Barclays Bank Plc v Boulter
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MUMMERY,SIR BRIAN NEILL,LORD JUSTICE LEGGATT |
| Judgment Date | 23 April 1997 |
| Judgment citation (vLex) | [1997] EWCA Civ J0423-3 |
| Docket Number | CCRTI 97/0115/G |
| Court | Court of Appeal (Civil Division) |
| Date | 23 April 1997 |
[1997] EWCA Civ J0423-3
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM WATFORD COUNTY COURT
(HIS HONOUR JUDGE SIMMONS)
Royal Courts of Justice
Strand
London WC2
Lord Justice Leggatt
Lord Justice Mummery
Sir Brian Neill
CCRTI 97/0115/G
MR C CONEY (Instructed by Messrs Comptons, London NW1 7AN) appeared on behalf of the Appellant
MR M SULLIVAN (Instructed by Messrs Teacher Stern Selby, London WC1R 4JH) appeared on behalf of the Respondent
Wednesday, 23 April 1997
This is an appeal from a ruling from His Honour Judge Simmons in the Luton County Court on the 18th September 1996 on a pleading point taken on behalf of Barclays Bank Plc (the Bank) in the opening of an action brought by the Bank, as mortgagee, for possession of a freehold dwelling house at 6, Little Potters, Bushey, Hertfordshire (the House), jointly owned by the defendants, Mr Victor Boulter and Mrs Julie Boulter. Title is registered at HM Land Registry. The issue is whether Mrs Boulter, who resists the claim for possession and counterclaims for a declaration that she has a half share in the house free of a legal charge in favour of the Bank dated the 24th September 1979, is entitled, on her defence and counterclaim as at present pleaded, to argue at trial that the Bank had constructive notice of matters pleaded in support of a claim that her husband induced her to sign the legal charge by misrepresentation.
This point is important in claims founded on the decision of the House of Lords in Barclays Bank Plc v O'Brien [1994] 1 AC 180. The O'Brien decision is central to this case. Its effect was summarised by Lord Browne-Wilkinson in his speech at page 198 G to 199 B—
"Where one cohabitee has entered into an obligation to stand as surety for the debts of the other cohabitee and the creditor is aware that they are cohabitees: (1) the surety obligation will be valid and enforceable by the creditor unless the suretyship was procured by the undue influence, misrepresentation or other legal wrong of the principal debtor: (2) if there has been undue influence, misrepresentation or other legal wrong by the principal debtor, unless the creditor has taken reasonable steps to satisfy himself that the surety entered into the obligation freely and in knowledge of the true facts, the creditor will be unable to enforce the surety obligation because he will be fixed with constructive notice of the surety's right to set aside the transaction; (3) unless there are special exceptional circumstances, a creditor will have taken such reasonable steps to avoid being fixed with constructive notice if the creditor warns the surety ( at a meeting not attended by the principal debtor) of the amount of her potential liability and of the risks involved and advises the surety to take independent legal advice."
Neither O'Brien nor the ensuing clutch of cases decided in this court raised a specific issue on the pleading and proof of constructive notice ( see Banco Exterior Internacional v Mann [1995] 1 AER 936: Massey v Midland Bank Plc [1995] 1 AER 929 and TSB Bank Plc v Camfield [1995] 1 AER 951; Banco Exterior Internacional S.A. v. Thomas [1997] 1 WLR 221.) The question of notice usually arises in County Court proceedings brought by a bank or other creditor for possession of the matrimonial home. In those circumstances pleading points taken, as here, before evidence is called, are rightly given short shrift in most cases:the objection is either rejected and not pursued to appeal or it is upheld and an application for leave to amend is then made and granted on terms.The present case is exceptional. The critical point is whether it is (a) for the defendant wife to plead that the plaintiff bank had constructive notice of her equity against her husband; or (b) for the plaintiff bank or other creditor to plead, by way of reply to the wife's challenge to the validity of the legal charge, that it had no constructive notice of the matters relied on by her in support of her challenge.
The Judge accepted the Bank's contention that it was necessary for Mrs Boulter to plead constructive notice by the Bank and that Mrs Boulter could not succeed on this part of her case without making an amendment, which she was unwilling to make.
