Undue Influence

UNDUE INFLUENCE
•The law on undue influence in Malaysia is provided in s 16 of
the Contracts Act 1950 which has embodied English law on this
subject.
•This part will examine:

(i) English law and developments on undue influence;

(ii) s 16 of the Contracts Act and Malaysian decisions on

undue influence; and

(iii) the effect of, and relief for contracts entered into under
undue influence.
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Undue influence under English law

•In this part, the following matters will be discussed:

(i) classification of undue influence;
(ii) requirement of manifest disadvantage;
(iii) undue influence in husband and wife relationships; and
(iv) the role of independent advice in undue influence.

•As a quick highlight, the House of Lords decision of Royal Bank

of Scotland plc v Etridge (No 2) [2001] 4 All ER 449, HL has
reviewed the law on undue influence and on some issues, and
has adopted a different approach from previous decisions.

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Classification of undue influence
A starting point of the English doctrine of undue influence is
the case of Allcard v Skinner (1887) 36 Ch D 145 where the
Court considered the basis for judicial intervention of undue
influence cases and classified them into two main categories of
actual undue influence and presumed undue influence.
In Bank of Credit and Commerce International SA v Aboody
[1992] 4 All ER 955; [1990] 1 QB 923, CA, the Court of Appeal
retained the two traditional classes of "actual undue
influence" and "presumed undue influence" but went on to
subdivide "presumed undue influence" into two further sub-
classes, known as Class 2A and Class 2B cases.
This was adopted by the House of Lords in Barclays Bank plc
v O'Brien [1993] 4 All ER 417, HL. However, there have been
differing views on this approach.

4
Classification of undue influence…
The later House of Lords decision of Royal Bank of Scotland
Plc v Etridge (No 2) [2001] 4 All ER 449, HL. is of the view that
this sub-classification would give rise to confusion. The law
Lords prefer to reconsider the original rule in Allcard v Skinner
(1887) 36 Ch D 145.
In Allcard v Skinner (1887) 36 Ch D 145 the plaintiff became a
member of a religious sisterhood and bound herself to observe
the rules of poverty, chastity and obedience. Within a few days
after becoming a member, she made a will bequeathing all her
property to the defendant, the lady superior of the sisterhood.
Subsequently, she left the sisterhood and, some six years later,
commenced an action claiming the return of her property on
the ground that it was made over by her while acting under the
undue influence of the defendant.
Lindley LJ (at pp 182-183; 185), explained the principle on
undue influence as follows:
5
Classification of undue influence…

“The principle must be examined. What then is the principle? Is

it that it is right and expedient to save persons from the
consequences of their own folly? or is it that it is right and
expedient to save them from being victimised by other people?
In my opinion the doctrine of undue influence is founded upon
the second of these two principles. Courts of Equity have never
set aside gifts on the ground of the folly, imprudence, or want of
foresight on the part of donors. … On the other hand, to protect
people from being forced, tricked or misled in any way by
others into parting with their property is one of the most
legitimate objects of all laws; and the equitable doctrine of
undue influence has grown out of and been developed by the
necessity of grappling with insidious forms of spiritual tyranny
and with the infinite varieties of fraud.” 6
“Where a gift is made to a person standing in a
confidential relation to the donor, the Court will
not set aside the gift if of a small amount simply
on the ground that the donor had no
independent advice. In such a case, some proof of
the exercise of the influence of the donee must
be given. The mere existence of such influence is
not enough in such a case; see the observations
of Lord Justice Turner in Rhodes v Bate… But if the
gift is so large as not to be reasonably accounted
for on the ground of friendship, relationship,
charity, or other ordinary motives on which
ordinary men act, the burden is upon the donee

7
to support the gift.”
 In Barclays Bank plc v O'Brien [1993] 4 All ER 417, HL. the
House of Lords adopted the classification applied by the
Court of Appeal in Bank of Credit and Commerce
International SA v Aboody [1992] 4 All ER 955 CA which
further subdivided "presumed undue influence" into two
further sub-classes. Lord Browne-Wilkinson at the House of
Lords stated:
“A person who has been induced to enter into a
transaction by the undue influence of another (the
wrongdoer) is entitled to set that transaction aside as
against the wrongdoer. Such undue influence is either
actual or presumed.”
 In Bank of Credit and Commerce International SA v Aboody
[1992] 4 All ER 955 at 964, the Court of Appeal adopted the
following classification:
8
Class 1: actual undue influence
In Class 1 cases it is necessary for the claimant to prove
affirmatively that the wrongdoer exerted undue influence
on the complainant to enter into the particular transaction
which is impugned.

Class 2: presumed undue influence

In Class 2 cases the complainant only has to show, in the
first instance, that there was a relationship of trust and
confidence between the complainant and the wrongdoer of
such a nature that it is fair to presume that the wrongdoer
abused that relationship in procuring the complainant to
enter into the impugned transaction.

9
In class 2 cases therefore there is no need to produce
evidence that actual undue influence was exerted in
relation to the particular transaction impugned:
•once a confidential relationship has been proved,
•the burden then shifts to the wrongdoer—
• to prove that the complainant entered into the
impugned transaction freely,
• for example by showing that the complainant
had independent advice.

• Such a confidential relationship can be

established in two ways, ie under 2 sub-classes:
Class 2A and Class 2B. 10
 Class 2A
 Certain relationships (for example solicitor and client,
medical advisor and patient) as a matter of law raise the
presumption that undue influence has been exercised.
 Class 2B
 Even if there is no relationship falling within class 2A, if
the complainant proves the de facto existence of a
relationship under which the complainant generally
reposed trust and confidence in the wrongdoer, the
existence of such relationship raises the presumption of
undue influence.
 In a class 2B case, in the absence of evidence disproving
undue influence, the complainant will succeed in setting
aside the impugned transaction merely by proof that the
complainant reposed trust and confidence in the
wrongdoer without having to prove that the wrongdoer
exerted actual undue influence or otherwise abused such 11
trust and confidence in relation to the particular
transaction impugned. “ [1993] 3 WLR 186 at 791-792.
 However, the subsequent House of Lords decision, Royal
Bank of Scotland Plc v Etridge (No 2) [2001] 4 All ER 449, HL
disagreed with this approach.
 Lord Nicholls and Lord Clyde stated that distinguishing
between actual and presumed undue influence can give rise
to confusion, and Lord Clyde questioned the utility of
further subdividing "presumed undue influence" into
Classes 2A and 2B.
 The House of Lords observed that the confusion could be
cured by “discarding a label [i.e. the classification in O’Brien
case above] which gives rise to this sort of ambiguity.
 The better approach is to adhere more directly to the test
outlined by Lindley LJ in Allcard v Skinner 36 Ch D 145, and
adopted by Lord Scarman in National Westminster Bank plc
v Morgan [1985] AC 686.
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Manifest disadvantage
The requirement of manifest disadvantage originated from
Lord Scarman's judgment in National Westminster Bank plc v
Morgan [1985] 1 All ER 821, HL.
The presumption that undue influence was exercised would
only arise if the transaction was "manifestly disadvantageous"
to the person influenced.
The principle justifying the court in setting aside a transaction
for undue influence can now be seen to have been established
by Lindley LJ in Allcard v Skinner. It is not a vague 'public policy'
but specifically the victimisation of one party by the other.” (at
827-828.)

