In any non-commercial hybrid transaction where more than a trivial element of borrowing discharges the debts of one of the borrowers, a lender is put on inquiry as to the possibility of undue influence and obliged to follow the “Etridge protocol”.
The Supreme Court has determined this principle in Waller-Edwards v One Savings Bank Plc [2025] UKSC 22.
The appellant commenced a relationship at a time when she was emotionally vulnerable but financially independent as the sole owner of her mortgage-free home with substantial savings. She was persuaded by her partner Nicholas Bishop to exchange her home and savings for Spectrum, a property he was building, which was subject to an existing charge.
In 2013, Bishop remortgaged Spectrum for £384,000 with the respondent bank. The bank understood from him that the funds would be applied to purchase another property for the couple and redeem an existing mortgage debt. It also required him to pay off £39,500 of loan and credit card debt. So, being partly joint borrowing and partly to discharge Bishop’s debts, this was a non-commercial hybrid loan.
Unknown to the bank, Bishop also made a divorce payment of £142,000 to his ex-wife. Following the remortgage, the couple’s relationship ended, arrears accrued on the mortgage and the bank brought possession proceedings in November 2021.
The appellant argued at trial that she had acted under Bishop’s undue influence when entering the transaction and that since she was a surety for part of the loan to pay off Bishop’s debts, the bank was put on inquiry that her agreement may have been obtained by undue influence. The bank failed to take steps to follow the Etridge protocol and satisfy itself that her agreement had been obtained in full knowledge of the liability she was undertaking. Consequently, the remortgage transaction should be set aside between her and the bank.
Undue influence was established at first instance but the County Court, High Court and Court of Appeal all decided that the bank was not put on inquiry of the possibility of undue influence because this was joint borrowing and not a surety transaction.
The Supreme Court unanimously allowed the appeal. A creditor is put on enquiry as to the possibility of undue influence in any non-commercial hybrid transaction where on the face of it more than a trivial element of borrowing serves to discharge the debts of one of the borrowers and might not be to the financial advantage of the other. Such a transaction is to be regarded as a surety transaction and the “Etridge protocol” followed to protect vulnerable parties.
Louise Clark is a property law consultant