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The UK Supreme Court in Waller-Edwards v One Savings Bank plc [2025] UKSC 22 clarified when lenders are put on inquiry of possible undue influence in relationship-based lending. It established a bright-line rule stating that if a non-trivial part of a joint loan repays one borrower’s personal debts, lenders need to follow the safeguards in Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44, including requiring the borrower to obtain Independent Legal Advice.
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In June 2025, the UK Supreme Court delivered an important ruling clarifying when lenders must take additional steps to protect borrowers in relationship-based lending.
The decision focused on undue influence in lending and, more specifically, when a lender should be considered “put on inquiry” that one party in a transaction may be under pressure from another.
At the heart of the case was a common situation in property finance, which is a joint loan where part of the borrowing benefits only one borrower. These arrangements, sometimes referred to as “hybrid loans,” have long created legal uncertainty for lenders.
The Supreme Court’s judgement introduces a clear “bright line” rule, making it easier to determine when safeguards such as Independent Legal Advice (ILA) should be required. For lenders, brokers and legal professionals, the ruling has significant practical implications.
Let’s discuss it further.
In lending law, courts have traditionally treated two types of transactions differently. In a surety situation, one person effectively guarantees another person’s debts.
In these cases, lenders are normally put on inquiry, meaning they need to follow the Etridge protocol safeguards established in Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44, including ensuring that the vulnerable party receives Independent Legal Advice (ILA).
By contrast, pure joint borrowing, in which both borrowers appear to benefit equally, has generally not triggered those same protections.
The difficulty arises with “hybrid loans.” These are transactions that appear to involve joint borrowing, but where part of the loan is clearly used to repay the debts of only one borrower - creating a grey area.
The question is, should the lender treat the transaction as joint borrowing or as a potential surety arrangement where undue influence in lending could be present?
The dispute in Waller-Edwards v One Savings Bank plc [2025] UKSC 22 began in the County Court during possession proceedings brought by the lender.
The court accepted that undue influence by Mr Bishop had occurred but concluded that the bank had not been put on inquiry, largely because the remortgage appeared to be a joint borrowing overall.
The decision was challenged on appeal, but both the High Court and the Court of Appeal broadly agreed with the original approach. They treated the transaction as a matter of “fact and degree", looking at the arrangement as a whole to decide whether it was essentially joint borrowing.
The case eventually reached the UK Supreme Court, which took a different view and clarified the correct legal test.
When the Waller-Edwards v One Savings Bank plc [2025] UKSC 22 case reached the Supreme Court, the judges rejected the lower courts’ “fact and degree” approach. Instead, they introduced a clearer “bright line” test to determine when lenders are put on inquiry of possible undue influence in lending.
The Court held that in a non-commercial hybrid loan, a lender will be put on inquiry if more than a trivial (more than de minimis) portion of the borrowing is used to repay the debts of only one borrower, and that use may not benefit the other borrower financially.
If this condition exists on the face of the transaction, the lender is required to treat the situation as a case of surety and follow the safeguards set out in Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44.
As per the Etridge protocol, the lender will typically:
Insist that the borrower receives Independent Legal Advice
Ask the borrower to consult an independent solicitor
Require the solicitor to provide a signed ILA certificate confirming the advice was given
Only after the lender receives the certificate will the lender usually allow the transaction (e.g., a mortgage or guarantee) to be completed.
The ruling in Waller-Edwards v One Savings Bank plc [2025] UKSC 22 provides lenders with clearer guidance, but it also raises the compliance bar.
The Supreme Court’s bright-line test means lenders can no longer rely on arguing that a loan was “overall” for joint benefit if any meaningful portion is used to repay one borrower’s personal debts.
In practice, this means more transactions will require adherence to safeguards under the Etridge protocol. Many lenders will likely adopt a cautious approach. If part of the loan clears one party’s liabilities, the other borrower may be treated as a potential surety.
As a result, lenders may increasingly require borrowers to obtain Independent Legal Advice (ILA) to ensure the transaction is properly explained and documented.
For Independent Legal Advice providers, the decision in Waller-Edwards v One Savings Bank plc [2025] UKSC 22 is likely to increase demand for their services.
Because lenders will now be put on inquiry more often in hybrid loan situations, many lenders will adopt a cautious approach and require clients to obtain Independent Legal Advice (ILA) before completing the transaction.
However, the ruling also highlights the importance of robust advice and documentation. If a dispute later arises, courts may closely examine whether the advice was genuinely independent and whether the client fully understood the risks involved.
Clear file notes, conflict checks, and properly documented explanations of the loan’s purpose and potential consequences will be essential in demonstrating that the borrower made an informed and voluntary decision.
The decision in Waller-Edwards v One Savings Bank plc [2025] UKSC 22 provides clearer guidance for lenders dealing with undue influence in lending, particularly where part of a joint borrowing transaction benefits only one borrower.
By introducing a straightforward test for hybrid transactions, the Supreme Court has made it easier to identify when lenders require Independent Legal Advice to be obtained by their clients.
iLA is the UK’s leading independent legal advice provider, helping borrowers understand the documents they’re signing and providing the clear, independent advice that lenders and clients increasingly rely on.
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The information in this blog is general in nature. It is not intended as legal or financial advice. You should always obtain professional advice before making decisions based on your own circumstances.
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