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Bank of Scotland v Bennett 1998 Court of Appeal

The bank held a guarantee and charge on the Bennett family home securing the debts of a business in which the husband was the director and 47% shareholder. The wife also held shares (11%). The wife was the sole beneficial owner of the matrimonial home. The wife was against her husband's involvement in the business. He had left a well paid reliable job to start it. She had no faith in the business and did not want to sign the charge but her husband pressured her and threatened to end the relationship if she did not sign. The trial judge held that the charge was procured by actual undue influence of which the bank had constructive notice. The bank appealed.


The charge was procured by actual undue influence although the trial judge erred in finding constructive notice. The trial judge had assumed the bank had the knowledge that the wife was the sole beneficial owner of the property and only held an 11% sharing holding when there was in fact no evidence that they were aware of these facts.

Lord Justice Chadwick:

"The correct approach, in cases of this nature, is to look at the transaction through the eyes of the lender and to ask whether, in the light of all the facts which the lender does know, it is put on inquiry that there is a real risk that the wife’s apparent consent to the transaction may have been obtained by some improper conduct (pressure, abuse of trust and confidence or misrepresentation) on the part of the husband."

Back to lecture outline on Undue influence in Contract Law