Duress and undue influence

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Duress-  introduction- one of the grounds in which English law will set aside a transaction because the consent of one of the parties has been improperly obtained. Duress is pressure which the law considers unacceptable. This is to protect the consent of the contracting parties. Two main elements for duress from Universe Tankships v International Transport Workers Federation 1983- Lord Scarman 'two elements to the wrong of duress 1) pressure amounting to compulsion of the willl of the victim and 2) the illegitimacy of the pressure exerted.' These must be satisfied for it to be actionable.

1) Pressure amounting to compulsion of the will- for this element of duress to be satisfied the pressure must have caused the complainant to enter into the contract. Must have been of a sufficient degree. There are 3 main types of pressure in the context of duress. 

1) types of pressure- a) threat to the person- This could be threats to the contracting party Barton v Armstrong 1976,  or threats to a third party Royal Boskali Westminster v Mountain 1999. 

b) threat to a persons goods- Maskell v Horner 1915. 

c) threat to persons economic interest- recent development- D + C Builders v Rees 1966 and Pao On v Lau Yiu Long 1980.

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2) causation. The pressure must have caused the complainant to enter into the contract. But what is the test for causation? The test may differ depending on the type of duress. 

a) Barton test- Barton v Armstrong 1976- 'was a reason (not the reason, nor the predominant reason nor the clinching reason) why the complainant acted the way he did).

b) a different test for economic duress? Dimskal Shipping v ITF 1992- Lord Goff 'a significant cause' inducing the threatened party to enter into the contract. Huyton SA v Peter Cremer 1999- the pressure must be the 'decisive or clinching reason'. Opposite of Barton, this is a but for test. 

A test hasnt be adopted for property- either make a new test or use one already made but it is not clear which on they would use.

c) evidential factors of causation- In Pao On v Lau Yui Long- Lord Scarman listed a number of factors which the courts could consider as evidence of causation. They include i) whether the victim protested ii) whether he had an alternative course of action iii) whether he was independently advised iv) whether after entering into the contract he took steps to avoid it. These are only indicators and are not conclusive in themselves. Have to consider all the circumstances. 

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Protest- Maskell v Horner

Practical alternative- Henessy v Craigmyle 1986.

Independent advice- If victim of a threat you may get advice to show your options of not giving into it. Shows practical options and if you dont the court may have view that pressure didnt make you take it. Pao On v Lau Yiu Long. 

Whether claimant took steps to avoid the contract- If took steps to avoid the contract when the pressure was removed shows that pressure made them enter. If they continue the contract without the pressure it shows the pressure didnt make them take it. 

2) Is the pressure illegitimate? even if there is pressure which caused the complainant to enter into the contract, that is not sufficient to constitute duress. For there to be duress the pressure must be illegitimate. When is pressure illegitimate? There are two general rules with exceptions. The first is that a threat to do anything which is illegal (a threat of unlawful action) is illegitimate. The second is that a threat to do something which the defendant has a right to do (a threat of lawful action) is not illegitimate. 

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Threat of unlawful action- A threat of any unlawful action is illegitimate. An action is unlawful if it is a criminal offence, a tort or a breach of contract.

Threat to break a contract- some agree with this and others dont. Huyton v Peter Cremer - should not always be illegitimate. In some cases it is legitimate to threaten to break a contract to renegotiate. 

Test for legitimacy- a) change of circumstances- from time concluded to time of threat must have been change of circumstance in which performance is required. Not foreseeable. Where risk allocated to one party they must bear that risk. b) whether demand is reasonable- cant be extortionate.

B and S contracts v Victor Green Publication 1984. 

Threat of lawful action- a threat to do something the defendant has the right to do is not normally illegitimate. However a threat to do something you have the right to do can sometimes be unlawful and can even be criminal.

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a) where the threat of lawful action is unlawful- blackmail. If make a threat of unwarranted demands for own personal gain- unlawful. 

b) where the threat of lawful action is not unlawful- CTN Cash and Carry v Gallaher 1994- not illegitimate. R v Attorney General for England and Wales 2003- illegitimate even though it was a lawful action- not provided a test for this. 

Tam Tak Chuen v Khairul Rahman 2009 and Lemoine v Griffith 2012. 

There has been a test made by academics- should be if threatener is acting in good faith or not. Derived from CTN Cash and carry. 

Nelson thinks theres four factors to take into account - 1) whether threat is an abuse of the legal process 2) whether threateners demand is in good faith 3) whether threateners demand is unreasonable 4) in all circumstances of the case is the threat unconscionable/ unreasonable.- This was applied in High Court of Singapore in Tam Tak.

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Undue influence

It is an equitable doctrine developed by the Courts of Equity. Deveolped as duress is limited. 

1) Nature of undue influence- a) relationship with duress- duress was restrictive. To give greater scope to suceed undue influence was made= flexible and broader and deals with pressure. Acts of pressure but also indirect pressure arising from a relationship between the parties. No direct threat to the claimant so is wider. 

b) forms of unacceptable conduct- Royal Bank of Scotland v Etridge 2 2002. The first includes overt acts of improper pressure, such as unlawful threats. This area is also covered by the law of duress as developed in modern times. The other form of undue influence 'arises out of a relation between two persons where one has acquired over the other a measure of influence or ascendancy of which the ascendant party then takes unfair advantage' This is an easier area to suceed upon. 

c) proof of undue influence- actual and presumed undue influence. 

