Barclays Bank Plc v Thomson

JurisdictionEngland & Wales
JudgeLORD JUSTICE SIMON BROWN,LORD JUSTICE WAITE,LORD JUSTICE MORRITT
Judgment Date07 November 1996
Judgment citation (vLex)[1996] EWCA Civ J1107-4
Docket NumberCCRTI 95/1806/H
CourtCourt of Appeal (Civil Division)
Date07 November 1996
Barclays Bank Plc
Plaintiff/Appellant
and
Jennifer Thompson
Defendant/Respondent

[1996] EWCA Civ J1107-4

Before:

Lord Justice Simon Brown

Lord Justice Waite

Lord Justice Morritt

CCRTI 95/1806/H

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM GLOUCESTER COUNTY COURT

(HIS HONOUR JUDGE FOLEY)

Royal Courts of Justice

Strand

London WC2

MR. ALI MALEK QC (Instructed by Messrs. Eversheds, Cardiff) appeared on behalf of the Appellant

MR. M CROALLY (Instructed by Messrs. Clement Jones, Bangor) appeared on behalf of the Respondent

1

Thursday 7 November 1996

LORD JUSTICE SIMON BROWN
2

The respondent is the freehold owner of Valley View, Blakeney Hill, Blakeney in Gloucestershire (the property), which became her family home in the late 1980's upon its purchase by a trust of which she was sole beneficiary. She still lives there with her three teenage children, her husband having left in 1994.

3

In July 1990, in circumstances to which I shall come, the appellant Bank obtained a legal charge over the property, dated 16th July 1990, to secure the borrowing on Mr and Mrs Thomson's joint account at Barclays' Chepstow branch.

4

On 28th April 1992 the Bank wrote to the respondent and her husband demanding repayment of their liability in the sum of £100,480, and on 20th November 1992, that demand remaining unmet, issued proceedings against her in the Gloucester County Court claiming possession of the property.

5

On 22nd January 1993 District Judge Ing made an order for possession in favour of the Bank. Although the order records the respondent as having attended the hearing in person, it is common ground that she did not do so although her husband did.

6

Two years later, on 17th January 1995, the respondent applied to have the possession order of 22nd January 1993 set aside, an application which was dismissed by District Judge Ing on 21st March 1995. That application raised for the first time a defence to the claim under the legal charge, what I may call the Barclays Bank v O'Brien defence. It was rejected by the District Judge on the merits.

7

The respondent's appeal against that order came before Judge Foley, who, on 4th October 1995, allowed the appeal and gave directions for the future conduct of the proceedings. The hearings before both District Judge Ing and Judge Foley were, it should be noted, conducted on affidavit evidence.

8

Before us today is the Bank's appeal, brought by leave of Hutchison LJ, against Judge Foley's order. Principally, the appeal raises the undue influence issue. Under a respondent's notice, however, other issues are raised arising out of the respondent's non-attendance at the original hearing on 22nd January 1993, and it will be necessary to turn briefly to these later in the Judgment.

9

With regard to the undue influence issue, the respondent asserts and, for the purposes of the present proceedings the Bank are content to assume, that this loan transaction was to her manifest disadvantage and that she was subject to undue influence on the part of her husband and/or that he misrepresented to her that the debt being secured by the charge was to be limited to £20,000. The case, therefore, falls into class 2(B) of the O'Brien classification and the critical question arising is whether or not the Bank are fixed with constructive notice of this undue influence (and/or misrepresentation).

10

The central facts are these. Discussions took place on 14th and 21st June 1990 between Mr and Mrs Thomson and their local bank manager, Mr. Brabon, with regard to increasing their overdraft facilities provided these were secured by legal charge. In her affidavit of 29th September 1995 the respondent deposes:

"Mr Brabon spoke to me at all times in the presence of Mr Thomson. He never spoke to me separately. He told me that the charge was in the nature of a mortgage which could result in my losing my home. I accept that I understood that losing my home was a possible consequence of the charge. Mr. Brabon did not otherwise explain the terms of the charge. He advised me and Mr Thomson to go together to a firm of solicitors across the road from the Bank. These solicitors were called Francis & Co. Mr Brabon did not advise me to obtain independent legal advice. Immediately after leaving the meeting with Mr Brabon, Mr Thomson and I went to Francis & Co. [Their advice was] to the effect that: "That is a standard form that is issued by the Bank. You realise that you are putting your house up for security". This solicitor did not explain to me that the charge was an all-monies charge which secured all present and future indebtedness of the company for an unlimited period. Indeed, this solicitor would not have known from the form of the charge that it was in the nature of a guarantee by me of my husband's business debts."

