Abigail and Diane, two sisters, inherited their mother's home seven years ago.  They are registered as joint proprietors of the house, and both live in it. Abigail runs an art gallery from rented commercial property near the home. Diane works as a shop assistant in a local shop and is not involved in Abigail's business.  Two years ago, Abigail's business began to get into difficulties. She decided that she would borrow a sum of money to purchase new paintings and sculptures to display in the gallery. Unfortunately, she was unable to borrow enough money from any of the larger banks, building societies or finance companies.  Therefore, she decided to approach Bob who ran a small credit company, Krooked Loans. Bob agreed to lend Abigail £150,000, repayable over a five-year term, on condition that Abigail granted him a mortgage over the house owned by Abigail and Diane.

Bob came to the house and explained the loan and mortgage to Diane and stated that she could seek independent legal advice on the matter if she chose. He emphasised that it was 'just a formality' and that there was 'no real risk' involved in the transaction. Bob left the contract to be signed, outlining the obligations between Bob, Abigail and Diane, at the sisters' home. He asked Abigail and Diane to return the paperwork to him as soon as possible. Initially, Diane refused to sign but Abigail threatened not to speak to her again, unless she signed. Diane signed the paperwork and Abigail took the money from Bob.

Diane is now concerned since she has heard that Abigail has fallen behind in the repayments. Yesterday, Diane overheard Abigail saying that she had 'made a big mess of things' and would leave Diane to deal with Bob and the loan repayments. Diane cannot afford to make the repayments to Bob and is concerned that she will lose her home.

 
Advise Diane on the following:

(a)    what remedies will be available to Bob if the loan is not repaid, and

          ISSUES?

          RULES?

          APPLICATION?

          CONCLUSION?  

(b)   whether there is any way that Diane can avoid liability

          ISSUES?

          RULES?

          APPLICATION?

          CONCLUSION?