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The statement "Following the High Court's decision in Garcia v National Australia Bank Ltd1, it has been suggested that different principles are applicable to the setting aside of securities given by wives to support their husbands' borrowings, on the one hand, and securities given by non-wives to support third party borrowings, on the other", is accurate and the law of equity under a) doctrine of undue influence and b) Special Wives Equity justifies the differences…
This position arises in case of relationships between solicitor and client, parent and child, wife and husband which is known as fiduciary relationship, where trust and confidence exists. In this case, undue influence is presumed by law unless until it is proved contrary2.
The presumption of undue influence is recognised by court of law basically where fiduciary relationship exists believing that in fiduciary relationship one party succeeds in exerting unfair influence or undue influence over the other. The court of law recognises relationship between employer and junior employee, doctor and patient also to bring into the ambit of presumption of undue influence3.
In fiduciary relationship between wife and husband the creditor has a bounden duty before obtaining guarantee from the wife where wife is not a benficiary, is that a) to take reasonable steps to establish that her consent had been properly obtained, b) to discuss the facts with her c) to warn her of the consequences d) to suggest to take independent legal advise. Failing which, the transaction could be set aside by court of law4.
Equity law protects innocent persons from undue influence by giving an opportunity to rescind the contract executed under ...
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