undue influence assignment

LAW OF CONTRACT II

( LAC 2073 )

UNDUE INFLUENCE ( Q 50 )

LECTURER: DR. FARAH SALWANI BT MUDA@ISMAIL

TLB 4

SITI NUR JANNAH BT HASANUDDIN 1122051

Question 50 ( m/s 609 )

Explain the difference between actual and presumed undue influence under the Contracts Act

1950. How could a defendant rebut the presumption of undue influence???

Norla, an old and wholly illiterate Malay woman, executed a deed of gift of landed property in

favour of her nephew, Hashim. Before executing the deed, the donor had independent advice

from Khalid a lawyer. Khalid was unaware that the gift constituted practically the whole of

Norla’s properties. Hashim was living with Norla for a couple of years after he returned from

Singapore after closing his business. He used to look after Norla and also collected rent, carried

out repairs, etc, to the properties. Subsequently Norla brings an action against Hashim claiming

that the deed of gift is voidable on account of undue influene. Will she succeed???

Answer :

Question 1

(a) Explain the difference between actual and presumed undue influence under the

Contracts Act 1950.

(a)

Undue influence is an improper pressure which is not amount to coercion because it does not

involve any element of violence to the person or detention of property. When a transaction (gift

or contract) has been obtained by undue influence, the transaction is considered as a contract that

lack of consent.

Section 16(1) in the Contract Act 1950 speaks about a contract is induced by undue influence

when the wrongdoer was in dominant position in his relationship with the complainant, and the

wrongdoer used the dominant position to obtained the transaction and the transaction was unfair

to the complainant.

There are two ways to prove that the transaction has been obtained by undue influence which are

actual undue influence and presumed undue influence. There are differences between these two

group of undue influence.

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Group one, the actual undue influence is where the victim or complainant could actually proved

that the dominant party used undue influence in obtaining the transaction where as in group two,

the presumed undue influence, the complainant could not actually prove that the dominant party

used undue influence to obtain the transaction but succeeded on the ground of the presumption of

undue influence.

In actual undue influence, the complainant was able to produce evidence that at the time or

before the execution of transaction (gift or contract), the wrongdoer was in a dominant position

in his relationship with the complainant. Second, the wrongdoer used or exerted undue influence

on the complainant to enter into the transaction.

For example, in the old English case of Morley v Loughnan, illustrated the actual undue

influence. The deceased (Morley) had made a series of gifts to L (Loughnan). L is a member of

“Exclusive Brethen” which was a religious group. The deceased had been living in L’s house for

the rest of seven years and had been under L’s religious influence. The deceased’s executor

alleged that L obtained these gifts from Morley through the exercise of undue influence. They

were able to prove that during Morley’s lifetime, he had orally expressed to a neighbour that L

and his family have ruined his life and they had taken away all his property. This show that

Morley gave the money away without free consent. The court held that the money was obtained

under the purpose of religious brotherhood. They succeeded the claim.

Even though that in the actual undue influence cases, the complainant were able to prove that the

wrongdoer used his influence and dominated the complainant like a puppet or the complainant

was mental incapacity. The court will rescind the transaction on the ground that it shall not allow

anyone to get any benefit from his fraud or wrongful act.

It should be noted that Section 16(1) require the presence of unfair advantage, however Visu

Sinnadurai J in the case of Polygram Records Sdn Bhd v The Search, held that in cases of actual

undue influence, it is not a mandatory for the complainant to prove that the wrongdoer had

obtained unfair advantage. He has right to have the transaction set aside regardless whether it

was fair or unfair to him, if he actually proved that the wrongdoer used his position to obtain the

transaction.

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However in the presumed undue influence, the complainant must prove that, first, the wrongdoer

was in a dominant position in his relationship with the complainant at the time of the transaction

and secondly, the transaction gave unfair advantage to the complainant. The burden of proof now

shifted to the wrongdoer to prove that the complainant entered into the transaction willingly,

with free consent.

The court interferes on the ground of public policy and to prevent the abuse of the relationship

that existed between the parties and the influence arising there from. The wrongdoer cannot get

any benefit from the transaction unless he fulfilled his duty of fiduciary or shows that the

transaction is truly for the benefit of the person influenced.

