Lloyds Bank v Bundy [1975] QB 326

• Defendant mortgaged his farm to Plaintiff to raise money for his son’ business and on failing his mortgage payments, the bank began foreclosure proceedings.

• CA found undue influence since there was a long-standing relationship of confidentiality and trust between Defendant and Plaintiff (or rather the bank manager) and Plaintiff knew that Defendant could not afford to take out the mortgage and make the repayments. 

Lord Denning

• Inequality of bargaining power is the rationale for unconscionable bargains, duress, and undue influence.

• Gathering all these threads together, the law “gives relief to one who, without independent advice, enters into a contract upon terms which are very unfair or transfers property for a consideration which is grossly inadequate, when his bargaining power is grievously impaired by reason of his own needs or desires, or by his own ignorance or infirmity, coupled with undue influences or pressures brought to bear on him by or for the benefit of the other.”

• In this case, there was a fiduciary duty between Defendant and Plaintiff, the consideration moving to the bank was grossly inadequate, the bank failed to advise Defendant to get independent advice, Defendant’s care for his son weakened his bargaining position and therefore the agreement was to be set aside.

• However in case this principle is wrong, the case falls within class 2B of undue influence. 

NB: The majority of CA said that the case was based on 2B of undue influence. Eric Sachs LJ held that there is no exhaustive list of relationships to which undue influence is confined: it depends upon the circumstances of the case.