The Limits of Undue Influence

DOIhttp://doi.org/10.1111/j.1468-2230.1985.tb00861.x
Publication Date01 September 1985
Date01 September 1985
AuthorDavid Tiplady
NOTES
OF
CASES
THE
LIMITS
OF
UNDUE
INFLUENCE
THE
doctrine of undue influence represents a wide, though
infrequently invoked, judicial discretion
to
set aside transaction+
be they gifts or contracts-in which it appears that one party may
have used his position
of
dominance over another in order to bring
that transaction into being. The jurisprudential basis of this
doctrine, and hence the general limits
of
its applicability, were
examined by the House of Lords, for the first occasion this century,
in
National Westminster Bank
v.
Morgan.’
At the same time Lord
Scarman, in a speech with which the rest
of
their Lordships agreed,
took the opportunity to comment upon the so-called doctrine
of
inequality of bargaining power, as formulated by Lord Denning
M.R. in
Lloyds Bank
v.
Bundy,2
in which the doctrine
of
undue
influence appears as merely a categorical illustration of a more
comprehensive equitable jurisdiction.
The reported facts
of
Morgan
were relatively straightforward.
Mr.
Morgan, a self-employed businessman of more optimism than
acumen, was in financial trouble. His home, which he owned
jointly with his wife, the respondent, was mortgaged to the Abbey
National Building Society, who were threatening foreclosure. Mr.
Morgan persuaded the appellant bank to buy out the original
mortgagees, on the understanding that his business affairs would
be straightened out within a short time. A new charge on the
family home was executed in favour of the bank. This charge in
terms secured all present and future liabilities of the husband to
the bank, although it was intended only to cover the amounts
necessary to pay
off
the original mortgage and support the
borrowers’ domestic finances for a brief time thereafter. Mrs.
Morgan sought and was given the bank’s assurance on this point
before signing the charge, which she did at her home immediately
following a short conversation with the bank manager. The effect
of the charge had therefore been misrepresented to her: the charge
covered her husband’s business liabilities, although Mrs. Morgan
had been assured that this was not
so.
Some time after these
events Mr. Morgan died. The monies secured by the charge were
not repaid and the bank sought possession of the house. In the
House of Lords Mrs. Morgan resisted the action on the sole
ground that her agreement to the charge was induced by undue
influence on the part
of
the bank.
Their Lordships were particularly concerned with two questions:
first, whether, on the facts, the necessary relationship between the
parties had been established for the doctrine to apply, and,
1985
1
All
E.R.
821.
[IW~]
Q.B.
326.
579

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