Abbey National v Tufts
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE KENNEDY,LORD JUSTICE CHADWICK,LORD JUSTICE LAWS |
| Judgment Date | 16 February 1999 |
| Judgment citation (vLex) | [1999] EWCA Civ J0216-10 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 February 1999 |
| Docket Number | No CCRTF 98/1362/2 |
[1999] EWCA Civ J0216-10
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDER OF MR RECORDER HIRST QC
(Sitting at Norwich County Court)
Royal Courts of Justice
Strand
London WC2
Lord Justice Kennedy
Lord Justice Chadwick
Lord Justice Laws
No CCRTF 98/1362/2
MR MARC BEAUMONT (Instructed by Godfrey Morgan of Norwich, Norfolk) appeared on behalf of the Appellant
MISS KAREN WALDEN-SMITH (Instructed by Messrs Shoosmith Harrison of Northampton) appeared on behalf of the Respondent
I will ask Lord Justice Chadwick to give the first judgment.
This is an appeal from an order made on 2nd September 1998 by Mr Recorder Hirst QC sitting in the Norwich County Court in possession proceedings brought by Abbey National Plc ("the Bank") as mortgagee of property known as 84 St Mary's Grove, Sprowton, Norwich.
The property was purchased by the appellant, Mrs Marion Tufts, in May 1993 and is registered in her name at HM Land Registry under Tile No NK 140197. The purchase price, £63,995, was funded in part by an advance of £59,936 made to Mrs Tufts by the bank on security of legal charge dated 25th May 1993. The charge itself was registered at HM Land Registry on 24th June 1993.
Within a few months from the grant of the mortgage Mrs Tufts began to fall behind in monthly repayments due. This cannot be regarded as surprising in the circumstances she was then, as she had been at the date of the mortgage, unemployed. She was not to be in receipt of housing benefit until April 1994. By that time the arrears had built up to a figure in excess of £2,500. They have continued to grow over the years.
The bank commenced these proceedings for possession on 1st May 1995 by issue of a summons in Norwich County Court. It appears that a possession order was made on 17th July 1995, but was suspended on terms that instalments be paid so as to reduce the arrears. Further orders were made on 24th January, 8th July and 4th November 1996. On 21st January 1998 the possession order then current was set aside by the district judge on the basis that he was satisfied that Mrs Tufts had a substantive defence which ought to be tried. On 16th February 1998, a defence, in the form settled by counsel, was served on Mrs Tufts' behalf. That defence, as amended on 6th May 1998, took three main points. First, that the advance from the bank had been obtained by fraud of the borrower's husband, Mr Gerald Tufts, and that knowledge of that fraud was to be imputed to the bank on the grounds of agency. Secondly, that the application for advance, and the execution of the mortgage by Mrs Tufts, had been procured by the exercise of undue influence by her husband, and that knowledge of that undue influence was to be imputed to the bank again on the grounds that Mr Tufts was the agent or sub-agent of the bank for the purposes of the transaction. And, thirdly, that the bank had constructive knowledge of the fraud and of the undue influence. By way of counterclaim, Mrs Tufts sought rescission of the legal charge and rectification of the Land Register so as to delate the relevant entry.
The action and counterclaim came before Mr Recorder Hirst QC for trial in September 1998. He found that the advance had been obtained by the fraud of Mr Gerald Tufts, to which Mrs Tufts was not knowingly party. The fraud may be summarised shortly: (1) the bank's application for advance form was signed by Mrs Tufts before any of the relevant parts had been completed. (2) The form, when completed by Mr Tufts, was false in at least two material respects: in that (a) it purported to show that Mrs Tufts' marital status was that of "married woman separated from her husband"—although, in fact, Mr and Mrs Tufts were living together and had every intention of continuing to do so—and (b) it purported to show Mrs Tufts was employed as an executive distributor, had been in employment for some three years and was in receipt of a basic salary before tax of £22,600 pa—none of which was true. (3) The application was accompanied by two letters, one from a supposed employer, Green Zone Distribution, purporting to verify employment details and the other from Mrs Tufts, in these terms:
"I confirm that the mortgage applied for has nothing to do with my ex-husband, Mr G A G Tufts. You will note that I have left the family home at 3 Uphalle, Thorpe Market, Taverham, Norwich. I now wish to rebuild my life and this is the first step for me."
