Author Suzanna Corrigan

Undue influence and the presumptions that apply to it

The issue of undue influence most commonly arises in finance transactions where a guarantor or third-party security provider attempts to demonstrate that it did not adequately consent to the giving of a guarantee or the granting of security by virtue of undue influence. This typically occurs at the point when the lender tries to enforce the guarantee or third-party security and the guarantor or third-party security provider raises a claim for undue influence as a defence to the enforcement.

A successful claim of undue influence in this context allows the court to set aside the guarantee or the security. This can be the case even where the lender did not know about the undue influence. Lenders therefore need to understand the doctrine of undue influence and the presumptions that apply to it.

What is undue influence and...