Introduction
The doctrine of undue influence, a principle within equity, concerns itself with transactions where one party unfairly exerts influence over another, thereby compromising their free will. This equitable doctrine seeks to protect vulnerable individuals from exploitation by those in positions of trust or power. Undue influence operates in situations where a transaction, typically a gift or contract, is not the product of a party's independent volition but is instead the result of improper pressure. The principles underpinning undue influence are aimed at ensuring fairness and preventing the abuse of relationships. Key requirements include establishing the nature of the relationship between parties and demonstrating the impact of the influence on the specific transaction, which can either be explicitly proven (actual undue influence) or presumed due to the relationship (presumed undue influence).
Two Classes of Undue Influence in Allcard v Skinner
In Allcard v Skinner (1887) 36 Ch D 145, the Court of Appeal delineated two distinct classes of undue influence, a framework that has significantly shaped subsequent case law in this area. The judgment, delivered by Cotton and Lindley LJJ, distinguished between situations where undue influence is actively applied and those where the relationship between the parties gives rise to a presumption of undue influence. This classification is fundamental to understanding how courts approach cases of alleged exploitation and is still cited in modern case law, including Royal Bank of Scotland v Etridge [2002] 2 AC 773. The case itself involved a woman, Allcard, who gifted her property to a religious sisterhood while under the influence of the superior, Skinner. This factual context provided the setting for a detailed examination of the principles governing undue influence and its application.
Class 1: Actual Undue Influence
The first category, actual undue influence, necessitates that the claimant actively demonstrate the exertion of influence on the other party that caused them to enter into a transaction against their free will. This class of undue influence involves an examination of the specific actions and behaviours of the party alleged to have exercised improper influence. As Lindley LJ explained in Allcard v Skinner, it involves "some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating." This approach focuses on observable conduct that shows a specific act of influence. An example of actual undue influence in practice can be found in Williams v Bailey (1866) LR 1 HL 200, where a father was pressured by his son’s bankers to secure his son’s debts, demonstrating coercion that led to a contract not freely entered into. This form of undue influence requires a claimant to prove that influence was expressly used and that the donor would not have entered into the transaction otherwise.
Class 2: Presumed Undue Influence
The second class of undue influence, which is often more complex, arises when the relationship between the parties is such that the law presumes undue influence. This classification does not require specific proof of the exercise of influence. Instead, the burden of proof shifts to the party benefitting from the transaction to demonstrate that the other party acted with full autonomy. The focus is on the nature of the relationship and the potential for abuse due to inherent power imbalances. This class is further divided into two subcategories: Class 2A and Class 2B.
Class 2A Relationships
Class 2A involves relationships where the presumption of undue influence arises automatically as a matter of law. These categories include relationships such as parent and child, solicitor and client, doctor and patient, trustee and beneficiary, and religious advisor and disciple. Allcard v Skinner itself is a prime example of a Class 2A case, since the relationship between the religious superior and the member of the sisterhood was one of influence, with the rules of the sisterhood demanding obedience from its members. The court found that Allcard was bound to render absolute submission and could not obtain independent advice at the time of the gifts. In Re Craig (deceased) [1971] Ch 95, the court also found a presumed undue influence due to the relationship between an elderly man and his secretary/companion, highlighting the automatic presumption for certain relationships.
Class 2B Relationships
Class 2B applies where a relationship of trust and confidence is established based on the specific facts of the case. In these situations, a general relationship of reliance or dependence is demonstrated, which establishes the potential for undue influence. The claimant must show that they placed trust and confidence in the wrongdoer. The onus then shifts to the defendant to show that the transaction was not a product of undue influence. This is a fact-sensitive inquiry. The court considers the overall relationship and whether it suggests a power dynamic. While the relationship between banker and customer usually does not raise a presumption of undue influence, Lloyds Bank v Bundy [1975] QB 326 exemplifies an exceptional case where a bank was found to have a special relationship of trust and confidence with an elderly customer. In Re Brocklehurst (deceased) [1978] Ch 14, the court declined to find a presumed undue influence because the elderly man was found to be of a dominating nature, and was found not to have reposed trust and confidence in the recipient of his gifts.
