National Westminster Bank v Morgan – Case Summary

National Westminster Bank Plc v Morgan

House of Lords

Citations: [1985] 2 WLR 588; [1985] AC 686.


The defendant bought a house on mortgage with her husband. The couple were unable to keep up with the mortgage payments, so the building society who granted the mortgage began possession proceedings. The husband asked the claimant bank to refinance the loan. They agreed, subject to a legal charge on the house in both of the couple’s names.

After the husband signed the charge, the claimant’s manager called the defendant to obtain her signature. Their discussions were tense, and she seemed concerned about the effect of the charge. Nevertheless, she ultimately signed the agreement. The mortgage fell into arrears again, and the claimant sought to enforce the charge.

The defendant resisted the possession proceedings on the grounds that her signature had been obtained by the manager using undue influence. At trial, the judge held that there was no undue influence because the transaction was not ‘manifestly disadvantageous’ to her and there was no evidence of overt pressure. Meanwhile, the defendant and the bank manager did not have a fiduciary relationship, so no presumption of influence arose as a matter of their relationship.

  1. Could the refinancing deal be set aside for undue influence?

The House of Lords upheld the findings of the trial judge. The transaction was not voidable for undue influence.

This Case is Authority For…

Undue influence is designed to protect parties to a transaction from being victimised by others. As such, undue influence will not arise merely from the parties having a relationship: the transaction itself must bear some element of ‘wrongfulness’.

The Lords in this case rejected the idea put forwards in Lloyds Bank Ltd v Bundy [1975] QB 326 that there is a separate principle of ‘inequality of bargaining power’ which allows contracts to be set aside where there is no undue influence or duress.


The House of Lords in this case spoke of the need for a ‘manifest disadvantage’ in the transaction before undue influence could arise. The House of Lords in Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44 have since clarified that it is not necessary to establish undue influence to show that the transaction was manifestly disadvantageous. Manifest disadvantage is good evidence of undue influence, however.