11

I should make plain at once that the Bank have never sought to rely upon this visit to Francis & Co as any part of their case that they took reasonable steps to guard against undue influence.

12

On 20th June 1990 Mr Brabon wrote to another firm of solicitors, Gwyn James & Co. as follows:

"Mrs. Jennifer Thomson, Valley View, Blakeney Hill, Blakeney

We are assisting Mrs Thomson and her husband with facilities and we would require a legal charge on the above property. We are led to believe that the property is presently unencumbered and held in trust for Mrs Thomson.

We are also informed that the Trustees are presently conveying the Title of Valley View into Mrs Thomsons name, therefore would you be in a position to register our proposed legal charge without any delay."

13

Gwyn James & Co replied on 25th June 1990:

"We confirm the contents of the first paragraph of your letter and we are waiting for the Solicitors acting for the Trustees to transfer the property to Mrs Thomson. We expect that the Transfer will require Mrs Thomson's signature and it would seem sensible that the proposed Legal Charge and the Transfer be executed at the same time.

As we have not seen the documents of title, we cannot tell you whether or not the title is registered, but we suspect that it is. If this is the case, will you wish us to register the Legal Charge—we shall be happy to get it executed by Mrs Thomson."

14

The Bank wrote again on 27th June 1990:

"We write further to your letter of 25 June relating to the above property and confirm that Mrs Thomson proposes to charge the property to us in order to secure borrowing in both her name and that of her husband.

We, therefore, enclose for your completion and return to this office standard undertaking duly amended.

We also enclose for signature by Mr and Mrs Thomson Legal Charge forms which we should be grateful if you would acknowledge receipt of and also register our interest on our behalf.

We require that the full content of the Legal Charge is explained to Mrs Thomson so that she is fully aware of what she is signing and the fact that the property is being used to secure the borrowing at this office.

We also require confirmation that Mr Thomson is the only other person with any equitable interest in the property and to this end we enclose a Certificate of Occupancy which we should be grateful if you would have signed in your presence and witnessed on our behalf, also confirm that to the best of your knowledge the details are correct.

We also enclose a card which enables us to open a Business account at this office in joint names. Perhaps you would be kind enough to obtain the Thomsons' signatures on this card so that we can proceed with the opening of the account on their behalf."

15

The final letter in the series is one from Gwyn James & Co to the Bank dated 5th July 1990, the day the respondent signed the Charge:

"We return all the bank forms signed but we have retained the mortgage which has been signed but left undated until we are able to confirm that the property is finally vested in Mrs Thomson.

We have explained the full content of the legal charge to Mrs Thomson and she is aware of what she has signed and that the property is being used to secure borrowing on the joint bank account.

We can confirm that Mr Thomson is the only other person who may have an equitable interest in the property.

We also enclose our own Undertaking as requested."

16

The respondent's account of the meeting with the solicitors at which she signed the legal charge is this:

"I went to see Gwyn James at the suggestion of and together with my husband. At a certain point, Mr James asked Mr Thomson to leave the room. Mr James then advised me …… to this effect: "You know that by signing this you are allowing your house to act as security for your husband's business". Again, like the solicitor at Francis & Co., he did not explain that the charge was unlimited in effect, with respect both to amount and period. Again, had he explained this to me, I would not have entered into the charge."

17

She further deposes that Mr James:

"was the solicitor retained generally by my husband's business. My husband suggested that he should act for me in the transfer of my house from the Trustees to my sole name. This was an example of how my husband normally looked after business affairs for me. Otherwise, I had nothing to do with Mr James who was essentially my husband's solicitor."

18

The Bank's internal information card shows that a £50,000 facility (that discussed at the meetings in June) was granted to Mr and Mrs Thomson on 10th July 1990, it being recorded that:

"undertakings have been received from solicitors and confirmation that charge forms have been signed. Gwyn James have also confirmed in their letter dated 5th July 1990 that they have fully explained the content of the legal charge to Mrs Thomson and she...

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