Banco Exterior Internacional v Mann

JurisdictionEngland & Wales
Judgment Date23 November 1994
Judgment citation (vLex)[1994] EWCA Civ J1123-12
Docket Number94/0264/B
CourtCourt of Appeal (Civil Division)
Date23 November 1994
Banco Exterior Internacional (Formerly Banco Exterior UK)
(1) Tony Mann
(2) Valerie Mann
(3) Leonard Harris

[1994] EWCA Civ J1123-12

(Mr J V Martin QC Sitting as Deputy High Court Judge)

Before: The Master of the Rolls (Sir Thomas Bingham) Lord Justice Hobhouse and Lord Justice Morritt





MR J BOGGIS QC and MR J S PALMER (instructed by Messrs Eversheds Days Hill & Perks, Norwich) appeared on behalf of THE PLAINTIFF/APPELLANT

MR MICHAEL HART QC and MR ROBERT DEACON (instructed by Messrs Mischon de Reya, London WC1) appeared on behalf of DEFENDANTS/RESPONDENTS


Wednesday 23 November 1994


THE MASTER OF THE ROLLSIn this case, the court, unfortunately, has been unable to agree, but by a majority the appeal, for reasons that have been made available in writing, will be allowed. The result of that is that the order of the learned deputy judge will be set aside and the Bank's claim against the second defendant for possession of 12 Hillcrest Avenue, Edgware, succeeds.


This is an appeal of the plaintiff, to which I shall refer as 'the Bank', from the order of Mr John Martin QC sitting as a deputy High Court Judge of the Chancery Division, dated 14 December 1993, whereby he dismissed, as against the second defendant, Mrs Mann, the Bank's claim as mortgagee for possession of 12 Hillcrest Avenue, Edgware. That claim was upheld as against the first and the third defendants who are respectively the husband of Mrs Mann and his trustee in bankruptcy.


The property was and, I think, still is the matrimonial home of Mr and Mrs Mann, but it was always registered in the name of Mr Mann alone. Mr Mann wished to charge it as security for facilities to be granted by the Bank to his company, Bilabard Ltd. Such a charge would be a second charge as there was already a first charge in favour of a Building Society.


By a letter dated 31 December 1985 and marked "for the attention of Mr T Mann", the Bank offered to the company a facility of £175,000 to be secured by a debenture over the assets of the company, a personal guarantee of that liability from Mr Mann and a second charge over the property to secure that guarantee. The letter stated:

The charge form should be signed, sealed, witnessed and all alterations initialled, but should not be dated. The declarations should be signed by Mrs Mann or her son (as appropriate), and dated. This should be done in the presence of their solicitor who will sign to the effect that the contents have been explained."


These documents were sent on to Mr Rochman of Rochman Landau & Co, who for some years had been the solicitors for the Company and for Mr Mann. On 9 January 1986 he wrote to Mrs Mann at the premises of the company and to Hillcrest Avenue as follows:

"I enclose copies of the forms of declaration which the Banco Exterior —UK will require you to sign in the presence of 'your solicitor' who must explain the effect of the contents of the declaration to you.

As you, I am sure, appreciate the effect of the declarations you are being asked to sign is that you will waive any rights you might have in the house at Hillcrest Avenue behind that of Banco Exterior —UK to the extent that they are owed any monies by Bilabard Limited or to the extent of any collateral guarantees.

In effect if the company does not repay any monies due to the Bank and the Bank need to rely on the security of Hillcrest Avenue, then you cannot set up any claim to ownership or rights in that house which will defeat the Bank's interest.

It will be necessary for you to complete these documents in my presence and perhaps you could let me know when it would be convenient for you to attend here for that purpose.

If there are any further queries, please let me know."


The judge concluded that this letter was received by Mrs Mann and that she had an opportunity to read it before she saw Mr Rochman.


On the following day, 10 January, Mrs Mann attended on Mr Rochman. His attendance note reads:

"Attending upon Valerie Mann and explained to her the nature of the declaration and got her to complete the same. She will arrange for her children to come in next week to complete the documents. Also attending with her Tony Mann. She left after she had signed the document."


