From: Matthew
Hoyle <MHoyle@oeclaw.co.uk>
Sent: Wednesday
4 June 2025 15:13
To: 'Robert
Stevens'; Gerard McMeel KC; ODG list
Subject: RE: UKSC
on undue influence
I don't think its right to be quite so harsh
on the role of legal advice. It may be that in some relationships (and I have
seen some in practice) A simply trusts B that they are acting in their best
interests by suggesting they enter into a contract not because of dependence
but simply naivety. A timely intervention by an independent party may indeed
cause the scales to fall from their eyes about what is really happening.
That being said, that will often not be the case in familial contexts, as the
HCAus judgment in Thorne v Kennedy makes clear. It's more likely in
business transactions where one party is young or inexperienced and simply
doesn't have an external perspective on the relationship.
So I agree in this context Etridge
(and any extension of Etridge) doesn't make much sense other than
(cynically speaking) as a way to give banks an easy way to spike these kinds of
claims.
This is a field which is calling out to be
dealt with by FCA regulation rather than sui generis legal rules.
Best,
Matthew
Matthew Hoyle
Barrister
One Essex Court
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From: Robert Stevens <robert.stevens@law.ox.ac.uk>
Sent: 04 June 2025 14:51
To: Gerard McMeel KC <Gerard.mcmeel@quadrantchambers.com>;
ODG list <obligations@uwo.ca>
Subject: RE: UKSC on undue influence
What a curious mess the law now is.
The judgment begins [1]:
The law recognises that there are certain
(non-commercial) relationships where there is a heightened risk that one party
has an undue influence over the other: the husband-and-wife relationship is an
obvious example but there are others too.
The law does indeed recognise some
relationships where undue influence is presumed (parent/child, religious
adviser/disciple, solicitor/client). But husband and wife is not one of them.
There is no special rule about husbands and wives.
The references to notice are completely
misleading. If H exercises undue influence over W, and W guarantees H s debts,
it does not matter that the lender doesn t know of the undue influence, and
could not have taken any further imaginable step to find out. If the lender
does not ensure that W obtains independent legal advice, the guarantee is
vulnerable to being set aside. This is just a step banks must take to be sure
that the guarantee cannot be set aside, it is nothing to do with notice of
anything.
Why require the independent legal advice to
be given? In cases of undue influence, it won t make a scrap of difference to
how W behaves. In a relationship of undue influence one party is under the
thumb of the other, and chatting to a solicitor about the fact that the
guarantee isn t a great deal from W s perspective won t alter that. W probably
knows that already, but doesn t care. W is entering into the transaction
because of the relationship of complete dependence, not because it is a good
deal. The solicitor cannot in a brief conversation make the scales fall from
W s eyes.
The requirement of independent legal advice
only makes sense to protect against rescission for misrepresentations as to
terms (Barclays Bank v O Brien was actually a case where H had told W lies
about the terms of the guarantee, there was no undue influence found.) The
independent legal advice should clarify for W what the terms are, so that it
cannot be asserted that the guarantee was induced by lies by H about that. (W
relying on misrepresentations by H about facts other than as to the terms of
the deal that the solicitor can clarify, should not in my view enable the
setting aside of guarantee at all). Independent legal advice prevents W from
making any relevant mistake, and so enables the bank to resist a claim to set
aside a guarantee for misrepresentations by H (again, this is nothing to do
with notice ).
Being cynical, a major potential problem
would be where the guarantee/loan is secured over the matrimonial home, so that
it makes commercial sense for H and W to collude and claim that H induced W to
enter into the transaction because of lies , thereby getting the
guarantee/loan set aside as against W, allowing the couple to resist the claim
of the bank for possession and sale. Lies are much easier to lie about.
Having a special rule about guarantees made a
certain amount of sense. Such contracts are ones where (at least directly) the
guarantor obtains no benefit from the transaction, another party, the borrower,
does. It is for that reason that since at least 1677 we have required
guarantees to be in writing, which we don t for contracts generally. The judge
made rule for this class of contracts has never been one about husbands and
wives, but applies to non-commercial guarantees generally.
But now, for purposes of undue influence ,
the special guarantees rule is to be applied to any non-commercial hybrid
transaction where, on the face of the transaction, there is a more than de
minimis element of borrowing which serves to discharge the debts of one of the
borrowers and so might no be to the financial advantage of the other.
Whether all of this judicial legislation
makes policy sense overall is impossible to tell.
Is the additional cost to borrowers generally
worth it (all co-borrowers will now have to pay solicitors their ludicrously
high fees for stating the bleeding obvious)?
Does it make sense to extend this rule
outside of the context of guarantees? Which contracts should be outside the
rule and why?
Would it be better not to permit the reversal
of contracts of loan because of a relationship of dependence the lender knows
nothing about and can know nothing about? Similarly, in cases of
misrepresentation that are not the responsibility of the lender, but of the
co-borrower, and of which the lender knows nothing and could know nothing,
should rescission be permitted at all (as it would not be for other contracts)?
I ve no idea, and despite their apparent
certainty, I don t think the judges are privy to any further information giving
them an answer to these difficult questions either.
R
From: Gerard McMeel KC <Gerard.mcmeel@quadrantchambers.com>
Sent: 04 June 2025 12:14
To: ODG list <obligations@uwo.ca>
Subject: UKSC on undue influence
An
interesting reversal of the Court of Appeal in One Savings Bank PLC v
Waller-Edwards [2024] EWCA Civ 302 by the UK Supreme Court today - [2025] UKSC
22 - suggesting there is still a role to by played by undue influence in
so-called "hybrid cases", where the vulnerable party effectively pays
off the abusive party's debts in what is formally joint borrowing.
Citation
by Lady Simler of various academic accounts including Profs Enonchong and
Capper, and the recent interesting comment by Dr Rowan in Legal Studies.
Gerard
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