May 2001).
[104] This policy is given explicit recognition in North American case law. See Re Love 182 BR 161, 171 (Bankr, 1995). ‘The doctrine of undue influence protects the family’s interest by strengthening the presumption of undue influence whenever the donor, in an inter vivos gift to a religious adviser, fails to provide for his or her family’: Ann Penners Wrosch, ‘Undue Influence, Involuntary Servitude and Brainwashing: A More Consistent, Interests-Based Approach’ (1992) 25 Loyola of Los Angeles Law Review 499, 533–4.
[105] See, eg, Nel v Kean [2003] EWHC 190 (Unreported, Simon J, 14 February 2003). Justice Simon found the second of two disputed loans did not meet this benchmark because ‘[a]lthough expressed as a loan, its effect was to alienate her only remaining asset for the foreseeable future and, on one construction, forever. It would mean that her children received nothing from her and that a private venture (albeit one to which she was plainly attached) would receive everything’: at [107].
[106] See, eg, Family Provision Act 1982 (NSW).
[107] It is interesting that the alternative claim in Quek v Beggs was brought pursuant to the Family Provision Act 1982 (NSW). It did not need to be pursued because Mrs Quek’s children succeeded on the basis of undue influence.
[108] (1764) 2 Eden 286, 287; 28 ER 908, 908.