Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44 (11 October 2001) is a leading case concerned with English land law and English contract law and the circumstances under which actual and presumed undue influence can be argued to vitiate consent to a contract.

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 (either suffices), be used solely for the benefit of one person.

A bank (or its solicitor) is "put on inquiry" (fixed with constructive knowledge) 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 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.

But it can indicate minimum requirements which, if met, will reduce the risk of error, misunderstanding or mishap to an acceptable level.

If these requirements are met the risk that a wife has been misled by her husband as to the facts of a proposed transaction should be eliminated or virtually so.

[2] The idea of manifest disadvantage for presumed undue influence was rejected but replaced (like the milder tone in Allcard v Skinner) with a transaction that ‘calls for explanation’,[3] or one which ‘is not readily explicable by the relationship between the parties.’[4] 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.’[5] That is because it is nothing out of the ordinary.

There are three cases - Harris, Wallace and Moore - which have not got beyond the interlocutory stage, the wives' pleadings having been struck out as disclosing no defence to the banks' claims for possession.

Finally there is a single case - Kenyon-Brown - in which the wife was suing her solicitor for damages for breach of duty.

The wife was claiming damages against a firm of solicitors on the basis that, under the undue influence of her husband, she had entered into an adverse suretyship transaction for the benefit of her husband, which also involved charging a cottage which they jointly owned, and that the solicitors had failed to give her appropriate advice to prevent this happening.

The wife was unable to give specific or reliable evidence in support of her case against the solicitors but relied upon the fact that the transaction was manifestly disadvantageous to her and upon the duty of the solicitor, as stated by the Court of Appeal in Etridge No2 [1998] 4 All ER 705 at para 19, to satisfy himself that she was free from improper influence.

In Kenyon-Brown, the majority of the Court of Appeal, in disagreement with the trial judge, considered that this led inexorably to the conclusion that the solicitor must have been negligent.

If she had been able to give reliable evidence and be clearer about what she said had happened and had been in a position to challenge the solicitor's attendance note, she might have succeeded.

The bank claimed the possession of a flat in Priory Road, Hampstead, which was jointly owned by Mr and Mrs Wallace.

The outcome was an offer from the bank of new finance for the second company secured by unlimited guarantees from both the husband and wife and a legal charge on their house.

The bank wrote to Wragge & Co, knowing them only as the husband's solicitors, asking them, among other things, "to explain the nature of the document to both parties and confirm to us that independent legal advice has been given".

The loan transaction was not wholly straightforward in that, whilst it included the refinancing of indebtedness which was already secured on the matrimonial home in Pangbourne, it was as to 3/5ths composed of a substantial additional advance to the company run by the husband which was already in financial trouble (and was to fail within two years).

The potential saving fact for the lender was that the husband had started his deception by persuading his wife to sign the mortgage application form in blank.

The husband, who was the primary applicant, filled this in with the name of the solicitors who had been instructed by Mr Zerfahs without informing the wife or obtaining her authority: "Quiney & Harris (Nigel Whittaker)" and their address in Wootton Bassett near Swindon.

Having received instructions from Mr Zerfahs, the solicitors, without obtaining confirmation from the wife, referred to her and her husband in correspondence as "our clients".

But, for present purposes, the lender's case has to depend wholly upon an estoppel arising from her having signed the application form in blank and, it is argued, an inference that she had been separately advised as an independent client by the solicitor.

The transaction was presented in a fashion which may have led the wife and the solicitors mistakenly to believe that only an advance of £36,000 was involved, not a probable £100,000.

This case was rejected by the Judge and, in any event, there was evidence that the extended scope of the transaction is something which she would in fact have supported and was not causative.

It is because to set aside the judgments entered against her below would be contrary to the grounds upon which her case was conducted at the trial and in the Court of Appeal.

This factually involved a relationship of complete trust and confidence between the wife and her husband in relation to financial matters.

I agree with Lord Scott that it is a case where, having drawn the appropriate inferences, actual undue influence was in fact established.

The relevant point which should have been considered was therefore whether the bank took steps of the kind referred to by Lord Nicholls (para 79) (or in the National Westminster document) in order to protect itself from being affected by any such undue influence.

Her account (which the judge accepted) gives a pertinent reminder of the gap between theory and reality and illustrates the type of charade which, as Sir Peter Millett has observed (sup), lenders well know may occur and should not be tolerated or sanctioned by equity.

As between the wife and the bank, the judgments in the courts below were primarily concerned with aspects of the problem of presumed undue influence which do not now arise and with the question of the adequacy of a certificate signed by a legal executive as opposed to a solicitor which must depend on the facts of each case.

It is accordingly unnecessary to say anything about the undue influence issues.Lord Scott gave a judgment dealing extensively with the particular facts of each claim.