Undue influence 

Undue influence is an equitable doctrine concerned with the quality of consent. Where one party's will has been so influenced by another that their agreement is not truly their own, equity may set the transaction aside. The focus is on the weaker party's impaired judgement, rather than on the stronger party's conduct — which is what distinguishes it from unconscionable conduct.

Actual undue influence

The party seeking relief proves that the other in fact exerted such influence that their free judgement was displaced. No particular relationship is required, and no presumption assists; it is proved on the evidence.

Presumed undue influence

Equity presumes influence where the relationship is one of trust and confidence such that the weaker party may be taken to have reposed confidence in the stronger. Two routes:

• Relationships presumed as a class — solicitor and client, doctor and patient, parent and child, guardian and ward, religious adviser and adherent. Notably, the relationship between spouses is not in this class, though influence may be proved on the facts.
• Relationships proved on the evidence to have that character, which is the more common route in practice.

Where the presumption arises and the transaction calls for explanation, the burden shifts to the stronger party to show the transaction was the free exercise of the other's will. That is most often discharged by proof of independent advice — genuinely independent, informed, and given by someone who understood the transaction, not merely a signature on a certificate. In Johnson v Buttress (1936) 56 CLR 113,¹ the High Court set aside a gift of property from an elderly, illiterate man to a person he trusted and relied on for guidance, holding that the relationship of trust and confidence gave rise to a presumption of influence the recipient failed to rebut.

In Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49,² the joint reasons of Kiefel CJ, Bell, Gageler, Keane and Edelman JJ restated the presumption as arising where the person is proved to be in a particular relationship and the transaction is one, commonly involving a substantial benefit to another, that cannot be explained by ordinary motives or is not readily explicable by the relationship (at [34]). The same reasons declined to treat the relationship of fiancé and fiancée as one to which the presumption attaches (at [35]-[36]).

In Gunn v Meiners [2022] WASCA 95,³ the Court of Appeal of Western Australia (Mitchell, Beech and Vaughan JJA), a court below the High Court, read the plurality's reference to judgmental capacity being "markedly sub-standard" in Thorne as concerned with actual undue influence rather than the presumption, and said that a position of influence, or the weaker party's susceptibility to influence, is not ordinarily enough to raise the presumption.

On the separate limb of unconscionable dealing, Gunn did not understand Thorne to have departed from Kakavas on knowledge. The Court of Appeal of New South Wales in Nitopi v Nitopi [2022] NSWCA 162,⁴ decided afterwards, read the same High Court decisions differently: Bell CJ said that Thorne and Stubbings appear to represent something of a retreat from Kakavas's apparent insistence on actual knowledge or wilful ignorance, and Ward P said that there appears to have been a move away from that requirement and an acceptance that constructive knowledge may suffice. The reading of "ought to have known" is therefore contested between intermediate appellate courts.

Third parties and guarantees

The recurring commercial setting is a guarantee given by one person for another's debts, often within a family, where the lender takes the benefit. A lender may be affected by undue influence between the guarantor and the borrower where it had notice of the circumstances, and lenders accordingly insist on independent legal advice. Australian law addresses this through both undue influence and unconscionability, and the two lines of authority should be read together.

Consequences

The transaction is voidable in equity and may be set aside, on terms if justice requires. The usual bars apply: affirmation, delay, third-party rights, and inability to restore the parties substantially to their positions. Equity is more flexible than the common law about what counts as sufficient restoration.

Applying this in a problem question

1. Ask first whether actual influence can be proved.
2. If not, identify the relationship and whether it falls in a presumed class or can be shown to have that character.
3. Ask whether the transaction calls for explanation.
4. Examine any independent advice critically — was it genuinely independent and informed?
5. Address unconscionability in the alternative; the facts usually support both.

Where the authority sits

Equity, developed through Australian appellate authority, and closely intertwined with unconscionable conduct. Cite Australian decisions; English authority on guarantees follows a somewhat different path.