Patricia Quinn and Undue Influence

The Irish Times is reporting that the Commercial Court has just issued judgment rejecting Patricia Quinn's plea that she did not have to repay her loan eur.3 million loan to Anglo Irish Bank (now Irish Bank Resolution Corporation) because of undue influence. Justice Peter Kelly, correctly, ruled that "[t]he law since the middle of the 18th century allowed for no presumption of undue influence between a wife and husband, and there was also no actual evidence of undue influence by Mr Quinn over Mrs Quinn, such as bullying behaviour."

This is a relatively straightforward case and it is surprising that an undue influence argument was even advanced. The law has moved on considerably beyond patronising views about a married woman's contractual powers. It is necessary to show that the woman is under the dominion of her husband in order to succeed. In other words, a lot more than the mere fact of marriage is necessary for an undue influence presumption to arise. Further, even if dominion is shown, it is not the end of the inquiry. If the woman exercised independent judgement the transaction would stand. Quinn's claim seems to have been based on authority along the lines of Midland Bank v. Cornish, where there was clear evidence of the bank taking advantage of the wife. But there is no evidence of unfair advantage here and it beggars belief for a woman who serves as a director on a number of corporate boards, and who must be assumed to be reasonably sophisticated, to make such a claim.  

In sum, Justice Kelly got it absolutely right and it would be hard to see this judgment being overturned on appeal - at least on undue influence grounds.

More on Online Shopping Charges

I blogged previously about new EU consumer rules targeting hidden charges for the use of credit/debit cards and the predictable response from repeat offenders like Ryanair. Now the UK's Office of Fair Trading (OFT) has ordered full disclosure of these charges to aid consumers. Via the BBC:
It warned that if travel firms did not comply, it would take action against them, using consumer protection laws.

"We will take enforcement action against any businesses that do not respond to today's announcement and instead continue to use misleading surcharging practices," said Cavendish Elithorn, of the OFT.
Consumer minister Edward Davey said: "We will work with the OFT to make sure that consumers paying by card do not have to pay excessive surcharges."

He added that the government was supporting the introduction of European rules, which would stipulate that surcharges must reflect the costs to businesses. It could be up to two years before these are adopted in UK law.

Mandatory disclosure alone may not be enough to get rid of these charges if offenders act in copycat fashion and if consumers don't have much bargaining power or true choice. But it might make a small difference. For e.g., Easyjet charges GBP 8 for the use of a debit card whereas Ryanair charges GBP 6.
I wonder how long it will take for the Irish authorities to bring the new EU rules into effect.

New EU Consumer Law for Online Shopping

The European Parliament has approved a new consumer rights directive aimed at giving more rights to consumers, especially in online shopping situations. Via ZDNet:
In a vote on Thursday, the new Consumer Rights Directive was passed by 615 votes to 16, with 21 abstentions. The adopted text will have to be enforced in EU member states within two years, if it gets approved by the Council of Ministers in July.

From the EU release:
The new rules will stipulate a 14-day EU-wide withdrawal period for distance and off-premises sales (i.e. those in which the consumer cannot see the good before buying it), during which consumers may change their minds. If they regret the purchase, for whatever reason, they may return it. The price paid by the consumer for the good must be refunded within 14 days of the withdrawal. This is a major step forward for consumer rights.

The unintended consequence of such supposedly pro-consumer rules is that sellers will seek to protect against the risk of unreasonable returns by increasing the price. It might have been preferable to set a shorter mandatory period and allow for private ordering. Sellers would have charged lower prices for goods with shorter return periods and consumers would have had more choice. As long as the return period was clearly disclosed, consumers would not have been harmed.

More from ThisisMoney:
The rules state that traders are banned from charging consumers fees that exceed the cost of transacting a payment. Budget airlines such as Ryanair - who charge a £6 administration fee for booking with a credit card that is not a pre-paid Mastercard - argues that the new EU rules will not affect them. Ryanair's Stephen McNamara said: 'The change in rules will not affect us directly, our credit card charge is just an administration fee not a surcharge.'

Just more proof that Ryanair continues to believe it is above the law!

Pre-Nups Enforceable in England: The Katrin Radmacher Case

The UK Supreme Court just ruled that pre-nuptial agreements are enforceable under English law in certain circumstances. I haven't seen the full judgment, but here are extracts from the FT:

... the Supreme Court decided by a majority of eight justices to one to uphold a pre-nuptial agreement signed by Katrin Radmacher, a German paper industry heiress worth more than £100m, which was being challenged by her French ex-husband Nicolas Granatino, a former investment banker at JPMorgan.
The couple married in late 1998 and had signed a pre-nuptial agreement four months earlier, waiving their rights to claim against each other’s wealth if they split.
Mr Granatino, who is studying for a doctorate at Oxford university, admits that he willingly entered into the deal but claims he did not know the extent of his wife’s wealth and did not receive independent legal advice.
His lawyers also pointed out their circumstances when they split in 2006 were very different from when they met at members’ only Tramp nightclub in Mayfair, when Ms Radmacher was running a fashion store in central London.
Mr Granatino had since quit his City job to study for his Oxford university doctorate and has started patenting his biochemical processes.
Court documents show that Mrs Radmacher has accepted that if her former husband, who has just completed a doctorate at Oxford University and is now looking for a research post, fails in this appeal, he will face “financial ruin”.

