is not one of confidence, and that the presumption of undue influence does not apply. In National Westminster Bank plc v Morgan, the respondent’s husband’s business was in deep financial trouble and he was unable to keep up payments due under the mortgage on the family home. The bank agreed to refinance the debt in order to avoid threatened foreclosure by the original mortgagees. The bank took a legal charge on the property. The respondent only agreed to this after having been assured by the bank that the arrangement covered no more than the amount of the original loan. In fact, this assurance was inaccurate, as the mortgage extended to cover all of the husband’s liabilities to the bank. When the husband died, the question arose whether the mortgage could be set aside on the ground of undue influence. The House of Lords held that the bank had not crossed the line which distinguished a normal business relationship from one in which the bank was able to exert influence over their customer. In particular, the fact that the arrangement was not to the manifest disadvantage of the respondent was considered to be a key factor in the decision: National Westminster Bank plc v Morgan [1985] 1 AC 686, p 702

doi:10.4324/9781843141518-173

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is not one of confidence, and that the presumption of undue influence does not apply. In National Westminster Bank plc v Morgan, the respondent’s husband’s business was in deep financial trouble and he was unable to keep up payments due under the mortgage on the family home. The bank agreed to refinance the debt in order to avoid threatened foreclosure by the original mortgagees. The bank took a legal charge on the property. The respondent only agreed to this after having been assured by the bank that the arrangement covered no more than the amount of the original loan. In fact, this assurance was inaccurate, as the mortgage extended to cover all of the husband’s liabilities to the bank. When the husband died, the question arose whether the mortgage could be set aside on the ground of undue influence. The House of Lords held that the bank had not crossed the line which distinguished a normal business relationship from one in which the bank was able to exert influence over their customer. In particular, the fact that the arrangement was not to the manifest disadvantage of the respondent was considered to be a key factor in the decision: National Westminster Bank plc v Morgan [1985] 1 AC 686, p 702

ABSTRACT

National Westminster Bank plc v Morgan [1985] 1 AC 686, p 702 Lord Scarman: As to the facts, I am far from being persuaded that the trial judge fell into error when he concluded that the relationship between the bank and Mrs Morgan never went beyond the normal business relationship of banker and customer. Both Lords Justices saw the relationship between the bank and Mrs Morgan as one of confidence in which she was relying on the bank manager’s advice. Each recognised the personal honesty, integrity, and good faith of Mr Barrow. Each took the view that the confidentiality of the relationship was such as to impose upon him a ‘fiduciary duty of care’. It was his duty, in their view, to ensure that Mrs Morgan had the opportunity to make an independent and informed decision: but he failed to give her any such opportunity. They, therefore, concluded that it was a case for the presumption of undue influence.