“… The wrongfulness of the transaction must, therefore, be

shown: it must be one in which an unfair advantage has been 13
taken of another.” (at 829.)
 This requirement was applied by the Court of Appeal in Bank
of Credit and Commerce International SA v Aboody.
However, it was overruled by the House of Lords in CIBC
Mortgages plc v Pitt & Anor [1993] 4 All ER 433, HL, where
the position in Pitt was considered by Lord Nicholls in Royal
Bank of Scotland plc v Etridge (No 2) [2001] 4 All ER 449, HL.
which had discussed the requirement of manifest
disadvantage in relation to the evidential shift in the burden
of proof in cases where a presumption has been drawn.

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 Lord Nicholls stated:
“Lord Scarman [in National Westminster Bank v Morgan]
attached the label “manifest disadvantage” to the second
ingredient necessary to raise the presumption. This label has
been causing difficulty. It may be apt enough when applied
to straightforward transactions such as a substantial gift or a
sale at an undervalue. But experience has now shown that
this expression can give rise to misunderstanding. The label
is being understood and applied in a way which does not
accord with the meaning intended by Lord Scarman, its
originator.
The answer lies in discarding a label which gives rise to this
sort of ambiguity. The better approach is to adhere more
directly to the test outlined by Lindley LJ in Allcard v Skinner
and adopted by Lord Scarman in Morgan's case.”(at 461-
462.) 15
 In Malaysia, the requirement of manifest disadvantage was
applied in Polygram Records Sdn Bhd v The Search & Anor
[ 1994] 3 MLJ 127.
 This case involved a group of music band boys known as "The
Search" who had entered into two written contracts with the
plaintiffs, both recording contracts containing substantially
the same terms. The defendants, the group, alleged that the
second contract was made under undue influence. In this
case, having established the existence of undue influence,
the next issue was whether the defendants had succeeded in
establishing the necessary element of "manifest
disadvantage".

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 Visu Sinnadurai J stated:

“It has long been generally accepted both by judges and

textbook writers, that in every case where undue
influence was being alleged, the party seeking to set
aside the transaction must also establish some manifest
disadvantage to the contracting party: see for example
the decision of the Court of Appeal in Bank of Credit and
Commerce International SA v Aboody [1990]1 QB 923;
[1992] 4 All ER 955.

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Guarantee by wives
Situations of guarantees executed by wives at the request of
their spouses raise a specific concern of undue influence.
Cases prior to Barclays Bank plc v O'Brien [1993] 4 All ER 417;
[1993] 3 WLR 786, HL. had applied the agency theory, holding
the husband to be acting as the agent of the creditor bank when
he asked his wife to execute the guarantee or charge over his
debts. Therefore, if the husband was guilty of undue influence in
procuring the wife's agreement, the bank as his principal would
be party to the same wrongdoing and would be unable to
enforce the guarantee or charge.
This approach was rejected by Lord Browne-Wilkinson in
Barclays Bank plc v O'Brien who was of the view that it was
founded on obscure and possibly mistaken foundations which
had given rise to artificial developments and conflicting
decisions.
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 His Lordship, in restating the law, applied the doctrine of
constructive notice, holding that the bank would have
constructive notice of the husband's wrongdoing unless it
had taken reasonable steps to satisfy itself that the wife had
undertaken her obligations freely and with knowledge of all
relevant facts.

 The House of Lords also took a different view on the

application of the presumption of undue influence to the
husband and wife relationship, in particular cases where
wives guaranteed the payment of their husband's business
debts.

Lord Browne-Wilkinson noted that although there was no

Class 2A presumption of undue influence in cases involving
the husband and wife relationship, the courts were more
ready to find that a husband had exercised undue influence
over his wife than in other cases: 19
“In my judgment, this special tenderness of treatment
afforded to wives by the courts is properly attributable to
two factors.
First, many cases may well fall into the class 2B category of
undue influence because the wife demonstrate that she
placed trust and confidence in her husband in relation to her
financial affairs and therefore raises a presumption of undue
influence.
Second, the sexual and emotional ties between the parties
provide a ready weapon for undue influence: a wife's true
wishes can easily be overborne because of her fear of
destroying or damaging the wider relationship between her
and her husband if she opposes his wishes.” (at 424.)
20
 However, in Royal Bank of Scotland v Etridge No.2 [2001] 4
All ER 449, HL, Lord Nicholls made it clear that the court
should not be too ready to find undue influence in every case
where a wife stands as surety for her husband's business
debts:
“Statements or conduct by a husband which do not pass
beyond the bounds of what may be expected of a
reasonable husband in the circumstances should not,
without more, be castigated as undue influence. Similarly,
when a husband is forecasting the future of his business,
and expressing his hopes and fears, a degree of hyperbole
may be only natural. Courts should not too readily treat
such exaggerations as misstatements.” (at 462-463.) 21
Independent legal advice
In cases of undue influence, evidence showing that the
complainant (wife) had received independent advice has been
a common mode to disprove the exercise of undue influence.
However, proof of it does not, of itself, necessarily show that
the transaction was free of undue influence.
In Etridge's case, Lord Nicholls considered at length the steps
and the content of legal advice that banks should adopt in
cases of guarantees given by wives for their husbands' debts.

