Undue Influence Introduction: Pressured to enter into contract by the influence of the other. ( indirect force, there is no violence act, no one put guns on head, someone with position or authority relationship to manipulate you to enter into contract, being induced to enter into contract, abuse the relationship, abuse of power. Undue influence is provided under S.1(1! of "# 1$%&. S.1(1! provided that ' # contract is said to be induced by that one of th e partied in a position to dominate the will of other and uses that position p osition to obtain an unfair advantage over o ver the other.
Undue Infuence (S.16(1)) Dominant Position Actual (S.16(1))
Use o Position
Unair Advantag e
Presum ed (s.16(2))
First Element: Dominant Position Raghunath Prasad v Sarju Prasad
acts: ) too* a loan from P upon the security of a mortgage. +he interest rate for the loan was very high, namely - per mensem (or - annually!. ) contended that the mortgage was entered into under undue influence, in view of the high interest rate and the fact that he was desperately in need of money at the time. +he Privy "ouncil held that the defendant had not brought himself within s 1 of the Indian "ontract #ct (in pari materia with s 1 of the "ontracts #ct!. In this case, the Privy "ouncil held that the relation between the parties was simply that of lender and borrower. /ord Shaw stated though the bargain had been unconscionable (and it has the appearance of being so! a remedy does not arise until the initial fact of a position to dominate the the will has been established. #fter that fact is established, then the unconscionable nature of the bargain and the burden of proof on the issue of undue influence comes into operation.
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Hong Kong Shanghai Bank Corp v Syarikat nited !eong Enterprise Sdn Bhd " #nor
In this case, the second defendant had signed a guarantee in favour of the plaintiffs for loans given to the company in which he was a director. 0is allegation that he signed under un due influence was reected by the 0igh "ourt. +he "ourt held that P21 (an advocate of the law firm acting as solicitors for the ban*! was not in a position to dominate the will of the second defendant as alleged by the second defendant. 3n the contrary, the forcefulness of the second defendant4s character was demonstrated when the second defendant got P21 to meet him at a coffee house instead of going to P214s office himself. urther, the lac* of independent legal advice did not necessarily point to undue influence, as the second defendant, being a man wise of the world, had not said that he wanted legal advice or had as*ed for it. $nd Element: se o% Position Poosathurai v Kannappa Chettiar " &rs
In this case, the appellant alleged that his maternal uncles influenced him to e5ecute a deed of sale and he sought to cancel the deed. 3n the facts, the Privy "ouncil held that it was not proved that the sale was unconscionable or constituted an advantage unfair to the plaintiff, that is, it was not a sale for undervalue. It is not sufficient to have mere influence, the influence must be undue in that dominant person has used his position to obtain an unfair advantage. /ord Shaw stated: “It is a mistake ... to treat undue influence as having been established by a proof of the relations of the parties having been such that the one naturally relied upon the other for advice, and the other was in a position to dominate the will of the first in giving it. Up to that point 'influence' alone has been made out. Such influence may be used wisely, judiciously and helpfully. '(rahim (in )usa v Bahari (in *+iyan ,Sued as #dministrator o% the estate o% Chin - Husin (in Der.n(ang
+he plaintiff sought specific performance of an alleged sale and purchase agreement he entered into with +o* "hin (the deceased!. +he defendant, defendan t, as administrator of +o* "hin4s estate, contended, inter alia, that the agreement was brought about by the undue influence of the plaintiff as the deceased was an illiterate, illiterate, elderly and feeble man who was subect to the influence of the plaintiff being in a position of trust and c onfidence/ +he court held that Undue Influence had not been made out and no unfair advantage obtained. 6" 7ohrah 8 stated that: “he evidence of ok !hin being under the influence of the plaintiff was far from clear. he plaintiff was was his nephew nephew and lived lived near him him but not with with him as the the defendant defendant tried to make make out ... the plaintiff and his wife did provide food for ok !hin and his wife but I cannot see from this relationship the plaintiff's dominance over ok ok !hin. 2|Page