In the English case of Allcard v Skinner, the plaintiff was introduced to the defendant who was

the spiritual director of a Protestant community called “The Sister of the Poor”. Then she became

the member of the community and bound herself to the rule of poverty, chastity and obedience.

The rule of poverty bound her to relinquish all earthly possessions and the rule of obedience, was

not to seek any advice from anyone outside the community without permission. In 1874, she

transferred certain stocks to the defendant as the superior of the community. Subsequently, in

1879, she left the sisterhood. She immediately revoked the will. She claimed that the return of

stocks on the ground that it was obtained by undue influence.

The court held that the gifts were obtained by presumed undue influence. At the time of the gift,

the plaintiff was bound to make absolute submission to the defendant as superior of the

sisterhood. She had no power to obtain any independent advice. The defendant was in dominant

position with the plaintiff at the time of the execution of the gift. Thus, the judgment was in

favour to the plaintiff.

To conclude, there is only one type of undue influence but there are two ways of proving it that

the court had classified which is actual undue influence and presumed undue influence.

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Question 1 (b) How could a defendant rebut the presumption of undue influence???

(b)

The law raises a presumption of undue influence against the wrongdoer if the complainant can

prove the elements of domination and unfair advantage in the transaction (gift or contract). It is

obvious that the same power that can dominate the will of the weaker party is often also in a

position to prove that he did not practice any domination as to bring the transaction.

The wrongdoer or defendant can rebut the presumption of undue influence, first, by showing that

the transaction was made of free exercise of the complainant’s independent will. Usually, the

wrongdoer will prove that the complainant had seek independent legal advice before entering

into the transaction.

For example, one of the unsuccessful cases that claim for undue influence was Pengiran

Othman Shah v Karambunai Resorts Sdn Bhd or formely known as Lipkland (Sabah) Sdn Bhd

& Ors. In this case, the appellants, who were twin brothers, inherited 3,835 acres of land in

Karambunai, Sabah from their mother and grandmother when they were still infants. The

appellants’ father who was Pengiran Othman, their relative and Minister of Federal Territory

acted as the legal representatives. When they reached 16 years on 1982, they signed a

memorandum with the respondents to grant 99 years lease over 1500 acres of land.

In October, the respondents paid various sum to the appellants in compliance with the

memorandum. Both of the party had several other agreements after the first memorandum.

However on 1994, the appellants sought a rescission of all the agreements and a declaration that

they were all void on the ground that the appellants had been undue influence.

Luckily, the respondents successfully proved that the appellants had received independent legal

advice during the ten years of transactions with the respondents. The court dismissed the

appellants claim for undue influence. The court held that the doctrine of undue influence was to

save persons from being forced, tricked or misled in anyway by others into parting with their

property. In the light of the documentary evidence, it could not be said that the appellants had

been denied of any independent legal advice when they executed the various agreements. They

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executed the agreements freely. They had not been rushed into executing the agreements within a

limited period of time.

It should be noted that, the dominant position may also rebut the presumption even without

proving the complainant received independent legal advice. Secondly, he must show that the

complainant or victim understood what he was doing not just the nature of the transfer but its full

significance and effect.

This requirement is conveyed in the case of Lim Kim Hua v Ho Chui Lan, where the court

stated that the complainant must understood what he was doing and that it was his mental act. In

this case, the plaintiff was the registered proprietress of a shophouse at Kanowit ('the

shophouse'). In 1983, the plaintiff executed a will devising and bequeathing the shophouse to her

four grandchildren as follows: 1/2 share to the second defendant, who was the first defendant's

son, and the remaining 1/2 share to be divided equally between her three other grandchildren. On

3 May 1984, she executed a memorandum of transfer ('MT1') transferring 1/2 share of the

shophouse to the second defendant. Thereafter, on 30 December 1985, she executed another

memorandum of transfer ('MT2') transferring the remaining 1/2 share to the first defendant and

one Ho Chui Hiong at 1/4 share each. Subsequently, the plaintiff had sought for a declaration

that both MT1 and MT2 were null and void and for the cancellation of the entries of the transfers

in the land register, on the grounds that: (i) the transfers were obtained by fraud or dishonesty;

and (ii) the defendants had exerted undue influence on her to part with the shophouse. It was not

disputed that the plaintiff who was old, illiterate and had a poor memory was dependent on the

first defendant for her food, accommodation and management of the affairs of the shophouse

between 1983 and 1986.

