(ii) Transactions with Expectant Heirs
Where someone is expecting to receive an inheritance at some point in the future, their desire to receive money as soon as possible may make them peculiarly susceptible to moneylenders who may seek to lend money at extortionate rates of interest or purchase the inheritance at a gross undervalue. Such expectant heirs are characterized as being disadvantaged by a special disability; what Lord Selborne LC called ‘the follies and vices of unprotected youth, inexperience, and moral imbecility’.[1] If the defendant’s conduct in transacting with such people can be characterized as unconscionable, the transaction is liable to be set aside. The operation of this principle is illustrated by Earl of Aylesford v Morris[2] where the claimant stood to inherit his father’s estate and took out a loan from the defendant to pay off his debts at an interest rate of 60 per cent. This was set aside because the nature of the relationship between the parties and the terms of the transaction was such that the defendant was presumed to have acted fraudulently. As a condition of setting the transaction aside, the claimant was required to repay the principal sum and a reasonable interest rate of 5 per cent. One of the crucial factors which influenced the court in characterizing this transaction as unconscionable was the fact that the claimant was inexperienced and immature. It was accepted that the presumption of unconscionability could have been rebutted if the defendant could prove that the claimant had obtained independent legal advice.
