Undue influence

The guidance of the Law Society’s Conveyancing and Land Law Committee following the House of Lords’ decision in Royal Bank of Scotland v Etridge [2001] 3 WLR 1021 (20/ LL p 104) is aimed at conveyancers rather than litigators. However, it is important for litigators, particularly family solicitors, to be aware of the pitfalls to be avoided when advising a wife agreeing to a charge on her interest in the matrimonial home and also whether or not she could avoid the consequences of such a charge on the grounds of the undue influence of her husband. The guidance emphasises that the first decision for the solicitor is whether he should be acting at all in advising a wife before she agrees to a charge. The risk of conflict is extreme when attempting to reconcile Lord Nicholls’ comments concerning the provision of full information, with a client who, in many cases, may not wish for the documentation to be fully explained. When the wife realises that the home will be at risk to secure her husband’s borrowing, there may be some reluctance to sign, although where the wife has an interest in supporting her husbands business she may, despite the risks, have a good reason to sign the charge. It must be established that it is the wife and not the husband who is the client. The solicitor must obtain full financial information concerning the husband’s account. This will normally include information about the purpose of the new facility; the indebtedness; the amount of the overdraft facility; and the amount and terms of any new borrowing together with a copy of any application form. It is important that the wife should understand she could lose her home if the husband’s business does not prosper and could even possibly be made bankrupt.