Undue influence claim avoids summary judgment against mortgagor

A creditor failed to obtain summary judgment against a mortgagor because the mortgagor successfully argued undue influence by her husband.

In this case¹, a husband and wife borrowed money from a creditor and gave a mortgage over their jointly owned property as security for the loan.  At the same time, and without the wife’s knowledge, the husband borrowed additional funds from the same creditor for his business.  The business loan was secured in part by the mortgage.

The wife was advised by a solicitor, but that solicitor was unaware of the business loan because separate solicitors were engaged by her husband to act on the business transaction.  The judge determined that this fact was a crucial aspect of the case, noting that the advice given to the wife was insufficient to properly inform her of the risks. 

Further, the judge stated that it is arguable that the creditor had actual or constructive knowledge of the insufficiency because it was aware that the wife was being advised by separate solicitors from those who were advising her husband on the business transaction.  If the creditor knew that the solicitors were unaware of crucial facts about the transaction and the risks, the creditor may not be able to rely on the solicitor’s certificate provided to it.

The judge concluded that the threshold for the creditor’s summary judgment was not achieved because of the evidence supporting a cause of action for undue influence, which could arguably be imputed to the creditor.

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