The Judge made the following order—
"the second defendant [Mrs Boulter] may not, on her pleading as it stands, allege that the plaintiff had constructive notice of the matters set out in paragraphs 4 and 5 of her defence and counterclaim. And it is further ordered that if the second defendant wishes to allege such constructive notice she must apply to amend to plead that she relies on such constructive notice and give particulars of all facts and matters on which she relies in support of the allegation that the plaintiff had such notice."
Mrs Boulter has chosen to follow the appeal route rather than the amendment route because, if she amended to plead constructive notice of Mr Boulter's alleged misrepresentation and succeeded on that basis, but failed on an alternative pleaded case that Mr Boulter acted as the Bank's agent, she would be vulnerable to an application by the Bank that she should pay all the costs of the action up to the date of the amendment.
In seeking to follow the appeal route, Mrs Boulter faced the initial obstacle that the Judge refused leave to appeal. He did,however, adjourn the case generally with liberty to restore after Mrs Boulter had made an application to the Court of Appeal for leave. Her paper application was refused, but she ultimately obtained leave to appeal on a renewed application.
The limited nature of this appeal should be noted. This court is not called upon to decide (and does not decide)—
(1) whether Mrs Boulter has a good claim against her husband to set aside the legal charge for misrepresentation; or
(2) whether Mrs Boulter derived any financial advantage from the transaction she now seeks to set aside; or
(3) whether the Bank is, as a matter of fact or law, fixed with constructive notice of Mrs Boulter's equity against her husband.
The sole question on this appeal is whether, on the present pleadings and absent any specific plea that the Bank had constructive notice, Mrs Boulter is entitled to argue at the trial of the action ( which has yet to take place) that the Bank is fixed with constructive notice of her claim against her husband.
The Background Facts
Mr Victor Boulter was employed by the Bank from the 17th August 1959 to the 27th March 1991. On the 24th September 1979 Mr & Mrs Boulter, who had been married since September 1966, executed a legal charge over the House, charging it with payment of all monies or liabilities covenanted to be paid or discharged by them to the Bank. On the 30th March 1993 the Bank demanded payment by Mr Boulter of a total of £122,881.46 alleged to be owed by him on three Home Mortgage Accounts and on his current account, together with interest. Mr Boulter did not comply with the demand. Mrs Boulter denied that she was bound by the legal charge. She and her husband refused to agree to the sale of the House or to vacate it.
The Proceedings
In 1993 the Bank started proceedings for possession of the house against Mr & Mrs Boulter. Mrs Boulter served a separate defence and counterclaim, admitting that she had signed the legal charge over the House, but pleading as follows—
" 4. As to paragraph 8, the second defendant admits signing the legal charge dated the 24th September 1979. The second defendant is the wife of the first defendant, having married him in September 1966. At all material times the first defendant dealt with all the financial and business matters of the defendants. At all material times the second defendant reposed trust and confidence in the first defendant. Before the second defendant signed the said charge, the first defendant represented to her that it secured the monies borrowed by him/them from the plaintiffs to finance the purchase of the matrimonial home, 6 Little Potters, Bushey, Hertfordshire, and nothing more. The second defendant cannot remember the exact words used, and the best particulars that she can give are that the first defendant said to her something like : " It's the £36,000 for the house" or " It's to cover the borrowing on the house ".
5. The second defendant relied upon the said representation in signing the said charge. By reason of the said representation the second defendant was induced to believe, and did believe, that the said charge was a mortgage charging the matrimonial home with the amount borrowed from the plaintiffs in order to purchase the same (which the second defendant knew to be £36,000) and no more.
6. The said representation was false in that the said charge purports to charge the said house with all monies due to the plaintiff.
7. The plaintiffs procured the signature of the second defendant through the first defendant and in the premises the first defendant was acting as the plaintiffs' agent in respect thereof.
8. The second defendant received no explanation of the true meaning and effect of the said charge."
Mrs Boulter counterclaimed for a declaration that—
" she has a half share in the property…….. free of the legal charge in favour of the Plaintiffs."
On the 24th January 1996 the Bank served a reply and defence to counterclaim denying that Mr Boulter had acted as the Bank's agent in the execution of the legal charge and asserting that it had been signed by Mrs Boulter at the Bank's Bushey Heath Branch in the presence of the Bank's clerk Miss J F McKenzie (now Mrs...
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