Barclays Bank v. O'Brien [1994] 🚩

Lord Browne Wilkinson defined two further types of presumed undue influence

class 2B covers relationships where undue influence would not automatically be presumed from the nature of the relationship itself but may arise because one party placed so much trust in the other that the presumption would arise

class 2A : specific relationships : solicitor and client, medical adviser and patient, parent and child. does NOT cover HUSBAND AND WIFE

facts

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  • mrs o sought to set aside mortgage transaction on grounds she has signed documents under undue influence and misrepresentation
  • once overdraft exceeded loan, bank sought order for possession of property
  • mrs o relied on husbands false representation that security was limited to £60,000 and covered short term loan for 3 weeks whilst house remortgaged
  • bank did not explain contents of mortgage documents when she signed and did not advise her to take independent legal advice she did not read documents before signing
  • mrs o'brien signed legal charge over co-owned matrimonial home as security for husband's debts

judgment

Lord Browne-Wilkinson sought to bring law up to date to show there remains a concept of undue influence

  • "in a substantial proportion of marriages it is still the husband who has the business experience and the wife is willing to follow his advice without bringing truly independent mind and will to bear on financial decisions"
  • "the number of recent cases in this field show that in practice many wives are still subjected to, and yield to, undue influence by their husbands"
  • "such wives can reasonably look to the law for some protection when their husbands have abused the trust and confidence reposed in them"

there is an argument that if the rules on undue influence are too strict then banks will be far less ready to lend money in security of matrimonial home

Lord Browne-Wilkinson divided those who may bring doctrine to their aid as

  1. wives
  2. other persons

he concluded that a wife may claim to set aside transaction where she has been induced to stand as husband surety by his undue influence
this will be enforceable against third party if either:

  • the husband was acting as third parties' agent; or
  • the third party has actual or constructive notice of the facts giving rise to her equity

there are inherent difficulties w Lord Browne-Wilkinson's judgment

NatWest Bank v. Amin [2002] : a bank could not rely on a statement by a solicitor saying that terms and conditions had been explained to Mr and Mrs Amin, who had agreed to allow their property to be used as security for a loan to their son. The bank knew that Mr and Mrs Amin could not speak English and that the solicitor advising them could not speak Urdu

in the cases that followed O'Brien a variety of approaches were taken by the court and it was clear that law was more confused rather than less confused as a result of the decision