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 Lord Nicholls stated:
“The furthest a bank can be expected to go is to take
reasonable steps to satisfy itself that the wife has had
brought home to her, in a meaningful way, the practical
implications of the proposed transaction. This does not
wholly eliminate the risk of undue influence or
misrepresentation. But it does mean that a wife enters
into a transaction with her eyes open so far as the basic
elements of the transaction are concerned.” (at 467.)

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 Lord Nicholls also set out the legal content which was
considered the core minimum as follows:
“Typically, the advice a solicitor can be expected to give
should cover the following matters as the core
minimum. (1) He will need to explain the nature of the
documents and the practical consequences these will
have for the wife if she signs them. ...
(2) He will need to point out the seriousness of the risks
involved. ...
(3) The solicitor will need to state clearly that the wife
has a choice. The decision is hers and hers alone …
(4) The solicitor should check whether the wife wishes
to proceed …

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“The solicitor's discussion with the wife should take place at
a face-to-face meeting, in the absence of the husband. It
goes without saying that the solicitor's explanations should
be couched in suitably non-technical language. It also goes
without saying that the solicitor's task is an important one.
It's not a formality.
The solicitor should obtain from the bank any information he
needs. If the bank fails for any reason to provide information
requested by the solicitor, the solicitor should decline to
provide the confirmation sought by the bank.”(at 470.)

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Undue influence under s. 16 of the Contracts Act 1950
The law on undue influence in Malaysia is provided in s 16 of
the Contracts Act. It defines undue influence as follows:
“(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.
(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 another –
(a) where he holds a real or apparent authority over the
other, or where he stands in a fiduciary relation to the other;
or
(b) where he makes a contract with a person whose mental
capacity is temporarily or permanently affected by reason of 26
age, illness, or mental or bodily distress.”
 Question: Who is the person among the parties “is deemed
to be in a position to dominate the will of another”?
 Answer: Section 16(2) of the Contracts Act
(i) He/she who “holds a real or apparent authority over the
other”: s 16(2)(a)-1st limb.
(ii) He/she who “stands in a fiduciary relation to the other”: s
16(2)(a)-2nd limb.
(iii) He/she who makes a contract with a person whose is mental
incapable either temporarily or permanently (age; illness,
mental or bodily distress): s 16(2)(b).

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a.mohaimin.ayus
 S. 16(2) CA specifically categories the type of person who
could be deemed to be in dominating position capable of
exerting undue influence:

(1) A person who holds a real or apparent authority over the

other party. (e.g. “real authority”: a commander in the army,
chief of police, minister, ruler, over their subordinates;
“apparent authority” like creditor over debtor,)
(2) A person who stands in a fiduciary relation to the other
party. (e.g. B reposes trust and confidence over A.) A
becomes B’s advisor and advises B on certain matters. A,
therefore, stands in a fiduciary relation to B.
(3) A person who enters into a contract with a party whose
mental capacity is affected by reason of age (either too old or
too young), illness, o.r mental or bodily distress.
28
 S. 16 CA further provides:
“(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 the contract was
not induced by undue influence shall lie upon the person in a
position to dominate the will of the other.
(b) Nothing in this subsection shall affect section 111 of the
Evidence Act, 1950.
 Section 16 has embodied the English equitable doctrine. The
traditional categories of actual and presumed undue influence
can be seen in the provisions ins 16 where the courts have
applied s 16(1) for cases of actual undue influence and s 16(2)
for cases of presumed undue influence. Section 16(3) deals
with the burden of proof of undue influence. 29
(Query: Is this statement true?)
 In keeping with the equitable nature of the doctrine of
undue influence, s 16 has been interpreted flexibly while
bearing in mind the Malaysian context by looking at the
actual words provided in the section itself.
 In Tengku Abdullah ibni Sultan Abu Bakar & Ors v Mohd
Latiff bin Shah Mohd & Ors and other appeals [1996] 2 ML]
265, CA, Gopal Sri Ram JCA stated:

“It has been recognised that the section does not differ
from the English law upon the subject of undue influence.
See Poosathurai v Kanappa Chettiar (1919) Times, 19
November. Decisions of English courts are therefore a
useful guide to the approach that our courts ought to
adopt to the interpretation of s 16. Much the same may
be said of the decisions of the courts of those
jurisdictions where the law upon the subject of undue
influence is the same as English law.
30
 It was recognised that s. 16 CA on undue influence does not
differ from the English equitable doctrine. It should,
therefore, be interpreted flexibly. Gopal Sri Ram JCA
continued:
“Undue influence, like all other equitable doctrines, is an
extremely flexible concept. Subject to policy
considerations, the categories in which it may operate
are therefore not closed. For this reason, it is important
to apply the doctrine, as housed in s 16 of the Contracts
Act 1950, to varying fact patterns in a flexible manner.
This is to be done by interpreting s 16 in a broad and
liberal fashion. Being a remedial provision - in the sense
that it is designed to relieve obligations - it should, in our
judgment, be given a liberal interpretation.”

Earlier in the judgment, the learned Judge advised:

“For present purposes we may, we think, safely confine
our discussion to the doctrine of undue influence as it
operates in this country. Although much of the
jurisprudence upon the subject is common throughout
the Commonwealth, it is best that we hearken to the 31
relevant statutory provision through which the doctrine
finds expression.”
Not mere influence but undue: s 16(1) CA
Under s 16(1) CA, both elements must be satisfied:

(i)the relation subsisting between the parties are such that one
person is in a position to dominate the will of another; and

(ii)the dominant person uses that position to obtain an unfair

advantage over the other.
This was made clear in Poosathurai v Kannappa Chettiar & 0rs
(1919) LR 47 IA 1, PC (Appeal from India) 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.

