Wright v HSBC Bank Plc

A settlement with a bank will not be set aside for undue influence or economic duress merely because the customer is vulnerable and indebted. Where the bank is entitled to demand repayment, and does not apply illegitimate pressure, the settlement remains binding. A bank may lawfully make continued lending conditional upon abandonment of claims, provided that doing so involves no illegitimate pressure or abuse of influence.

Financial advisers owe duties to act in the customer’s best interests. Advising and pressing a customer experiencing a cash shortage to commence pension arrangements immediately, before the expected supporting income exists, may breach those duties. Loss is confined to the financial consequences proved to flow from that breach.

Patricia Mary Wright sued HSBC Bank plc concerning banking and financial products supplied to her and her late husband. Following complaints about the Bank’s conduct, the Bank made a settlement offer in October 2001. Mrs Wright accepted it in February 2002, subject to specified lending arrangements.

She sought rescission of the settlement for misrepresentation, undue influence, economic duress, breach of fiduciary duty, illegality and repudiation. She also pursued a claim concerning cancellation of a joint life policy and alleged mis-selling of a pension. The central issues were whether the settlement was binding and whether the Bank had breached duties in advising on the pension and insurance arrangements.

1. The settlement was binding. The alleged representations about reduced monthly commitments, clearing all debts and a £4,000 settlement were not actionable or were not relied upon. Mrs Wright had read and understood the Bank’s actual offer before accepting it.
2. The circumstances did not establish undue influence or economic duress. Mrs Wright was vulnerable, but the Bank was entitled to demand repayment of substantial indebtedness. It did not pressure her to settle or make settlement a condition of continued lending. Even if it had taken that position, it would not necessarily have involved illegitimate pressure, given the Bank’s rights and the history of the borrowing.
3. There was no breach of fiduciary duty. The facts were materially different from Lloyds Bank v Bundy [1975] 1 Q.B. 326, where the bank relied on a guarantee given by a father to support his son’s existing borrowing in circumstances known to the bank manager to be inappropriate.
4. The claim concerning cancellation of the joint life policy failed. The parties understood that cancellation would leave Mr Wright uninsured, and no advice was required in the circumstances.
5. The pension advice was unsuitable and breached a common-law duty. Mr Halksworth had advised and pressed Mrs Wright to commence pension arrangements while the parties’ outgoings exceeded their income and before the expected rental income was available. The conduct also gave rise to a claim under section 62 of the Financial Services Act 1986, applying the cited Lautro and Imro rules.
6. The recoverable pension loss was the interest paid on borrowing used to fund the premiums, offset against the increase in the pension fund over the premiums paid. The pension was not the cause of the later need to sell the flat.
7. Section 5 of the Financial Services Act 1986 did not apply because Mr Wilton entered no agreement. Section 27 of the Financial Services and Markets Act 2000 did not apply because he was not carrying on a regulated activity and gave no advice.
8. The claims arising between October 2001 and February 2002, including rescission of the settlement, failed. The estate’s claim concerning the joint life policy also failed. The remaining 1999 claims were barred by the settlement.

First-instance proceedings in the High Court. The judgment records an earlier application to amend the particulars of claim before Burton J, but no appellate decision.