In Waller-Edwards v One Savings Bank Plc [2025] UKSC 22, the Supreme Court held that whenever a joint non-commercial loan includes a more than a “non-trivial” element for one borrower’s sole benefit, a lender is put on inquiry for undue influence and must ensure the other party receives independent legal advice. This decision will increase the burden on retail banks to scrutinise such transactions at the onboarding stage.

A couple jointly applied to borrow funds, which were applied in part to the personal debts of one of them. Ms Waller-Edwards was persuaded by her partner (Mr Bishop) to invest her savings in a property which he was developing. In 2013, the couple jointly borrowed £440,000 from One Savings Bank Plc (the “Bank”). The Bank understood that the loan was to pay off an existing mortgage debt and to purchase another home for the couple. The Bank required that Mr Bishop pay off his existing personal debts (amounting to £39,500), and part of the loan was used to discharge these liabilities. Ms Waller-Edwards was unable to service the repayments and in due course the Bank commenced possession proceedings. Ms Waller-Edwards claimed that the amounts used to pay her partner’s personal debts should have put the Bank on inquiry as to potential undue influence.

Under the “Etridge Protocol” a lender must ensure that a person who may be subject to undue influence understands the transaction. If a lender is put on inquiry that one party’s agreement to a transaction may have been obtained by undue influence, it must follow the steps laid down in Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44, to ensure that the potentially vulnerable party understands the transaction and receives independent legal advice (the so-called “Etridge Protocol”). A bank is automatically put on inquiry where a spouse becomes surety for (i.e., guarantees) the other spouse’s debts. The Court of Appeal and the courts of first instance held that this case should not be treated the same as “surety” cases in relation to which the Etridge Protocol automatically applies because, looking at the particular facts from the bank’s perspective, the loan had been made for the couple’s joint purpose rather than for the benefit of one spouse with debts.

The Supreme Court unanimously held that a bank is put on inquiry if it is aware that more than a de minimis or “non-trivial” element of the joint loan is for the purposes of one spouse only. If the bank is on inquiry, it must follow the Etridge Protocol. In the present case, a surety component of £39,500 (approximately 9% of the total loan amount) was more than de minimis [60] and therefore engaged the Etridge Protocol. The court said that “workable simplicity” was needed to assist banks to put in place procedures which could be applied in a routine and straightforward manner and did not require the exercise of judgment by bank officials. The Court rejected arguments that this test would be onerous for the lender given that these protocol steps are already taken in relation to “surety” cases. The fact that banks would have to apply these steps in relation to a wider group of loans (i.e. joint applications) was not relevant to the legal test to be applied.

This judgment will require extensions of existing policies and procedures in relation to the arrangement of loans in non-commercial contexts. The Etridge Protocol will now apply more often and independent legal advice for customers will be required - potentially increasing the need for legal documentation in joint borrowing and surety cases and lengthening transaction timelines.

The judgment is available here.

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