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Undue influence

Two requirements- first the complainants free will must have been impaired by the defendants unconscionable conduct. Secondly the undue influence must have caused the victim to enter into the transaction. 

1) is the complainants free will impaired? a) direct pressure- Bullying: in BCCI v Aboody 1990- a husband bullied his wife into signing a guarentee to support his debt (transaction 6).

Bank of Scotland v Bennett 1999- a husband pressured his wife by using wounding and insulting language and accusing her of disloyalty.

b) indirect pressure- a) deliberate concealment of material facts, where the defendants owes the complainant a duty of candour and fairness (relationship must create this.) BCCI v Aboody 1990 (first 5 transactions). Hewlett v First Plus Financial Group 2010. 

b) domination- Re Craig 1971 and Barclays Bank v Coleman 2002- domination arising from religious or cultural back ground of the parties- Hassidic Jews. 

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Presumed undue influence

Presumed undue influence- purpose to fill an evidential gap. Two requirements: 1) a preexisiting relationship between the parties in which one party has acquired influence over the other- a relationship of influence. 2) the transaction complained of must be one that calls for explanation. If these two requirements are satisfied the presumption of undue influence is raised and the burden of proof will shift to the defendant to rebut the presumption.

1) relationship of influence- a) presumption of influence: i) solicitor and client Wright v Carter 1902 ii) medical adviser and patient Dent v Bennett 1839 iii) parent and child Lancashire Loans v Black 1934 iv) spiritual leader and follower Allcard v Skinner 1887  and v) finance and financee Leeder v Stevens 2005. 

b) relationships where there is no presumption of influence: husband and wife, unmarried cohabitants, non cohabiting lovers, employer and employee Credit Lyonnais Bank v Burch 1997 and banker and customer Lloyds Bank v Bundy 1975.

Nature of the transaction- whether the transaction is one that calls for explanation Allcard v Skinner 1887. 

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Undue influence

a) where the disadvantage is very large- Credit Lyonnais Bank v Burch

b) where there is no disadvantage- Dunbar Bank v Nadeem 1998.

Rebutting the presumption- a) what is presumed? 

b) what must be shown to rebut the presumption? Zymet v Hyman 1961- 'it must be shown that the complainant entered into the transaction only after 'full, free and informed thought' about it.'

c) how can this fact be shown? Independent advice- Allcard v Skinner 1887 and Hammond v Osborn 2002. 

Duress or undue influence of a third party- 1) the problem- C exercises undue influence on B and as a result B enters into a transaction with A. In such a case the law has to reconcile to conflicting interests. On the one hand, there is the interest to protect B's freedom of consent with C's wrongdoing (undue influence). This interest suggests that the transaction between B and A should be set aside. On the other hand the law is also concerned to protect A's legitimate expectation that his transaction with B will be enforced. This interest suggests that the transaction between B and A should be enforced. 

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Third parties

2) actual notice

3) constructive notice- i) what is constructive notice? Barclays Bank v O'Brien 1994 and Royal Bank of Scotland v Etridge No.2 2002. 

ii) three requirements- First the complainant must show that her consent to the transaction was procured by some wrongdoing (undue influence). Second the complainant must show that the other contracting party was aware of circumstances raising suspicion that the complainants consent was improperly obtained. And third the defendant failed to take reasonable steps to satisfy himself that the consent of the other party was not properly obtained. 

1) wrongdoing- could be duress or undue influence- by the third party. 

2) circumstances raising suspicion- put on inquiry- by the other party eg bank. A creditor will be put on inquiry in every case which the relationship between the debtor and the surety is non commercial. This includes husband and wife, employer and employee, parent and child, and friends. 

3) reasonable steps- Etridge- the creditor could either provide direct explanation to the surety (wife for example) or ensure that the surety recieves independent advice from a solicitor. 

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Third parties

a) direct explanation- at a private meeting in the absence of the debtor- explains the practical effects before the wife signs. Ordinary and plain language must be used. Banks in the UK tend to avoid this. 

b) independent advice by a solicitor- have to do these steps- The bank must i) contact the wife directly (cant proceed unless have name of wifes solicitor) ii) send all necessary information abou t the transaction to her solicitor (loan amount, period of repayment, purpose. Bank must obtain husbands consent to give to solicitor, if he doesnt consent it will not go any further.) iii) ask the solicitor to give her independent advice (to explain the nature and effect of the transaction to her) before she signs it. Without husband. iv) recieve a certificate from the solicitor confirming that the nature and effect of the transaction were explained to the wife before she signed. Wife shouldnt sign unless she understands. Even if there had been undue influence and the solictors certificate is false you can sue the solicitor. 

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1) rescission- the nature of rescission, the requirement of resitiutio in integrum. Erlanger v New Sombrero Phosphate 1878 and Halpern v Halpern 2007. CoA suggested that rescission for duress and that undue influence should be the same. 

2) account of profits- O'Sullivan v Management Agency 1985 

3) defences- affirmation Allcard v Skinner 1887.

estoppel Nicholl v Ryder 2000.

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