Behind closed doors: economic abuse, undue influence and the family courts

Undue influence in non-commercial relationships

The case of Waller-Edwards (Appellant) v One Savings Bank Plc (Respondent) is a difficult one; it concerns a co-habiting relationship which the appellant entered at a vulnerable time in her life. At the start of the relationship, Catherine Waller-Edwards was financially independent, owned a mortgage free house valued at £600,000, had savings of £150,000 and a pension income of £7,000 per year. By the end of the relationship, she was left with a heavily mortgaged home which she was not permitted to occupy, her savings depleted entirely and with no means to meet the mortgage payments on said home. It was readily accepted by the court that the appellant found herself in this distressing situation due to the undue influence of her former partner, Mr Bishop, who had by this time disappeared.

The appellant’s story begins with Ms Waller-Edwards entering a relationship with Nicholas Bishop in 2011. They did not marry but lived together in a house referred to as ‘Spectrum’ from September 2012 in a co-habiting relationship. In 2013, Mr Bishop sought to re-mortgage Spectrum with the respondent bank, One Savings Bank Plc (‘the Bank’). Waller-Edwards and Bishop were both to be parties to the loan, the plan for which was to provide £333,000 to pay off the mortgage on Spectrum and purchase a new home for the couple’s benefit. A further £39,500 would also be lent to Bishop so he could pay down his own personal debts. Ultimately, £384,000 was paid to the couple.

Unbeknownst to the Bank, Bishop actually used £142,000 of the loan to make a divorce payment to his ex-wife. When the relationship between the couple ended, Bishop moved out of Spectrum and Waller-Edwards was left to meet the mortgage payments from her own resources, something she was unable to do. The Bank commenced possession proceedings in November 2021. Further, as the loan had been obtained on the premise that Spectrum was to be used as a buy-to-let property, Waller-Edwards was in breach of the condition not to live in the property. The matter proceeded to the civil courts.

At the first trial, the court found that Waller-Edwards had entered all of these transactions under the undue influence of Bishop. Lenders do have procedures to help safeguard against these situations – if a person enters a loan for the benefit of their spouse (or other person with whom they are not in a commercial relationship) then the lender will be ‘put on inquiry’ if the loan appears to benefit the spouse only. This is because the potential for one spouse to unduly influence the other to enter a loan is well-known. If the lender is ‘on inquiry’, then they must make further checks to ensure no undue influence has taken place. However, if the circumstances are the same but the loan appears to be a joint one for the benefit of both parties, then the lender is NOT put on inquiry. This was established in the cases of Barclays Bank v O’Brien [1994] 1 AC 180, CIBC Mortgages plc v Pitt [1994] AC 200 and Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773.

However, the position was less clear as to what happens in the case of a ‘hybrid loan’, where only a proportion of the funds lent would be to the joint benefit of the parties. In Waller-Edwards’ case, around 10% of the loan was to be used to the sole benefit of Bishop in paying off his debts. In the County Court and Court of Appeal, it was held that this hybrid loan did not fall into the category of a loan that would put the Bank on inquiry. However, the Supreme Court allowed the appeal, finding that in any scenario where a non-commercial loan is made to a couple and more than a de minimis amount of that loan is used to discharge the debts of one of the borrowers (so may not be to the financial advantage of the other) then the lender should view this as a ‘surety’ transaction and should be placed on inquiry of the possibility of undue influence. In the light of this judgment, it is now left to the Bank and Waller-Edwards to come to an agreement as to how to remedy the situation.

Defining economic abuse

In this case, where a vulnerable person found themselves in difficult financial circumstances due to the undue influence of a partner, the court ultimately helped. The clarity over the situation with hybrid loans between spouses or partners will protect other couples in future. However, in many cases of economic abuse, the vulnerable partner cannot obtain a remedy as they are unaware of the concept of economic abuse and so do not seek help.

The Domestic Abuse Act 2021 (DAA 21) defines economic abuse as any behaviour that has a substantial adverse effect on a person’s ability to:

• acquire, use or maintain money or other property (such as a mobile phone) or  
• obtain goods (such as food or clothing) or services (such as broadband or heating).

(S1(4) of the Domestic Abuse Act 2021).

Economic abuse is not an offence in its own right, but its inclusion in the DAA 2021 means the police may consider a pattern of economic abuse as coming under the offence of controlling or coercive behaviour. This offence was made a crime in 2015 and is defined by the Home Office as:

‘an intentional pattern of behaviour that occurs on two or more occasions, or which takes place over time, in order for one individual to exert power, control or coercion over another.’

The following four elements must be present for the crime of controlling or coercive behaviour to have been committed:

1. The behaviour takes place repeatedly or continuously;
2. The victim and perpetrator are ‘personally connected’ (for example they are or have been married or in an intimate personal relationship);
3. The behaviour causes the victim to fear violence on at least two occasions, or the serious alarm and distress caused by the suspect’s behaviour has had a substantial adverse effect on the victim’s usual day to day activities; and
4. The perpetrator must have known (or ought to have known) that their behaviour would have a serious effect on the victim.

Elements one and two are clear, but the concept of ‘substantial adverse effect’ as set out in element three has been further explained by the Crown Prosecution Service (CPS), and includes deterioration in physical or mental health, self-harming, or withdrawing from normal day-to-day activities like socialising. The CPS guidance also makes it clear that economic abuse (including coerced debt and controlling mortgages) can amount to coercive or controlling behaviour. Crucially, as of 5 April 2023, a victim of controlling or coercive behaviour can bring a prosecution against a perpetrator who subjects them to controlling or coercive behaviour after the relationship has ended.

