The Supreme Court ruled a savings bank that involved a borrower in the case, and she said she was forced by her ex-partner to cash it together.
The court ruled that lenders should comply with specific legal provisions to help ensure that homeowners Catherine Waller-Edwards were not “impaired” when agreeing to loans to the property.
Legal experts say the ruling means lenders and brokers may need to take additional measures to meet their requirements that the borrower is not subject to mandatory control when signing a mortgage contract.
Previous court cases have led to an agreed process where lenders must follow a protocol called the Etridge to help prevent such financial coercion.
However, today’s ruling, Waller-Edwards (Appellant) v One Savings Bank Plc (Respondent), means lenders will need to follow the agreement in a wider context.
background
In this case, the borrower and appellant Catherine Waller-Edwards was previously financially independent because she had no mortgage on the house, saving considerable savings and moderate pension income.
But, according to the verdict, in 2011, she developed a relationship with builder and real estate developer Nicholas Bishop, when she was “emotionally fragile.”
The bishop convinced her to exchange her house and save for the property he was building, and the property had already collected a loan.
In 2013, Bishop recaptured the property for £384,000 with a savings bank.
The lender understands that the account will be used to pay off the existing mortgage debt and to purchase another property by purchasing.
In fact, the money was used to pay off his car financing, credit card, and pay his ex-wife the divorce and clear the property’s first mortgage.
After this, the relationship between Waller-Edwards and the Bishop broke down and the Bishop moved out of Waller-Edwards, the property has now been heavily mortgaged.
With her pension income alone, she can’t keep repaying and mortgage payments are owed.
The lender began litigation in November 2021.
Waller-Edwards appealed to recover the case, and believed that the Itrich agreement should be applied to the Edwards agreement and was improperly affected by the bishop when making the repayment, as it was partially used to pay off the bishop’s debt of £39,500.
The judge agreed, but later the county court, the Supreme Court and the Court of Appeal found that a savings bank did not need to comply with the agreement and make a check to ensure Waller-Edwards was not improperly affected as it was considered a “co-borrowing” rather than a “conservative transaction” rather than a guarantee she acted as a guarantor.
Today’s judgment reverses this discovery.
Impact on lenders
Frances Edwards, senior assistant to Herbert Smith Freehills Kramer, said: “The ‘eTridge Agreement’ that has been around since the early 2000s attempts to protect vulnerable parties who may be forced to provide guarantees for loans in loans that inappropriately affect them.
“It requires banks to communicate directly with the parties, ask them to obtain independent legal advice on the loan, and confirm from the confirmation letter of the attorney acting on the party that the attorney has fully explained the nature of the transaction and its practical significance.
“In the judgment made on 4 June 2025, the Supreme Court of the UK expanded its requirements for banks to comply with the agreement, in which the funds were included in the two non-commercial parties, but the funds should be partially used for one party’s purposes.
“In fact, this requires the bank to send its usual Etridge agreement letter in these other circumstances, and many people may follow the Court of Appeal’s decision on the case.
“The judgment provides clarity about what is needed, simplifying the complex ‘fact and degree’ exams presented by the Court of Appeal.”
Questioning the impact on brokers
Blackford financial crime partner Jennifer Richardson said the ruling greatly increased lenders’ liability for checks on borrowers.
But she said: “In the case of mortgage brokers, for example, the decision also raises a lot of questions.
“Will this responsibility extend to them too? Will this lead to a stricter regulatory regime?
“Attorneys are usually expected to determine similar situations when dealing with clients, and if they don’t, they face regulatory investigations.
“It may be due to this situation that we see similar regulation between lenders.”
