In Future Loans Limited, a loan was agreed between the lender (previously called CitiFinancial (Isle of Man) Ltd) of the one part, and Ms Porter and Mr Gianquitto (who were at that time husband and wife) of the other part. In exchange for entering into the transaction the lender was granted a second charge over the marital property. The loan payments were not maintained, and the lender issued proceedings in the Isle of Man High Court for £79,389.47. Ms Porter defended the claim, arguing that she was entitled to rescission of the loan agreement and the charge over her home by reason of undue influence and misrepresentation by her exhusband.

Deemster Corlett concluded that Ms Porter was plainly under the undue influence of her husband, who had misled both herself and the lender. The Deemster held that the lender was put on inquiry of the possibility of undue influence because there was limited benefit to Ms Porter in agreeing to the transaction, and that the lender took no steps to satisfy itself that she was entering into the transaction freely and with knowledge of the true facts. Accordingly, the Deemster dismissed the lenders claim against Ms Porter, and held that the loan agreement and second charge were set-aside insofar as Ms Porter was concerned.

Of particular note was the Deemster’s comments regarding the provision of independent legal advice to Ms Porter. In this regard Deemster Corlett stated that: “What the law requires, and what clearly did not happen in this case, is that the wife … should be advised to take her own independent legal advice about the transaction and that she should be at least given the opportunity to discuss the matter at a meeting entirely apart from the other parties to the transaction. This would give the opportunity (which may not be taken) for the wife to raise any concerns she may have about the transaction and for her to have brought to her attention the essential factual basis upon which the decision to lend has been made. This would not need to be a lengthy or difficult process.”

This case highlights the importance for lenders to have internal policies to highlight where issues of undue influence could potentially arise. Where such a risk is identified, then the partner must be advised to take independent legal advice, and there should also be a meeting between the lender and the partner alone to discuss transaction, its rationale, and the potential risks with non-compliance of the repayment terms.

Furthermore, this case highlights the importance of taking full and detailed contemporaneous notes to ensure that questions regarding the transaction can be answered many years following completion of the transaction.

Failure to abide by this process could, as demonstrated in this case, lead to real problems for lenders in enforcing their rights and security under a loan agreement.

PDF Version

Type

Insight

Locations

Isle of Man

Share
Twitter LinkedIn Email Save as PDF
More Publications
15 Nov 2022

Insurance and reinsurance in the Isle of Man: Overview

A Q&A guide to insurance and reinsurance in the Isle of Man. Reproduced from Practical Law with the ...

3 Nov 2022

Significant Judgment for Isle of Man Fund Managers

A rethink of exclusion clauses in fund agreements may be needed after the Isle of Man’s appeal cou...

Contributors: Garry Manley
25 Oct 2022

An update to Isle of Man Trust Law

In the week that the Trust and Trustees Bill 2022 goes for its second reading (25 October 2022), it ...

27 Sep 2022

Similar but Different

While the basic features of the trust remain, there are some notable differences in how trusts can b...

25 Jul 2022

Balancing Regulatory and Data Protection Compliance

This article considers data protection compliance in the context of financial services regulatory co...

Contributors: Claire Milne WS
30 Jun 2022

Getting into the Weeds: Isle of Man Regulation of Global Cannabis Investments

The global cannabis industry has grown rapidly in recent years as a number of jurisdictions have lib...

Contributors: Sophie Corkish
24 Feb 2022

Welcoming Fintech Innovation in the Isle of Man

The Isle of Man Financial Services Authority (IOMFSA) has published online support for fintech innov...

25 Nov 2021

Regulatory Approach to ESG across the Crown Dependencies

New requirements may require investment products to display a label reflecting their sustainability ...

25 Nov 2021

The International Comparative Legal Guide to Gambling 2022 – Isle of Man Chapter

This chapter was first published in The International Comparative Legal Guide to: Gambling 2022, by ...

Contributors: Sophie Corkish
30 Jul 2021

Fighting international fraud

First published in New Law Journal, July 2021. Appleby partners Anthony William and Jared Dann an...

Contributors: Jared Dann, Claire Corkish