A bright line reinstated: Supreme Court clarifies banks’ duties in hybrid mortgage cases

English property law periodically produces epoch-making decisions of the highest court. In years to come, Waller Edwards v One Savings Bank plc [2025] UKSC 22 may well become such a decision. It enjoys the respectable jurisprudential lineage of three famous House of Lords’ decisions: Barclays Bank v O’Brien [1994] 1 AC 180, CIBC Mortgages v Pitt [1994] 1 AC 200 and Royal Bank of Scotland v Etridge No 2 [2002] 2 AC 773, but it also applies established principles in a novel way.

Etridge, decided in 2002, was seminal. Lord Nicholls expounded a modern variant of constructive notice, balancing the rights of mortgage lenders against those (usually women) whose property is abused to support exploitative behaviour in domestic relationships.

In Etridge, the House distilled the test for a bank being "on inquiry" into two propositions. Lord Nicholls held that banks are "put on inquiry" in every case where the relationship between the surety and the debtor is non-commercial. Thus (a) a non-commercial relationship plus (b) a ‘surety’ transaction places a mortgage lender on inquiry.

Ms Waller Edwards ("W") succeeded at trial in the County Court in 2022 in establishing that her property had been heavily mortgaged as a consequence of her partner’s ("B") presumed undue influence. However, she failed to establish that the Bank was "on inquiry" of the risk of such influence under the Etridge criteria.

A bank placed "on inquiry" must comply with Etridge steps and recommend that a wife takes independent legal advice. If it does not, the undue influence taints the transaction.

W appealed on constructive notice to the High Court in 2023 and the Court of Appeal in 2024. Both dismissed her appeals. The courts held that although the Bank knew of the non-commercial relationship, it did not know she was a "surety" for B’s debts.

Whether someone is a "surety" may seem straightforward, but on the facts of Waller Edwards, it was not. The mortgage application appeared to be mostly for joint purposes, with about 10 per cent to discharge B’s personal credit debts. However, B was defrauding the Bank and pressurised W to agree. None of the money discharged the declared debts.

The courts adopted a ‘balance sheet’ approach, weighing 90% joint purposes against 10% B-centric. They concluded the Bank was not "on inquiry" as the joint element outweighed the surety element.
However, Etridge provides that knowledge a wife is "a" surety triggers the test. It does not specify how much of a surety she must be. Why wasn’t 10 per cent enough?

Bright line rule and the de minimis principle

Before the Supreme Court, W submitted that a "surety" in a hybrid mortgage includes a woman (a) in a non-commercial relationship, who (b) agrees to proffer her home interest to discharge her partner's non-trivial personal debts. Ergo, such facts place the bank "on inquiry".

The Supreme Court agreed. First, it identified the rationale in Etridge: a surety transaction creates a heightened risk of undue influence because the wife assumes liability for her husband’s debts with no financial benefit.

W argued the test in hybrid cases should be absolute, not one of ‘fact and degree’ — what Emmet & Farrand on Title referred to as a “bright line rule”.

The test serves two functions: guiding banks’ conduct and guiding courts in hindsight. The test must be workable for both. It is protective: if the bank engages the protocol, it is shielded from defences; if the wife receives independent advice, she is better protected.

W argued the ‘fact and degree’ test failed banks because: (a) it leads to inconsistency in underwriting; (b) banks must analyse every hybrid case on a spectrum of risk, which is impractical; (c) it opens banks to more litigation.

The SC rejected the ‘fact and degree’ test at [52]:
“…the approach adopted is a binary one. Either the creditor is on notice of the risk of undue influence, or it is not; and if the creditor is on notice, then the Etridge protocol must be followed… The level of risk is infinitely variable, and not for the lender to judge on some fact-specific basis.”

In the CA, Peter Jackson LJ asked whether W contended for 2 or 3 baskets of loans: (i) joint purposes, (ii) solely for H, (iii) joint with a non-trivial sole purpose for H. W argued basket (iii) is a subset of (ii). The SC agreed at [55]-[56]:
“There is a need for…simplicity… to assist banks… The bright line approach to non-commercial hybrid cases achieves just that… Discharge of the onus of inquiry is not difficult. It involves recommending independent legal advice… a modest burden for banks and other lenders.”

Heresy or no heresy?
The CA treated W’s argument as radical. But Etridge set a low threshold for being "on inquiry". The SC agreed at [58]: “This is not a radical departure… Rather, it accords with the principle… that favour certainty and afford a broad scope of protection… where a wife offers to stand surety for a loan used to pay off her husband’s debts to a more than de minimis extent.”
The SC welcomed W’s proposed test — only joint loans with de minimis husband-centric elements fall outside Etridge. At [60]: “…the de minimis principle is of such long standing… Courts have little difficulty in identifying what is and is not caught by the principle.”

Policy zeitgeist

Bank warnings that allowing the appeal would harm lending were rejected. W argued her test aligns with modern regulation and protections against economic abuse.

The FCA’s post-Etridge regime obliges responsible lending and identifies economic abuse as a key issue. W cited:
•    MCOB rules (requiring affordability checks for guarantors);
•    FCA guidance on vulnerable customers (2021);
•    The FCA’s 2024 letter on domestic financial abuse;
•    The Domestic Abuse Act 2021 and criminalisation of coercive control.

W also cited Dr Eleanor Rowan, Cardiff University, whose work linked joint mortgages and economic abuse, arguing a ‘fact and degree’ test would deter independent legal advice. The SC reflected these arguments.

Too onerous?

W submitted her bright line test is not onerous. The SC agreed at [61]-[62], noting that bright line rules are more practicable for high-volume lenders than the subjective analysis required under a ‘fact and degree’ test.

The Bank argued that sending Etridge protocol letters would stultify lending. But Etridge already dismissed that concern as a “modest burden”. The SC agreed.

Computer-generated Etridge letters are a simple counter-measure against undue influence.

The SC further noted that hybrid case extensions to Etridge protect banks as well. More protocol usage means fewer challenges to mortgages.

The SC accepted W’s submission that 10% is not de minimis. It also rejected the MR’s query about who ultimately benefited from the debt: what matters is legal liability, not benefit.

At [53]: “…It is not a question of who benefits… It is a question of whether the wife has, for no consideration, taken on a legal liability that is not hers… That is the only relevant question…”

W argued banks have other protections. One is counter-restitution (e.g. Dunbar Bank v Nadeem [1998]). Another is subrogation (e.g. Castle Phillips v Piddington [1994]). But the Bank in this case pleaded neither.

The SC considered whether many historic partial surety cases may now be challenged. That seems unlikely. Only time will tell.