The plaintiff further contended that the first defendant who was fully aware of the content of the

will and the subsequent transfer of 1/2 share of the shophouse to her son, the second defendant,

had deliberately concealed the matter from the plaintiff when MT2 was executed, to overreach

the beneficiaries' interests. However, the defendants maintained that it was the plaintiff herself

who suggested the preparation of the transfers and that the district office's clerk had explained

the contents of the transfers to the plaintiff before she thumbprinted the relevant documents.

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The court found held that it was insufficient for the defendant to rebut the presumption by

alleging that her grandmother wanted to carry out the transfer in a hurry and the contents were

read and explained to her. The court allowed the plaintiff claims only against the first defendant,

Ho Chui Lan, but not against the second defendant, Lim Kiew Yau.

Thirdly, the gift was the free and intelligent act of the donor. Independent legal advice was not

necessary to rebut the presumption of undue influence.

This is proven in the Singaporean case, Hooi Cheng Kwong v Paul Hooi. In this case, Ng Swee

Kee, the mother of the defendant claimed that she was induced to make certain shares to the

defendant by his undue influence. Unfortunately, before the hearing of the case, Ng Swee Kee

died. Then the claim was continued between the plaintiffs, who was the second son and

executors of the the will of the deceased and the defendant, who was the third son.

It was proved that the donor and the donee had special relationship of mother and son. This

relationship raises a presumption that the done had influence over the donor. The court will

rescind the transaction unless the defendant proved that the transaction was the spontaneous act

of the donor and the transaction was at free exercise of the donor’s will.

The court found that the donor was intelligent woman who acted independently even if the

lawyer was acting for both the donor and the done. The best evidence in this case came from the

mouth of the deceased. She made it clear in cross-examination that the only reason why she

wanted the shares back was that she was unhappy with the defendant because when she fell ill in

1978 and was admitted into hospital he did not visit her. She stated that she wanted to punish

him for not visiting her in hospital and she went on to say that had he visited her in hospital she

would not want her shares back. If ever there was a clear indication that she had intended the

gifts and only changed her mind later because of a frivolous reason, it is in this passage of her

evidence. The mere fact of the case is that the independent legal advice will not necessarily save

the transaction. Therefore, the claim of the plaintiff was dismissed.

To conclude, the dominant party can rebut the presumption of undue influence by showing that

the transaction was the result of the complainant’s free will such as the complainant had an

independent legal advice before entering into the transaction. But it should be noted that,

independent legal advice was not a mandatory, it was recommended.

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Question 2

Norla, an old and wholly illiterate Malay woman, executed a deed of gift of landed property in

favour of her nephew, Hashim. Before executing the deed, the donor had independent advice

from Khalid a lawyer. Khalid was unaware that the gift constituted practically the whole of

Norla’s properties. Hashim was living with Norla for a couple of years after he returned from

Singapore after closing his business. He used to look after Norla and also collected rent, carried

out repairs, etc, to the properties. Subsequently Norla brings an action against Hashim claiming

that the deed of gift is voidable on account of undue influene. Will she succeed???

Facts

1) Norla, an old and illiterate Malay woman.

2) She executed a deed of gift of land to her nephew, Hashim.

3) Before executing the deed of gift, she had independent advice from Khalid who is a

lawyer.

4) Khalid was unaware that the gift practically the whole of Norla’s properties.

5) Hashim was living with Norla for a couple of years.

6) He used to look after Norla and also collected rent, carried out repairs, etc, to the

properties.

7) Then, Norla brings an action against Hashim claiming that the deed of gift is voidable on

account of undue influence.

Issue(s)

1) Whether Hashim was in a dominant position to exert undue influence ?