32
Not mere influence but undue: s 16(1) CA…
 Lord Shaw said:
“It is a mistake … to treat undue influence as having been
established by a proof of the relations of the parties having
been such that the one naturally relied upon the other for
advice, and that the other was in a position to dominate the
will of the first in giving it. Up to that point ‘influence’ alone
has been made out. Such influence may be used wisely,
judiciously and helpfully. But, whether by the Law of India or
the Law of England, more than mere influence must be
proved so as to render influence, in the language of the law,
‘undue’. It must be established that the person in a position
of dominated has used that position to obtain unfair
advantage for himself, and so to cause injury to the person
relying upon his authority or aid.”
33
 Mere proof of “unconscionable” transaction, or “unfair
advantage” of the transaction, alone is insufficient if the
other party is not in a dominating position.
 In Raghunath Prasad v Sarju Prasad (1923) 51 IA 101 (PC)
the Privy Council held:
“[Even though the bargain had been unconscionable … a
remedy under the … Act does not come into view until the
initial fact of a position to dominate the will has been
established. Once that fact is established, then the
unconscionable nature of the bargain and the burden of
proof on the issue of undue influence come into operation.”
 No case of undue influence is made out if the plaintiff has
merely established that the transaction was unconscionable,
without firstly establishing that the defendant was in a
34
position to dominate his will.
 In Poosathurai v Kannappa Chettiar & 0rs, the appellant
alleged that his maternal uncles influenced him to execute a
deed of sale and he sought to cancel the deed. On the facts,
the Privy Council held that it was not proved that the sale
was unconscionable or constituted an advantage unfair to
the plaintiff, that is, it was not a sale for undervalue.
 The above principles were applied in the Malaysian case of
Saw Gaik Beow v Cheong Yew Weng & Ors [1989] 3 MLJ
3O1, where the High Court emphasised the requirement
that an unfair advantage was obtained and in this case,
referred to it as "manifest advantage".
 Edgar Joseph Jr J said:
“… it is only in exceptional circumstances that the
equitable remedy of setting aside a transaction on
grounds of undue influence will be granted. So even if a
bargain may appear to be harsh, courts are not inclined 35
to intervene unless it can also be demonstrated that that
the transaction was to the manifest disadvantage of the
person subjected to the dominating influence. The
foundation of the principle to grant equitable relief of
this kind is not inequality of bargaining power but the
prevention of victimisation by one party of another…
quite apart from the question of manifest disadvantage,
a party relying on the plea of undue influence would
have to show that (a) the other party had the capacity to
influence him, (b) the influence was exercised, (c) its
exercise was undue and (d) that its exercise brought
about the transaction (see Bank of Credit & Commerce &
Anor v Aboody [1989] 2 WLR 759. (at 308.)

36
 Similarly, in Ibrahim bin Musa v Bahari bin Nciyan (Sued as
Administrator of the estate of Chin @ Husin bin Derwnbang,
deceased [1990] 2 CLJ 223, which also involved a sale and
purchase of property. The High Court held that there was no
unfair advantage obtained. The plaintiff sought specific
performance of an alleged sale and purchase agreement he
entered into with Tok Chin (the deceased). The defendant, as
administrator of Tok Chin's estate, contended, inter alia, that
the agreement was brought about by the undue influence of
the plaintiff as the deceased was an illiterate, elderly and
feeble man who was subject to the influence of the plaintiff
being in a position of trust and confidence.
 The Court held that undue influence had not been made out.
KC Vohrah J stated:
“The evidence of Tok Chin being under the influence of the
plaintiff was far from clear. The plaintiff was his nephew
and lived near him but not with him as the defendant tried
to make out ... the plaintiff and his wife did provide food
for Tok Chin and his wife but I cannot see from this 37
relationship the plaintiff's dominance over Tok Chin.”
 In Hongkong & Shanghai Banking Corp v Syarikat United Leong
Enterprise Sdn Bhd & Anor [1993] 2 MLJ 449, the second
defendant failed to establish that the first requirement "a
position to dominate" was present.
 In this case, the second defendant had signed a guarantee in
favour of the plaintiffs for loans given to the company in which
he was a director. His allegation that he signed under undue
influence was rejected by the High Court.
 The Court held that PW1 (an advocate of the law firm acting as
solicitors for the bank) was not in a position to dominate the will
of the second defendant as alleged by the second defendant. On
the contrary, the forcefulness of the second defendant's
character was demonstrated when the second defendant got
PW1 to meet him at a coffee house instead of going to PW1's
office himself. Further, the lack of independent legal advice did
not necessarily point to undue influence, as the second
defendant, being a man wise of the world, had not said that he
wanted legal advice or had asked for it. 38
Deemed to be in position to dominate: s 16(2) CA
When one party is in a special relationship/standing to another
or by virtue of some special condition existing at the time of the
transaction, a presumption may arise that the person is in a
position to dominate the other.
Section 16(2) of the Contracts Act provides for two categories:
(a) where a person holds a real or apparent authority
over the other or where there is a fiduciary relationship;
and
(b) when the contract is made with a person whose
mental capacity is affected by age, illness, or mental or
bodily distress.
If any of the above is established, a presumption arises that the
party is in a position to dominate and exercise undue influence
over the other. The party who is in the position to dominate has
the burden to prove that the transaction was right and proper
and that the other party acted freely without any undue 39
influence on his part.
Deemed to be in position to dominate: s 16(2) CA
In an early case, Salwath Haneem v Hadjee Abdullah (1894) 2
SSLR 57, the parties involved were family members. The
plaintiff was the sister in law of the two defendants, Abdullah
and Daud, who were the younger brothers of Arshad, the
plaintiff's husband. During Arshad's absence from Singapore
from 1878 to 1889, his property was managed by Abdullah, who
collected his rents, paid for his expenses, and supplied the
plaintiff with money.
The parties were on intimate terms: Abdullah and Daud were
frequently in their brother Arshad's house and had access to the
women's quarters. Arshad's sons went to school in Abdullah's
house and frequently went there to play with their relatives.
Abdullah was trustee of a house for one of the sons.
After some negotiations over a family dispute, the plaintiff
signed a conveyance of some properties to the defendants. She
later sought to set aside the conveyance and the issue of undue
influence was raised. 40
 The Court stated the principles as follows:
“It is a well recognised doctrine of equity that when a
confidential relationship has existed between two persons
and one of them has obtained from the other a conveyance
of property or other advantage for which he has given no
consideration, then it is for such party, if he claims the
benefit of the transaction, to prove that it was a righteous
and proper transaction. And accordingly such party must
show that the deed he sets up as embodying the transaction
was fully understood by the person who executed it, and
that such person executed it freely and without being
subject to undue influence”. (at 73-74.)

