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Lloyds Bank v Bundy [1975] QB 326 Court of Appeal

A father secured the debts of his son's business on his farm which had been in the family for generations. The father and son had both banked at the branch for many years and relied on advice given. The son's company also banked at the same branch and the bank manager was aware of the dire financial position of the company. The bank had allowed the son to run up an overdraft exceeding security given thus far and was fearful that the company would go under leaving them with an unsecured debt. The bank manager and the son called at the farm with the forms already filled in. The father was told of the amount of the charge which was £11,000 and exceeded the value of the farm and he was also required to give a guarantee. The father agreed to sign in order to help his son. He was not given the opportunity to think it over or to obtain legal advice.

Held:

There was a relationship of trust and confidence between the father and the bank manager giving rise to a presumption of undue influence under class 2 b. The charge and guarantee were therefore set aside.

NB the normal relationship between a banker and customer is not one of trust and confidence but a business relationship whereby the bank is looking out for its own interest (See Natwest v Morgan) however, the bank manager in giving evidence admitted that the father relied implicitly and solely on the advice given by him and the father stated that he had trusted the bank and had a long relationship with the bank and generally acted on advice given.

Back to lecture outline on Undue influence in Contract Law