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Published online by Cambridge University Press: 16 January 2009
Barclays Bank p.l.c. v, O'Brien1CIBC Mortgages p.l.c.v. Pitt2presented the House of Lords with an opportunity to consider when a creditor should be prevented from eforcing a transaction against a person who entered int it as a result of the undue influence or misreprentation of another. Lord Browne-Wilkinson's declared objective was to restate the law on this point “in a form which is principled, reflects the current requirements of society and provides as much certainty as possible”.3 Whether he achieved these three aims is a question on which commentators disagree. According to one, his Lordship proved himself “a master of the judicial art”4 by achieving all three.5 Another has argued that his judgments “may give rise to as much confusion as this difficult area has already witnessed”6 and that, in his efforts to attain the second of his goals, he overlooked the first and the third.
1 [1994] 1 A.C. 180.
2 [1994] 1 A.C. 200.
3 [1994] 1 A.C. 180, 195A.
4 M. Dixon, [1994]C.L.J. 21.
5 Ibid. at 24.
6 P. O'Hagan, [1994] N.L.J. 765.
7 [1994] 1 A.C. 180, 195E–F.
8 Hayes, J., “Sureties, Intermediaries and ‘Agency in a Real Sense’” (Chancery Bar Association seminar, 14 March 1994).Google Scholar
9 A phrase used for convenience, but cf. infra notes 53–55 and accompanying text.
10 [1990] 1 Q.B. 923, 953.
11 Dent v. Bennett (1839) 4 My. & Cr. 269.
12 Wright v. Carter [1903] 1 Ch. 27.
13 Howes v. Bishop [1909] 2 K.B. 390.
14 [1994] 1 A.C. 180, 188E–F.
15 Ibid. at 188D–E.
16 Ibid. at 190H–191A.
17 Ibid. at 196C–D.
18 Ibid. at 198D.
19 But cf. Bamforth, N., “Constructive Notice after Barclays Bank v. O'Brien” (Chancery Bar Association seminar, 14 March 1994).Google Scholar
20 Caunce v. Caunce [1969] 1 W.L.R. 286, 294 per Stamp J.
21 [1994] 2 F.L.R. 342. See J. Mee, [1995] Conv. 148.
22 Ibid. at 345.
23 Ibid.
24 Ibid.
25 [1994] 1 A.C. 200, 210A–211G.
26 Ibid. at211G.
27 Ibid. at 211E.
28 Ibid. at 2l1G.
29 Ibid.at 211E–F.
30 [1994] 1 A.C . 180, 196G–H.
31 Ibid. at 197A.
32 Paragraph 12.1 of the Code of Banking Practice, adopted by banks and building societies in March 1992.
33 [1994] 1 A.C. 180, 198B.
34 [1994] 2 F.L.R. 342.
35 Ibid. at 347.
36 [1992] Q.B. 109.
37 Allied Irish Bank v. Byrne (1 February 1994, unreported); Bank Melli Iran v. Samadi-Rad (9 February 1994, unreported).
38 The Times 7 December 1994.
39 M. P. Thompson, [1994] Conv. 140, 144. See also P. O'Hagan, [1994] N.L.J. 765, 766.
40 Exceptions include Matrimonial Homes Act 1983, s. 2(8)(a).
41 Elias v. Mitchell [1972] 1 Ch. 652, 659; Murray v. Two Strokes Ltd. [1973] 1 W.L.R. 823, 827. T. Bailey, [1983] Conv. 99, 102.
42 National Provincial Bank Ltd. v. Ainsworth [1965] A.C. 1175.
43 O'Hagan, P., op. cit. at 766, cites National Provincial Bank Ltd. v. Ainsworth [1965]Google Scholar A.C. 1175, 1238. G. Battersby, [1995] L.S. 35, 44 cites Blacklocks v. J.B. Developments (Godalming) Ltd. [1982] Ch. 183.
44 See R. Sexton, [1994] N.L.J. 820; M. Dixon and C. Harpum, [1994] Conv. 421, 422–424.
45 (1964–65) 113 C.L.R. 265, 291.
