05/06/2025
Ever suffered financial abuse - partner re-mortgages and uses funds for his own gain?? read this....
Judgment
The Supreme Court unanimously allowed the appeal. A judge ruled that a lender should be 'put on inquiry' in any non-commercial hybrid transaction where there is a more than a trivial element of borrowing which might not be to the financial advantage of the other.
Such a transaction, if viewed in this way, should be regarded as a “surety” transaction and the creditor placed on inquiry of the possibility of undue influence.
When a lender is put on inquiry, it is then required to follow the Etridge protocol. This is a series of steps designed to reduce the risk of a vulnerable person entering into a transaction where there is a risk in providing a legal guarantee of their partner’s debts for nothing in return. If a lender is put on inquiry and fails to follow the Etridge protocol the vulnerable party is entitled to set aside the transaction as against the bank.
Etridge notes that surety transactions are more likely than others to be tainted by undue influence because the vulnerable party takes on a legal liability for the other’s debt for no apparent personal gain. On the other hand, the risk in a joint borrowing transaction is much lower because, on the face of it, both parties are jointly liable for the debt and so both stand to benefit from it.
Because the risk of undue influence is sufficiently high in surety transactions, the judge ruled that it is proportionate to place a requirement on banks faced with surety transactions to follow the Etridge protocol to avoid being fixed with notice of the undue influence.
The latest ruling states that a lender should be put on inquiry whenever one party offers to stand surety for another's debts.
This means that additional and meaningful protection will be extended to men and women at risk of economic abuse by their partners.
A report recently published by the FCA suggests that as many as one in six women in the UK has experienced financial abuse by a current or former partner. In addition, a report by the charity Surviving Economic Abuse found that one in eight UK women who held a joint mortgage in the last two years experienced joint mortgage economic abuse from a current or former partner – equivalent to over 750,000 people.
A spokesperson for OSB said: “We note the judgement of the Supreme Court today. We are naturally disappointed by the decision, which was based on a very particular set of facts.
“This is a complex case arising from a loan in 2013, and we are assessing the implications of the ruling, although we note that cases involving undue influence are rare. At the same time, we will review our current procedures.”
Joel Leigh, partner at Howard Kennedy who represented the appellant, Catherine Waller-Edwards, said: “The Supreme Court’s decision is a landmark development in the law of undue influence, the most significant since Etridge. It is remarkable that hybrid transactions have gone unrecognised for so long, and that a workable test has only now been confirmed.
“While some lenders may have already adopted a cautious approach, the absence of formal recognition likely left many vulnerable individuals without recourse. These were people who, dependent on a partner who abused their trust, were drawn into transactions that left them financially exposed. Many will have lost homes, creditworthiness, and stability and lacked the means or confidence to challenge it. Even those prepared to challenge such contracts would have faced an uphill battle, because without any legal recognition of "hybrid" transactions, claims were doomed to fail unless (as in Catherine's case) taken to the highest court in the land. The Supreme Court’s judgment delivers long-overdue clarity and a vital safeguard: from now on, in any non-commercial hybrid transaction, a more than de minimis surety element is enough to put a lender on inquiry and require compliance with the Etridge protocol.
“Catherine’s fight has not only secured justice for her but has reshaped the legal landscape, extending meaningful protection to both men and women at risk of economic abuse within their personal relationships.”
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