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CIBC Mortgages v Pitt [1994] 1 AC 200 House of Lords

Mr Pitt wished to purchase some shares on the stock market. He pressured his wife into signing a mortgage of £150,000 securing the family home. The stated purpose of the loan was to purchase a holiday home and pay off the existing mortgage. The husband used the money to purchase shares and then used those shares as collateral to purchase further shares. For a time the shares did very well and he was a millionaire on paper. The wife saw no benefit from these shares as any income was always used to purchase more shares. In 1987 the stock market crashed. The bank sought to enforce the security under the mortgage which at the time exceeded the value of the home. The wife raised actual undue influence in defence.

Held:

Overruling BBCI v Aboody - it is not necessary for a claimant to demonstrate manifest disadvantage where a defence is based on actual undue influence. However, as the transaction on its face did not seem to the manifest disadvantage of the wife, because the stated purpose was to purchase a holiday home, the bank was not put on enquiry and therefore could not be fixed with constructive notice.

Back to lecture outline on Undue influence in Contract Law