Barclays Bank v O’Brien Revisited: What a Difference Five Years Can Make
| Date | 01 July 1999 |
| Published date | 01 July 1999 |
| DOI | http://doi.org/10.1111/1468-2230.00227 |
| Author | Paula Giliker |
ingly, Amadio and Garcia are simply separate, well-defined categories of
unconscionable conduct.
The precise ambit of Yerkey vJones, in light of the majority’s judgment, is yet to
be determined, and if the possibilities mooted in Garcia are taken up, it will extend
far further than Dixon J would doubtless have expected in 1939. For now, it is not
clear that the decision in Garcia will greatly affect the conduct of banking
business, as the lender must only explain the effect of the transaction to the wife in
order to avoid a finding of unconscionability. Indeed, the cases of Garcia and
O’Brien only ever arose because of the failure in each case of the bank’s officer to
implement the bank’s own policy requiring an explanation of the documents.
Given the comparative lack of development of unconscionability in English law,
it is no surprise that the House of Lords and the High Court of Australia have taken
different routes to virtually the same destination. The analysis of the High Court in
Garcia is a welcome clarification of a principle of great utility, and expresses the
nature of the equitable protection without some of the more troublesome aspects of
the doctrine in O’Brien.
Barclays Bank vO’Brien Revisited: What a Difference
Five Years Can Make
Paula Giliker*
In Royal Bank of Scotland vEtridge (No 2),1the Court of Appeal faced once again
the familiar Barclays Bank vO’Brien scenario. The appeals related to claims by
wives who had acted as sureties to secure the debts of their respective spouses. The
spouse had defaulted and the lending institution now sought to enforce the
agreement. In each case, it was alleged the guarantee should be set aside on the
basis that the wife had entered the agreement due to the undue influence of her
spouse, of which the lending institution had constructive notice. In Barclays Bank
vO’Brien,2Lord Browne-Wilkinson had rejected arguments that this category of
surety merited special treatment or that the husband should be deemed to act as the
bank’s agent3and had based his decision on notice. A lending institution would
only be bound as a third party by the undue influence exercised by another if it had
actual or constructive notice of the debtor’s misconduct. Whilst actual notice
would be rare, constructive notice would exist where the lending institution had
been put on inquiry by the fact that the transaction was not on its face4to the
financial advantage of the surety and there was a substantial risk that in procuring
the surety’s assent, the principal debtor had committed a legal or equitable wrong,
such as undue influence or misrepresentation. This could be rebutted, however, by
July 1999] Royal Bank of Scotland vEtridge (No 2)
* Faculty of Laws, Queen Mary and Westfield College, London.
1 [1998] 4 All ER 705.
2 [1994] AC 180
3 On any save rare occasions, where a genuine agency relationship exists.
4 See CIBC Mortgages vPitt [1994] AC 200.
ßThe Modern Law Review Limited 1999 609
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