Barclays Bank v O’Brien [1993]
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Barclays Bank Plc v O’Brien [1993] UKHL 6 is an English contract law case concerning undue influence. The court set out the two basic categories of undue influence: actual undue influence and presumed undue influence. The presumed undue influence is further divided into presumed undue influence from a special relationship and presumed undue influence from readily ascertainable facts raising suspicion of undue influence.
In 1981, Mr and Mrs O’Brien owned a house together in Slough with a £25,000 mortgage. When the mortgage increased to £60,000, an employee at Barclays Bank, Mr Tucker, noted concerns about Mrs O’Brien. In 1987, Mr O’Brien's company faced financial difficulties, and they agreed with Barclays Woolwich to raise the company’s overdraft to £135,000, guaranteed by Mrs O’Brien and secured on their home. There was a miscommunication as Mrs O’Brien was not properly informed about the implications. Despite a document advising independent legal advice, she signed without reading it, and a message meant to inform her was mishandled. The company struggled, and when demands for repayments were not met, possession was sought. Mrs O’Brien claimed undue influence and sought to void the contract.
The House of Lords ruled that the contract was voidable due to undue influence. Lord Browne-Wilkinson addressed a policy debate concerning the balance between the increasing equality between spouses and the importance of banks securing homes. He emphasised that banks could be held liable if they had notice of undue influence, whether actual or constructive. Constructive notice of undue influence arises when a party is aware of a relationship raising concerns and must ensure no undue influence exists. Lord Browne-Wilkinson outlined two categories of undue influence:
Class 1: Actual undue influence, requiring affirmative proof by the claimant.
Class 2: Presumed undue influence, where the complainant shows a relationship of trust and confidence, shifting the burden to the wrongdoer to prove the transaction was freely entered into.
Class 2(A): Certain relationships, such as solicitor and client, medical advisor and patient, raising the presumption of undue influence as a matter of law.
Class 2(B): De facto relationships where the complainant reposed trust and confidence, raising the presumption of undue influence.
The issue of presumed undue influence was revisited in Royal Bank of Scotland Plc v Etridge (No 2) (2001), where doubts were cast on the categorisation, but O’Brien's classification is often maintained in academic texts.
In 1981, Mr and Mrs O’Brien owned a house together in Slough with a £25,000 mortgage. When the mortgage increased to £60,000, an employee at Barclays Bank, Mr Tucker, noted concerns about Mrs O’Brien. In 1987, Mr O’Brien's company faced financial difficulties, and they agreed with Barclays Woolwich to raise the company’s overdraft to £135,000, guaranteed by Mrs O’Brien and secured on their home. There was a miscommunication as Mrs O’Brien was not properly informed about the implications. Despite a document advising independent legal advice, she signed without reading it, and a message meant to inform her was mishandled. The company struggled, and when demands for repayments were not met, possession was sought. Mrs O’Brien claimed undue influence and sought to void the contract.
The House of Lords ruled that the contract was voidable due to undue influence. Lord Browne-Wilkinson addressed a policy debate concerning the balance between the increasing equality between spouses and the importance of banks securing homes. He emphasised that banks could be held liable if they had notice of undue influence, whether actual or constructive. Constructive notice of undue influence arises when a party is aware of a relationship raising concerns and must ensure no undue influence exists. Lord Browne-Wilkinson outlined two categories of undue influence:
Class 1: Actual undue influence, requiring affirmative proof by the claimant.
Class 2: Presumed undue influence, where the complainant shows a relationship of trust and confidence, shifting the burden to the wrongdoer to prove the transaction was freely entered into.
Class 2(A): Certain relationships, such as solicitor and client, medical advisor and patient, raising the presumption of undue influence as a matter of law.
Class 2(B): De facto relationships where the complainant reposed trust and confidence, raising the presumption of undue influence.
The issue of presumed undue influence was revisited in Royal Bank of Scotland Plc v Etridge (No 2) (2001), where doubts were cast on the categorisation, but O’Brien's classification is often maintained in academic texts.
