Case name & citation: Johnson v Buttress  HCA 41; (1936) 56 CLR 113
Decided on: 17 August 1936
Jurisdiction: High Court of Australia
The bench of judges: Latham C.J., Starke, Dixon, Evatt and Mc Tiernan JJ.
Area of law: Undue influence in contract
This is an Australian contract law case that considers the issue of undue influence. It discusses whether and how a presumption of undue influence is assumed based on the relationship between two parties.
Facts of the case (Johnson v Buttress)
A 67 year old man, John Spencer Buttress, was illiterate and did not have much experience and knowledge of business affairs. In connection with business matters, he usually used to rely on the advice of others. In 1931, he had become very much reliant on the advice of Mary Johnson, a distant relation of his deceased wife. On 24 April 1931, he transferred a cottage in Maroubra to Johnson in exchange for no consideration. Such transfer was executed in the presence of Johnson’s solicitor. Buttress did not obtain any independent advice regarding the transfer and there was evidence to show that Buttress failed to understand the irrevocable nature of the transfer.
After Buttress died in 1934, his son obtained the papers of administration of his father’s estate. He then initiated proceedings in the Supreme Court of New South Wales to set aside the transfer of the cottage made by his father. The proceedings were initiated to set aside the transfer on grounds of undue influence.
Was there a relationship of trust and confidence between Buttress and Johnson that arose a presumption of undue influence in relation to the transfer?
If there was a presumption of undue influence, could Johnson rebut it?
The decision by the trial judge
The trial judge set aside the transfer of the cottage and decided that it was made on grounds of undue influence. To this, Johnson appealed in the High Court.
High Court’s judgment in “Johnson v Buttress”
On 17 August 1936, the High Court unanimously upheld the decision of the trial judge and thus, dismissed the appeal.
It was observed that sufficient evidence existed to establish that there was a relationship of trust and confidence between Buttress and Johnson such that it arose a presumption of undue influence in relation to the transfer. Further, the Court decided that Johnson was not able to rebut this presumption.
Ratio decidendi (the rationale for the decision)
A person is said to unduly influence another to give a gift if he or she uses some special capacity or opportunity (in an unfair manner) to alter the will or freedom of that other to do so.
There are a number of factors that a Court will take into account when determining whether the necessary relationship of influence exists. These include the donor’s intelligence, experience, and knowledge of business matters, as well as whether or not the donor received independent advice and whether or not the donor was accustomed to relying on the stronger party’s judgment in business matters.
In the given case, since all of these factors could be proved, it was found that the transfer of the cottage by Buttress was unduly influenced by Johnson. Neither did Buttress had adequate knowledge of business affairs nor did he obtain any independent legal advice. Moreover, he had become reliant on the advice of Johnson (the influencing party) and did not understand that he had irrevocably disposed of the property.
It should also be noted that where a relationship of trust and confidence has been established, the influencing party has the option to rebut the presumption of undue influence. This can be done if he or she demonstrates that they did not take advantage of the donor and that the gift was the consequence of an autonomous and well-understood act by the donor, who was in a position to exercise their free judgment based on information as complete as that of the donee. However, in this case, Johnson could not rebut this presumption. Hence, the transfer was set aside.
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