2) Whether Hashim used the dominant position to obtain Norla’s deed of gift ?

3) Whether the deed of gift, give unfair advantage to Norla ?

4) Whether the Khalid who is the lawyer, advice to Norla can be considered as the exercise

of Norla’s independent will ?

5) Whether Norla can set aside the deed of gift ?

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In this case, Norla claimed that the deed of gift is voidable on account of undue influence by her

nephew, Hashim. Hence, the issue arise, is whether Hashim was in a dominant position to exert

undue influence?

Generally, by virtue of Section 16(1) in the Contract Act 1950, it stated that a contract is induced

by undue influence when the wrongdoer was in dominant position in his relationship with the

complainant, and the wrongdoer used the dominant position to obtain the transaction and the

transaction was unfair to the complainant.

Therefore, to prove undue influence, the first thing the complainant must prove that the other

party was in a position to dominate his will. No further question arises until the complainant

prove this.

In the case of Raghunath Prasad v Sarju Prasad, illustrated that it is a mandatory to prove that

the other party was in position to dominate the will. In that case, the appellant was the owner of

one half of valuable joint Hindu family property. His father owned the other half. They quarreled

and the father launched criminal proceedings against the appellant. The appellant borrowed Rs

10 000 from the respondent to defend the proceedings. Then, the respondent executed a

mortgage for a loan of Rs 10 000 at 2% interest per month. The appellant argued that the

transaction was unconscionable and voidable for undue influence. The Privy Council held that

there was remedy unless it was established that the lender was in a position to dominate the will

of the borrower. The court judgment in favour to the respondent.

Hence, binding to the precedent case, the law puts the duty on Norla to prove that her nephew,

Hashim was in a dominant position to dominate the gift.

But how can the complainant (Norla) prove that the wrongdoer (Hashim) was in a position to

dominate the will? By virtue of Section 16 (2) (a) and (b) of the Contract Act 1950, stated that

the court will deem that a person is in a dominant position to dominate the will of another when

the party holds a real or apparent authority over the other, or the party stands in a fiduciary

relation, or when the party makes a contract with a person whose mental capacity is temporarily

or permanently affected by the reason of age, illness, or mental or bodily distress.

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It should be noted that, the Contract Act 1950 does not define the meaning of the above

provision. Hold a real or apparent authority means domination under both classes of cases such

as senior officer over a junior where as fiduciary relationship is a relationship build on trust and

confidence between fiduciary and the beneficiary. For example Section 16 illustrations (a) points

out the relationship between parent and child which is A having advanced money to his son B.

During his minority, upon B’s coming of age, obtains, by misuse of parental influence, a bond

from B for a greater amount than the sum due in respect of the advance. A employs undue

influence.

There are three general characteristic of fiduciary relationship. Firstly, the fiduciary has the

exercise of some discretion or power. Second, it can uniterally exercise that power to affect the

beneficiary’s legal and third, the beneficiary is peculiarly vulnerable to or at the mercy of the

fiduciary holding the discretion power. For example of fiduciary relationship are, doctor and

patient, solicitor and client and others.

This is proven in the case of Tengku Abdullah ibni Sultan Abu Bakar v Mohd Latiff bin Shah

Mohd. In this case, the appellants were the promoter of the Raintree Club. The respondents were

members of the club. On behalf of the club, the appellants entered into a contract to purchase

shares in Raintree Development Bhd from Allied Capital Sdn Bhd for the sum of RM 47m. But

the club and the members of the club alleged that the value of the shares was only RM 24.6m.

The appellants as the major shareholders of Allied Capital and Raintree Development were in

breach of their fiduciary duty as the promoters of the club.

The court stated that fiduciary relationship also exists between two persons such as when one

person entrusted to another the negotiation of a contract on his behalf or for his benefit and relied

on the other to procure for him the best term available. The court dismissed the appellants

claimed because the appellants had breached their fiduciary duty to the club. They are deemed to

exercise undue influence over the club

However, there are relationship that are not fiduciary in character but the fiduciary relationship

may exists in certain cases which the law counted that a party is in a dominant position to

dominate the will of the other as stated under Section 16 (2)(a).