"ut even assuming assuming in in the conte#t conte#t of s $% of the the !ontracts !ontracts &ct $() $() the plaintiff plaintiff was in in a position position to dominate the will of ok !hin it must be shown that the plaintiff used that position to obtain an unfair advantage over ok !hin *see +oosathurai v anappa !hettiar - rs /$$$ 01 I& $2 3aghunath 3aghunath +rasad v Sarju +rasad +rasad &I3 $40 +! %)5. %)5. "ut what what was unfair6 unfair6 here here was no no gift by ok !hin to the plaintiff of ok !hin's shares in the 7 pieces of land. here was a sale of those shares shares and the price price was 87,))).)) 87,))).)) and no evidence evidence was adduced adduced to show show that the 87,))).)) 87,))).)) was an under valuation of the shares in the said pieces of land. I fail to see undue influence.” 0rd Element: n%air #dvantage Sa. 1aik Beo. v Cheong 2e. 2e. 3eng " &rs
acts: In this case, the plaintiff sued for specific performance of a sale and purchase agreement entered into between herself and the first defendant. +he first defendant alleged that he had not no t given free consent to the agreement ag reement as he had been e5posed to influence from the plaintiff as his spiritual advisor. +he "ourt held that there was no undue influence. +he first defendant was an educated, intelligent and mentally alert man with a strong personality. +he agreement was in his clear handwriting. 0e also too* no steps to repudiate the agreement over the course of si5 years. +he "ourt also held that the said transaction was not unfair to the defendants and there was no no evidence that the transaction itself was 9wrongful9 in that it constituted an advantage ta*en of the person subected to the influence. +he High Court emphasised the re4uirement that an un%air advantage .as o(tained and in this +ase5 re%erred to it as 6mani%est advantage6/ •
quite apart from the question of manifest disadvantage, a party relying on the plea of undue influence would have to show that (a) the other party had the capacity to influence him, (b) the influence was exercised, (c) its exercise was undue and (d) that its exercise brought about the transaction (see Ban of !redit " !ommerce " #nor v #boody $%&'& $%&'& *+ -&, -&, '(id5 at 078/
3 Categories S.16(2)
Fiduciary
Real/Apparent Authority
Relationship (trust & confdence)
Person ith !e"ecti#e $ental Capacity
Real9 #pparent #uthority Kha. Cheng Bok " &rs v Kha. Cheng Poon " &rs ( ather and Son!
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In this case, the deceased was a man of great wealth and the plaintiffs and defendants were his children and grandchildren, respectively. #n issue arose whether the deceased had been unduly influenced by his third son, "heng Poon, into ma*ing certain gifts. "heng Poon was the only son who lived with the deceased and was the deceased4s favourite son. e%%rey ;an held that a presumption o% undue in%luen+e .as raised and that it had not (een dis+harged/
he proved or admitted facts showed that the relationship between the donor and donee at or shortly before before the the e#ecution e#ecution of the gifts gifts had been been such as to to raise a presu presumption mption that that the donee had great influence over the donor 9 a natural conse:uence of the condition of the parties. Fidu+iary Relationship ,;rust and Con%iden+e< ;ara Rajaratnam v Datuk agindar Singh " &rs
+he plaintiff agreed to transfer her land as security for an ad vance of &,&&& to the plaintiff. +he money was to be used to pay off a charge as well as to the first defendant an amount payable pa yable by the plaintiff4s brother;in;law brother;in;law for whom the first defendant stood as surety for for a loan obtained. +he first and second defendants were advocates advo cates and solicitors who prepared the necessary documents. +he plaintiff4s land was transferred to the second defendant who bought the land on behalf of the first defendant. +he second defendant had assured the plaintiff that that although it was in the form of a sale, it would remain a security and will be transferred bac* to her after one year. +hrough the collusion of the defendants, the land was eventually transferred to the third defendant, who was also an advocate and solicitor. In the third defendant4s action for possession of the land, the plaintiff pleaded, inter alia, undue undu e influence. 