Chapter 1 Undue Influence

Definition – Undue Influence occurs when an individual is able to persuade

another’s decision due to the relationship between the two parties

Undue Influence under English law

Classification of undue influence

Requirement of manifest disadvantage

Under influence in husband and wife relationships

The role of independent advice in under influence

Classification of undue influence

There are two types of undue influence where Actual and Presumed

Actual and Presumed went to Subdivide undue influence

Subdue undue influence were divide into subclasses into two

Class 2A and Class 2B cases

Allcard v Skinner

Facts : The plaintiff just happened to join the religious sisterhood and she was
taking vows of poverty , chastity and obedience.After a few days later , she
decided to pass on her property to the defendant by a will.She left the sisterhood
and came back after six years later.She wanted to claim of her property that was
made by the defendant’s undue influence

Held : The Court of Appeal held that while the plaintiff’s contribution was
voidable due to the unfair impact brought on the complainant by the plaintiff , she
was not entitled to return from the training she had undergone because of her
actions and delay.
Actual Undue Influence

In a case of actual undue influence, the innocent party must show the Court
evidence that at the time of the signing of the contract the wrongdoer had an
influence over the innocent party.

Class 2A : Presumed undue influence

The complainant needs to show that there was a relationship of trust and
confidence between the complainant and the wrongdoer

No need to show evidence that undue influence was applied in relationship

Once a confidential relationship has been proved , the burden goes to the
wrongdoer

So that the wrongdoer can prove that the complainant had entered into impugned
transaction ( To have doubts )

Class 2A

Certain relationships such as solicitor and client , medical advisor and patient

Class 2B

The existence of relationship can raise undue influence if the complainant proves
trust and confidence in the wrongdoer

The complainant can save the impugned transaction by proof that the complainant
has trust and confidence in the wrongdoer

Without prove that the wrongdoer apply undue influence

Manifest Disadvantage

The wronfulness must be shown ; it must be the one in which an unfair advantage
has been taken over another

Malaysian case
Polygram Records Sdn Bhd v The Search (the requirements of Undue
Influence)

Facts : A group of young singers are known as The Search who had entered into
two written contracts with the plaintiffs , both recording contracts containing the
same terms.The defendants , the group of singers states that the second contract
was made undue influence.

Held : The High Court held that dismissing the plaintiff’s claim and recording and
allowing part of the group’s counterclaim.

Undue Influence under S 16 of CA

S 16 (1) A contract is said to be induced by Undue Influence where the relations

subsisting between the parties are such that one of the parties is in a position to
dominate the will of the other and uses that position to obtain an unfair advantage
over the other

S 16 (2) In particular and without prejudice to the generality of the foregoing

principle , a person is deemed to be in a position to dominate the will of the
another

S 16 (2) (a) Where he holds a real or apparent authority over the other , or where
he stands in a fiduciary relation to the other

S 16 (2) (b) Where he makes a contract with a person whose mental capacity is
temporarily or permanently affected by the reason of age , illness or mental or
bodily stress

S 16 (3) (a) Where a person who is in a position to dominate the will of another,
enters into a contract with him , and the transaction appears , on the face of it or on
the evidence adduced , to be unconscionable , the burden of proving that contract
was not induced by undue influence shall lie upon the person in a position to
dominate the will of the other

S 16 ( 1) for cases Actual Undue Influence

S 16 (2) for cases Presumed Undue Influence

S 16 (3) deals with the burden of proof of undue influence

Poosathurai v Kannapa Chettiar & ors( requirement of Undue Influence)

where the Privy Council held that it is not sufficient to have mere influence , the
influence must be undue in that the dominant person has used his position to obtain
an unfair advantage.

Ibrahim bin Musa v Bahari bin Nayan

Held : The Court held that there was no unfair advantage obtained.

There was no gift by Tok Chin to the plaintiff of Tok Chin’s shares in the 3 pieces
of land.There was a sale of those shares and the price was 3,000.00 and no
evidence was adduced to show that the 3,000.00 was an under valuation of the
shares in the said pieces of land.

Hongkong & Shanghai Banking Corp v Syarikat United Leong Enterprise

Sdn Bhd & A nor (unfair Advantage)

Facts : In this case, the second defendant argued that since no further money was
advanced to the first defendant by the plaintiff at the date or after the signing of the
guarantee, the guarantee was actually to secure past advances and thus was past
consideration and not enforceable. The second defendant’s contention was
rejected.

