Undue Influence

National Westminster Bank plc v Leggatt and another (TLR 16 November CA)

In 1972 Mr and Mrs Leggatt granted an unlimited second charge to the bank to secure all their liabilities. When in 1974 Mr Leggatt formed a business partnership with a Mr Jarvis, Mrs Leggatt signed an unlimited guarantee to the bank for all of the partnership liabilities to the bank. In 1990 the partnership exceeded its overdraft facilities and the bank wanted further security and after advice from a solicitor at a meeting at which Mr Leggatt was present throughout, Mrs Leggatt executed a charge form. When a wife stood surety or, as in this case provided security for her husband’s debts, the creditor would be put on enquiry if the transaction was not on its face to the financial advantage of the wife, with the consequence that unless the creditor took reasonable steps to satisfy himself that the wife’s agreement to enter into the transaction had been properly obtained he would have constructive notice of the wife’s rights. In the present case the charge was not on its face disadvantageous to Mrs Leggatt. On the contrary, given the enforceability of the 1972 charge and the fact, as found by the judge, that unless the 1990 charge had been signed the partnership business would collapse, it was to her financial advantage to sign it. Accordingly the bank was not fixed with constructive notice of a presumed undue influence or of a manifest disadvantage to the wife and the bank was entitled to possession under the charge on the property.