1 (! of the "ontracts #ct in relation to #(dul Ra=ak referred to the presumption under s 1(! solicitors and applied it to the facts of this case as follows: “"ut once a person acts as a solicitor then the presumption of undue influence arises, and unless they can rebut it the property they ac:uired from their client cannot be allowed to remain in their hands. &cting as a solicitor intrinsically creates a fiduciary relationship between a solicitor and his client which the solicitor cannot take advantage of since it imposes an obligation on its part to act with strict9fairness and openness towards them *;aisbury's,
ato', position of respect and dignity in the State, they were clearly in a position to dominate her will to their advantage. ;engku #(dullah i(ni Sultan #(u Bakar " &rs v )ohd !ati%% (in Shah )ohd " &rs and other
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In this case, the first and second appellants, appe llants, together with the #yala #yala uired all the shares in a company called ?aintree )evelopment Sdn @hd (?)@! which owned a piece of land that was identified as the proposed site of the clubhouse. #llied "apital Sdn @hd was incorporated to build the club4s premises. +he preponderance of the shares in ?)@ and #llied were held by the first and second app ellants. /ater, the shareholders of ?)@ sold their shares to #llied. # protem committee committee of the club was elected and passed a resolution which authorised the first and second appellants to enter into a share ac>uisition agreement on behalf of the club under which the entire capital of ?)@ was to be purchased by the club from #llied for ?=A million. +he purpose was to ac>uire the building and the facilities for the club. 'n this +ase5 the Court o% #ppeal stated that 6the +ategories o% %idu+iary relations are never +losed6 and held that the %idu+iary do+trine applied to promoters o% a +lu( Rosli (in Darus v )ansor - Harun (in Hj Saad " #nor/>7 >7 ?$77@A )! $7/
In this case, the defendants who were the uncles of the plaintiff failed to rebut the presumption that undue influence was e5ercised in the conveyance of the plaintiff4s land to them. +he plaintiff had inherited land from his adoptive mother after her death and had subse>uently subse>u ently transferred it to his uncles, the defendants, in e>ual shares. 0e later applied for a declaration that the transfer was null and void on the ground that it was induced by the undue influence of the defendants. ;he High Court agreed and set aside the +onveyan+e/ ;he +ourt held that a relationship o% dominion o% the un+le to.ards P +ould (e presumed and D had not re(utted this presumption/
In ;ong Seng Din Bon " #nor v Ban Chap #h Seng ?@>8A $ C! $> +he evidence showed that the defendant had fully won over the love and trust of both the plaintiffs, who were an elderly childless childless couple, to such as e5tent that the defendant was treated li*e their son. +he defendant who was in a position of active confidence of the th e plaintiffs had subtly e5erted undue influence over them. +he "ourt set aside the transfer of property from the first and second plaintiffs to the defendant on grounds of undue influence. Sai.ath Haneem v Hadjee #(dullah,@8><
+he parties involved were family members. +he plaintiff was the sister in law of the two defendants, #bdullah and )aud, who were the younger brothers of #rshad, the plaintiff4s husband. )uring #rshad4s absence from Singapore from 1BAB to 1BB$, his property was managed by #bdullah, who collected his rents, rents, paid for his e5penses, and supplied the plaintiff with money. +he parties were on intimate terms: #bdullah and )aud were fre>uently in their brother #rshad4s house and had access to the women4s >uarters. #rshad4s sons went to school in #bdullah4s house and fre>uently went there to play with their relatives. #bdullah was trustee of a house for one of &|Page
