CIBC Mortgages plc v Pitt
A lender is not put on inquiry where the loan is made to husband and wife jointly for their joint benefit, and actual undue influence does not require manifest disadvantage.
Facts
Mr Pitt wanted to borrow money on the security of the family home, which he and his wife owned jointly, to buy shares on the stock market. He pressured his wife into agreeing. They applied jointly to CIBC Mortgages for a loan, which was stated to be for paying off their existing mortgage and buying a holiday home. Mrs Pitt signed the documents without reading them and received no independent advice. Mr Pitt used the money to buy shares, which lost most of their value in the 1987 stock market crash. When he could not keep up the repayments, the lender sought possession.
Legal principle
The House of Lords held that the charge was valid against the lender. Mrs Pitt had established actual undue influence by her husband, and the House held that a claimant who proves actual undue influence does not have to show that the transaction was manifestly disadvantageous. However, the lender was not affected by the undue influence. Unlike in O'Brien, the loan was made to the husband and wife jointly, apparently for their joint purposes, and there was nothing to put the lender on inquiry that the wife's consent had been improperly obtained.
Related cases on duress and undue influence
- Allcard v Skinner (1887) 36 Ch D 145
- Atlas Express Ltd v Kafco (Importers and Distributors) Ltd [1989] QB 833
- Barclays Bank plc v O'Brien [1994] 1 AC 180
- Barton v Armstrong [1976] AC 104
- Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144
- CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714
- Lloyds Bank Ltd v Bundy [1975] QB 326
- National Westminster Bank plc v Morgan [1985] AC 686
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