Equity And Trusts - Equity and Trusts

BEFORE YOU START:

IS THE UNDUE INFLUENCE BEING EXERCISED BY A THIRD PARTY? IF SO, WRITE THIS INSTEAD OF THE INTRODUCTION BELOW.

IS IT A SPECIAL WIVES EQUITY? IF SO GO TO THE END OF PRESUMED UNDUE INFLUENCE

Introduction (third party)

From the facts it appears that [plaintiff] has been subjected to undue influence which has resulting in [property] being transferred to [defendant]. However, as [defendant] has received the benefit of the transaction but has not [him/herself] exerted the undue influence against [plaintiff], [plaintiff] will need to argue third party undue influence, that is to say [third party] exerted the undue influence which resulted in the transaction in question.

In the case of Bridgeman v Green, the court famously held: “...partitioning and counting [the subject matter of the transaction] out amongst his relatives and friends will not purify the gift and protect it against the equity of the person imposed upon.” Therefore, [plaintiff] can rely on the equitable doctrine of undue influence as [his/her] judgment may be regarded as impaired by the influence of [third party]. The intent of [defendant] is irrelevant in this enquiry as equitable fraud is a much broader concept than common law fraud.

[Plaintiff] must first prove that [third party] was exercising undue influence over [plaintiff].

SKIP STRAIGHT TO EITHER “PRESUMED” OR “ACTUAL” BELOW, REPLACING “[DEFENDANT]” WITH “[THIRD PARTY]”. IF PRESUMED IS UNCERTAIN, APPLY ACTUAL AS WELL.

Introduction (non-third party)

From the facts, it appears that [plaintiff] has been subjected to undue influence which has resulted in [property] being transferred to [defendant]. As [plaintiff] and [defendant] are known to one another (if it is a trustee and beneficiary they do not have to be known to each other), [plaintiff] may rely on the equitable doctrine of undue influence to argue that [his/her] judgment w as impaired by the influence of [defendant]. [Plaintiff] will claim that there has been unconscientious use by [defendant] of a special capacity or opportunity that exists by reason of their relationship of influence, and thus [plaintiff’s] act of entering into the transaction in question cannot be considered free or voluntary. The intent of [defendant] is irrelevant in this enquiry as equitable fraud is a much broader concept than common law fraud.

CHOOSE EITHER PRESUMED OR ACTUAL BELOW. IF PRESUMED IS UNCERTAIN, APPLY ACTUAL AS WELL.

Presumed undue influence

[Choose from the following]:

• Class 2a: The relationship between [plaintiff] and [defendant] falls into the recognised category of [parent and child/solicitor and client/trustee and beneficiary/doctor and patient/spiritual adviser and worshipper/man and fiancé], thus raising a presumption of undue influence.

• Class 2b: The relationship between [plaintiff] and [defendant] does not fall into a recognised category of undue influence. However, if [plaintiff] can prove that the relationship is one of undue influence, the presumption will apply. In the case of Johnson v Buttress a 67-year-old illiterate, low intelligence man was held to be devoid of capacity in business affairs. The man’s wife died and he moved in with family friends. He decided to transfer his house to Mrs Johnson, who at first refused, but then organised with her solicitor for the contract to be completed. The court held that wherever the relationship between donor and donee is such that the latter is in a position to exercise dominion over the former by reason of the trust and confidence reposed in the latter, the presumption of undue influence in raised. [Argue on facts whether there is such a relationship in the facts. If you cannot establish it or you are not sure, go to actual undue influence. If it is similar to Johnson v Buttress, continue on this path.]

As the presumption has been successfully raised by [plaintiff], the onus now shifts to [defendant] to prove that [plaintiff’s] act was the pure, voluntary, well-understood act of the mind of the donor: Johnson v Buttress. If [defendant] cannot prove this then [plaintiff] has the right to have the transaction set aside.

[Choose from the following]:

• Adequacy of consideration: [Defendant] can rebut the presumption by arguing that [he/she] provided [plaintiff] with adequate consideration in the form of [consideration]: Union Fidelity Trustee v Gibson). As there [is/is not] adequate consideration, it is likely [defendant] [will/will not] be able to rebut the presumption, and thus the transaction [may/may not] be set aside. [If not, go straight to remedies].

