Presumption of undue influence between husband and wife

[James]

The exam q often asks whether the presumption arises between husband
and wife. I'm studying from Delany's book and she only mentions in
passing that it doesnt. Does anyone have any info on why? Any cases
etc?

Thanks.

[pingu]

Ive had huge problems with this question, It sounds relatively
straight forward but if you look at the examiners reports she looks
for the cases involving wives giving surety for their husbands debts.
While you can use this case law, you will however be wholly repeating
yourself for the 2nd part of the question which asks to discuss the
effect on 3rd parties.

I found it very difficult to separate the cases without them
overlapping in each parts of the question.....namely A and B. the only
way i found got around this (and only partially) is by quoting
references made by the judges in relation to the presumption between
husband and wife and keep the facts and principles of the case for the
2nd part

Its skimpy but its the best Ive come up with so far

[James]

Ah Delaney does cover it, just under the heading of actual undue
influence.

I dont think there's any real problem with repeating the case law. In
part A you'll be dealing with whether there's a presumption with
regards husband and wife whereas in part B youre focusing more on the
position of the 3rd party and what they need to do to ensure they can
rely on the contract

[pingu]

ok, Im actually using the delany book aswell,what pages did you find
the info on relationship between husband and wife?

its the 2003 version i think

[James]

Bottom of 611 to top of 613-its a fairly handy one

> > rely on the contract- Hide quoted text -
>
> - Show quoted text -

[pingu]

cheers,
I think I came over that earlier...buts its what you need all the
same. You see what I mean with its reference to all the 3rd party
cases...or is it just the insomnia kicking in....again

[James]

I know what you mean, theyre the same cases as the 3rd party ones but
they deal with the presumption between husband and wife as well, so
quotes from those pages will be different from the ones you use for
the 3rd party stuff. My brain is melted with this stuff.

> > > - Show quoted text -- Hide quoted text -

[Barca]

Part A of that question gets me too. I'm working from memory, but as
far as I can tell, the husband/wife releationship doesn't automatially
give rise to the presumption. In Etridge, the HL said that whenever a
wife stands surety for her husband's debts, the bank is put on
inquiry. Here we're still using the O'Brien standard, so the bank
needs to have notice of some facts that would put them on notice. I'm
still not clear on whether or not the bank automatically being on
inquiry means that the presumption automatically arises, and
conversely whether the Irish postition is that it doesn't arise, and
actual Undue Influence is needed. Does that sound right?

[JJ]

It's quite tricky alright, I'm trying to look at it in a step-by-step
way -
1. Certain relationship do automatically give rise to presump of due
influence, but hus/wife isn't one - Bank of Montreal v Stewart
2. Despite this, the courts increasingly treat wives as a special
class of litigant, since the oppotunities for abuse and undue
influence are greater in this relationship than others - O'Brien,
Etridge, Smyth, Hogan
3. Therefore the courts take note that undue influence can arise when
the wife has no financial interest in the loan for which she is
standing surety. O'Brien compared to Ulster Bank v Fitzgerald
4. Note its not only wives, but co-habitees too (O'Brien) and even
just stable relationships (Massey).

That's all I'd say for the first half of the question. For the second
half about enforcing against 3rd parties I'd talk about Constructive
Notice, the Bank being put on inquiry when there is no financial
advantage, and this inquiry only allowing recission if no legal advise
was offered. Therefore, a presumption does arise by virtue of the
bank being put on inquiry, but this presumption will not be total
unless no legal advise was offered. As far as I know the same
situation applies in Ireland, i don't think it's different but don't
quote me on that....

[pingu]

Its like a rubix cube

[Joy Quillinan]

it's not that bad, don't let yourself get too confused with the details of the cases just get your head around the principle of each case.  equity is usually a fair paper and marked very nicely so you'll do fine.
 
