Massey v Midland Bank Plc [1995] 1 All ER 929; [1995] 27 HLR 227
Guarantee agreement; misrepresentation; duties of creditor
(296 words)
Facts
Ms Massey owned a house. Her companion (although they did not live together), P, convinced to charge the house as security for an overdraft granted to his business. P fraudulently claimed that he would pay of previous, similar charge over the house that Ms Massey had given him for another – failed – business. The bank informed Ms Massey that she would have to receive independent legal advice before it would agree to the transaction. Eventually, Ms Massey was advised by P’s solicitors, following which she signed the charge. Acting on the solicitor’s assurances that Ms Massey was advised, the bank provided P with the money. P’s new business failed, however. Ms Massey was served with a demand and a summons for possession.
Issues
Ms Massey declined to satisfy the bank’s demand, arguing that she was induced by P’s fraudulent misrepresentation and undue influence to sign the charge. She claimed that P’s unlawful act affected the bank. The deputy judge disagreed and found in favour of the bank. Ms Massey appealed.
Decision/Outcome
The Court held that in situation like this (i.e. where a person provides security without benefitting from it), the bank would be “put on inquiry”. However, once the bank is satisfied that the person in question received independent legal advice from a solicitor who had knowledge of the proposed charge, it was no longer under a duty to make further inquiries (unless, it had reasons to believe that the advice given was improper). Thus, the bank in this had taken all reasonable steps to make sure that the charge was obtained in acceptable circumstances and that the person received independent legal advice about the charge. Consequently, no constructive notice of P’s misrepresentation was given to the bank and Ms Massey appeal had to be dismissed.
Updated 20 March 2026
This case summary accurately reflects the decision in Massey v Midland Bank Plc [1995] 1 All ER 929. However, readers should be aware that the legal framework governing a bank’s duties where a surety may have been subject to undue influence or misrepresentation has been significantly developed and, in important respects, superseded by the House of Lords’ decision in Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44; [2002] 2 AC 773. Etridge remains the leading authority in this area and substantially revised the practical requirements placed on lenders. In particular, the House of Lords set out detailed guidance on what steps a lender must take to avoid being fixed with constructive notice, including requirements as to communication directly with the solicitor advising the surety. The standard endorsed in Massey — that a bank is generally protected once it knows that independent legal advice has been received — remains broadly correct as a general principle, but the Etridge guidelines impose considerably more specific obligations on lenders and solicitors than this summary might suggest. Students and practitioners should treat Massey as a precursor to Etridge rather than a self-sufficient statement of the current law.
