eventually agreed after the husband had applied pressure. A 20 year mortgage with the plaintiffs was arranged for a sum of £150,000, the stated purpose being to pay off the existing mortgage and to buy a holiday home. Documents relating to the mortgage were prepared, which the wife signed without reading them. At no stage was she advised of the content of the documents, nor was she advised to seek independent advice. Accordingly, she was not aware of the amount of the loan. Once the existing mortgage debt was settled, the husband used the remainder of the loan to speculate on the stock market and, in the 1987 stock market crash, he lost a substantial amount, with the result that he could no longer continue to repay mortgage instalments as they became due. The plaintiffs now sought an order for possession of the matrimonial home, which the wife contested on the ground that she had been induced to sign the relevant documents by misrepresentation, duress and undue influence. The trial judge held that there was actual undue influence, but this decision was reversed in the Court of Appeal on the ground that there was no manifest disadvantage to the wife in entering into the mortgage transaction. This decision, in turn, was reversed by the House of Lords on the ground that, in cases of ‘actual undue influence’, there is no requirement of manifest disadvantage, thereby finding in favour of the wife: CIBC Mortgages plc v Pitt [1994] 1 AC 200, p 207

doi:10.4324/9781843141518-169

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eventually agreed after the husband had applied pressure. A 20 year mortgage with the plaintiffs was arranged for a sum of £150,000, the stated purpose being to pay off the existing mortgage and to buy a holiday home. Documents relating to the mortgage were prepared, which the wife signed without reading them. At no stage was she advised of the content of the documents, nor was she advised to seek independent advice. Accordingly, she was not aware of the amount of the loan. Once the existing mortgage debt was settled, the husband used the remainder of the loan to speculate on the stock market and, in the 1987 stock market crash, he lost a substantial amount, with the result that he could no longer continue to repay mortgage instalments as they became due. The plaintiffs now sought an order for possession of the matrimonial home, which the wife contested on the ground that she had been induced to sign the relevant documents by misrepresentation, duress and undue influence. The trial judge held that there was actual undue influence, but this decision was reversed in the Court of Appeal on the ground that there was no manifest disadvantage to the wife in entering into the mortgage transaction. This decision, in turn, was reversed by the House of Lords on the ground that, in cases of ‘actual undue influence’, there is no requirement of manifest disadvantage, thereby finding in favour of the wife: CIBC Mortgages plc v Pitt [1994] 1 AC 200, p 207

ABSTRACT

In the present case, the Court of Appeal, as they were bound to, applied the law laid down in National Westminster Bank plc v Morgan [1985] 1 All ER 821; [1985] AC 686, as interpreted by the Court of Appeal in Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923: a claim to set aside a transaction on the grounds of undue influence, whether presumed (Morgan) or actual (Aboody), cannot succeed unless the claimant proves that the impugned transaction was manifestly disadvantageous to him. Before your Lordships, Mrs Pitt submitted that the Court of Appeal in Aboody erred in extending the need to show manifest disadvantage in cases of actual, as opposed to presumed, undue influence. Adopting the classification used in O’Brien’s case,* p189 a-g, it is argued that although Morgan’s case decides that the claimant must show that the impugned transaction was disadvantageous to him in order to raise the presumption of undue influence within Class 2A or 2B, there is no such requirement where it is proved affirmatively that the claimant’s agreement to the transaction was actually obtained by undue influence within Class 1.