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To establish the fiduciary relationship between the parties, there are two ways which is divided

into two classes ,Class 2(A) and Class 2(B). in Class 2 (A) as matter of law, the person is deemed

to be in a dominant position such as doctor is deemed to be in a dominant position over his

patient. Where as in Class 2(B), is where the relationship does not fall under Class 2(A).

Generally, the complainant reposed trust and confidence in the wrongdoer. The wrongdoer is

deemed to be in a dominant position due to the actual existence relationship such as the

relationship between spouse and sibling and others.

In the English case of Allcard v Skinner, illustrated the relationship which fall under Class 2(A).

In this case, the plaintiff was introduced to the defendant who was the spiritual director of a

Protestant community called “The Sister of the Poor”. Then she became the member of the

community and bound herself to the rule of poverty, chastity and obedience. The rule of poverty

bound her to relinquish all earthly possessions and the rule of obedience, was not to seek any

advice from anyone outside the community without permission. In 1874, she transferred certain

stocks to the defendant as the superior of the community. Subsequently, in 1879, she left the

sisterhood. She immediately revoked the will. She claimed that the return of stocks on the

ground that it was obtained by undue influence.



sisterhood. She had no power to obtain any independent advice. The defendant, was in dominant



Hence, not all relationship that are fiduciary in the sense that give rise to duty of disclosure, put

the person to be in a dominant position under Class 2(A). But it may fall under Class 2(B).

Class 2(B) principle applied to cases where influence is acquired and abuse, the confidence is

reposed and betrayed. According to the case of Southern Bank Bhd v Abdul Raof bin Rakinan,

the first defendant owed money to the plaintiff under overdraf facility. The plaintiff obtained

judgment in default of appearance against the first defendant on 3 November 1997. The second

defendant (the first defendant's wife) was sued as a guarantor. She admitted signing the

guarantee but she claimed that she had signed it under the 'undue influence' of the first defendant

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on her. The plaintiff filed an application for summary judgment against the second defendant at

the subordinate court. The sessions court judge dismissed the application and the plaintiff

appealed.

The High court held that relationship between husband and wife does not fall under Class 2(A)

but the court found that the husband had exercised undue influence over his wife under Class 2

(B). And, where a wife has been induced to stand surety for her husband’s debt by his undue

influence, she has equity as against him, to set the transaction aside.

Therefore, in Norla’s case, I assume that the relationship between Norla and Hashim fall under

fiduciary relationship under Class 2(B) as they are aunt and nephew. Their relationship is not in a

matter of law but generally Norla had reposed trust and confidence towards Hashim as he is the

one who looked after Norla and also collected rent, carried out repairs, etc, to the properties.

Thus, I can conclude that Hashim was in a dominant position where he stands in fiduciary

relation with Norla. This answered the first issue.

The second issue, whether Hashim used the dominant position to obtain Norla’s deed of gift?

There are only one undue influence but the court classified cases of undue influence into two

classes which are actual undue influence and presumed undue influence.

Class one, the actual undue influence is where the victim or complainant could actually proved

that the dominant party used undue influence in obtaining the transaction where as in group two,

the presumed undue influence, the complainant could not actually prove that the dominant party

used undue influence to obtain the transaction but succeeded on the ground of the presumption of

undue influence.

In actual undue influence, the complainant was able to produce evidence that at the time or

before the execution of transaction (gift or contract), the wrongdoer was in a dominant position

in his relationship with the complainant. Second, the wrongdoer used or exerted undue influence

on the complainant to enter into the transaction.

For example, in the old English case of Morley v Loughnan, illustrated that the complainant was

able to prove that the wrongdoer used his influenced to dominate the will. In this case, the

deceased (Morley) had made a series of gifts to L (Loughnan). L is a member of “Exclusive

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Brethren” which was a religious group. The deceased had been living in L’s house for the rest of

seven years and had been under L’s religious influence. The deceased’s executor alleged that L

obtained these gifts from Morley through the exercise of undue influence. They were able to

prove that during Morley’s lifetime, he had orally expressed to a neighbour that L and his family

has ruined his life and they had taken away all his property. This shows that Morley gave the

money away without free consent. The court held that the money was obtained under the purpose

of religious brotherhood. They succeeded the claim.

