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Dear all,

I want to pick up on a number of things that have come out of the recent discussion on undue influence and in particular in Jason Neyer's contributions. A number of things then.

Firstly I quite agree with Robert that this has nothing to do with implied agreements of any description, and nor does misrepresentation. Whenever I see implied agreement I immediately go on high alert, as it were, to see if this is real. There are far too many imaginary implied agreements around without adding more, and it does seem to me to go back to the old error that restitution is about implied contract (Sorry, Steve). It is either implied in fact, and on the officious bystander test I don't think it is, or it is not implied at all. If we are going to say it is implied by law we might as well say there's a rule that undue influence works if X, Y and Z are true.

If we are talking about fault and wrongs, and this may just be to perpetuate a misunderstanding, but I think it worth reiterating ... I don't think undue influence is a wrong. Certainly if there is a wrong committed by the defendant on the claimant that may well vitiate the contract - fraud is good case in point. That is to say no more than that a wrong is sufficient, but that is no reason to say it is necessary. Crudely we can say that when we enter a contract, subject to the need to protect the other party, we should do so with full consent. Undue influence vitiates that and so with caveats to protect the defendant's right to expect a contract or transfer to remain in force, we vitiate the contract or transfer. This is no more than the old debate as to whether undue influence is a claimant or a defendant sided unjust factor.

Crucially though I want go off on a tangent and pick Jason Neyers up on his aside about natural obligation. It is far from obvious to me that the operation of the presumptions (along with Lord Nicholls' requirement of a transaction calling for an explanation) is counter-intuitive. My girlfriend may well be legitimately pissed off with me if I never give her any presents, ever - Christmas, or birthday presents. Further you would expect that I would give her Christmas and birthday presents. This is just normal behaviour. She probably isn't entitled to expect that I reregister the house I've bought to put it in her name instead of mine. That might not be quite normal - it may need explanation. It may be that our relationship is such that I am so love sick for her that I'll give her anything (Louth v Diprose). I think the point is that sometimes it is intuitive that I really meant it because I love her, and sometimes it isn't. Sometimes these relationships are abused, and the presumption is an attempt to draw the line between those relationships that are and are not abused. As importantly as that I want to squelch Jason Neyers' notion of natural obligation. It seems to me that he is using a phrase which has the capacity to cause immense difficulty, and he is using it in a very dangerous way. I have no obligation - natural or otherwise - to give presents to my girlfriend, whatever her expectations are, and whatever potentially unpleasant consequences there are of not indulging her expectations. To use the phrase in this type of context raises the possibility of a very wide, vague and difficult to establish concept. It would then be legitimate to attack it on this basis. I do believe in natural obligations, but I would want to confine the term to invalid agreements where the reason the agreement is invalid does not reflect a belief that the agreement is itself "bad", for example it is illegal, or a belief that the claimant needs protecting (undue influence for instance). That has the advantage of keeping the concept in tight rein, and preventing it running off into the somewhat unruly "moral/ familial obligation" undergrowth.

I will not go into this in any more detail (unless you want me to), but my latest utterances will be on the subject of natural obligations in, I think, the next issue of the LMCLQ.

Duncan

Dr Duncan Sheehan
Postgraduate Admissions Officer
Norwich Law School
University of East Anglia
Norwich NR4 7TJ
United Kingdom

-----Original Message-----
From: Enrichment - Restitution & Unjust Enrichment Legal Issues On Behalf Of Jason Neyers
Sent: Friday, April 02, 2004 3:10 PM
Subject: Re: [RDG:] Undue Influence

Dear Colleagues:

I think that I have been misunderstood:

William Swadling wrote:

Unjust Enrichment is most avowedly not about fault: see Birks, The Role of Fault in the Law of Unjust Enrichment, in Swadling & Jones (ed), The Search for Principle (Oxford, 1999).

That is not what I was trying to say. My point is that UE is about enrichments that are unjustified (at least from a Canadian perspective). An enrichment cannot be unjustified when there is a valid legal reason explaining why X has Y's value. In cases of that you would term "mistake," there is no valid legal reason why X has Y's value and hence it must be returned, as you point out not because X is at fault, but because the value is Y's. My point was that in cases of UI there is a valid legal reason (usually a contract or gift) justifying X's retention of Y's value. Hence, the only way it can be an UE is to find a way to knock out this valid legal reason. So my claim is not the UE is about fault but that in some instances a wrong is a necessary practical precursor to one succeeding in an UE claim.

Robert Stevens wrote:

I don't think this can be correct. One party's innocent misrepresentation entitles the other party to rescind a contract. No fault is required; rescission is not based upon an implied agreement that the contract it is capable of being rescinded.

This raises the question of why a contract can be rescinded for a material innocent misrepresentation. I agree the reason is not fault. But I do not agree that it has nothing to do with the implied agreement of the parties. I see the reason for the courts intervention, being similar to the reason the court intervenes (or is asked to intervene) in cases like Scott v. Coulson, Bell v. Lever Bros. The implied agreement/condition is that the contract is to bind only their shared fundamental assumption is true. Hence if you would have put the point to the parties in Redgrave v. Hurd, they would have objectively agreed that the contract was to bind only if the practice brought in L400 per year. While one may not agree with this analysis, it has a long history: see Grotius, The Law and War and Peace, Bk. II c.11 and the work of Peter Benson, The Unity of Contract of Law (2001: CUP). As I argued above, once the contract is set aside on this basis, then UE can follow.

Robert Stevens wrote:

A breach of fiduciary duty may also be wholly innocent (e.g. Boardman v Phipps [1967] 2 AC 407) and is always a wrong.

I fail to see how this impeaches what I have said. It is like saying one may breach a contract without fraud or negligence but it is still considered a wrong -- the fault being failure to deliver what was promised. If anything it seems to support my contention that UI could be a wrong even if the fault element might not be fraud or negligence.

Low Fatt Kin Kelvin wrote:

To answer Mr Neyer's point about presumed undue influence being counter- intuitive, it is not sufficient merely to establish some sort of relationship of trust and confidence to raise the presumption. It is necessary to, according to Lord Nicholls, demonstrate that the transaction calls for an explanation. Bearing in mind this additional requirement, I do not see how it is counter-intuitive.

Being no expert on UI (so I would be happy to be disabused of this notion) my understanding of the cases is that generally a "transaction calls for an explanation" when it to the material disadvantage of the party entering into it. When is someone most likely to enter into a such a transaction such as guaranteeing a loan? When they are in a close family relationship. Yet instead of presuming that the basis of the transaction was natural love and affection or mutual support, the essence of family life, the court presumes it was on the basis of an influence which is 'undue'. Is that not at least somewhat counter-intuitive?