Lloyd's Maritime and Commercial Law Quarterly
The uncertain boundaries of undue influence
Andrew Phang * and Hans Tjio †
This article focuses on the recent House of Lords decision of
Royal Bank of Scotland v. Etridge (No. 2), which refines and elaborates upon the principles laid down in its earlier decisions in
C.I.B.C. Mortgages Plc v. Pitt1
and
Barclays Bank Plc v. O’Brien.2
Etridge contains important pronouncements on the nature of undue influence and also elaborates upon the steps which banks ought to take in order to avoid being fixed with constructive notice of undue influence or some other vitiating factor. The article also considers briefly the viability of a broader doctrine of unconscionability which is at least hinted at in the case.
A. INTRODUCTION
Long awaited, not least because of its potentially profound impact on the commercial (in particular, banking) community, the recent House of Lords’ decision in Royal Bank of Scotland
v. Etridge (No. 2)
3
is both long and complex. As we shall see, it is not always easy to ascertain what the judges concerned intended. The present article is therefore only an incipient as well as tentative attempt at unravelling the various themes and propositions. We will focus on general propositions rather than the merits of the actual decisions, which total eight in number in this consolidated appeal.4
Our analysis is divided into three main parts: the first dealing with the House’s pronouncements on the elements of undue influence itself; the second focusing on the steps which banks ought to take in order to avoid being fixed with constructive notice of undue influence or some other vitiating factor (such as misrepresentation); with the third part briefly considering the viability of the broader doctrine of unconscionability, which doctrine is alluded to throughout (especially in the speeches of Lord Nicholls of Birkenhead and Lord Hobhouse of Woodborough).
* Professor of Law, Singapore Management University.
† Associate Professor of Law, National University of Singapore. The authors are grateful to Richard Nolan of the University of Cambridge for his perceptive comments and suggestions. However, all errors are ours alone.
1. [1994] 1 A.C. 200.
2. [1994] 1 A.C 180.
3. [2001] U.K.H.L 44; [2001] 3 W.L.R. 1021. References hereafter will be to paragraphs in the speeches.
4. They are: Royal Bank of Scotland Plc
v. Etridge (No. 2); Barclays Bank Plc
v. Harris; Midland Bank Plc
v. Wallace; National Westminster Bank Plc
v. Gill; UCB Home Loans Corp. Ltd
v. Moore; Barclays Bank Plc
v. Coleman; Bank of Scotland
v. Bennett,
and Kenyon-Brown
v. Desmond Banks & Co.
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