The House of Lords recently handed down its much anticipated judgment in Royal Bank of Scotland v Etridge (No. 2) [2001] UKHL44, clarifying the English law regarding lending bank’s duty towards a wife putting up surety for her husband. The decision extends what was previously required by a bank in this type of transaction, and provides a number of practical suggestions to banks on how to avoid a claim of undue influence. In light of the Yerkey v Jones, Amadio and Garcia line of authority in Australia, the decision will be of great interest to Australian lenders.
The English Court of Appeal was asked to consider whose responsibility it was to independently advise a wife providing security for her husband’s business debts. Essentially, the Court found that, provided the wife was represented by a solicitor in her dealings, the bank had no further obligations to her and was entitled to assume that the wife had been properly advised and could ordinarily resist a claim of undue
