Royal Bank of Scotland plc v Etridge (No 2)

Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44 (11 October 2001) is a leading case concerned with English land law, English contract law, and the circumstances under which actual and presumed undue influence can be argued to vitiate consent to a contract.

Facts

In eight joined appeals, homeowners had mortgaged their property to a bank. In all cases, the mortgage was securing a loan that was used by a husband for his business, while his wife had not directly benefited. The businesses had failed, and the wife had alleged that she had been under undue influence to sign the security agreement. Therefore, it was contended that the security should be void over her share of the home's equity and that because of this the house could not be repossessed. In the eighth appeal the core of the action was between the wife and her solicitor (Mr Banks); the bank was not joined as a party.

Judgment

The House of Lords held that for banks to have a valid security they must ensure that their customers have independent legal advice if they are in a couple where the loan will, based on constructive or actual knowledge (either suffices), be used solely for the benefit of one person. A bank (or its solicitor) is "put on inquiry" (fixed with constructive knowledge) that there may be the risk of undue influence or misrepresentation, if they transact for security over a domestic home, but the loan will only benefit one person and not the other. The solicitor who would give independent advice, however, could also be acting as a solicitor for the bank, or both a husband and wife (or either partner). The solicitor would certify that he or she was satisfied that both borrowers had given their fully informed and true consent, although if this ultimately turned out to be wrong, the bank's security would not be affected.