Presumption of undue influence requires disadvantage

In National Westminster Bank plc v Morgan ([1985] AC 686, HL) a husband and wife signed a charge over their jointly-owned property in favour of the bank. This was a condition attached to a bridging loan made by the bank. Without the loan, another lender would have enforced a possession order in respect of the property. The wife was hesitant about signing the charge but realised that otherwise she would lose her home. The manager of the local branch had brought the charge to her home and explained it to her. When, later, the couple were unable to repay the bridging loan, the bank sought an order for possession. The wife’s defence was that she had signed as a result of the bank’s undue influence.

Lord Scarman held that there was no undue influence. First, the relationship was simply that of banker and customer and there was no relationship of trust and confidence. Second, there is no presumption of undue influence unless there is something disadvantageous about the transaction (at 704). There was nothing disadvantageous to the wife about this transaction.

This ‘was an ordinary banking transaction whereby Mrs. Morgan sought to save her home’ (at 709).

Michael Lower

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