When Love Meets Liability: Supreme Court Clarifies Undue Influence in Joint Borrowing Cases
Key Takeaways:
- The bright line test replaces the grey area — Lenders are automatically “put on inquiry” if a non-commercial joint loan benefits one borrower more than a trivial amount.
- Etridge compliance is now essential — Failure to ensure independent legal advice can render the loan or mortgage unenforceable against the influenced borrower.
- Vigilance over relationships and risk — Love and loans don’t always mix. Lenders must review policies, reassess portfolios, and tread carefully in hybrid joint borrowings.
Supreme Court Clarifies Lenders’ Duties in Relationship-Linked Loans
In a landmark decision handed down on 4 June 2025, the UK Supreme Court in Waller-Edwards v One Savings Bank plc [2025] UKSC 22 has redrawn the boundaries for when lenders are “put on inquiry” in non-commercial hybrid loan transactions — cases where joint borrowers take out a loan that partly benefits only one of them.
This judgment has far-reaching implications for lenders, couples entering into joint borrowing, and solicitors tasked with ensuring that borrowers receive proper independent advice. It reinforces the protective framework established in Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 — better known as the Etridge Principles — and confirms that these principles apply more widely than previously understood.
When Is a Lender “Put on Inquiry”?
Traditionally, a lender is not put on inquiry in joint non-commercial loans — for example, when a couple borrows money together to buy or remortgage their shared home. However, lenders are put on inquiry in surety transactions, where one person guarantees or gives security for another’s debts.
The Etridge case established that when a lender is “put on inquiry,” it must take protective steps to ensure that the borrower’s consent is free and informed — usually by insisting on independent legal advice for the vulnerable borrower.
Until now, a grey area existed: what if the loan was partly for joint purposes and partly to pay off one borrower’s individual debts?
The Background: Love, Property, and Pressure
The case centred on Ms Waller-Edwards, who entered a relationship in 2011 with Mr Bishop, a property developer. He persuaded her to exchange her mortgage-free home and savings for a property he was developing — one already subject to a mortgage.
In 2013, they jointly remortgaged that property for £384,000. The lender was told the funds would repay the existing mortgage and help purchase another investment property. In reality, a significant portion — around £39,500 — was used to pay off Mr Bishop’s personal debts.
When their relationship ended, Ms Waller-Edwards was left with a heavily mortgaged home and no means to meet repayments. When possession proceedings began in 2021, she argued that Mr Bishop had exerted undue influence and that the lender should have followed the Etridge protocol to ensure she entered the transaction freely and knowingly.
The Court of Appeal’s Approach: “Fact and Degree”
The Court of Appeal ruled against her, applying a “fact and degree” approach. It held that this was joint borrowing for joint purposes, not a surety transaction — meaning the lender was not put on inquiry.
The Court reasoned that because both names were on the loan and mortgage, and some of the funds benefited them jointly, it would not be reasonable for the lender to assume undue influence had occurred.
Unsatisfied, Ms Waller-Edwards appealed to the Supreme Court, seeking clarity on how lenders should treat these hybrid transactions.
The Supreme Court’s Decision: The “Bright Line” Test Prevails
The Supreme Court unanimously allowed the appeal, establishing a clearer, stricter test for lenders.
The Court adopted the “bright line” test, rejecting the flexible “fact and degree” approach. Under this test:
If, on the face of the transaction, it appears that one party to a non-commercial joint loan stands surety — even partly — for the other’s debts or obligations beyond a de minimis (trivial) amount, the lender is automatically put on inquiry.
This means the lender must apply the Etridge safeguards, including ensuring the weaker party receives independent legal advice before proceeding.
In this case, Ms Waller-Edwards had incurred a legal liability to discharge Mr Bishop’s £39,500 personal debt without any corresponding benefit — clearly more than a de minimis amount. The lender should therefore have been on inquiry and taken steps to protect her.
What This Means for Lenders
The ruling significantly increases lenders’ obligations when handling joint loans between partners or family members. It confirms that the Etridge Principles apply in non-commercial hybrid transactions, not just in classic guarantor or surety scenarios.
Lenders must now:
- Conduct additional due diligence when part of a joint loan benefits only one borrower.
- Update internal policies and training to reflect the bright line test.
- Require independent legal advice for borrowers who may be acting under pressure or whose participation appears to disadvantage them.
- Review existing mortgage portfolios for potential exposure to unenforceable loans where undue influence may have occurred.
Failing to follow Etridge now carries serious consequences: any loan or mortgage obtained through undue influence could be set aside or deemed unenforceable against the vulnerable borrower.
The Unanswered Question: What Counts as “De Minimis”?
The Supreme Court deliberately left open the meaning of de minimis, leaving lenders uncertain about where the threshold lies. Is £1,000 enough? £5,000? £10,000?
Until future case law clarifies this, prudent lenders should assume even small amounts may trigger an inquiry duty. To avoid risk, many are expected to apply Etridge protocols to all hybrid joint borrowings, regardless of amount.
Implications for Litigation and Possession Claims
Lenders pursuing possession proceedings in such cases must be able to demonstrate that they considered the risk of undue influence and followed the Etridge Principles.
Under the Pre-Action Protocol for Possession Claims, lenders should include in their documentation:
- A review of whether they were “put on inquiry.”
- Evidence that independent advice was given and documented.
- Confirmation that the borrower understood the transaction’s purpose and implications.
Failure to do so could delay proceedings or result in the court setting aside the mortgage altogether. Lenders may need to explore alternative dispute resolution or settlement rather than risk a costly court defeat.
The Legal and Human Message
Beyond its technical implications, Waller-Edwards is a reminder that personal relationships can blur financial judgment. When love, trust, and property intertwine, the potential for undue influence rises sharply.
For lenders, this means heightened vigilance. For solicitors, it underscores the importance of ensuring independent legal advice is genuinely informed and separate from the influencer’s reach.
As the Supreme Court put it, the risk of undue influence must be viewed from the lender’s perspective, not through hindsight. If the transaction looks unbalanced — one borrower gains, the other assumes liability — the lender must act.
Comment
This ruling closes a long-standing gap in the law. The Etridge Principles now apply to all non-commercial hybrid loan transactions, ensuring vulnerable borrowers receive protection even in seemingly joint arrangements.
For lenders, the decision means more time, cost, and caution — but also greater certainty. For borrowers, particularly those in personal relationships, it means added legal safeguards against manipulation or coercion.
Love may still complicate money, but the law has drawn a clearer line: when affection and finance mix, due diligence must follow.
Related Reading:
2025 Standard Crime Contract: Welcome Packs, Key Changes, and Resources for Providers
