Equitable fraud committed by third parties

Abstract

In the twin cases of Barclays Bank Plc v O’Brien and CIBC Mortgages Plc v Pitt the House of Lords consided for the first time an issue which has fresuently troubled the lower courts in recent years. In essence the issue can be boiled down to the following question:Where a debt owed by A to C is guaranteed by B, in what circumstances will the fact that A induced B to make the guarantee by misrepresentation, undue influence or other conduct of which Equity disapproves, render the guarantee voidable by B against C?(This simplified scenario, where A is the principal debtor, C the creditor, and B the guarantor, will be used in much of what follows). The contemporary significance of the question, and the difficulty which it has posed to the courts, are graphically shown by the fact that it has given rise to eleven reported decisions by the Court of Appeal in the last eight years.