On the facts, the Court held that there was a confidential
relationship between the plaintiff and the defendants: 41
“The Defendants are the brothers-in-law of the Plaintiff.
When her husband, Arshad, was absent from the
Colony... Abdullah managed his business, collected his
rents, paid his expenses, supplied her with money for her
wants, in fact acted as her husband's representative
Eat the time the agreement and conveyance were
executed] Arshad was lying on his bed dangerously ill and
unable to attend to business the Plaintiff, Saiwath, the
other wife, Zainab, and the children must have looked
upon Abdullah as the representative of their husband and
father, as the head of the family from whom they could
expect advice and protection. Under such circumstances,
his influence over them must have been necessarily
great...” (at 74.)
 However, the defendants failed to prove that the
42
plaintiff had acted of her own volition in executing the
agreement and the conveyance.
 A confidential relationship was also held to have arisen in
Rosli bin Darus v Mansor @ Harun bin Hj Saad & Anor.
[2001] 4 MLJ 206.
 In this case, the defendants who were the uncles of the
plaintiff failed to rebut the presumption that undue
influence was exercised in the conveyance of the plaintiff's
land to them. The plaintiff had inherited land from his
adoptive mother after her death and had subsequently
transferred it to his uncles, the defendants, in equal shares.
He later applied for a declaration that the transfer was null
and void on the ground that it was induced by the undue
influence of the defendants.
 The High Court agreed and set aside the conveyance.
43
Jeffrey Tan J stated the applicable principles:
“The principle on which the court acts in relieving against
transactions on the ground of inequality of footing between
the parties is not confined to cases where a fiduciary relation
can be shown to exist, but extends to all the varieties of
relations in which dominion may be exercised by one man
over another, and applies to every case where influence is
acquired and abused, or where confidence is reposed and
betrayed ... “ (at 216.)

44
 In Tong Seng Din Bon & Anor v Ban Chap Ah Seng [1987] 2 CLJ
269 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 fully
won over the love and trust of both the plaintiffs, who were an
elderly childless 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.
 There are a number of cases where the courts have considered
whether a presumption of undue influence arises where some
special relationships falling within s 16(2)(a) are involved, that
is: (i) father and son; (ii) solicitor and client; (iii) fiduciary
relationships; and (iv) husband and wife. The courts have also-
considered whether the presumption arises under s 16(2)(b) 45
where a person's mental capacity has been affected by illness.
Father and son
The presumption has been applied to a father and son
relationship in Khaw Cheng Bok & Ors v Khaw Cheng Poon &
Ors [1998] 3 MLJ 457.
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 the deceased's favourite son.
46
 Jeffrey Tan J held that a presumption of undue influence was
raised and that it had not been discharged.
“Furthermore, and it was not the father and son relationship per
se, undue influence could be presumed. The deceased, at
death's door, was totally dependent, and in that sense
beholden, to Cheng Poon and his family. From the evidence
adduced, there existed that close confidential relationship
where Cheng Poon and his family were persons with great
influence and pull over the life of the deceased and in a
commanding person to exert undue influence or 'dominion'
over the deceased; the deceased and Cheng Poon, with
regard to the gifts, were not persons dealing on a footing of
equality.”

47
Solicitor and client
A type of relationship where one party may be deemed to hold
authority and exercise undue influence over another is the
solicitor- client relationship.
A case in point which went on to the Federal Court is Tara
Rajaratnam v Datuk Jagindar Singh & Ors [1983] 2 MLJ 127, HC;
[1983] 2 MLJ 196, FC.
In this case, the plaintiff agreed to transfer her land as security
for an advance of $220,000 to the plaintiff. The money was to be
used to pay off a charge as well as to the first defendant an
amount payable by the plaintiff's brother-in-law for whom the
first defendant stood as surety for a loan obtained.
The first and second defendants were advocates and solicitors
who prepared the necessary documents. The plaintiff's land was
transferred to the second defendant who
48
Solicitor and client…

bought the land on behalf of the first defendant.

The second defendant had assured the plaintiff that although it
was in the form of a sale, it would remain a security and will be
transferred back to her after one year.
Through the collusion of the defendants, the land was
eventually transferred to the third defendant, who was also an
advocate and solicitor.
In the third defendant's action for possession of the land, the
plaintiff pleaded, inter alia, undue influence.
Abdul Razak J referred to the presumption under s 16(2) of the
Contracts Act in relation to solicitors and applied it to the facts
of this case as follows:

49
“The relationship of solicitor and client is regarded in
equity as a fiduciary relationship, and the rule of equity
that a transaction inter vivos is presumed to have been
procured by undue influence until the contrary is shown
applies to transactions between a solicitor and his client
and accordingly the question in each case is not merely
whether the client understood but rather how his
intention was procured. (Halsbury’s 3rd edn. vol. 26,
para. 118). Section 16(3)(a) of the Contracts Act says that
where a person 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 the contract was not induced by undue influence
shall lie upon the person in a position to dominate the
will of the other.” 50
“But once a person acts as a solicitor then the
presumption of undue influence arises, and unless they
can rebut it the property they acquired from their client
cannot be allowed to remain in their hands. Acting as a
solicitor intrinsically creates a fiduciary relationship
between a solicitor and his client which the solicitor
cannot take advantage of since it imposes an obligation
on its part to act with strict-fairness and openness
towards them (Halsbury's, Vol. 26 Para. 131). But a
person need not be having fiduciary relationship with
another for undue influence to arise if the relation
between the parties are such that one of the parties is in
a position to dominate the will of the other (s 16(2)
Contracts Act).
51
 The evidence led showed that the plaintiff had been asked to
sign the agreement in circumstances, if not in terms clearly
unfavourable to her when between her, a lay person and the
defendants, very senior lawyers and State Dato', position of
respect and dignity in the State, they were clearly in a
position to dominate her will to their advantage.
 The burden of proving that the contract was not induced by
undue influence was on the person in a position to dominate
the will of the other that is the first and second defendants.
It is clear from what has been said they had not discharged
that burden.
 The High Court's decision was upheld on appeal to the
Federal Court.
52
 In Seah Siang Mong v Ong Ban Chai & Another Case [1998] 1
CLJ Supp 295, the High Court held that the solicitor-client
relationship came within a fiduciary relationship under s 16(2)
(a) of the Contracts Act. The Court held that the defendant
(OBC) who was an advocate and solicitor had failed to
discharge the burden of showing that no undue influence had
been exercised by him.
 Mohd Ghazali J stated:
“… the solicitor-client relationship that existed between the
plaintiff makes their relationship a fiduciary relationship and
pursuant to s. 16(3)(a) of the Contracts Act 1950, the burden of
proving that the 1980 agreement/PA was not induced by
undue influence was on OBC. I find that OBC had not
discharged that burden and his admission that he failed to
advise the plaintiff to obtain independent legal advice is an
admission of his failure to discharge the burden. The evidence
had also shown that a confidential relationship existed 53
between the plaintiff and OBC.” [1998] 1 CLJ Supp 295 at 327.
Fiduciary relationship
A significant case on fiduciary relationship under s 16(2)(a) of the
Contracts Act is the Court of Appeal's decision in Tengku Abdullah
ibni Sultan Abu Bakar & Ors v Mohd Latiff bin Shah Mohd & Ors
and other Appeals [1996] 2 MLJ 265, CA. In this case, the Court of
Appeal stated that "the categories of fiduciary relations are never
closed" and held that the fiduciary doctrine applied to promoters
of a club.
In this case, the first and second appellants, together with the
Ayala Group of Companies from the Philippines, planned to
incorporate a proprietary club in Malaysia. They acquired all the
shares in a company called Raintree Development Sdn Bhd (RDB)
which owned a piece of land that was identified as the proposed
site of the clubhouse. Allied Capital Sdn Bhd was incorporated to
build the club's premises. The preponderance of the shares in RDB
and Allied were held by the first and second appellants. Later, the 54
shareholders of RDB sold their shares to Allied.
 Gopal Sri Ram JCA adopted a broad approach to the equitable
doctrine of undue influence as applied to s 16 of the Contracts
Act and stated:
“Undue influence, like all other equitable doctrines, is an
extremely flexible concept. Subject to policy considerations,
the categories in which it may operate are therefore not
closed. For this reason, it is important to apply the doctrine,
as housed in s 16 of the Contracts Act 1950, to varying fact
patterns in a flexible manner. This is to be done by
interpreting s 16 in a broad and liberal fashion. … [T]he
respondents' pleading speaks of undue influence and of
domination. True it is, that the facts of this case certainly do
not fall within any of the traditional categories of relationships
in which a court of equity intervenes to relieve a party who
has entered into a disadvantageous bargain with one whose
undue influence occasioned it. But, as we observed a moment 55
ago, the categories to which the doctrine applies are not
closed and it is a question of subjecting the facts of a
particular case to meticulous scrutiny in order to
determine if there is room for the operation of the
doctrine.
The consequence of undue influence upon a contract is
prescribed by s 19(1) of the Contracts Act 1950 ... The
usual remedy by which an innocent party may relieve
himself of all his obligations under a contract procured by
undue influence is rescission.” (at 323.)
The Court granted the plaintiff a remedy allowed
restitutionary relief and directed that Allied return to the
club, the difference between RM47m and the fair price
of the shares, as ordered by the trial judge. The Court
also upheld the award of damages given by the trial
judge. 56
Husband and wife
 Following English cases, the Malaysian courts have held that
a husband and wife relationship does not give rise to a
presumption of undue influence. The factual situation in
which such arguments are raised are similar: a wife has given
a guarantee for a loan granted to her husband by a finance
company and upon the finance company enforcing the
guarantee, the wife raises as a defence that she had signed
the guarantee under the undue influence of her husband.
 In Public Finance Bhd v Lee Bee Rubber Factory Sdn Bhd &
Ors [1994] 1 MLJ 495, the High Court held that no
presumption of undue influence arose by reason of the
husband and wife relationship alone.

57
 Edgar Joseph Jr SCJ said:
“There is ample authority to show that certain classes of
relationship by themselves and nothing more do give rise to a
presumption of undue influence; examples are: parent and child
(see Phillips v Hutchinson [1946] VLR 270), a person in loco
parentis and his charge (see Bank of New South Wales v Rogers
(1941) 65 CLR 42), guardian and ward (see Taylor v Johnson
(1882) 19 Ch D 603), doctor and patient (see Radcliffe v Price
(1902) 18 TLR 446), solicitor and client (see Westmelton (Vic) Pty
Ltd v Archer [1982] VR 305), spiritual adviser and a member of
his congregation (see Allcard v Skinner (1887) 36 Ch D 145), a
man and his fiancee (see Yerkey v Jones (1939) 63 CLR 649 at p
675) and perhaps trustee and beneficiary (see Wheeler v
Sargeant (1893) 69 LT 181).

58
Most people would think that a conspicuous omission from
the list aforesaid is that of husband and wife. However, the
case of Yerkey v Jones (1939) 63 CLR 649 per Dixon J at p
675, shows that the approach of the courts is that there is
nothing unusual in a wife showing her affection for her
husband in a tangible way, as for example, by guaranteeing
repayment of his debts. And, so, it is said, that the affection
and confidence inherent in the marital state does not, ipso
facto, amount to undue influence in the eyes of the law. (See
Colonial Bank of Australasia v Kerr (1889) 15 VLR 74).
I could not therefore hold, having regard to the authorities
cited above, that simply by reason of the relationship of
husband and wife existing between the second and third
defendants, a presumption of undue influence arose.”(at
505.) 59
 This decision was followed in Mayban Finance Bhd v Liew Ek
Chiu & Ors [1998] 1 CLJ 56, where Steve Shim J stated:
“…the onus of proof generally lies on the party alleging undue
influence. There are however certain relationships which can
give rise to a presumption of undue influence but the case
authorities appear to establish that the relationship of
husband and wife is not one of them: see Public Finance Bhd
v Lee Bee Rubber Factory Sdn Bhd & Ors [1994] 1 MLJ 495 on
p 505. That being the position, in the instant case, the 2nd
defendant, having alleged undue influence on the part of the
plaintiff and the 1st defendant, the onus would be on her to
prove it.”” (at 61.)
 However, it should be noted that in both Mayban Finance
Bhd's case above anin Southern Bank Bhd v Abdul Raof bin
Rakinan & Anor [2000] 4 MLJ 719 the courts also referred to
the House of Lords decision in Barclays Bank plc v O'Brien
and another [1993] 4 All ER 417 where Lord Browne-
Wilkinson held that a wife who has been induced to stand
surety for her husband's debt by his undue influence, has an
equity as against him and in some circumstances, also as 60
against the creditor, to set aside the transaction.
• In the Southern Bank Bhd case [2000] 4 MLJ 719, KC Vohrah
J quoted Lord Browne-Wilkinson's judgment in Barclays
Bank pie v O'Brien [1993] 4 All ER 417, HL. "' as follows:
“… A wife who has been induced to stand as a surety for her
husband's debts by his undue influence, misrepresentation
or some other legal wrong has an equity against him to set
aside that transaction. Under the ordinary principles of
equity, her right to set aside the transaction will be
enforceable against third parties (e.g. against a creditor) if
either the husband was acting as the third party's agent or
the third party had actual or constructive notice of the facts
giving rise to her equity.”