Burden of Proof and Rebutting the Presumption
A key component of undue influence is the allocation of the burden of proof. In cases of actual undue influence (Class 1), the claimant must provide evidence to demonstrate the exertion of undue influence. The evidentiary standard shifts in cases of presumed undue influence (Class 2). In Class 2A relationships, the onus is on the defendant to prove that no undue influence was exercised. Likewise, if a Class 2B relationship is proven, the defendant must rebut the presumption. To achieve this, the defendant typically needs to show that the claimant received independent legal advice before the transaction, had full awareness of the nature of the transaction, and acted freely and voluntarily. The defendant must prove that the donor fully understood the transaction with informed consent, thereby negating any inference of undue influence.
The Role of Independent Legal Advice
Independent legal advice is critical when rebutting the presumption of undue influence. The advice must be truly independent, provided by a professional who is fully aware of the facts and who explains the implications of the transaction to the party in a manner they can understand. The role of independent advice is to assure the court that the vulnerable party was not merely giving effect to the wishes of the dominant party but acted based on an informed choice. The absence of independent legal advice raises suspicion, suggesting a higher likelihood of undue influence. The Court of Appeal in Allcard v Skinner recognized that Allcard did not receive independent legal advice, which was central to the conclusion that undue influence had been exerted.
Manifest Disadvantage and Transaction Calling for Explanation
Early cases in undue influence required a showing of manifest disadvantage, meaning the transaction was clearly detrimental to the party claiming undue influence. However, this requirement has been significantly modified. As articulated in Royal Bank of Scotland v Etridge, the focus shifted to a transaction that "calls for explanation", one that cannot be reasonably accounted for by ordinary motives. This means that the courts will look to whether the transaction was unusual and unexplained by the nature of the relationship, friendship, or charity. A transaction with no other logical rationale strongly supports a claim of undue influence, which shifts the burden to the beneficiary of the gift or contract to prove its legitimacy.
Delay and Acquiescence
Allcard v Skinner also demonstrated the importance of timely action in seeking redress. The Court of Appeal decided that despite establishing undue influence, Allcard's claim to reclaim her property failed. The court found that Allcard's delay of six years before taking action, after leaving the sisterhood, indicated that she had acquiesced to the transaction, affirming it through her inaction. This aspect of the case highlights the limitations of equitable remedies, especially when complainants wait too long before seeking assistance, where the delay implies that they accepted the transaction in question after the cessation of undue influence.
Modern Treatment of Undue Influence
The principles established in Allcard v Skinner remain fundamental to understanding the modern law of undue influence. The two-class framework, initially defined by Lindley LJ and Cotton LJ, has been affirmed and refined by later cases. Royal Bank of Scotland v Etridge [2002] 2 AC 773 offers a thorough review and clarification of these principles. This case, along with cases like Barclays Bank v O’Brien, highlights that the court has focused on a more robust approach to identifying situations where undue influence is likely. The modern treatment of undue influence is not only relevant in the context of traditional relationships but has also been applied in cases involving guarantees, where the principles are applied to safeguard individuals, particularly wives, who may have been unduly influenced by their husbands.
Conclusion
Allcard v Skinner represents a crucial decision in the development of the doctrine of undue influence. It established a systematic approach to understanding and adjudicating claims of improper influence, based on whether the influence was actual, or presumed from a relationship. The court outlined that undue influence could be either expressly exerted, or implied from relationships based on trust, confidence, and control. The case introduced the crucial concepts of the two-class system, alongside consideration of the burden of proof, the role of independent legal advice, and the implications of delay and acquiescence in such matters. These elements continue to inform judicial decisions in cases of undue influence, demonstrating how this landmark case continues to shape this equitable jurisdiction as applied in circumstances with similar characteristics and influence imbalances. By articulating these principles, Allcard v Skinner has created a lasting framework to ensure fair dealings and to protect vulnerable individuals from the improper exercise of power.
