Barclays Bank pcl v. Harris (FC) (executor of Beryl Iris Harris (deceased) Midland Bank plc v. Wallace and another (AP) Royal Bank of Scotland v. Etridge National Westminster Bank plc v. Gill and another (AP) UCB Home Loans Corporation Limited v. Moore and another (AP) (Conjoined Appeals) Governor and Company of the Bank of Scotland v. Bennett and another (AP) Kenyon Brown v. Desmond Banks and Co Barclays Bank plc v. Coleman and another (FC)

Undue influence is established by proof that influence was abused so that consent was not the product of free will. The claimant bears the legal burden. Proof of trust and confidence, together with a transaction calling for explanation, may shift an evidential burden; manifest disadvantage is not a separate requirement.

A lender is put on inquiry whenever a person offers non-commercial security for a spouse’s debts. It avoids constructive notice by taking reasonable steps to ensure the surety receives a meaningful explanation of the transaction and its practical risks. Ordinarily it may rely on an authorised solicitor’s written confirmation, unless it knows or ought to realise that proper advice was not given.

The solicitor must advise the surety privately, explain the risks and alternatives, and respect the client’s decision. Acting also for the debtor or lender is not automatically disqualifying, but any real conflict requires withdrawal.

Eight conjoined appeals arose from non-commercial surety transactions. In seven, a wife had charged her interest in the matrimonial home to secure debts owed by her husband or his company. When the lender sought possession, she alleged that her consent had been procured by undue influence or misrepresentation and that the lender was affected by constructive notice. The eighth appeal concerned a wife’s negligence claim against the solicitor who had advised her.

Five wife-and-bank cases had been determined together by the Court of Appeal in [1998] 4 All ER 705. The remaining appeals came from decisions reported at [1999] 1 FLR 1115, [2001] QB 20 and [2000] PNLR 266. Three possession cases remained at the interlocutory stage, while the others had received full trials.

The central issues were the proof of undue influence, when a lender is put on inquiry, what reasonable protective steps it must take, and the nature of the advising solicitor’s duty.

1. Disposition. Lord Bingham recorded the unanimous disposition. The House allowed the appeals in Midland Bank plc v Wallace, Barclays Bank plc v Harris, UCB Home Loans Corporation Ltd v Moore, Bank of Scotland v Bennett and Kenyon-Brown v Desmond Banks & Co. It dismissed the appeals in Royal Bank of Scotland plc v Etridge, National Westminster Bank plc v Gill and Barclays Bank plc v Coleman.

2. Undue influence. Lord Nicholls delivered the leading speech, which Lord Bingham stated had the unqualified support of every member of the House. Undue influence concerns the abuse of influence, whether through overt pressure or unfair advantage taken of a relationship of ascendancy, trust, dependence or vulnerability. The complainant bears the legal burden. Trust and confidence, combined with a transaction calling for explanation, may create a rebuttable evidential inference, but the court must decide the issue on all the evidence.

   The expression manifest disadvantage should be discarded as a separate test. Disadvantage is not an ingredient of undue influence, although the nature of the transaction is relevant to whether it calls for explanation. Marriage itself creates no irrebuttable presumption of influence, and an ordinary guarantee for a spouse’s business debts is not inherently inexplicable.

3. Lender put on inquiry. Per Lord Nicholls, applying and clarifying Barclays Bank plc v O’Brien [1994] 1 AC 180, a bank is put on inquiry whenever a wife offers security for her husband’s debts or those of his company. A joint loan does not ordinarily have that consequence unless the bank knows it is really for the husband’s purposes. The same protective principle extends prospectively to other non-commercial relationships, but not to commercial guarantors capable of protecting their own interests.

4. Reasonable steps. Per Lord Nicholls, with Lord Hobhouse expressly agreeing, a lender need not investigate whether undue influence occurred. It must take reasonable steps to ensure that the practical implications are brought home to the surety. Ordinarily it may rely on written confirmation from a solicitor acting for her, provided it communicates directly with her, confirms her choice of solicitor, supplies the necessary financial information and discloses any particular suspicion. It proceeds at its own risk if it knows, or ought to realise, that appropriate advice was not given.

5. Solicitor’s duty. Per Lord Nicholls, the solicitor must advise the wife face to face and without her husband. The core minimum includes the nature and consequences of the documents, the seriousness and extent of the risk, the existing and proposed indebtedness, the possibility of losing the home or bankruptcy, the wife’s freedom to refuse, and possible negotiation of limits or terms. The solicitor advises; the competent client decides. Acting also for the husband or bank is not automatically prohibited, but the solicitor must cease acting if a real conflict inhibits advice.

6. Application. The interlocutory appeals in Harris, Wallace and Moore had to proceed to trial because it was arguable that no solicitor had been authorised to advise the wife and that the lenders had not taken adequate steps. Etridge and Gill failed because undue influence was not proved after trial; Coleman failed because the bank was entitled on the case as conducted to rely on the solicitor’s confirmation. Bennett succeeded because an unusual ranking agreement affecting the surety’s position had not been disclosed. The negligence claim in Kenyon-Brown failed because breach and causative loss were not proved.

• House of Lords: In [2001] UKHL 44, unanimously allowed the appeals in Wallace, Harris, Moore, Bennett and Kenyon-Brown, and dismissed those in Etridge, Gill and Coleman.
• Court of Appeal: In [1998] 4 All ER 705, dismissed the wives’ appeals in Etridge, Harris, Moore, Wallace and Gill. In [1999] 1 FLR 1115, allowed the bank’s appeal in Bennett. In [2001] QB 20, dismissed Mrs Coleman’s appeal. By a majority in [2000] PNLR 266, allowed Mrs Kenyon-Brown’s negligence appeal.
• First instance: Etridge, Gill, Coleman, Bennett and Kenyon-Brown followed full trials. Harris, Wallace and Moore reached the House following striking-out or summary-judgment proceedings.