In the scenario of Waller-Edwards vs. One Savings Bank Plc, the vulnerable party was influenced to enter a debt that was not in their best interests and then left to service the payments from their own resources. The Home Office guidance on the offence of controlling or coercive behaviour sets out that running up debts in the victim’s name without their knowledge, coercing the victim into making financial decisions that are not in their best interests and no longer paying the mortgage without reason post-separation are all examples of economic abuse that may be considered to fall under the controlling or coercive behaviour offence.

Economic abuse in the family courts

Prosecutions for coercive and controlling behaviour in the form of economic abuse can of course be conducted through the criminal courts, but when it comes to the issue of economic abuse in the family courts, the occurrence of said abuse is most relevant within financial proceedings. Section 25 of the Matrimonial Causes Act 1973 (the MCA 1973) sets out that when considering how the financial assets within a marriage are to be divided, the court must have regard to:

“the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it.”

There is a high bar that must be reached before a court will take bad conduct into account, with the judge in S v S (Non-Matrimonial Property: Conduct) [2006] EWHC 2793 setting out that the conduct must have the ‘gasp factor’. Mostyn J continued to limit the examples of behaviour that would be taken into account with his comment in OG v AG (Financial Remedies: Conduct) [2021] 1 FLR 1105 that:

“The financial remedy court is no longer a court of morals. Conduct should be taken into account not only where it is inequitable to disregard but only where its impact is financially measurable”.

This view was slightly loosened by Peel J in Tsektov v Kharova [2023] EWFC 130 where he stated that the behaviour in question must have had:

“an identifiable (even if not always easily measurable) negative financial impact”.

This leaves us in a position where if a party wishes to argue for economic abuse to be considered in financial proceedings, they will need to prove the economic abuse and then identify that there has been a financial loss attributable to that conduct.

The case of DP v EP (Conduct; Economic Abuse; Needs) [2023] EWFC 6 was set against this background and provides an example of the court interpreting certain behaviours as economic abuse. Within the case, H was illiterate and relied on W to manage their joint finances. It was found that W took advantage of H’s illiteracy by placing joint funds beyond his reach, knowing that he would not consent but was unable to monitor her financial decisions. This behaviour was held to fall under the definition of the DAA 2021 as it had a substantial adverse effect on H’s ability to access and use his own money. This was further compounded by W’s exploitation of a dominant position. HHJ Reardon considered that this case did indeed have ‘the gasp factor’ and would be inequitable to disregard. She continued to state that:

“there must be some scope for conduct which has had consequences to be reflected in the ultimate division of assets, even where those consequences are not financially measurable.”

Accordingly, she judged that a fair outcome would be a move away from a 50:50 split to a 53:47 split in H’s favour. When compared to the unequal asset divisions the courts regularly make even in the absence of economic abuse (60:40 or higher) this is a modest departure.

In the financial case of N v J [2024] EWFC 184, Peel J again acknowledged that the domestic abuse that had taken place was ‘vile and indefensible’, but it did not meet the ‘exceptional nature’ threshold for being taken into account in the division of financial assets. The treatment of economic abuse in children proceedings has fared slightly better, with guidance in the case of Re H-N and Others (Children) (domestic abuse: findings of fact hearings) [2021] EWCA Civ 448 setting out that the court should focus on patterns of behaviour, rather than just specific incidents. This is especially helpful to victims of economic abuse, which is often characterised by more insidious, ongoing examples of abuse. However, as can be seen, this approach has not filtered through to financial proceedings.

How can the family courts help in the future?

This lack of an approach by the family courts towards economic abuse has not gone unnoticed. Both Resolution and the Nuffield Foundation funded Fair Shares project have released reports highlighting how economic abuse is not sufficiently taken into account in financial proceedings. Key concerns include:

1. Parties to financial proceedings are obliged to consider non-court dispute resolution and can be penalised with costs orders should they not do so. Without strict disclosure rules in place, many NCDR methods could lead to a perpetuation of economic abuse.
2. Even within the court process, behaviour that constitutes economic abuse (excessive spending to reduce the marital assets, non-disclosure and the breach of court orders) is rarely adequately addressed or reprimanded.
3. The very nature of economic abuse is that a victim can struggle to access personal funds. This is a real barrier to accessing legal representation in family proceedings.

The reports continue to outline their recommendations for addressing these issues, including:

1. Much clearer rules on the duty of full and frank disclosure, a duty which will extend to NCDR and solicitor negotiation. Costs rules will be amended so a failure to provide full and frank disclosure can be penalised in a cost order.
2. Rules on interim maintenance and orders for one party to fund the other’s legal costs will be amended, allowing a judge to deal with interim payments on outgoings at an early hearing, or removing the requirement for one party to exhaust all options for funding their legal fees with high interest litigation loans before they can obtain funding from the other party.
3. Greater consequences for non-compliance with financial remedy orders, such as withholding a sum of money from the perpetrator’s share of the assets which can be used to meet the victim’s legal fees of enforcement proceedings if required.

The presence of economic abuse in all its forms, be that undue influence to enter a loan not in the victim’s interests or refusing to allow a partner access to bank accounts can be perpetuated by the family court’s current approach to financial remedy proceedings. The high threshold for allowing instances of bad conduct into proceedings has seen much debate within the courts, and the high threshold is there for a reason. However, the unique nature of economic abuse means it can actively harm a victim’s ability to access a fair outcome in family proceedings, so calls for reform in this area are sorely needed.

Jessica's article was published in Family Law Week, 7 July 2025, and can be found here.