18 Mar 2026
By Rosemary MaCann, Trainee Solicitor, Real Estate, Gilson Gray
The Supreme Court’s landmark 2025 ruling in the Waller-Edwards v One Savings Bank Plc case has important and lasting impacts for lenders. The judgement clarified when a lender is put on inquiry in joint borrowing scenarios involving non-commercial relations, where part of the lending only benefits one of the borrowers.
The decision must be understood against the background of key authorities in this area namely Barclays Bank plc v. O’Brien [1994] (“O’Brien”), C.I.B.C. Mortgages plc v. Pitt [1994] 1 AC 200 (“Pitt”) and Royal Bank of Scotland v. Etridge (No 2) [2002] (“Etridge”).
Pre-Waller-Edwards position: O’Brien, Pitt, Etridge.
Before Waller-Edwards, the established position was that where two borrowers entered into a joint loan for joint non-commercial purposes secured over jointly owned property, the lender would not usually be put on inquiry as to undue influence. By contrast, in surety cases where one party guarantees or provides security for the debts of the other, the lender would ordinarily be put on inquiry.
O’Brien concerned a husband and wife who granted a second mortgage over their matrimonial home to secure overdraft facilities for a company in which only the husband had an interest. The wife derived no apparent financial benefit. The House of Lords considered that although the bank had no actual knowledge of undue influence, the bank should have appreciated the substantial risk that the wife may have been induced to enter into the transaction by her husband’s undue influence or misrepresentation – this is otherwise known as constructive notice.
Importantly, the court also emphasised that this principle was not confined to husband and wife relationships. Other emotional or personal relationships, such as cohabitees, could equally give rise to the same risk. O’Brien, therefore, significantly extended the principle of constructive notice at the time and caused some uncertainty for lenders.
Pitt clarified that where undue influence may have occurred between borrowers but the transaction was genuinely for their joint benefit, the lender would not be affected provided it had no actual notice of wrongdoing.
The confusion created by O’Brien and Pitt was addressed in Etridge. The House of Lords explained that the concept of a lender being put on inquiry was something of a misnomer. Lenders were not required to investigate or act as detectives, but they were put on notice of a risk and therefore obliged to take specified protective steps. The term inquiry nevertheless remained the accepted shorthand.
Waller-Edwards
Waller-Edwards concerned a couple who entered into a joint mortgage. While the loan was described as joint borrowing, part of the advance was used for the sole benefit of one borrower. The relationship was non-commercial and there was no evidence that the lender had actual knowledge of any undue influence.
The Supreme Court held that where joint borrowers are in a non-commercial relationship and any part of the loan benefits only one borrower, the lender is put on inquiry of undue influence. This applies even where the non-joint element of the loan is relatively small.
The Supreme Court confirmed that this situation should be treated in the same way as a surety transaction for the purposes of the Etridge principles. As a result, the lender is required to take reasonable steps to protect the potentially vulnerable borrower, including ensuring that they receive proper independent legal advice and understand the nature and risks of the transaction.
The Court rejected the argument that lenders are only put on inquiry where the loan is wholly for the benefit of one borrower. Instead, it established a clear rule that mixed purpose or hybrid loans in personal relationships trigger the lender’s duty.
The decision provided clarity by establishing a bright line test for lenders, and removed any remaining doubt as to the application of the Etridge safeguards in non-commercial joint borrowing cases.
Impact going forward
The practical consequences for lenders are significant. Lenders must always consider Etridge principles when lending to couples or individuals in a personal relationship, where there is any element of the loan benefiting only one borrower. Where the sole benefit of one borrower is more than ‘de minimis’, Etridge safeguarding requirements will be triggered. However, the Court did not precisely define or give guidance regarding the threshold at which a portion of the loan being for the sole benefit of one borrower triggers the Etridge principle.
Conclusion
Waller-Edwards provided welcome clarity to lenders on the approach to hybrid non-commercial loan transactions. The obligation to assess borrowers’ circumstances will therefore increase. Lenders will need to update internal processes and undertake additional due diligence, failure to do so may render the loan or security unenforceable against the vulnerable party, or at the very least delay possession proceedings against them.
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