It should be noted that in the actual undue influence cases, the complainant were able to prove

that the wrongdoer used his influence and dominated the complainant like a puppet or the

complainant was mental incapacity. The court will rescind the transaction on the ground that it

shall not allow anyone to get any benefit from his fraud or wrongful act.

However in Class two, the presumed undue influence, the complainant must prove that, first, the

wrongdoer was in a dominant position in his relationship with the complainant at the time of the

transaction and secondly, the transaction gave unfair advantage to the complainant. The burden

of proof now shifted to the wrongdoer to prove that the complainant entered into the transaction

willingly, with free consent.

The court interferes on the ground of public policy and to prevent the abuse of the relationship

that existed between the parties and the influence arising there from. The wrongdoer cannot get

any benefit from the transaction unless he fulfilled his duty of fiduciary or shows that the

transaction is truly for the benefit of the person influenced.

In the English case of Allcard v Skinner, the plaintiff was introduced to the defendant who was

the spiritual director of a Protestant community called “The Sister of the Poor”. Then she became

the member of the community and bound herself to the rule of poverty, chastity and obedience.

The rule of poverty bound her to relinquish all earthly possessions and the rule of obedience, was

not to seek any advice from anyone outside the community without permission. In 1874, she

transferred certain stocks to the defendant as the superior of the community. Subsequently, in

1879, she left the sisterhood. She immediately revoked the will. She claimed that the return of

stocks on the ground that it was obtained by undue influence.

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sisterhood. She had no power to obtain any independent advice. The defendant, was in dominant



From the above cases, I can conclude that in Norla’s case, Hashim did not used or exerted undue

influence on her as before executing the deed of the gift to Hashim, she consulted with Khalid

who is a lawyer for an advice regarding the deed of gift. Thus, I assume that Norla’s case fall

under presumed undue influence which is Norla cannot prove that Hashim used his dominant

position to execute the gift.

Then the third issue, whether the deed of gift, give unfair advantage to Norla? In order to

establish presumed undue influence, the complainant need to prove, first, the wrongdoer was in

dominant position to dominate the will. Second, the transaction was unfair advantage to the

complainant.

The first requirement had been fulfilled where at the time of the execution of the deed of gift,

Hashim was in dominant position with Norla. As for the second requirement, Norla need to

prove the transaction was unfair advantage or manifest disadvantage of the her.

This requirement is conveyed in Polygram Records Sdn Bhd v The Search where the

relationship between the complainant and the wrongdoer fell under Class 2(B) category. In that

case, the plaintiffs, Polygram Records Sdn Bhd, entered into a written agreement ('the first

contract') with a rock group, The Search ('the group'), on 7 October 1984. They were signed on

by Eric Yeoh ('Eric'), the then artiste and repertoire manager of the plaintiffs. The first contract

was for a period of two years, with an option for two further periods of one year each,

exercisable at the discretion of the plaintiffs, and not the group.

On 12 June 1985, a new contract ('the second contract') was entered into between the plaintiffs

and the group, purportedly for the reason that there were some changes in the composition of the

group. Although the second contract contained many provisions which were identical to that

contained in the first contract, there was a major modification, which the group claimed was not

brought to their attention. The modification was that the period of option which the members of

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the group granted to the plaintiffs was extended to two additional periods of 24 months each,

instead of the two additional periods of 12 months each under the first contract. It was

established during the trial that no copy of the second contract was ever given to the group until

1987, when the solicitor acting for the group requested a copy of it for the purposes of the

present action.

After the release of the third album with Polygram in February 1987, it was clear that the group

was dissatisfied with their existing arrangements with Polygram and sometime at the end of

1987, the group made the recording of an album under a new company, Go-Search. Go-Search

was a company incorporated by the members of the group themselves. The company did only the

recordings, whilst another company, Pacific Music Corp (M) Sdn Bhd ('the sixth defendant') did

the distribution.

