Banking cases
These are situations where there is not normally a special or fiduciary
relationship, but there may be in particular circumstances.
- Has the client ‘crossed the line’ into an area of confidentiality? – If so,
undue influence would be presumed – Lloyds Bank v Bundy. - Has the weaker party suffered manifest disadvantage? National
Westminster v Morgan. - Was there a relationship of trust in the particular circumstances of the
case? – BCCI v Aboody. - In cases of proved undue influence (i.e. undue influence which arises on
this particular occasion) manifest disadvantage need not be shown –
CIBC v Pitt. - For an appraisal of the current situation, see Barclays v O’Brien
concerning a claim of undue influence. The court found that (a) there
was a misrepresentation between husband and wife, and (b) the banks in
these cases should be ‘put on enquiry’ (alerted, or informed). The whole
loan was set aside. - Regarding the extent of the banks’ responsibility, see Banco Exterior v
Mann, Midland Bank v Massey, TSB v Camfield, Royal Bank of Scotland
v Etridge, Bank of Scotland v Bennett.
Questions
1 Jake is a lecturer in economics. Kevin is one of Jake’s students who has frequently sought
his advice over finance. Jake advises Kevin to invest his student loan and savings, amounting
to £3000, in a local company, Leeways Ltd, in which Jake is a director. During the next year
Leeways Ltd has operating difficulties, and the value of its shares falls dramatically, so that
Kevin’s investment is now worth £500. Kevin was planning to use the money to start a
business of his own, and is now unable to do this. He claims that he was greatly influenced
by the advice given by Jake, and feels that Jake should have known of the difficulties of
Leeways Ltd, which have caused him to lose a lot of his investment.
Advise Kevin of his remedies, if any, in the law of contract.
2 ‘The grounds upon which economic duress may be claimed are vague, the doctrine itself
suffering from a lack of definition.’ How far do you agree with this statement?
3 Critically examine the recent line of ‘banking cases’ which have been the subject of
claims of undue influence.
4 True agreement cannot really be said to exist if unfair pressure is placed upon one of the
parties. How do the doctrines of duress and undue influence deal with such situations?
164 Contract law