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Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44

Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44


Citation:Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44

Link to case on WorldLII.

Rule of thumb:If a person suggests they are still under undue influence from a person they have close ties of love & affection with to enter a contract significantly against their interest even after a solicitor has been consulted, does undue influence law still apply? Yes, even if a solicitor has been consulted, a person still must do basic checks to ensure there is no undue influence before a person enters a contract significantly against their own interests for the benefit of another party who holds influence over them.

Background facts:

The facts of this case were that Mrs Etridge’s husband was a businessman and she was told by the bank to read the full documentation as well as consult a solicitor before signing a guarantee for her husband’s business debts using the family home. Although Mrs Etridge did consult a solicitor and largely understood what she was singing Mr Etridge however got in her ear again and told her that there was essentially no chance of his business failing, and the whole situation was just one big ado about nothing. Mrs Etridge stated in the bank when she was in words to the effect that she although she basically understood it she knew that there was no chance her husband’s business would fail. The husband’s business did fail and the bank tried to repossess the house.

Parties argued:

Etridge argued that the bank had constructive notice of the undue influence her husband had placed on her after she had all the advice. The bank argued that they had informed Etridge to consult a solicitor, checked she had and they had removed their undue influence obligations.

Judgment:

The Court upheld the arguments of Etridge. The Court affirmed that the bank had notice that further undue influence had been placed on Etridge after the initial consultation. The bank were not entitled to repossess the house.

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Ratio-decidendi:

‘Once it is accepted that the wife has raised an arguable case that she was in fact the victim of undue influence and that the bank had been put on enquiry, it will have to be a very clear case before one can say that the bank should not have to justify its conduct at a trial’, Lord Hobhouse, ‘the high degree of trust and confidence and emotional interdependence which normally characterises a marriage relationship provides scope for abuse. One party may take advantage of the other’s vulnerability. Unhappily, such abuse does occur. Further, it is all too easy for a husband, anxious or even desperate for bank finance, to misstate the position in some particular or to mislead the wife, wittingly or unwittingly, in some other way. The law would be seriously defective if it did not recognise these realities’, Lord Nicholls

'the high degree of trust and confidence and emotional interdependence which normally characterises ... relationship provides scope for abuse. One party may take advantage of the other's vulnerability.... the law would be ... defective if it did not recognise these realities', Lord Nicholls

Where you know there is a risk of undue influence, then you can be liable for the agreement being struck down if you enter it even if separate legal advice was recommended – there were many cases discussed all in the one case here and this laid out which cases were being accepted and which one’s were not, ‘Once it is accepted that the wife has raised an arguable case that she was in fact the victim of undue influence and that the bank had been put on enquiry, it will have to be a very clear case before one can say that the bank should not have to justify its conduct at a trial’, Lord Hobhouse

Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.