Lord Phillips, president of the Supreme Court, said the majority of justices: “... hold that in this case the agreement was freely entered into and that both the husband and wife fully appreciated its implications.”

There is predictable condemnation from some quarters about the "cheapening of marriage", etc. I think this is a win for those who favour party autonomy and freedom of contract and does not cheapen marriage in any way.

Lady Gaga Strikes Back Against Fusari

Lady Gaga is no slouch when it comes to defending herself. Following on from my previous post about a $30 million lawsuit against her on Wednesday, news  is that Lady Gaga returned fire in the Supreme Court of New York against Fusari seeking declaratory relief. She asks the court to declare that her agreement with him is "void and unenforceable" and order the defendants to repay the moneys already paid to them.

Her suit is based on the New Jersey Employment Agency Act, the New York General Business Law (section 170) and the New York Arts and Cultural Affairs Law. These statutes, she claims, protect "employees (including inexperienced performing artists) from predatory and financially abusive practices by employment agencies in securing employment opportunities for employees."

Gaga claims that Fusari induced her to enter into an unlawful agreement to pay him 20% of her earnings from her first 4 albums. She was also required to use and pay Fusari to be her producer. Fusari was to be paid royalties whether or not recordings produced by him were on her albums.

If the court were to hold that the agreement is valid, she asks it to rule that Fusari is not entitled to any further sums.

This should get interesting if it actually gets to trial. I suspect that the case will be settled, much to the loss of contract law professors! Stay tuned for more!

Bad Romance: Lady Gaga Sued for $30.5 million

Readers of this blog are no strangers to Lady Gaga. The weird one has just been sued in New York by a jilted lover who is apparently seeking to cash in on her fame. Via the NY Post:
Now that's a bad romance -- Lady Gaga's ex-boyfriend says she's cheated him out of millions of dollars since he dumped her, a sensational new lawsuit charges.

Songwriter and producer Rob Fusari says in a $30 million lawsuit that he helped develop "guidette" Stefani Germanotta into the superstar she is today -- and even came up with her world-famous stage name -- but she is now reneging on a business deal that made him 20 percent owner of her company.
Fusari's lawyer, Robert Meloni, who filed suit yesterday in Manhattan Supreme Court, said: "He discovered her. It was his songs and productions and connections that got her her first deal."
But the pair worked together seven days a week and co-wrote her later hits "Beautiful, Dirty, Rich" and "Paparazzi."

Fusari said he played the Queen song "Radio Ga Ga" whenever she arrived at his studio, and "one day when Fusari addressed a cellphone text to Germanotta under the moniker 'Radio Ga Ga' his cellphone's spell check converted 'Radio' to 'Lady.' Germanotta loved it and 'Lady Gaga' was born."
Their relationship reached a "romantic level," the suit says, and they formed a company with Lady Gaga's dad that Fusari owns 20 percent of, the filing says.

There is a cottage industry in such suits by ex-lovers and the chap doesn't seem to have much of a case, but at a minimum, the brouhaha will give plenty of fodder to the paparazzi.

More on Upward-only Rent Clauses

Over at Clatter of the Law, Rossa McMahon has a nice post responding to my post on the ban order on upward-only rent clauses. He points out (correctly) that "[h]aving granted commercial tenants this special legal protection, why not make a similar intervention on behalf of suffering purchasers? Such a move would be fiercely (and fairly) resisted by financial institutions, but the Government would find it hard to justify its rush to action on behalf of commercial tenants while residential landowners suffer under the deal they struck."
Read the full post.

In this connection, it is also useful to note the Master of the High Court's decision in the case of Kidney v. Charlton. A&L Goodbody Solicitors have published a comment on it here. The interesting bits from the Master's decision (apparently obiter):

A court will not be easily persuaded to accept an interpretation which will give the lessor a windfall in a time of recession. And the courts will surely never rubber stamp any interpretation which clearly has the effect of unjustly enriching either party.

While the Common Law device of the implied term is often the explicit starting point, the courts’ readiness to infer fairness and balance into contracts, and especially into long term contracts, is sometimes justified on the basis of purposive interpretation techniques imported from European Civil Code jurisprudence and there is now a shift towards convergence of the commercial law principles operative in both spheres.

A system in which rent reviews are apparently adjudicated by estate agents whose day job is the marketing of like property usually by reference to selling points such as “strong rental growth potential” is prima facie a system which gives rise to significant and legitimate misgivings.