In 1988, Polygram commenced proceedings against the group for breach of contract and against

the sixth defendant for inducing the group to breach their contract with Polygram. The group

counterclaimed, inter alia, for a declaration that both the contracts were voidable on the grounds

of undue influence.

The court held that the terms in the second agreement were not new terms, but they were already

known to the group, by virtue of the first contract. Even though the period of the contract was

extended under the second contract, the duration was not such as to render the entire contract. It

manifestly gave disadvantage to the group.

Hence, if a transaction was unfair advantage or manifest disadvantage to the complainant, then it

fell under presumed undue influence. However, it should be noted that in Norla’s case, she

executed a deed of gift to Hashim. It is not necessary to prove unfair advantage. The evidence of

the relationship between the parties is sufficient to raise the presumption of undue influence. And

if there are no benefits moved to the plaintiff, the wrongdoer has to rebut the presumption of

undue influence. To put it simply, it is not necessary for Norla to prove unfair advantage.

This is supported in an earlier case in the Privy Council, Inche Noriah v Shaikh Allie bin

Omar. In this case, Inche Noriah, an old Malay woman, and wholly illiterate, executed a deed of

gift of landed property in Singapore in favour of her nephew, who had the management of all her

affairs. Before executing the deed the donor had independent advice from a lawyer who acted in

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good faith, Mr Aitken. He was unaware that the deed of gift practically the whole of her

properties, and did not bring home to her mind that she could more prudently, and equally

effectively, benefit the donee by bestowing the property upon him by will.

The court set aside the gift as the facts proved by the done were not sufficient to rebut presumed

undue influence. Thus, the mere proof of the existence of the relationship between the parties is

sufficient to raise the presumption of undue influence.

Then the fourth issue, whether the Khalid who is the lawyer, advice to Norla can be considered

as the exercise of Norla’s independent will? Under the presumed undue influence, the wrongdoer

or defendant can rebut the presumption of undue influence by showing that the transaction was

made of free exercise of the complainant’s independent will. Usually, the wrongdoer will prove

that the complainant had sought independent legal advice before entering into the transaction.

This is proven in the Singaporean case, Hooi Cheng Kwong v Paul Hooi, where the court held

that independent legal advice was not essential to rebut the presumption of undue influence.

What was necessary is to establish that the transaction was the result of free act of the donor.

In this case, Ng Swee Kee, the mother of the defendant claimed that she was induced to make

certain shares to the defendant by his undue influence. Unfortunately, before the hearing of the

case, Ng Swee Kee died. Then the claim was continued between the plaintiffs, who was the

second son and executors of the the will of the deceased and the defendant, who was the third

son.

It was proved that the donor and the donee had special relationship of mother and son. This

relationship raises a presumption that the done had influence over the donor. The court will

rescind the transaction unless the defendant proved that the transaction was the spontaneous act

of the donor and the transaction was at free exercise of the donor’s will.

The court found that the donor was intelligent woman who acted independently even if the

lawyer was acting for both the donor and the done. The best evidence in this case came from the

mouth of the deceased. She made it clear in cross-examination that the only reason why she

wanted the shares back was that she was unhappy with the defendant because when she fell ill in

1978 and was admitted into hospital he did not visit her. She stated that she wanted to punish

16

him for not visiting her in hospital and she went on to say that had he visited her in hospital she

would not want her shares back. If ever there was a clear indication that she had intended the

gifts and only changed her mind later because of a frivolous reason, it is in this passage of her

evidence. The mere fact of the case is that the independent legal advice will not necessarily save

the transaction. Therefore, the claim of the plaintiff was dismissed.

To conclude, the dominant party can rebut the presumption of undue influence by showing that

the transaction was the result of the complainant’s free will such as the complainant had an

independent legal advice before entering into the transaction. But it should be noted that,

independent legal advice was not a mandatory, it was recommended.

Applying this case to Norla’s case, before executing the deed of gift, Norla had consulted with

her lawyer, Khalid. However, Khalid was unaware that the gift practically the whole of Norla’s

property. Thus, he did not advise her the risk if she bestowing all of her property upon Hashim.