Held : The Court held that the lack of independent legal advice did not necessarily
point to undue influence as one of the party as being a man wise had not said that
he wanted legal advice or had asked for it

Deemed to be in position to dominate S 16 (2)

Saiwath Haneem V Hadjee Abdullah

Facts: The parties were family members , the plaintiff was a sister in law of the two
defendants , Abdullah and Daud , who were the younger brothers of
Arshad.Arshad’s property was managed by Abdullah , who collected his rents ,
paid for his expenses and supplied the plaintiff with money during his absence.

Held : The court held that there was a confidential relationship between the
plaintiff and the defendants but the defendants failed to prove that the plaintiff had
acted of her own volition unexecuting the agreement and the conveyance
Rosli bin Darus v Mansor , the defendants failed to rebut the presumption that
undue influence was exercised in the conveyance of the plaintiff’s land to them.

Held: The court held that a relationship of dominion of the uncle towards the
plaintiff could be presumed and the defendants has not rebutted the presumption.

Tong Seng Din Bon & Anor v Ban Chap Ah Seng

The court set aside the transfer of property from the first and second plaintiffs to
the defendant on grounds of undue influence.

The evidence showed that the defendant had full worn over the love and trust of
both the plaintiffs , who were an elderly couple to such as extent that the defendant
was treated like their son.The defendant who was in a position of active confidence
of the plaintiffs had subtly exerted undue influence over them.

Father and son

Khaw Cheng Bok & Ors v Khaw Cheng Poon & Ors , in this case the deceased
was a man of great wealth and the plaintiffs and defendants were his children and
grandchildren , respectively.An issue arose whether the deceased had been unduly
influenced by his third son, Cheng Poon , into making certain gifts.Cheng Poon
was the only son who lived with the deceased and was deceased’s favourite son

Solicitor and Client

Datuk Jagindar Singh v Tara Rajaratnam

Facts: The respondent had agreed to transfer her land in Kulai to the second
appellant as security for an advance of $220,000 to the respondent on her
account.The money was to be used to pay off a charge on the land and also to pay
the first appeallant an amount payable by the brother in law of the respondent fow
whom the first appellant getting an advance from the bank.The first and second
appellants were advocates and solicitors who acted for the respondent in preparing
the necessary document.

Husband and wife

Public Finance Bhd v Lee Bee Rubber Factory Sdn Bhd( no prosumption) ,
the High Court held that no presumption of undue influence arose by the reason of
the husband and wife relationship alone.

Parkinson’s disease( mental illness)

A presumption under s 16(2)(b) of the Contracts Act can arise where a person’s
mental capacity has been affected by illness

Chemsource Sdn Bhd v Udanis bin Mohammor Anor , the High Court applied
the doctrine of undue influence to a case of a defendant afflicted with Parkinson’s
disease

Burden of proof

S 16 (3) (a) where a person is who is in a position to dominate the will of another,
enters into a contract with him , and the transaction appears on the fact of it or on
the evidence adduced to be unconsciable , the burden of proving that the contract
was not induced by undue influence shall lie upon the person in a position to
dominate the will of the other

Chait Singh v Budin bin Abdullah , the court held that the presumption that the
transaction was an unconscionable especially since the rate of interest was
extravangant and presumption of the same strength would not arise in the case of a
man of better education and having advantage of some business experience.

Rebutting the presumption of undue influence

One of the ways to prove that the other party has acted his own free will is to show
legal advice had been obtained before the complainant signed a document.

Although the legal advice had been obtained , it will not necessarily rebut any
presumption of undue influence.
Inche Noriah v Shaik Allie bin Omar

Facts : In this case , the appellant brings an action against the respondent claiming
that a deed of gift , dated 18th April 1922 and made between the appellant and
respondent , should be set aside on the ground that the relationship between the
parties at the time when the deed was executed was such as to raise a presumption
of undue influence against the respondent and that presumption had not been
rebutted.

Held : The Court of Appeal held that by a majority , that there was no such
relationship as raised any presumption of undue influence and that if there were
such presumption , it had been rebuted by the facts proved by the respondent.

Undue Influence from third parties

Malaysian French Bank Bhd v Abdullah bin Mohd Yusof & Ors it was held
that in order to establish undue influence , the defendants have to prove that the
plaintiff was in a position to dominate their will and thus obtained an unfair
advantage by using that position.A plea of under influence can only be raised by a
party to the contract and not by a third party

Effect of and relief for undue influence

Section 20 states that where a party’s consent to an agreement has been caused by
undue influence , the agreement becomes voidable contract.

Relief of undue influence -S.65,66,76