Following this case, some questions remain open. For example, just how far
must a bank go in ensuring that independent advice is received, in order to
discharge its responsibilities? Some indication comes from the cases which
follow O’Brien, and these cases will help to clarify both the legal position and
the duty of the banks. However, to some extent at least, the recent cases also
cause further confusion, certainly regarding the precedent set by O’Brien, as
although the cases immediately following it appeared to confirm the decision,
the more recent ones tend to move away from support for the borrower.
- The case of TSB v Camfield (1994) followed the decision of the House
of Lords in O’Brien that the effect of the misrepresentation in this
particular case was to set aside the whole transaction. Similarly, in the
case of TSB v Camfield the whole loan was set aside. Various reasons
could be suggested for this. Firstly, there is the theoretical problem of
contract law not having a ‘halfway measure’ as in tort. The idea of
contributory negligence in tort does not exist in contract law, and a party
is wholly liable or not liable. To decide otherwise is to create a whole
new concept of contributory fault (this has been suggested by the Law
Commission). Secondly, if Mrs O’Brien had been liable for part of the
debt, she would still have had to sell the house, and in part, at least, the
aim of the court was to prevent that. - Some cases have stressed that banks will probably only be obliged to take
reasonable steps to ensure that independent advice is received (see Banco
Exterior v Mann (1994) where the husband and wife used the same
solicitor, and Midland Bank v Serter (1994) where the wife used the bank’s
solicitor). However the case of Royal Bank of Scotland v Etridge has now
provided the House of Lords an opportunity for review of the area in a set
of eight appeals over similar issues, each with their own facts.
160 Contract law
rights of the weaker party (here Mrs O’Brien) unless adequate steps
have been taken to ensure that she received independent advice. In such
circumstances the banks have a duty to ensure that there is no
misrepresentation or undue influence, which they did not carry out on
this occasion, so the House of Lords set aside the whole of the loan.Why do you think that the House of Lords allowed the whole of the loan to
be set aside, changing the Court of Appeal decision?Royal Bank of Scotland v Etridge (2001)
The wife owned property in her own name, her husband handling the
transfer of ownership and dealing with the bank. Amongst the documents