A Tale Of Two Judgments: Third? Party Undue Influence And The Path To Reform In Ireland

• Author: Noel McGrath
• Position: BCL (UCD), currently a candidate for the degree of LLM (Research) at the School of Law, University College Dublin. The author would like to thank the Irish Research Council for the Humanities and Social Sciences for their ongoing financial assistance
• Pages: 99-112

Cork Online Law R eview 2006 10

McGrath, A Tale o f Two Judgments: Third–

Party Undue Influ ence and the Path to

Reform in Ireland

!

!

∀∀

A TALE OF TWO JUDGMENTS: THIRD–PARTY UNDUE

INFLUENCE AND THE PATH TO REFORM IN IRELAND

Noel McGrath*

In this article the author undertakes a detailed and critical analysis of

two major cases in the area of Undue Influence and examines their effect.

Furthermore, the predicted implications of these decisions in the Irish context

are considered and reasoned recommendations with regards to possible

judicial approaches are forwarded. Including a concise synopsis of relevant

academic commentary this piece is up to date and invaluable to students of

equity grappling with the issue of undue influence.

A INTRODUCTION

In its decisions in Barclays Bank v O’Brien1 and Royal Bank of

Scotland v Etridge (No.2)2 the House of Lords attempted to balance the

competing interests of lending institutions and non–commercial persons

offering to stand surety for the debts of another. This paper will attempt to

assess the protections created for the surety by these decisions, and will

consider whether the approach in O’Brien and Etridge should be followed by

the Irish courts.

The typical situation which falls to be dealt with may be summarised as

follows. One party to a close personal relationship3 approaches a financial

institution4 seeking an advance often for the business purposes. The creditor

seeks additional security, usually in the form of a charge over the family home

which requires the other party to the relationship5 to agree to stand surety for

the debts of the debtor. When the bank seeks to enforce the security, the

surety will claim that it cannot be enforced against her since her consent was

procured as a result of undue influence, misrepresentation or some other

equitable or legal wrong.

1 Policy Considerations

Such situations give rise to a clear conflict of rights. On the one hand it

has been stated that:

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

* BCL (UCD), curre ntly a candidate for the degree of LLM (Research) at the School of L aw,

University College Dublin. The author would like to thank the Irish Research Council for the

Humanities and S ocial Sciences for their ongoing fin ancial assistance.

1 [1994] 1 AC 180, h ereinafter O’Brien.

2 [2001] UKHL 44, hereinafter Etridge.

3 The relationship i n question is almost invariably m arriage. However for the sake of

convenience this p arty will be referred to throughou t this paper as “the debtor” unles s the

context requires o therwise. It should be noted howe ver that the case law in this area d oes

cover relationship s other than marriage e.g. parent and child as in Commercial Bank of

Australia v Amad io (1983) 151 CLR 447.

4 Hereinafter “the c reditor” unless the context requir es otherwise.

5 Hereinafter “the surety” unless the context require s otherwise.