The declaration referred to is in the following form:

"I, Valerie Mann, an occupier of the mortgaged property, being the property mortgaged to Banco Exterior —UK of 60, London Wall EC2, by the terms of the attached Legal Charge hereby agree and declare as follows:

(a) That pursuant to section 6(3) of the Matrimonial Homes Act 1983, any Charge over the mortgaged property to which I may be entitled by virtue of the Matrimonial Homes Act 1983 (' the occupier's charge') and

(b) That any right or interest I may have in the mortgaged property which is or (if the title to the mortgaged property were registered under the Land Registration Acts 1925 —1971) would be an overriding interest by virtue of Section 70(1)(g) the of Land Registration Act 1925

are hereby postponed to the Charge created by the Charge annexed hereto to the intent that the occupier's Charge and any such right or interest shall rank after and take effect in all respects subject to the Charge thereby created and the monies and liabilities from time to time thereby secured and to the intent that Banco Exterior —UK shall be entitled to exercise all of its powers as Mortgagees which are conferred upon it by statute or by the attached deed free from the occupier's Charge and any such right or interest."


After her signature, it is recorded that it was executed

"in the presence of the undersigned who, prior to the execution thereof explained the nature and effect of the above declaration and agreement and of the attached Legal Charge which she appeared to fully understand."


and bears the signature of Mr Rochman. The various charge documents, including this declaration, were returned to the Bank.


The judge's findings in respect of this meeting were as follows:

"I make the following findings about the second defendant's meeting with Mr Rochman. The first defendant was present for part at least of the time when matters were explained to the second defendant. That seems to me to follow from the last two sentences I have quoted from the attendance note, which indicates that Mr Rochman had already seen the first and second defendant together by the time the second defendant left after signing the document. I find that Mr Rochman gave an explanation of the effect of the document in terms broadly similar to those set out in his letter of 9 January 1986, and that the second defendant understood that explanation. In particular, I am satisfied that she understood that she might lose her home if the company failed to repay the loan. I find also that she did tell Mr Rochman that she had little choice but to sign the document. I consider that Mr Rochman's recollection, albeit vague, is more likely than not to be accurate in this respect, and the substance of the second defendant's comment accords with my assessment of how she perceived matters at that time. It is implicit in these findings that I reject the suggestion made by the second defendant in her evidence to me that she would not have put her house at risk. I consider that to be her current attitude, not the one she held in 1986."


In January 1988 the company went into liquidation. But by 30 March 1990 there was still £279,000 owing to the Bank by the company, payment of which had been demanded of Mr Mann, who was by then bankrupt anyway. Accordingly, by an Originating Summons issued on 4 April 1990, the Bank sought an Order for Possession of Hillcrest so as to enable its sale with vacant possession.


On 6 June 1990 Mrs Mann applied to be joined as an additional defendant so as to claim an interest in the property binding on the Bank and thereby to resist the claim for possession of her home. In due course the matter came before Mr Martin QC, who made orders for possession against Mr Mann and his trustee in bankruptcy but dismissed the action against Mrs Mann. He concluded that Mrs Mann was entitled to an equitable interest in the property and that a presumption of undue influence of Mr Mann over Mrs Mann in relation to the declaration arose but had not been rebutted. The Bank does not challenge either of these findings.


He then considered the position as between Mrs Mann and the Bank. He quoted from the speech of Lord Browne-Wilkinson in Barclays Bank Plc v O'Brien [1994] AC 180, and then considered whether the Bank had constructive notice of the undue influence of Mr Mann over Mrs Mann in relation to the declaration. He concluded that the Bank did have such notice so that the interest of Mrs Mann was binding on the Bank and constituted a defence to the claim for possession. It is from that decision that the Bank appeals.


The relevant decision of the judge is in the passage at page 11 of his judgment which is in these terms:

"In the present case, I have found that the second defendant's declaration was procured by undue influence. Because the declaration amounted to the provision of security for the debts of a company in which the second defendant did not have a direct financial interest but her husband did, the plaintiff was put on inquiry as to the circumstances in which it was obtained. To avoid constructive notice of the undue influence, the plaintiff was to take reasonable steps 'to bring home to the wife the risk she [was] running...

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