46 Ibid. at 290.
47 M. P. Thompson, op. cit. at 145.
48 National Provincial Bank v. Hastings Car Mart [1964] C h . 665, 696, (approved on appeal, [1965] A.C. 1175, 1226, 1228, 1240 a n d 1262).
49 [1965] AC. 1175, 1248.
49aSee Gross v. Lewis Hillman Ltd. [1970] 1 Ch. 445, 460.
49bCf. G. Battersby, op. cit. at 45–46.
50 O'SulIivan v. Management Agency and Music Ltd. [1985] Q.B. 428; Cheese v. Thomas [1994] 1 W.L.R. 129.
51 Goff, R. and Jones, G., The Law of Restitution, 4th ed. (London 1993), p. 238.Google Scholar See also Goldsworthy v. Brickell [1981] Ch. 378, 409–410.
52 “The Undue Influence of Third Parties: Notice, Recission and Change of Position” (Society of Public Teachers of Law 1994 conference). See also M. Dixon and C. Harpum, op. cit. at 423.
53 Because:
(i) The traditional doctrine fixes purchasers with notice only of interests they would have discovered had they made proper inquiries, whereas under O'Brien, creditors are not required to make inquiries which would reveal the existence of undue influence, but to take precautions against it if the risk of it occurring is sufficiently high. (J. Mee, op. cit. at 7–11.)
(ii) The traditional doctrine is used to resolve conflicts between two rights arising out of different transactions at different times, whereas in undue influence cases the claims of victim and creditor arise out of the same transaction. (Ibid. at 18–25.)
54 Eg. Cowan de Groot Properties Ltd. v. Eagle Trust p.l.c. [1992] 4 All E.R. 700, 759–760; Eagle Trust p.l.c. v. SBC Securities Ltd [1992] 4 All E.R. 488, 507–508; El Ajouv. Dollar Land Holdings p.l.c. [1993] 3 AH E.R. 717, 739. See also A.G.J. Berg, [1994] L.M.C.L.Q. 34, 39.
55 See J. Mee, op. cit. at 36–46, for discussion of a possible alternative basis.
56 Although this is Lord Browne-Wilkinson's third goal, it is considered here for reasons of convenience.
57 See supra notes 26–27 and accompanying text.
58 See e.g. B. Fehlberg, (1994) 57 M.L.R. 467, 473; A. Mann Q.C., “Whose Business is it Anyway?” (Chancery Bar Association seminar, 14 March 1994); S.M. Cretney, [1994] R.L.R. 3, 8–9.
59 Supra, notes 29–30 and accompanying text. For criticism, see infra notes 70–71 and accompanying text.
60 A detailed examination of which is beyond the scope of this article. See further, Allied Irish Bank v. Byrne (1 February 1994, unreported); Bank Melli Iran v. Samadi-Rad (9 February 1994, unreported); Midland Bank p.l.c. v. Serter LEXIS 3 March 1994; Banco Exeterior Internacional v. Mann & Others. The Times 19 December 1994; and R. de Lacy, “What is Independent Advice?” (Chancery Bar Association seminar, 14 March 1994).
61 For discussion of uncertainty in the meaning of undue influence, see S.M. Cretney, op. cit. at 9–12.
62 [1994] 1 A.C. 180, 197D.
63 Ibid. at 188c.
64 See in particular ibid. at 188G–H and [1994] 1 A.C. 200, 211F.
65 National Provincial Bank Ltd v. Ainsworth [1965] A.C. 1175, 1233–1234 per Lord Upjohn.
66 [1994] 2 F.L.R. 342.
67 Caunce v. Caunce [1969] 1 W.L.R. 286, 294 per Stamp J.
68 B. Fehlberg, (1994) 57 M.L.R. 467, 473. See also Bamforth, N., “Constructive Notice after Barclays Bank v. O'Brien” (Chancery Bar Association seminar, 14 March 1994).Google Scholar
69 S.M. Cretney, op. cit. at 7—suggests that the line might have been drawn between transactions in which property is acquired and those in which it is used as security for further borrowing.
70 B. Fehlberg, op. cit. at 472–473. See also J. Mee, op. cit. at 13–14.
71 The Times 4 August 1994.
72 Transcript, p. 10.
