Natwest Bank v Morgan [1985] AC 686 House of Lords

The family home was subject to a mortgage for the purchase price (with Abbey National) and a second charge securing a loan of the husband's business. The couple were unable to meet the payments and got into arrears. Abbey obtained a possession order. Natwest offered a rescue package to help the couple save the home whereby they would pay off the existing mortgages and give a bridging loan which was to last 5 weeks for the purposes of aiding the husbands business.

The manager called at the couples' home in order to explain the effect of the charge and to obtain the signatures of both parties. He was at the house for 20 minutes and spent 5 minutes alone with the wife. The husband was reluctant to leave them alone and was said to be hanging around close by at all times. The manager told the wife the charge was to pay off the existing debt and to provide a bridging loan for a period of 5 weeks which was what the bank had intended to provide, however, the actual document did not limited the amount or time. Mrs Morgan had told the manager that she did not want to be exposed to any extra risks of her husband’s business as she had no faith in his ability as a business man. The manager assured her that the risks were limited in the way he had described. At no time did the manager advise her to get independent legal advice. She signed the charge. The bank later called in the charge. In her defence the wife stated that the bank manager had exercised undue influence over her in procuring her signature.

Held:

The normal relationship between a customer and banker was not one so as to give rise to a relationship of trust and confidence. Lloyds Bank v Bundy was confined to its facts but not expressly overruled. The wife had not established a relationship of trust and confidence and therefore no presumption of undue influence could arise.

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