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 ; the bank was not joined as a party.
Outcomes differed among the eight fact patterns and three on very particular scenarios. As such the final appeals are reported together in law reports headed Etridge but three reports detail endorsed dissents in the court below or go into further detail, as endorsed by the House of Lords:
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, be used solely for the benefit of one person. A bank is "put on inquiry" 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. 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. Instead, the possibility of an action in professional negligence against the solicitor would arise. This would be a personal action, and so it would not help the family stay in their home. Lord Bingham gave the first judgment, remarking that the principles set down in the opinion of Lord Nicholls commanded "the unqualified support of all members of the House." Lord Nicholls held that if the banks ensured that the wife had had independent advice, they could not be responsible for that advice being defective. The presumption is rebutted if there is ‘expression of… free will’. The idea of manifest disadvantage for presumed undue influence was rejected but replaced with a transaction that ‘calls for explanation’, or one which ‘is not readily explicable by the relationship between the parties.’ In the ordinary case it is not ‘to be regarded as a transaction which, failing proof to the contrary, is explicable only on the basis that it has been procured by the exercise of undue influence.’ That is because it is nothing out of the ordinary. You are put on inquiry whenever a wife offers to stand as surety for her husband’s, or a company’s debts, where the loan is only going to be for the husband’s purposes. Once on inquiry, the bank must ensure that the spouse has independent advice and a certification that they have formed a truly independent judgment. Lord Clyde gave a short judgment, followed by Lord Hobhouse who cast doubt on the utility of class 2B, identified in O'Brien. Lord Hobhouse summarised the outcomes of each claim. Lord Scott gave a judgment dealing extensively with the particular facts of each claim.
