Bank of Credit and Commerce International v Aboody [1990] 1 QB 923 Court of Appeal

A husband exerted actual undue influence over his wife in order to get her to sign a charge securing the family home on the debts owed by the company in which the husband and wife owned shares. The couple were unable to repay the mortgage and the bank sought to repossess the home. The wife sought to have the mortgage set aside on the grounds that it was procured by actual undue influence of the husband.

Held:

The husband had exerted actual undue influence on the wife. However, the transaction was not to the manifest disadvantage of the wife since she owned shares in the company. In considering whether a transaction was to the manifest disadvantage the court was to have regard to any benefits received in addition to the risks undertaken. Therefore the bank were granted possession.

NB - it is no longer necessary to establish manifest disadvantage in cases involving actual undue influence.

The Court of Appeal set out the classes of undue influence:

Class 1 - Actual undue influence (requires proof of the influence)
Class 2 a - presumed undue influence (relationship as a matter of law gives rise to presumption that influence was exerted)
Class 2 b - presumed undue influence (requires proof of relationship of trust and confidence if established the presumption of influence arises)

Back to lecture outline on Undue influence in Contract Law