• Independent advice: [Defendant] can rebut the presumption by arguing that [plaintiff] received competent, professional and independent advice: Bester v Perpetual Trustee. It may be sufficient for [defendant] to prove that [he/she] recommended independent advice by sought by [plaintiff] and [plaintiff] does not have to have taken the advice: Inchenoria v Shaik Allie Bin Omar [1929]. As [plaintiff] [does/does not] appear to have obtained independent advice [from person/from anyone], is it likely [defendant] [will/will not] be able to rebut the presumption, and thus the transaction [may/may not] be set aside. [If not, go straight to remedies].

• Lack of improvidence: [Defendant] will be able to rebut the presumption by arguing that there was a lack of improvidence that accompanied the transaction. This enquiry will be based on the nature of the transaction in terms of its enormity in the context of [plaintiff’s] circumstances. As there [is/is not] a lack of improvidence on the part of [defendant] it is likely [defendant] [will/will not] be able to rebut the presumption, and thus the transaction [may/may not] be set aside. [If not, go straight to remedies].

[Compare/distinguish]:

• Parent and child (including guardians):

  • In the case of Bullock v Lloyds Bank Ltd [1955] Ch 317 a 21-year-old girl inherited money and settled the money in the name of the father and brothers without any independent legal advice. The court held there was undue influence by the father. Undue influence was said to arise not only where a person exerted influence to secure a benefit, but also where a person of imperfect judgment was placed under the direction of someone possessing greater experience.

  • In the case of McNally v GIO Finance Ltd (1994) a 19-year-old quadriplegic received $1.5m in compensation. He was persuaded by his father to mortgage the wheelchair-accessible houses to guarantee a mortgage for his fathers’ business. Solicitor helped strap the pen into the boy’s hand so he could sign, and explained everything to both of them. The business went broke and the bank called upon the son to pay the mortgage. The court held there was undue influence by mortgagee.

• Solicitor and client:

  • In the case of Verduci v Golotta [2010] the court held that undue influence was presumed between respondent's son as solicitor and applicants.

• Trustee and beneficiary

• Doctor and patient:

  • In the case of Bar-Mordecai v Hillston [2004] the defendant was a 36-year-old doctor who treated a 72-year-old woman and her husband. When husband died, doctor moved in and started relationship with the woman, who purchased a practice for him etc. He claimed it was a loving relationship and they were just gifts. The court held that despite their active sex life, it was undue influence because the woman always referred to him as “doctor”.

• Spiritual advisor and worshipper:

  • In the case of Allcard v Skinner (1887) a woman entered into a convent, gave property to the sisterhood under the vow of poverty. When she left the convent she wanted it back. The Court held there was undue influence.

  • In the case of McCullogh v. Fern [2001] the Ferns were leaders of a religious movement that Mrs M belonged to. Mrs M was staying on their property at the time, and they told her it was part of the ‘divine plan’ for her to pay the mortgage off in full. She was in poor health, was separated from her husband and did so. The court held there was undue influence.

  • In the case of Hartigan v International Society for Krishna Consciousness Inc [2002] a woman had young kids on a small farm. She gave her whole property to the religious society. There was no evidence that the society had pressured her to do so. The court held there will undue influence.

• Man and fiancée

[Choose from the following]:

• As [plaintiff] is able to rely on presumed undue influence and [defendant] will most likely fail to rebut the presumption, the court may set aside the transaction of [property] to [defendant] in favour of [plaintiff].

• As [plaintiff] is able to rely on presumed undue influence and [defendant] will most likely successfully rebut the presumption on the grounds of [adequacy of consideration/independent advice/lack of improvidence], the court may uphold the transaction of [property] to [defendant] against [plaintiff].

Special wives equity

As [plaintiff] is the [wife/de facto partner] of [defendant] and [he/she] has provided a guarantee for [defendant’s] debt, namely [insert details of debt], a special wives equity may arise. The case of Yerkey v Jones set out the two limbs of the special wives equity.

[Choose from the following]:

• As [third party creditor] secured a guarantee from [plaintiff] for [husband’s] debt, [plaintiff] will need to prove that [defendant] has exercised actual undue influence for the transaction to be set aside. However, if [third party creditor] can prove that [plaintiff] received independent legal advice, the special wives equity will fail. [Plaintiff] must prove that [third party creditor]...