In the Court of Appeal recently, Nourse L.J. declared Credit Lyonnais Bank Nederland NV v. Burch to be “as clear a case for the setting aside of a transaction against a mortgagee as it was possible to think of”. Curiously, however, relief on the basis of Barclays Bank pic v. O'Brien was given although: (i) the relationship between the surety and principal debtor, of employee and employer, clearly falls outside that of an “emotional or sexual nature” (and no such relationship existed in fact) particularised in O'Brien as one factor giving rise to a lender's constructive notice of the transaction's potential invalidity and; (ii) the Bank twice wrote to the proposed surety advising of the unlimited nature of the charge and of the desirability of obtaining independent legal advice; moreover, (iii) there is surprising dicta suggesting that the nature and extent of the manifest disadvantage in the transaction to the surety may be so severe that, to be enforceable, the lender must not only urge independent advice, it must insist upon it, and must reasonably believe that the advice was obtained, was competent and even, that it was followed.
