“Actual undue influence does not require manifest disadvantage or put banks on notice.”
The House of Lords held that while Mrs Pitt had been subject to actual undue influence, the bank was not on constructive notice and the charge was enforceable.
Mr Pitt pressured his wife to agree to a second mortgage on their home, ostensibly for purchasing a holiday home but actually to speculate on the stock market. The transaction appeared to be for joint benefit.
Whether manifest disadvantage was required for actual undue influence and whether banks are on constructive notice when transactions appear to benefit both parties.
Lord Browne-Wilkinson clarified that manifest disadvantage is only required for presumed undue influence (Class 2), not actual undue influence (Class 1). Banks are only put on constructive notice when transactions are obviously disadvantageous to the surety, not when they appear to benefit both parties.
This case clarified the distinction between actual and presumed undue influence and limited the scope of O'Brien by showing banks are not always on constructive notice. It remains crucial for understanding when banks have duties to sureties.
Actual undue influence does not require manifest disadvantage, and banks are only on constructive notice when transactions are obviously disadvantageous to the surety.
The House of Lords held that despite actual undue influence, the bank was not on constructive notice and the charge was enforceable.
It clarified the distinction between actual and presumed undue influence and limited banks' constructive notice obligations established in O'Brien.
The court emphasized the distinction between the two classes of undue influence and their different requirements.
OSCOLA Citation
CIBC Mortgages v Pitt [1994] 1 AC 200
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[2026] UKSC 1
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