Bank of New South Wales v Rogers [1941] HCA 9

Bank of New South Wales v Rogers [1941] HCA 9

The relationship between the respondent and her uncle was one of loco parentis, giving rise to a presumption of undue influence in respect of the securities. The bank had knowledge of facts which should have put it on inquiry as to the propriety of the transaction and the absence of independent advice. As the bank neither made proper inquiry nor ensured independent advice, and as the presumption of undue influence was not rebutted, the securities must be set aside.

Parties
Appellant; Defendant: Bank of New South Wales; Respondent; Plaintiff: May Elizabeth Rogers
Jurisdiction
Australia
Procedural Posture
Appeal / Decision on Appeal From the Supreme Court of South Australia
Outcome
Appeal dismissed
Legal Topics
Undue Influence, Guarantee, Equitable Mortgage, Surety, Confidential Relationship, Notice (actual and Constructive)
Equity Banking Suretyship Undue Influence Guarantee Equitable Mortgage Surety Confidential Relationship +1 more

Case Brief

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Parties

Bank of New South Wales

Appellant; Defendant

May Elizabeth Rogers

Respondent; Plaintiff

Procedural Posture

Appeal / Decision on Appeal From the Supreme Court of South Australia

Legal Issues

  1. 1 Whether securities executed by the respondent (Rogers) over her shares in favour of the appellant bank as guarantee for her uncle’s debt should be set aside on the ground of undue influence.
  2. 2 Whether the relationship between Rogers and Gardiner (her uncle) was such as to give rise to a presumption of undue influence.
  3. 3 Whether the appellant bank had actual or constructive notice of circumstances that put it on inquiry as to undue influence, thereby obliging it to show that the transaction was Rogers’ free and voluntary act.

Ratio Decidendi

The relationship between the respondent and her uncle was one of loco parentis, giving rise to a presumption of undue influence in respect of the securities. The bank had knowledge of facts which should have put it on inquiry as to the propriety of the transaction and the absence of independent advice. As the bank neither made proper inquiry nor ensured independent advice, and as the presumption of undue influence was not rebutted, the securities must be set aside.

Court Disposition

Appeal dismissed

Orders

  • Securities executed by the respondent over her 987 shares in the Adelaide Steamship Co. Ltd set aside
  • The Bank of New South Wales ordered to return the 987 shares to the respondent