61
 However, as set out earlier, the position adopted by Lord
Browne- Wilkinson has not been affirmed by later English
decisions. The latest statement of the law on this issue is
Royal Bank of Scotland v Etridge (No 2) and other appeals
where the House of Lords held that in the ordinary course, a
wife's guarantee of her husband's business debts is not to be
regarded as a transaction which, failing proof to the contrary,
is explicable only on the basis that it has been procured by
the exercise of undue influence of the husband.
 Such transactions as a class are not to be regarded as prima
facie evidence of the exercise of undue influence by husband,
though there will be cases which call for an explanation. The
House of Lords has also set out the principles and guidance
with regard to the position of the bank and the duty of the
solicitor acting for the wife in the transaction. 62
Parkinson's disease
A presumption under s 16(2)(b) of the Contracts Act can arise
where a person's mental capacity has been affected by illness.
In Chemsource (M) Sdn Bhd v Udanis bin Mohammad Nor,
[2001] 6 CLJ 79, the High Court applied the doctrine of undue
influence to a case of a defendant afflicted with Parkinson's
disease.
Abdul Malik Ishak J stated:

“… in my judgment, the doctrine of undue influence can be

extended to the situation where the defendant was so afflicted
with the Parkinson's disease that he was unduly influenced to
sign the said agreement. The doctrine must be extended to the
situation at hand. 63
Parkinson's disease…

course, the defendant must affirmatively prove, at the trial, that

the plaintiff had in fact exerted influence over him and, in
consequent thereof, the plaintiff had procured a contract that
would otherwise not have been made by the defendant.” (at
99.)

64
Burden of proof: s 16(3) CA
Section 16(3)(a) of the Contracts Act provides as follows:
“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 fact of it or on the evidence adduced, to be
unconscionable, 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.”
Pursuant to s 16(3)(a), once a position to dominate the will
has been established, the burden of proof then shifts to the
person accused of exerting undue influence to prove that he
did not do so.
In Raghunath Prasad v Sarju Prasad AIR 1924 PC 60, PC
(Appeal from India), the Privy Council laid out the order of
proof as follows: 65
Burden of proof: s 16(3) CA …

“In the first place the relations between the parties to each
other must be such that one is in a position to dominate the
will of the other. Once that position is substantiated the
second stage has been reached, viz., the issue whether the
contract has been induced by undue influence. Upon the
determination of this issue a third point emerges, which is
that of the onus probandi. The burden of proving that the
contract was not induced by undue influence is to lie upon
the person who was in a position to dominate the will of the
other.” (at 63.)

66
 In an early case, Chait Singh v Budin bin Abdullah (1918) FMSLR
348 the transaction was considered as of unconscionable
nature . In this case, a moneylender sued a borrower upon a
promissory note which provided for interest at the rate of 36%.
The borrower had furnished good collateral security for the loan.
 The Court held that these circumstances raised a presumption
that the transaction was an unconscionable one, especially since
the rate of interest was extravagant, within the meaning of s
16(iii) of the Contract Enactment and liable to be set aside under
s 19A of that Enactment. It was also pointed out that a
presumption of the same strength would not arise in the case of
a man of better education and having the advantage of some
business experience (here the borrower was illiterate).

67
Rebutting the presumption of undue influence
When the exercise of undue influence has been raised, one of
the ways to prove that the other party has acted of his own free
will is to show that legal advice had been obtained before the
complainant signed the alleged document. However, the fact that
legal advice had been obtained will not, in itself, necessarily rebut
any presumption of undue influence.
In Inche Noriah v Shaik Allie bin Omar [1929] AC 127, PC (Appeal
from Singapore), the Privy Council considered the role of
independent legal advice in cases of undue influence.
In this case, the appellant was an elderly woman who was wholly
illiterate. The respondent was her nephew by marriage. The
appellant's husband had died, leaving her with considerable
landed property. The respondent, who was of Arab birth, had
arrived in Singapore when he was about 23 years of age. He and
his wife lived together at the appellant’s 68
house, and after his divorce and re-marriage, he lived in the
communicating house next door, which he rented from the
appellant's daughter.
The respondent saw the appellant daily. The respondent
was entirely without means when he reached Singapore, and
it was the appellant who started him in business.
After the death of the appellant's daughter, the appellant
executed a deed of gift whereby she gave to the respondent
absolutely the whole of her landed property, leaving herself
with a total gross income of about $30 a year. At the time
when the deed was executed, the appellant was so old and
infirm that she was unable to leave the house. She seldom
saw any of her relatives and friends, and the respondent
managed all her affairs, including her domestic affairs, and 69
bought her food and clothing. The issue which arose was
whether the deed could be set aside on the ground of undue
influence exerted by the respondent.
 The Privy Council upheld the trial judge's finding that the
relations between the appellant and the respondent were such
as to give rise to a presumption of undue influence. The
respondent brought evidence that the appellant had received
independent legal advice from a solicitor (Mr Aitken). However,
this fact was not sufficient to rebut the presumption. Although
the solicitor, Mr Aitken, had acted in good faith, he had
received most of his information from the respondent and had
not brought home to the appellant's mind the consequences of
what she was doing, or the fact that she could more prudently
and effectively have benefited the respondent without undue
risk to herself by retaining the property in her own possession
during her life and bestowing it upon him by her will. 70
Undue influence from third parties
It has been established that a contract resulting from undue
influence exerted by a third party (that is, one who is not a
party to the contract) is voidable.
In Malaysian French Bank Bhd v Abdullah bin Mohd Yusof &
Ors [1991] 2 MLJ 475 by a letter of guarantee executed by the
first and second defendants and by a second letter of guarantee
executed by the third and fourth defendants, the four
defendants agreed to guarantee payment of all moneys due and
payable by Syarikat Samaria Supply. The third and fourth
defendants later alleged that the first defendant had exercised
undue influence to induce them to execute the guarantee
agreement.
71
Undue influence from third parties …

The High Court, while holding that a person not a party to the
contract can commit undue influence, found on the facts that
the mere allegations of the third and fourth defendants were
not sufficient to raise the issue of undue influence.
Zakaria Yatim J said:

“In order to establish undue influence, the third and fourth

defendants have to prove that the other party to the contract,
that is the plaintiff, was in a position to dominate their will and
that the other party had obtained an unfair advantage by using
that position. A plea of undue influence can only be raised by a
party to the contract and not by a third party.” (at 477.)
72
“From the Bank of Montreal case [1911] AC 120, it
appears that when a party enters into a contract with
another and that party was induced by undue influence
by a person who is not a party to the contract, the
contract is not enforceable. In my view this conclusion is
not inconsistent with s 16 of the Contracts Act 1950. It is
based on the common law and should be considered as a
principle of law in addition to what is provided in s 16
especially in cases of bank guarantees.” (at 478.)