(4) In response to the bank's request for confirmation of the employment particulars contained in the letter from Green Zone Distribution sent with the application form, a further letter, dated 22nd April 1993, was sent, purportedly from that employer, repeating the false information which had already been provided.
The need for the subterfuge arose from the fact that Mr Tuft's business as a mortgage broker had failed in 1992 and he had been adjudicated bankrupt. As a result of the bankruptcy, Mr and Mrs Tufts were unable to keep up the payments on their former matrimonial home at Thorpe Market and it had been repossessed by, or surrendered to, the mortgage lender. It was reasonably clear, in those circumstances, that no institutional lender was likely to lend to Mr Tufts; nor to Mrs Tufts, if she were living with him, save after careful enquiry. Mrs Tufts might be acceptable as a lender if she were seen to be independent of Mr Tufts; but she had no regular employment or income. Mr Tufts' attitude was, as he explained to the judge, that he had been responsible, through the failure of his business, for the loss of the former matrimonial home; and that he was prepared to do whatever was necessary to ensure that his wife had another home in its place. It is a matter of record that, on 27th September 1996, Mr Tufts pleaded guilty at Norwich Crown Court to offences of conspiracy to defraud and furnishing false information (which included his part in the fraud in connection with this mortgage transaction). He was sentenced to three years' imprisonment. He was released from prison in September 1998—shortly after the trial in these proceedings—and has, I understand, returned to live with his wife at the mortgaged property.
The bank acted on the application form and on the letter of 23rd April 1993. On 6th May 1993 it sent to Mrs Tufts a letter of offer, which she accepted. A copy of the offer letter was sent to Mr J P Care, a solicitor with Messrs Stanger Knel & Co, who had been named as her solicitor in the application for advance form.
As is not unusual in a domestic mortgage transaction he acted, also, for the bank in the transaction. Mr Care wrote to the vendor's solicitors, Messrs Eversheds, on 7th May 1993, to suggest completion on 21st May 1993. On 10th May 1993 he sent a signed contract. On 12th May 1993 he signed and returned to the bank a certificate of title and funds request. On 16th May 1993, the bank forwarded the advance cheque to him. The matter proceeded to completion in a normal manner.
Mr Care did not, in fact, see Mrs Tufts at all in connection with the transaction. He took his instructions from Mr Tufts who, at that time, was working as a mortgage broker from the offices of Stanger Knel. Mr Care gave Mr Tufts the legal charge for execution by Mrs Tufts. She executed the charge in the presence of her mother, and returned it to Mr Care by the same route. Mrs Tufts gave evidence to the judge that she had not read the document; but there is no dispute that she did execute the charge and no dispute that she knew that it was a mortgage to secure the money needed to buy the new house.
The judge rejected the submission that Mr Tufts was the agent or sub-agent of the bank. There is no appeal against that finding—which, if I may say so, the judge was clearly entitled to make on the evidence. The judge rejected, also, the submission that the bank had constructive knowledge of the fraud; in the alternative, of the undue influence to which Mrs Tufts is said to have been subject. He held that there was no basis on which to set aside the legal charge. He ordered possession within 28 days and he ordered payment of the amount due in respect of principal and interest. It is against these orders that Mrs Tufts appeals to this court.
Mr Beaumont, who appears on her behalf, has taken a preliminary point that the bank had not proved its right to possession under the mortgage. He points out that the mortgage conditions themselves were not put in evidence. In my view, there is nothing in that point. First, the existence of the mortgage was admitted on the pleadings. It was not in dispute that the bank was a legal mortgagee, provided, of course, that the mortgage itself was not set aside. As legal mortgagee, the bank had an undoubted right to immediate possession save insofar as it had fettered that right by some contractual provision in the mortgage.
As to the mortgage conditions, there was evidence before the judge in the witness statement of Mrs Karen Bethal, an employee of the bank, signed on 28th April 1998 which stood as her evidence-in-chief. In paragraph 33 she said:
"In the mortgage conditions Abbey agreed to postpone its right to take possession of 84 St Mary's Green until such time as Mrs Tufts was two or more months behind with mortgage payments or in breach of some other term of the mortgage. Mrs Tufts is currently more than two months behind with mortgage payments, and up-to-date figures on the account will be available at trial."
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