 
HOMEWORK QUESTION: OCTOBER 2006 - QUESTION 6
1 - In considering whether the husband/wife relationship give rise to a presumption of undue influence, it is necessary to look at the views of the English courts as these have influenced the Irish courts in this matter.
English position: The leading English case on point BARCLAY'S BANK V O'BRIEN holds that the husband-wife relationship did not in itself give rise to presumption of undue influence, although it could where, on the particular facts, "a wife did...de facto...leave decisions on financial affairs to her husband". Additionally in ROYAL BANK OF SCOTLAND V ETRIDGE held that the mere existence of a husband/wife relationship is not enough to raise a presumption of undue influence. However the courts took the view that the presumption should apply whenever the bank or institution is aware that the relationship between the parties is a non-commercial one - i.e. whenever it is not an arm's length commercial agreement.
The Irish position: Now we will examine to what extent the Irish courts have adopted these principles. In BANK OF IRELAND V SMYTH, Geoghegan J relied on BARCLAY, holding that bank being aware of the husband/wife relationship should have advised the bank to obtain independent legal advice. However it is necessary to note this case dealt with a specific statutory requirment,s.3 of the Family Home Protection Act, which requires a wife to have full informed consent. The Supreme Court did not deal with this issue. However they did so in BANK OF NOVA SCOTIA V HOGAN. They expressed scepticism as to the reasoning in BARCLAY that it would be easier to establish circumstances in such relationships which would give rise to a presumption of undue influence. They also refused to decided whether "married woman in this jurisdiction [would] in certain circumstances enjoy as against their husbands a presumption of undue influence". The most recent case ULSTER BANK LTD V FITZGERALD, O'Donovan differentiated it from BARCLAY and the other cases saying it was not a case where the 3^rd party would be put on notice as the transaction was not one sided as wife had financial stake in her husband's business. It is worth noting that this position differs from ETRIDGE and this case has been criticised by Delaney as unsatisfactory.
In conclusion, in Ireland and England it appears that on the face of it the relationship of husband and wife does not raise a presumption. However it seems that in English courts it makes the a presumption of undue influence easier to establish, while in Ireland the matter needs further judicial clarification.
 
 
B - As mentioned in part A the presumption of undue influence does not automatically arise between husband and wife. Therefore in order to for a wife to have a wife to be able to rescind a transaction against 3^rd parties it will be necessary for the 3^rd party to have either actual notice or constructive notice of the husband's undue influence.
In cases of actual undue influence, it is necessary for the wife to prove affirmatively that in fact her husband exerted undue influence. If she can do so than that contract will be set aside.
In BARCLAY'S BANK V O'BRIEN, a husband agreed to secure his company's debt by executing a charge over the family home, jointly owned by him and his wife. The wife signed the necessary documentation without reading them, without having been advised as to their effect, and without any independent advice of any sort. The 3^rd party in this case, the bank was precluded from enforcing the guarantee as it was held to have contrstructive notice of her interest. The court held the 3^rd party was obliged to take reasonable steps to ensure the spouse did enter into the transaction freely and in knowledge of the true facts, and reasonable steps would vary on the circumstances. In the most common situation (guarantee of debts) reasonable steps would occur where the bank met the wife away from her husband and explained to her the potential liability and risks involved in the transaction and advised her to seek independent legal advice. In ROYAL BANK OF SCOTLAND V ETRIDGE, it was held that 3^rd parties were put on inquiry in every case where the relationship between surety and debtor in non-commercial. The bank as 3^rd party could shield themselves from constructive notice by meeting privately with the wife, telling her of her extent of liability as surety, the risk involved and urging her to take independent advice or relying on a certificate from a solicitor. It was also held in ETRIDEGE if the solicitor is an agent of the bank than the bank will be fixed with constructive notice and the wife would still be able to rescind the contract. However the mere fact that the solicitor also acts for the husband or the bank does not give confer constructive notice on the bank providing that the solicitor is satisfied that he is acting in the wife's best interests and would not give rise to any conflict of interest
In Ireland in BANK OF IRELAND V SMYTH, the Supreme Court held that a bank in seeking a consent from a wife was under a duty to make enquiries to ensure she understood what was being asked to consent to . This complies with the principles set out in BARCLAY. In the most recent Irish case on the matter, ULSTER BANK V FITZGERALD, O'Donovan J took a more restrictive view than ETRIDGE suggesting that it is enough that the guarantee documents give a written warning that independent advice should be sought. The court also took into consideration that since the wife had a financial stake in her husband's business, the transaction was not so one-sided as to put the bank on inquiry that improper pressure might have been applied. This is out of line with ETRIDGE which argued that the sharheolding etc might not reflect the reality of the situation and so the bank would still be notice. As mentioned above FITZGERALD has been criticised by Delaney as being unsatisfactory and again further judicial clarification would be welcome.
In conclusion if a wife can prove as a matter of fact that she has been unduly influenced into entering the transaction by her husband she would be able to rescind the contract. However where the undue influence falls under the category of presumed it appears that if the 3^rd party ensured that the wife fully understands the nature and consequences of the transaction and have advised her that she should seek independent advice (through the written instrument or orally) than they would be able to enforce the contract.

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> From: cha...@gmail.com
> To: FE-1-Stu...@googlegroups.com
> Subject: Re: Presumption of undue influence between husband and wife
> Date: Sun, 30 Sep 2007 09:08:20 -0700

[Barca]

JJ and Joy, nice one!