73
Unconscionability and inequality of bargaining power
The doctrine of unconscionability is related to the doctrine of
undue influence in that both doctrines arose out of the law's
concern to protect a weaker party from abuse or exploitation
by the stronger party.
In this regard, the concept of inequality of bargaining power is
also relevant as the parties in such transactions are seldom on
equal terms.
However, the courts have refrained from recognising such a
wide concept and Lord Denning's attempt in Lloyds Bank Ltd v
Bundy [19751 QB 326 at 336. to use the concept of inequality of
bargaining power was disapproved by the House of Lords in
National Westminster Bank plc v Morgan [1985] AC 686, HL. 74
Unconscionability and inequality of bargaining power
The doctrine of unconscionability is related to the doctrine of
undue influence in that both doctrines arose out of the law's
concern to protect a weaker party from abuse or exploitation
by the stronger party. In this regard, the concept of inequality
of bargaining power is also relevant as the parties in such
transactions are seldom on equal terms. However, the courts
have refrained from recognising such a wide concept and Lord
Denning's attempt in Lloyds Bank Ltd v Bundy [19751 QB 326 at
336. to use the concept of inequality of bargaining power was
disapproved by the House of Lords in National Westminster
Bank plc v Morgan [1985] AC 686, HL.
In Malaysia, Lord Denning's concept of inequality of
bargaining power has also not been accepted by the courts on
75
the ground of a lack of any established precedent.
 In National Westminster Bank Plc v Morgan [1985] AC 686
(HL), the House of Lords posed a question whether the Court
of Appeal in Lloyds Bank Ltd v Bundy [1975] QB 326 has
accurately state the law. In the observation of Lord Scarman
in Morgan, “Lord Denning MR believed that the doctrine of
undue influence could be subsumed under a general
principle that English courts will grant relief where there has
been ‘inequality of bargaining power’... He deliberately
avoided reference to the will of one party being dominated
or overcome by another. The majority of the court did not
follow him; they based their decision on the orthodox view of
the doctrine as expounded in Allcard v Skinner 36 Ch D 145.
The opinion of the Master of the Rolls, therefore, was not the
ground of the court’s decision, which was to be found in the
view of the majority [Cairns LJ and Sir Eric Sachs], for whom
Sir Eric Sachs delivered the leading judgment.” Lord Denning 76
MR’s dicta were disapproved.
 The provision in s 16(3)(a) of the Contracts Act concerning
the burden of proof when a position to dominate has been
established and the transaction appears to be
unconscionable, has raised the issue of the relationship
between the doctrines of undue influence and
unconscionability.
 Both are equitable doctrines and there are differing views
whether they are so similar that the doctrine of
unconscionability can be developed within s 16(3)(a) or are
they distinct doctrines that merit unconscionability a
separate development.
 In other common law jurisdictions, the doctrine of
unconscionability is well developed, particularly in Australia
with the High Court's decision in Commercial Bank of
Australia v Amadio & Anor (1983) 151 CLR 447. 77
 In Malaysia, the Court of Appeal in Saad Marwi v Chan
Hwan Hua & Anor [2001] 3 CLJ 98, CA. has recognised the
doctrine of unconscionability and at the same time referred
to the doctrine of inequality of bargaining power.
 However, there have been differing judicial views on this
matter in light of, inter alia, the provision on undue influence
in s 16 of the Contracts Act.

78
Effect of and relief for undue influence
Section 20 of the Contracts Act provides that where a party's
consent to an agreement has been caused by undue influence,
the agreement is a contract voidable at the option of that party.
Thus, the innocent party has the option to rescind or affirm the
contract. If the party chooses to rescind, the effects of rescission
as provided in ss 65, 66 and 76 of the Contracts Act apply.
Section 20 also provides that the contract may be set aside
either absolutely or upon such terms and conditions as the court
may deem just. This provision giving the court power to set aside
a voidable contract on terms as the court deems just appears only
in s 20 (and not in s 19 applicable for voidable contracts due to
coercion, fraud and misrepresentation). This is due to the
equitable nature of the doctrine of undue influence.
79
 In this respect, the Court of Appeal's decision in Tengku
Abdullah ibni Sultan Abu Bakar & Ors v Mohd Latiff bin
Shah Mohd & Ors and other appeals [1991] 2 MLJ 265 CA is
relevant.
 In this case, Gopal Sri Ram JCA stated:
“The consequence of undue influence upon a contract is
prescribed by s 19(1) of the Contracts Act 1950 …The
usual remedy by which an innocent party may relieve
himself of all his obligations under a contract procured by
undue influence is rescission. The circumstances in which
that remedy may lie in cases of contract appear in s 34(1)
of the Specific Relief Act 1950 … It is noteworthy that
nowhere in the Act [Specific Relief Act] is there a
prohibition against the grant of some other kind of relief
to a party who seeks to remedy a wrong perpetrated 80
upon him by another in consequence of exerting undue
influence in the wider sense that we had earlier
discussed.
Cases may arise where to grant rescission that cause
grave injustice. Yet the maxim of the law is ubi jus ibi
remedium. If a wrong is found to have occurred in
circumstances which disclose an abuse of confidence in
respect of which a court of equity may grant relief, it is
open to the court to grant such relief as would meet the
ends of justice.” (at 323-324.)
•In this case, the Court held that the promoters of the
club had fiduciary duties and agreed with counsel for the
respondents (members of the club) that the purpose of
equity is to ensure disgorgement by a wrongdoer who
had profited through an abuse of confidence. Thus, the
Court ordered that Allied return to the club, the
difference between the fair price for the construction of
the club's premises and the price charged and 81
substantially collected by Allied.