Therefore, the transaction was not the free exercise of Norla’s independent will as Norla had no

knowledge on her own value properties.

For the last issue, is whether Norla can set aside the deed of gift? Section 16 (3)(a) of the

Contract Act 1950 speaks about where a person who is in a dominant position to dominate the

will of the other party, enter into a contract and the transaction appeared to be unconscionable,

the burden of proving the contract, was not induced by undue influence, lie upon the person who

is in dominant position. Indirectly, it appears that a complainant who want to set aside a gift on

the plea of presumed undue influence cannot rely on it as the provision stated a contract, not gift.

However, by virtue of Section 16(3)(b) of Contract Act 1950, stated that nothing in Section16(3)

(a) will affect Section 111 of Evidence Act 1950. This section provided that when there is

question to the good faith of a transaction between the parties, one whom stands in a position of

active confidence, the burden of proving the good faith of the transaction is on the party who is

in position of active confidence. This provision of Section 111 of the Evidence Act 1950 uses the

word “transaction” and this applies to gift as well.

One of the cases that deal with gift was the case of Zaleha bte Ariffin v Salmah bte Md Zain. In

that case, one week prior to her death on 8 February 1991, the deceased transferred two lots of

land belonging to her to the defendant by way of 'hebah'. The transfer was duly registered by the

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land office. The estate of the deceased alleged that the transfer was a result of undue influence

exerted by the defendant on the deceased. It was submitted that the transfer was null and void on

the ground that Section 16 of the Contract Act 1950 applies only to contractual relations. It does not apply

to gift. Unfortunately, the court held that the issue whether or not there was undue influence exerted

by the defendant on the deceased was irrelevant. As the transfer of the lots to the defendant was

by way of 'hebah', the transfer was a gift and was not contractual in nature. Section 16 of the

Contracts Act 1950 applies only to contractual relations and therefore did not apply to such a

gift. The court then dismissed the suit with costs.

However, as the time passed, all courts of laws recognize that a gift may be set aside on the

ground of undue influence. This is proven in the case of Saw Gaik Beow v Cheong Yew Weng.

In that case, the plaintiff was a purchaser of a property and sued for specific performance of an

agreement of sale and purchase contained in and constituted by a memorandum in writing by the

first defendant. The registered proprietors were in fact the second and third defendants who are

the son and daughter of the first defendant. The first defendant admitted that he signed the

agreement but alleged that he did not give free consent as he was exposed to influence from the

plaintiff who was his spiritual adviser. The second and third defendants took the position that

they neither knew or approved of the agreement at the time of its execution by the first defendant

nor did they subsequently ratify the same. The first defendant suggested in 1964 to the plaintiff

that she buys a house in the town area. He offered to sell her the house and she could pay

whenever able. The plaintiff accepted. Subsequently, she together with DW2 (whom she later

married) paid the first defendant in the presence of the second and third defendants, and the first

defendant acknowledged the same in his own handwriting. Numerous payments were then made

by the plaintiff who moved into the house in May 1964, and each time the first defendant

acknowledged the same. Sometime in 1972, the plaintiff wished to settle the balance and it was

then that the plaintiff first discovered that the property was registered in the name of the second

and third defendants. They refused to execute a transfer and the plaintiff consulted her solicitors

who sent a formal demand in 1976. He alleged that the plaintiff was told by him that he was not

the owner but the plaintiff threatened that if he did not persuade the second and third defendants

to sell the property, he would be responsible for all dire consequences. Under these

circumstances, he had no choice but to sign on the exercise book. Subsequently, the first

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defendant pressed the plaintiff for further payments to which the plaintiff replied that she needed

time to sell off the family estate.

The court held that the doctrine of undue influence is not limited in its application to gifts but

extends to commercial transactions also. The court gives judgment in favour of the plaintiff.

Back to Norla’s case, Norla can set aside the gift by virtue of Section 16(3)(a) and (b) as the gift

comes within the contract term.

In conclusion, Norla will succeed in her claim against Hashim as she fulfilled the entire

requirement under undue influence.

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undue influence assignment

Education