McCulloch v Fern

The case of McCulloch v Fern involved a dispute over the validity of a substantial gift made by a follower to the leader of a religious sect. The follower, under the undue influence of the leader, made the gift to benefit the sect. The sect leader and her husband were the recipients of the gift, which was intended to discharge a mortgage over land owned by the leader and her husband. The court had to determine whether the gift was valid and if it could be set aside due to undue influence and unconscionable conduct.

The primary legal issues revolved around the presumption of undue influence in the context of the gift, whether actual undue influence was proven, and if the husband of the sect leader could claim entitlement to the gift under survivorship after the follower's death. The court also needed to consider the effect of delay in bringing the proceedings and whether the husband had standing to sue after the follower's death. The court further had to determine whether the categories of special disadvantage, which justified the imposition of a constructive trust, were closed or if new categories could be recognised.

The court held that the presumption of undue influence was not rebutted, and actual undue influence was proven. The gift was applied to discharge the mortgage over the land, and a constructive trust was imposed upon the land. The husband, aware of the undue influence and the follower's special disadvantage, could not conscientiously retain the benefit of the payment. The court found that the delay in bringing the proceedings was not unreasonable, and the husband had standing to sue as the joint tenant of the gift. The court emphasised that fraud unravels everything, and therefore, the husband's consent to the gift was procured by unconscionable conduct, leaving him without entitlement to the gift.

The court ordered that the gift be set aside, and a constructive trust be imposed on the land to discharge the mortgage. The sect leader and her husband were required to repay the amount of the gift to the follower's estate. The husband was denied any entitlement to the gift by survivorship.