the sons. #fter some negotiations over a family dispute, the plaintiff signed a conveyance of some properties to the defendants. She sought to set aside the conveyance and the issue of undue influence was raised. ) failed to prove that P had acted of her own volition in e5ecuting the agreement and the conveyance. ;eld? the >efendants >efendants proved proved that the the transactions transactions challenged challenged by the the +laintiff +laintiff were right and proper proper transactions, transactions, that she understood understood fully what she was was doing, and and further that that she acted acted freely freely and without without being subject to undue undue influence influence or pressur pressure... e... Person .ith De%e+tive )ental Capa+ity 'n !hemsource (/) 0dn Bhd v 1danis bin /ohammad 2or, %% the 0igh "ourt applied the doctrine of undue influence to a case of a defendant afflicted with Par*inson4s disease. #(dul )alik 'shak stated: 34 in my 5udgment, the doctrine of undue influence can be extended to the situation where the defendant was so afflicted with the 6arinson7s disease that he was unduly influenced to sign the said agreement. he doctrine must be e#tended to the situation at hand. f course, the defendant must affirmatively prove, at the trial, that the plaintiff had in fact e#erted influence over him and, in conse:uent thereof, the plaintiff had procured a contract that would otherwise not have been made by the defendant.@ C&&1D "/8 A$ at $$. Hus(and and 3i%e
ollowing English cases, the =alaysian courts have held that a mere relationship bet husband F wife does not give rise to a presumption of UI. Public inance inan ce @hd v /ee @ee ?ubber actory SG@ +he 0igh "ourt held that no presumption of undue influence arose by reason of the husband and wife relationship alone. Edgar oseph r SC stated:
“here is ample authority to show that certain classes of relationship by themselves and nothing more do give rise to a presumption of undue influence2 e#amples are? parent and child *see +hillips v ;utchins ;utchinson on /$0%= /$0%= >8A @ C! Steve Shim stated:
“ Bthe onus of proof generally lies on the party alleging undue influence. here are however certain relationships which can give rise to a presumption of undue influence but the case authorities appear to establish that the relationship of husband and wife is not one of them? see +ublic Cinance Cinance "hd v Aee "ee 3ubber Cactory Cactory Sdn "hd - rs /$0= /$0= $ DAE 0( 0( on p ()(. hat hat being the position, in the instant case, the 4nd defendant, having alleged undue influence on the part of the plaintiff and and the $st defendant defendant,, the onus would would be on her her to prove prove it.@ Ibid,at l.
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+he latest statement of the law on this issue at common co mmon law as decided in Royal Bank o% S+otland S+otl and v Etrid Etridge ge ,*o $< 03/ held: # wife4s guarantee of her husband4s business debts is not to be regarded as prima facie evidence of the e5ercise of undue influence by husband, though there will be cases which call for an e5planation. Burden o% Proo% •
S/@,0<,a<
2hen the e5ercise of UI has been bee n establishedGpresumed, the burden of proof then shifts to the person accused of e5erting UI to prove that the transaction was right and proper and that the other party acted freely without any undue influence on his part. aghunath aghunat h 6rasad v 0ar5u 0ar5u 6rasad 0alwath 8aneem 8aneem v 8ad5ee #bdull #bdullah ah Disprove o% ' or Re(utting the Presumption •
•
3ne of the common ways wa ys to prove that a party has acted of his own free will is to show that independent legal advi+e had been obtained before the complainant signed the alleged document. 0owever, the fact that legal advice had been obtained will not, in itself, necessarily rebut any presumption of undue influence.
Inche 2oriah 2oriah v 0hai #llie bin 9mar
oyal Ban of of 0cotland 0cotland plc v :tridge :tridge (2o )
ndue 'n%luen+e 'n%l uen+e (y 0 rd Parties
It has been established that a contract resulting from UI e5erted by a Hrd party (i.e. person not a party to the contract! is voidable. (|Page
/alaysian ;rench Ban Bhd Bhd v #bdullah #bdullah bin /ohd /ohd
@y a letter of guarantee e5ecuted by the first and second defendants and by a second letter of guarantee e5ecuted by the third and fourth defendants, the four defendants agreed to guarantee payment of all moneys due and payable by Syari*at Samaria Supply. +he +he third and fourth defendants later alleged that the first defendant had e5ercised undue influence to induce them to e5ecute the guarantee agreement. ;he High Court5 .hile holding that a person not a party to the +ontra+t +an +ommit undue in%luen+e5 %ound on the %a+ts that the mere allegations o% the third and %ourth de%endants .ere not su%%i+ient to raise the issue o% undue in%luen+e/
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