Royal Bank of Scotland Plc v Etridge… (Conjoined Appeals)
[2001] UKHL 44, [2002] 2 AC 773
House of Lords
Facts:
E used her interest in her matrimonial home as security to RBS for her husband’s debt.
There was no direct benefit to E.
E claiming that she signed the contract under the undue influence of her husband, voiding the contract. RBS claiming order for the home.
Legal Facts / Procedural History:
Queen’s Bench Division (High Court)
Court of Appeal
Legal Issues:
Whether E was unduly influenced by her husband.
Whether the bank was required to ensure E had received independent legal advice.
Appellant (Etridge) Arguments:
Banks are aware of the risk that a wife may seek to avoid a transaction on the ground of undue influence where the transaction relates to her matrimonial home, and she was allegedly influenced by her husband. A wife is also unlikely, and it is unrealistic to expect that they seek independent legal advice from what the husband provides. Banks should take steps to ensure a wife has received appropriate advice if they want the contract to be valid.
Respondent (RBS) Arguments:
RBS has a right to repossess the house.
Judgement (Bingham LJ, Nicholls LJ, Clyde LJ, Hobhouse LJ and Scott LJ):
Appeal dismissed.
Bank must ensure that the person providing a surety on the debt of their partner has received independent legal advice to inform them of the risks. If this is done, the person cannot claim that they have been unduly influenced.
If the solicitor fails to duly explain the practical implications of standing as surety then the claimant has a claim for damaged against the solicitor, not their partner or the bank. Once the bank has received confirmation from the solicitor, they can proceed as if the solicitor did their job correctly.
Nicholls LJ: ‘On the one side, there is the need to protect a wife against a husband's undue influence. On the other side, there is the need for the bank to be able to have reasonable confidence in the strength of its security’
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