Extra steps to ensure borrowers not subject to coercive control
The Supreme Court has found in favour of a borrower who says she was coerced into a joint mortgage by her ex-partner, ruling against One Savings Bank in a judgment handed down on 4 June 2025.
There is an agreed process - the Etridge Protocol - that lenders must follow, but the ruling in Waller-Edwards (Appellant) v One Savings Bank Plc (Respondent) widens the circumstances in which this process will apply.
Background
The Appellant entered into a relationship when she was the sole owner of a mortgage-free home with substantial savings. She was however emotionally vulnerable and was persuaded by her now ex-partner to “exchange her home and savings for a property he was building, which was already subject to an existing charge”. This property was then re-mortgaged, the bank understanding this money would purchase another property for a buy-to-let and to pay off existing debt. In actual fact, and not known to the bank, the loan was used to make a divorce payment and pay off the first charge on the property. When the relationship ended, the Appellant remained in the now heavily mortgaged house, which fell into arrears and possession proceedings commenced.
Decision
The question to be decided was whether the Appellant was a joint borrower, or a surety transaction where she was more a guarantor. The Supreme Court found that while it was joint borrowing, “where, on the face of the transaction, there is a more than de minimis (i.e. trivial) element of borrowing which serves to discharge the debts of one of the borrowers and so might not be to the financial advantage of the other. The transaction must be viewed from the bank’s perspective. Such a transaction, if viewed in this way, should be regarded as a “surety” transaction and the creditor placed on inquiry of the possibility of undue influence. The steps set out in the “Etridge protocol” must then be taken”.
In this case, the appellant “took on a legal liability for the loan to discharge Mr Bishop’s debt of £39,500. She received nothing in return. The amount involved was not de minimis or trivial” therefore the Etridge Protocol should apply. The lender should have advised her directly to obtain independent legal advice and to confirm that the nature of the transaction and any practical implications had been explained.
Posted on 06/05/2025 by Ortolan
