Case Summary: Waller-Edwards v One Savings Bank Plc [2025]

Trinity's Abigail Cheetham, who is a member of Chambers' Business and Property team, has provided the following summary of the recent Supreme Court decision of Waller-Edwards v One Savings Bank Plc [2025] UKSC 22.

The Supreme Court assessed the test to determine whether a lender is placed on inquiry of undue influence in a non-commercial relationship when granting a loan which, in part, benefits only one of two individuals who offer to stand surety. The category of loan is referred to as a ‘hybrid’ transaction as it has both joint and singular benefits to the recipients.

Background

The Appellant commenced a relationship with a property developer, Mr Bishop, in late 2011 when she was financially independent yet emotionally vulnerable. The Appellant owned her home without a mortgage which was valued at £600,000 and she had substantial savings of £150,000.

Mr Bishop persuaded the Appellant to exchange her home and savings to purchase a property he was building with an expected valuation of £750,000 upon completion. The Appellant and Mr Bishop jointly owned the legal title of the property yet entered a declaration of trust to confirm that the beneficial interest was owned in shares of 99% to 1% respectively.

Mr Bishop sought to re-mortgage the property with the Respondent in 2013. The Respondent was led to understand that £233,000 of the £384,000 loan was to pay an existing mortgage and that £100,000 would be used for the couple to purchase a home as the property would be let to tenants. The Respondent required Mr Bishop to pay his existing personal debts from the loan in the total sum of £39,500. Whilst undisclosed to the Respondent, Mr Bishop used £142,000 of the loan to make a divorce payment to his ex-wife and £233,000 to pay a third party with a charge over the property.

Upon the Appellant and Mr Bishop separating in October 2013, the Appellant remained living in the property. The Respondent commenced possession proceedings as the property had not been let in breach of a condition for the re-mortgage and as the Appellant had fallen into arrears. The Appellant argued that the Respondent ought to have been put on inquiry of undue influence in the transaction arising from its knowledge of her non-commercial relationship with Mr Bishop and that she would provide surety for £39,500 of the loan.

Appeal

At first instance, the County Court found that the Appellant had been subject to undue influence by Mr Bishop, yet it rejected her argument that the Respondent ought to have been put on inquiry of the undue influence as it held that the assessment was one of fact and degree. The personal benefit to Mr Bishop of £39,500 was of a minor extent as the value represented just over 10% of the loan. The Court held that this proportion of surety for the loan did not tip the case into one akin to a full surety case.

The High Court concurred that, looking in the round, the surety of £39,500 did not constitute a transaction in which the Appellant was viewed as being in a relationship of suretyship with Mr Bishop. The Court of Appeal dismissed the second appeal by rejecting the Appellant’s argument that a hybrid transaction ought to be treated in the same way as a full surety transaction unless the lender is aware that the surety element is trivial.

Decision

In providing the leading judgment, Lady Simler assessed the leading authorities of Barclays Bank plc v O’Brien [1994] 1 AC 180, CIBC Mortgages plc v Pitt [1994] 1 AC 200 and Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44; [2002] 2 AC 773 and clarified that, in accordance with those policy objectives, a creditor is put on inquiry in any non-commercial hybrid transaction where there is more than a de minimis element of borrowing which serves to discharge the debts of one of the borrowers yet might not be to the financial advantage of the other.

When those circumstances are present, the transaction must be viewed as a surety transaction and the lender is placed on inquiry of the possibility of undue influence. The lender must then comply with the steps outlined in the Etridge (No 2) protocol.

Lady Simler did not consider that the surety component of the loan amounting to £39,500 was de minimis. The appeal was allowed.

Comment

Lady Simler held that the clarification of the test in her judgment did not radically depart from the position and objectives of O’Brien, Pitt and Etridge No 2. Nevertheless, the judgment provides welcome clarification of a low threshold for a lender to be put on inquiry when a wife offers surety for a loan to pay her husband’s debts to more than a de minimis extent, given the elevated risk of undue influence in those cases.

Whilst the judgment referred to the more typical risk arising from undue influence arising in husband and wife transactions, this authority has wider implications for lenders in other non-commercial hybrid transactions. The judgment has assisted in clarifying that comparable protection exists for individuals in full and partial surety transactions and that operatives are not required to apply the largely subjective assessment of ‘fact and degree’ in each non-commercial hybrid transaction.