Manifest Disadvantage CASES
In English law, manifest disadvantage was a principle used in undue influence cases, requiring claimants to show that a transaction was clearly detrimental to them. It arose particularly in the context of presumed undue influence but has since been refined by later case law.
Definition and Principles
The concept was developed to help courts distinguish between legitimate influence and unconscionable pressure. It asked whether the transaction placed the influenced party at a clear and unjustifiable disadvantage.
Requirements for Establishing
- Clear detriment: The transaction must have been obviously harmful to the weaker party.
- Presumption of influence: Typically applied where relationships of trust existed, such as between solicitor and client.
- Judicial development: Early cases emphasised manifest disadvantage, but its role has since diminished.
Practical Applications
Historically applied in cases of undue influence, such as Allcard v Skinner (1887). Later, in CIBC Mortgages v Pitt (1994), the House of Lords clarified that manifest disadvantage is not always required, especially in actual undue influence claims.
Importance
Though less central today, manifest disadvantage remains important for understanding the evolution of undue influence and the courts’ protection of vulnerable parties in equity.
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Mrs Morgan co-signed a mortgage over her home to secure her husband's business loan, advised by the bank manager. She later claimed undue influence. The House of Lords ruled that to set aside a transaction for presumed undue influence, a 'manifest disadvantage' must be proven. Facts Mr and Mrs Morgan were the joint owners of their matrimonial home. Mr Morgan’s business encountered financial difficulties, and a previous lender was seeking possession of the house. To prevent this, National Westminster Bank Plc agreed to provide a short-term bridging loan, conditional upon a legal charge over the home. Mrs Morgan was hesitant
A junior employee provided an unlimited guarantee over her flat for her employer's business debts. She received no benefit and no independent advice. The court set aside the transaction for undue influence, finding the bank failed its duty of inquiry. Facts Miss Andrea Burch, a 21-year-old junior employee, worked for a travel company owned and run by Mr Andrea Pelosi, a man she trusted. At his request, she agreed to provide security for the company’s overdraft with Credit Lyonnais Bank Nederland NV. She executed a legal charge over her flat, securing an unlimited, all-monies guarantee for all the debts of
