Lloyds Bank Ltd v Bundy
Court of Appeal
Citations: [1975] QB 326; [1974] 3 WLR 501; [1974] 3 All ER 757; [1974] 2 Lloyd’s Rep 366.
Facts
The defendant was the father of a man who borrowed money from the claimant bank for his company. The defendant guaranteed the company’s overdraft on behalf of his son and later provided further guarantees secured by charges when the son was unable to pay the company’s debts.
Issue(s)
- Did a presumption of undue influence arise between the defendant and the claimant?
- If so, could the claimant rebut the presumption?
Decision
The Court of Appeal held in favour of the defendant. The parties had a relationship of confidence which in the circumstances amounted to a fiduciary duty. The transaction involved a conflict of interests which risked the defendant being left destitute in his old age. The charge was therefore set aside for undue influence.
This Case is Authority For…
The fact that the innocent party is relying on another for guidance or advice and reposes confidence in that advice, if the other is aware of this, can give rise to a presumption of influence.
Other
Lord Denning stated that English law grants relief where a person, without independent legal advice and from a position of severely unequal bargaining power, enters into a very unfair contract involving grossly inadequate consideration. This approach was rejected in National Westminster Bank v Morgan [1985] AC 686.
