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Royal Bank of Scotland v. Etridge (no 2) [2001] :red_flag: (judgement :…
Royal Bank of Scotland v. Etridge (no 2) [2001] :red_flag:
facts
eight conjoined appeals - each arising out of a transaction in which a wife charged her interest in her home in favour of a bank as security for her husbands indebtedness
wife later asserted that she signed the charge under the undue influence of her husband - in seven appeals the bank sought to enforce the charge signed by the wife - the bank claimed an order for possession of the matrimonial home
the wife raised the defence of the bank was on notice that her concurrence in the transaction had been procured by her husbands undue influence
the eighth appeal (Kenyon-Brown) concerned a claim by a wife for damages from a solicitor who advised her before she entered into a guarantee obligation of this character
the case established certain minimum requirements that a bank seeking to enforce a charge against a surety wife must satisfy to ensue it was not affected by the wife's claim
judgment
:
Lord Nicholls
- undue influence
he accepted that undue influence is covered by a large number of situation wherever there is abuse as well as exploitation of trust and confidence, reliance or dependency reposed in another; there are no longer special categories of relationship; he concluded that the division of cases into Class 2A and Class 2B presumed undue influence was not useful
an inference of undue influence can arise whatever the relationship
in some relationships trust and confidence must be proven and in others it is assumed
the burden of proof shifts to the other party where trust and confidence or dependency has been reposed in them and also the transaction cannot readily be explained by their relationship
in cases of actual undue influence there is no necessity to prove manifest disadvantage where undue influence is inferred, then manifest disadvantage must be shown
remodelled Class 2 - now the question is whether there is sufficient evidence for the court to conclude that there is undue influence on the
facts
judgement
:
Lord Nicholls
- lender put on inquiry
the bank will be put on inquiry whenever one person stands as a surety for another unless the surety is offered commercial advice. Etridge clarifies the point that it is the fact that one person is lending to another that is significant here and as a result the bank has a duty to inquire about the circumstances and whether undue influence played a part in the transaction
Lord Nicholls considered duties that a
bank will owe to the claimant
who enters into a transaction as surety for another:
a bank of any financial institution lending money should take steps to ensure that the claimant received legal advice by asking for the name of the claimant's legal adviser
the meeting should contain certain advice, e.g. the nature of the liability of someone standing as surety, the fact that their home is at risk and the wife should be urged to seek legal advice and the name of the legal adviser should be given to the bank or building society
where the claimant is advised by solicitor, the legal advice should also contain core elements e.g. nature of transaction and its implications and seriousness of the risk and the fact that the wife has a choice in the matter
the mortgagee has a duty to inform solicitor of any concerns that it has over whether the consent is genuine
legal adviser can act for both husband and wife
bank will not be acting as agent of the husband so its assumed that the advice given is given properly
"the furthest the bank can be expected to go is to take reasonable steps to satisfy itself that the wife has had brought home to her, in a meaningful way, the practical implications of the proposed transaction"