If, in a contract, undue influence is proved, the contract is voidable by the innocent party. There are two potential pathways to a decision: actual undue influence or presumed undue influence.

In a case of actual undue influence, the innocent party must show the Court evidence that at the time of the signing of the contract the wrongdoer had an influence over the innocent party.

In presumed undue influence, certain relationships, as a matter of law, will raise a presumption of undue influence. In such cases, the burden of proof lies on the party who was in the position of trust to disprove undue influence on the victim.

There are of course pre-existing relationships between two people that do not fall squarely into the established ‘classes’ that nevertheless result in the same outcome. 

On 17 June 2014, the Queen's Bench Division decision of Birmingham City Council v (1) Janet Beech (sued as Janet Howell) (2) Michael Beech [2014] EWCA Civ 830 decided that a relationship between a landlord's agent and a tenant under a contractual periodic tenancy was not inherently a relationship of trust and confidence such that a presumption of undue influence could arise.

Background Facts

The appellants (JH and MB) appealed against a decision ([2013] EWHC 518 (QB)) granting the respondent local authority's claim for possession of a rented property.

JH’s mother (M) was the sole tenant of a three-bedroomed property following the death of her husband. JH and MB were on the local authority's waiting list for accommodation. In 2007, they moved in to M’s property.

JH asked a local housing officer to be added as a joint tenant but local policy required that the request come from her mother directly. M had in the meantime moved to a residential care home and was visited by the housing officer.  M signed a Notice to Quit, ending her tenancy from March 2010. JH was informed that she would have to vacate by then. M died in June 2010.

Being a successor to the tenancy herself, a further succession beyond M was disallowed so the local authority refused the application to be added to the tenancy - M had given up the tenancy before she died.

JH and MB pleaded (i) there was a presumption of undue influence arising from the nature of the relationship between the housing officer and M and the nature of the transaction; (ii) local policy required the local authority to consider, before asking M to sign the Notice to Quit, whether she had an impairment affecting her mental capacity.

Held

A presumption of undue influence would only arise if there was (a) a relationship of trust and confidence in relation to the management of a subservient party's affairs; and (b) a transaction which by its nature called for an explanation.

Neither was present. The relationship at the date when the Notice To Quit was signed and given a contractual and property relationship under which each party had separate and distinct rights and obligations in relation to each other.

Furthermore, M's giving of the Notice to Quit was not an unusual or unexpected transaction calling for an explanation for any reason. The local authority was therefore entitled to terminate the tenancy and to obtain possession; it was predictable that it would seek to do so.

Even if M had not given the Notice to Quit, the local authority could, and inevitably would, have served its own Notice to Quit a week later. There was nothing about the giving of the notice to quit that required an explanation and which was capable of giving rise to a presumption of undue influence.

The mental capacity argument was hopeless as there was no evidential basis for suggesting that a formal assessment at the time when the Notice to Quit was given would have disclosed that M did not have such capacity.

Comment

Certain relationships as a matter of law shift the burden of proof to the ‘influencing’ party, compelling those that have the ascendancy to rebut an allegation of undue influence. Parent/child, trustee/beneficiary, lawyer/client and doctor/patient are well established but there are numerous other scenarios which exist between two parties. The Court of Appeal’s decision in this case says that the law will not presume this to be the case between a landlord’s agent and tenant. There will no doubt be future cases which further pare down the presumption.