The Gazette 1994

GAZETTE

JULY 1994

stated that where it is proved that undue influence has been exercised, the injured party may always set aside the transaction. In Bank of Nova Scotia v Hogan, the wife did not claim that the bank had actually unduly influenced her to create an equitable mortgage, but that the bank's failure to recommend independent legal advice was sufficient to bar it from recovering. Keane J found that the bank had recommended independent legal advice and that Mrs Hogan had acted freely. Further the Judge disbelieved her evidence and showed a certain impatience with her legal arguments; therefore one should be cautious about looking for statements of law in the judgement. The Judge, however, did state that in "normal banking transactions" there is no inequality between the parties which requires the giving of independent legal advice. He relied for this statement on Morgan, but we have seen that in Pitt the House of Lords made it clear that where undue influence is proved, it makes no difference whether or not a "normal banking transaction" is involved. customer or a surety, although in a particular case a relationship may exist between two such individuals from which undue influence may be inferred; 2) in general a person who alleges undue influence by a banker must prove it; 3) where undue influence is proved, it is not necessary for the injured party to prove loss; 4) it may be desirable that the banker recommends the other party to seek independent legal advice, but The law is therefore:- 1) there is no presumption that a banker unduly influences a

has caused much difficulty. As the House of Lords noted in Barclays Bank v O 'Brien the law has had to adapt to changing social conditions. On the one hand: "Society's recognition of the equality of the sexes has lead to a rejection of the concept that the wife is subservient to the husband". "In practice many wives are still subjected to, and yield to, undue influence by their husbands. Such wives can reasonably look to the law for some protection". 6 At one time certain judges believed that a husband as a matter of law was always presumed to unduly influence his wife. In Hogan the wife attempted to rely on these decisions. Keane J however referred to Howes v Bishop 1 which decided that there is no such presumption. Unfortunately Geoghegan J in Smyth took a rather different view. In Barclays Bank v O 'Brien the House of Lords repeated that there is no presumption of law that a husband unduly influences his wife. However, it pointed out that in any individual case there may be a relationship between two people which is such that it may readily be presumed that one unduly influences the other. The Law Lords noted that in many cases husbands and wives will be in such a relationship; but even where they are not, the House accepted that there is a greater than normal risk that a wife will succumb to undue influence by her husband. However, the House of Lords, unlike the Court of Appeal in the same case, did not feel that wives are a category deserving special protection. In Bank of Ireland v Smyth, on the other hand, Geoghegan J agreed with the Court of Appeal in O'Brien that wives are a "specially protected class". At the same time:

2) in any particular marriage, the relationship may be such that it can be presumed that the husband unduly influences his wife;

3) further, the law accepts that there is greater than normal risk that a

wife will succumb to undue influence by her husband.

Irish law cannot be stated with certainty. Undue Influence by Husband Affecting the Bank

The fact that a transaction was procured by the undue influence of a husband over his wife need not affect the bank if the bank is in no way responsible for the undue influence and is unaware of it. If the law presumed that a husband always unduly influences his wife, then it would seem arguable that the bank should always be deemed to be aware of the undue influence: since there is no such presumption, where then will the bank be affected by undue influence? The wife may claim that her husband should be deemed to be the bank's agent. It is always a question of fact whether or not the husband was so acting. In O'Brien however, the House of Lords criticised the notion of agency as "artificial" since a bank which requires its customer to find security rarely takes any further steps itself and may not even specify that it should be the wife who acts as security.

Two grounds for involving the bank have been suggested:-

1) that wives are a class deserving special protection,

2) that the bank will be deemed to have notice of the undue influence if the circumstances would cause a reasonable bank to enquire whether or not the wife was the victim of undue influence. The first theory was accepted by the j Court of Appeal in O'Brien and by Geoghegan J in Smyth. However it was rejected by the House of Lords in

absence of independent legal advice is not in itself proof of undue influence.

In the UK therefore the law is:-

Undue Influence by a Husband

1) there is no presumption of law that a husband unduly influences his wife;

The question of whether a husband is presumed to unduly influence his wife 188