Kindly see the embolded phrase below.
18.5 Remedy
There is no tort of undue influence. As a result, C cannot recover damages from D if a claim in undue influence is successful. This is sometimes criticised, and it may be that in time undue influence will evolve to be recognised as a wrong which triggers compensation.45 After all, in Libya Investment Authority v Goldman Sachs International, Rose J recognised that the stronger party owes certain duties to the weaker party in a relationship of influence. A breach of duty is a wrong, and the normal response to a civil wrong is damages.
Nevertheless, the traditional and orthodox view is that the only remedy for undue influence is rescission.46 It is worth highlighting that the usual bars of rescission apply.47 So, for example, in Allcard v Skinner, the claim for undue influence was barred because of the claimant’s delay in bringing her claim (laches). Similarly, in the three-party scenarios discussed in Chapter 18.4, if the bank is not put on inquiry and purchases its rights in good faith without notice of the undue influence, C will not be able to rescind the transaction since that would unfairly prejudice the bank. But if the bank is put on inquiry, then it will have notice of the undue influence, and as a result the rights it acquires will not be sufficient to prevent rescission unless that bank has taken reasonable steps to ensure that C has not entered into the transaction as a result of undue influence. In Etridge, Lord Scott said:48
If contractual consent has been procured by undue influence or misrepresentation for which a party to the contract is responsible, the other party, the victim, is entitled, subject to the usual defences of change of position, affirmation, delay etc, to avoid the contract.
There have been cases where rescission has been shown to be a flexible remedy that has been granted on terms.49 For example, in Cheese v Thomas,50 the agreement was between C, aged 85, and his great-nephew, D, to buy a house to live in together. They purchased a house for £83,000; C contributed £43,000 in cash, and D contributed the rest of the money by way of a mortgage. D defaulted on the mortgage payments, and the house was sold for £55,000. The court held that the relationship between C and D was one of trust and confidence, and that the transaction was manifestly disadvantageous to C, since he paid a substantial sum of money for a ‘seriously insecure’ right that tied him to that particular house.
45 See eg L Ho, ‘Undue Influence and Equitable Compensation’ in P Birks and F Rose (eds), Restitution and Equity (Mansfield Press, 2000) vol 1. Similar arguments are often made in the context of duress, which is also not, in itself, a wrong that leads to damages.
46 For general discussion of rescission, see Chapter 16.4. 47 See Chapter 16.4.4.
48 Etridge, [144]. 49 Though partial rescission is impossible: see Chapter 16.4.4.1. 50 [1994] 1 WLR 129.
JC Smith's The Law of Contract 2021 3 ed, pp 285-6.