In the present climate, it would be well to note also that the courts’ decision will be informed by public policy. Even in a case in which the drafted meaning is clear and unambiguous, the device of severance of an offending clause will be employed by the court where performance would be contrary to public policy.

In Ireland, fair rents have been a public policy objective since the days of the Land League. While the current Irish recession is not in the same league as the Great Depression, the public policy to secure early recovery is surely identical. The losses and burdens must be shared fairly.

These remarks are quite sweeping and I'm not sure that the recession is a sufficient justification for courts to rewrite commercial agreements.

Read the full decision!

Upward-only Rent Clause Ban: More evidence of the nanny state?

The Minister for Justice has reportedly signed a ban order on "upward-only" rent clauses in business leases. Even if he is correct in his claim that "the practice of including upward only review clauses in business leases is a deeply entrenched one...[and the] time has come to end this practice" by putting into place "more equitable business arrangements ... which take account of the reality facing many business owners and retailers," is a ban order the answer? The Minister's (admittedly well-meaning) action will only trigger costly externalities and undermine contractual freedom.

State intrusion into consensual private agreements might be tolerable if narrowly designed and limited to consumer contracts. Even in this limited domain, legislation must not undermine party autonomy. However, intrusion through fiat is perplexing when the parties are commercially sophisticated and are able to bargain freely. The proffered justification in this particular instance - "Upward only rent reviews have imposed enormous damage during this deep recession. It meant that the dramatic fall in property prices was not being reflected in lower rents for many businesses. Coupled with plummeting turnover and high business costs, upward only rent reviews have caused the loss of hundreds of jobs and businesses" - is not a sufficient condition for state intervention. Those leases were not signed under duress or coercion. Sensible landlords would accept the prevailing market-rent rather than leave their premises vacant. If this is not transpiring here, one explanation could be that they are betting on rents going up before the leases expire and are trading off short-term losses (by refusing to lower rent and triggering defaults) against future gain. There might also be a failure of bargaining. The resentment felt by tenants is understandable - being locked into paying a high rent in a bad market seems unfair.

In any event, the leases as drafted reflect a consensual allocation of risk. They may be one-sided and favour landlords over tenants. If shopowners can't afford the rents they are free to lease elsewhere. If enough business owners do this, rents will inevitably come down. If the landlords are indeed in a superior bargaining position, banning "upward-only" rent clauses will not make any difference. Their lawyers will find a way to capture the benefits of rents going up in a different form. State intervention rarely (if ever) eliminates disparities in bargaining power.

If the state gets into the business of re-writing private agreements, it won't have time to do much else.

Can't be sued for a 'C' grade

Law professors heaved a collective sigh of relief after reading about the judgment of a New York court last week in the case of Keefe v. New York Law School. The suit was brought by a disgruntled law student (who represented himself in the proceedings, apparently not having heard of that old saying about a lawyer who represents himself having a fool for a client) over a 'C' grade awarded to him in a legal writing class.

The gravamen of the claim was that "NYLS breached an implied contract with him through statements on the NYLS website that require NYLS to act in good faith and fair dealing." Keefe alleged that the "C" grade "was arbitrarily awarded" and bizarrely asked the court to order NYLS to "change its grading system from its current letter system to a pass/fail system, similar to that of Yale Law School." Boggles the mind.

The implied contract argument was supposedly based on language contained on NYLS's website. The decision mentions "the right program for every student" as one of the phrases relied on by the plaintiff to make his claim. This seems to be a terribly vague basis for a lawsuit.

The court was unsympathetic: "a student must identify specific language in the school's bulletins, circulars, catalogues and handbooks which establishes the particular "contractual" right or obligation alleged by the student in order to make out an implied contract claim. General statements of policy are not sufficient to create a contractual obligation. Only specific promises that are material to the student's relationship with the school can establish the existence of an implied contract. In the case at bar, Plaintiff fails to cite any specific provision or communication from NYLS that would establish an implied contract. One cannot breach a contractual promise that was never made. Plaintiff fails to point to any document or communication that gives rise to a promise which NYLS has breached." (internal citations omitted)

The court also correctly denied the plaintiff's plea to change NYLS's grading system. It held: "As a general rule, judicial review of grading disputes would inappropriately involve the courts in the very core of academic and educational decision making. Moreover, to so involve the courts in assessing the propriety of particular grades would promote litigation by countless unsuccessful students and thus undermine the credibility of the academic determinations of educational institutions. We conclude, therefore, that, in the absence of demonstrated bad faith, arbitrariness, capriciousness, irrationality or a constitutional or statutory violation, a student's challenge to a particular grade or other academic determination relating to a genuine substantive evaluation of the student's academic capabilities is beyond the scope of judicial review. ...NYLS clearly communicated through the student handbook that NYLS utilizes a letter grading system under which all of its students are evaluated. This Court declines to interfere with this quintessential function of an educational institution."