Both in commercial and private transactions people are entitled to put their own interests first, but sometimes this goes too far. Persuasion and negotiation are legitimate tactics but unfair pressure or abuse of a position of trust is not, and there are ways in which the law can intervene to put things right.
This is the first in a short series in which we briefly outline the law relating to various types of unlawful exploitations and what can be done about them. The series will deal with undue influence, duress and breach of trust, lack of capacity and, finally, how these relate to the law of negligence.
What is undue influence?
Undue influence occurs when someone (“the influencer”) uses his power, whether physical, financial, or emotional, to unfairly influence a decision being made by another person (“the victim”) so as, in effect, to undermine the victim’s free will. It can arise in a wide range of circumstances and any type of relationship or transaction. However, it arises most often in connection with financial transactions, gifts, and wills, where the influencer, trusted by the victim, exploits his power to obtain some material benefit, whether directly or indirectly. Sometimes it comes to light during the lifetime of the victim, and sometimes after death. Legal advice is often sought not by the victim, but by colleagues, family members, close friends, and even neighbours who have become concerned.
Two types of undue influence
For the purposes of legal analysis, there are two types of undue influence: the first of which is focused on the behaviour of the influencer and the other on the definition of the relationship between the influencer and the victim.
1. Direct influence
In the first situation, there is direct pressure from the influencer, which causes the victim to do something he would not have done if he had not been manipulated, bullied, or harassed by the influencer. The undue influence may consist of a single act, for example, a threat to deprive the victim of something, or the effect of a long campaign of “encouragement”. The pressure is more than ordinary persuasion, different from discussions which might take place within normal dynamics of a family or a long-standing friendship, but something where the behaviour of the influencer has been excessive, improper, or unconscionable. The influencer is usually someone who is trusted by the victim, such as a family member or friend or a business associate and the victim is often vulnerable in some way, such as because of age, illness, or social isolation. There is often deception by the influencer as part of the influence.
Practical examples are too numerous and varied to be able to give a complete list, but can include, for example, gifts of large sums of money or valuable shares to a carer or a financial adviser; wills cutting out family members in favour of a new “friend” or love interest who has undermined the trust of the victim in his family or selling assets at an undervalue to the influencer.
The burden of proof is on the person challenging the validity of the transaction on grounds of the conduct of the influencer in these cases.
2. Presumed influence in certain relationships
There is a second category where the law deems that “influence” is inherent in certain types of relationships, for example, as between doctor and patient, solicitor and client, or priest and parishioner. This list is not exhaustive, and the cases provide a wide range of examples.
Whilst the starting point is that these are relationships involving influence, it is not automatically presumed that the influence is “undue”. Nonetheless, where the suspect transaction occurs within such a relationship, the starting point is that it should be set aside, and it is the influencer who has to prove that the influence was not undue and convince the court that the transaction was lawful. Nonetheless, the challenger has to start by demonstrating that the relationship falls into a category of presumed influence.
Common features of both types of case
In both categories, there is a vast amount of case law in which the courts have tried to distinguish exactly what types of behaviour amount to direct influence, and which relationships fall into the second category. This illustrates the point that these cases are highly fact-sensitive and depend on detail.
Evidence required
There are common features in both categories, so the starting point is always the same. We need to investigate the relationship between the parties to establish into which category it falls. We must also investigate the transaction in question. There is almost always something about the transaction that cannot be explained by reference to the ways in which people usually behave, either generally or in line with their usual behaviour, and there is often something odd about it that has no obvious common-sense explanation, and where it looks as though the beneficiary has taken advantage of his position.
The victim’s right to dispose of their own property
The suspect transaction does not have to be disadvantageous to the victim, although the more disadvantageous it is, the better the explanation for it has to be. Relevant questions include whether the victim had independent advice, whether that advice was truly independent, and whether the advice was wrong or negligent. This will be addressed in more detail in a subsequent post.
It’s worth remembering throughout, that people are entitled to do whatever they like with their own property, even if they have had correct, independent legal advice not to do it. So, concerns about a particular transaction do not always lead to a claim of undue influence, although it may reveal other issues.
Investigation into the victim’s background, whether they are alive or dead, may involve scrutiny of previous business transactions, emails and text messages, diaries, medical records, and the observations of friends and family, as well as the drier evidence of bank and solicitors’ records. It takes time and is best carried out as soon as the suspect transaction comes to light. Occasionally, where the victim is alive, it may be necessary to seek emergency relief from the court to prevent a transaction from taking place. The key is to seek advice as quickly as possible.
The remedies
Where undue influence is established, the usual remedy is for the suspect transaction to be set aside. However, where the assets have been dissipated or sold on to an innocent third party, this may not be possible, and the remedy will consist of damages.
Undue influence and duress
These cases are rarely straightforward and claims of undue influence often arise alongside others such as lack of capacity, fraud, breach of trust, professional negligence, and occasionally duress. In the next article in this series, we’ll explore the concept of ‘duress’ in more detail.
If you have concerns about undue influence or duress – whether involving financial transactions, wills, or other suspect arrangements – taking early action is crucial. Edmonds Marshall McMahon has extensive experience in uncovering and challenging exploitative conduct. Contact us today to discuss how we can help you protect your rights or those of a vulnerable person.
with Liina Tulk
