Barclays Bank Plc v O'Brien

JurisdictionEngland & Wales
Judgment Date22 May 1992
Neutral Citation[1992] EWCA Civ J0522-1
Judgment citation (vLex)[1994] EWCA Civ J0630-12
Docket Number92/0481
CourtCourt of Appeal (Civil Division)
Date22 May 1992
Barclays Bank plc
Nicholas Edward O'Brien
First Defendant


Bridget Mary O'Brien
Appellant(Second Defendant)

[1992] EWCA Civ J0522-1


Lord Justice Purchas

Lord Justice Butler-Sloss

Lord Justice Scott






Royal Courts of Justice

MR. SIMON BUCKHAVEN (instructed by Messrs Stops & Burton, Daventry) appeared on behalf of the Appellant (Second Defendant).

MR. PHILIP GOODENDAY (instructed by Harry I. Alkin & Co.) appeared on behalf of the Respondent (Plaintiff).


This appeal from the judgment of His Honour Judge Marder Q.C. raises yet again a problem that has been before the Court of Appeal on a number of occasions over the past ten years or so. The problem arises where a debtor is required by a creditor to provide security for his indebtedness; the debtor and creditor agree that the security will be provided by some third party; the relationship between the debtor and the third party, typically husband and wife, makes it likely that the third party's assistance will be forthcoming; the debtor procures the third party's consent by some material misrepresentation or by exerting undue pressure or influence of some kind; the third party signs the necessary security documents without any independent advice and without any explanation from the creditor of the true effect of the documents; the third party subsequently, as a defence to the creditor's attempt to enforce the security documents contends that he or she was induced to sign by the debtor's material misrepresentation, or did not properly understand the import of the documents, or that his or her consent was not a true consent having regard to influence or pressure exerted by the debtor. The question for the courts in these cases is whether the third party can escape from the effect of the documents that he or she has signed. In most cases the relationship between debtor and third party is that of husband and wife. In some, however, it is that of adult child and elderly parent. In none of the cases has the relationship between the debtor and the third party been such that, in law, undue influence is to be presumed until rebutted.


Some of the cases to which I have referred suggest that the answer to the problem depends on whether or not the debtor can be regarded as having been appointed by the creditor to act as agent of the creditor in procuring the consent of the third party to the proposed security transaction.


This approach has, to my mind, lent an air of unreality to some of the arguments addressed to the court. In a typical case in which a husband, seeking a bank advance for his business purposes, is told by his bank manager that security in the form of a charge over the jointly owned matrimonial home must be provided, it would astonish both the husband and the bank manager to be told that the husband had been appointed by the bank as its agent to obtain the wife's consent to the proposed charge. It may be that a court of equity will regard the bank as affected by equities arising out of the manner in which the husband persuades his wife to agree to the proposed transaction. And it may be that the extent to which the bank has left it to the husband to procure the wife's consent and to explain the transaction to her will be a critical feature of the case. But to describe the issue as one which depends on whether or not the bank must be taken to have appointed the husband as its agent to deal with the wife and to procure her consent serves, in my opinion, to mask the basis upon which in certain cases creditors have failed to enforce their security against the third parties and upon which in other cases they have succeeded.


I think it convenient in this judgment first to set out the salient facts of the case, as found by the judge, and then to consider the authorities from which must be extracted the principles of law and equity to be applied to the facts. The facts


Mr. and Mrs. O'Brien were married in 1963. For the past 16 years or so their matrimonial home has been 151, Farnham Lane, Slough. They had purchased the property in December 1974 in their joint names with the aid of a building society mortgage. By 1987 the amount outstanding on the building society mortgage was £25,000 or thereabouts.


Mr. O'Brien is a chartered accountant who, in 1987, was in practice as a sole practitioner. He had also an interest in a company, Heathrow Fabrications Ltd., and was the company's auditor. He was not a director. He was, however, negotiating with the other shareholders to take an increased stake in the company.


The manager of Barclays Bank, Slough was a Mr. Roger Tucker. He and Mr. O'Brien were acquainted with one another and on first name terms. The company, when Mr. O'Brien first became associated with it, had banked at the Watford branch of Barclays Bank. Mr. O'Brien was instrumental in the account being transferred to Slough. In February 1987 Mr. Tucker was transferred to and became manager of a branch of Barclays Bank at Woolwich. The company's account was, accordingly, in April 1987 transferred to the Woolwich branch so as to continue to be supervised by Mr. Tucker.


The company had agreed an overdraft facility with the bank that by December 1986 had been raised to £40,000. The company frequently exceeded its agreed overdraft limit and, in December 1986, the debt balance on its account stood at about £57,000. In the first three months of 1987 a number of the company's cheques were dishonoured on presentation.


In April 1987 discussions took place between Mr. Tucker and Mr. O'Brien in which Mr. O'Brien was endeavouring to obtain an increase in the overdraft facilities available to the company. Mr. Tucker agreed to allow an overdraft facility of£60,000 for one month. His note of 2nd April 1987 records that:

"…I have agreed to mark an overdraft facility of £60,000 for one month, as O'Brien is presently in the course of remortgaging his house to raise the £60,000. If there is any problem with this (wife may be the problem) his son has raised £40,000 which if necessary will be in substitution of the £60,000".


This note shows that Mr. O'Brien was offering the house as security but that the Bank was aware that Mrs. O'Brien might not agree to the proposal.


The agreed £60,000 overdraft was utilised by the company but the additional security was not forthcoming. Discussions between Mr. Tucker and Mr. O'Brien continued. By 15th June 1987 the company's overdraft had risen to over £98,000. Cheques were once again being bounced.


In this state of affairs an important meeting took place between Mr. Tucker and Mr. O'Brien on 22nd June 1987. Mr. O'Brien wanted an increased overdraft facility for the company. Mr. Tucker wanted additional security. It was eventually agreed that the company would be allowed an overdraft facility of £135,000, reducing to £120,000 after three weeks. As security it was agreed that Mr. O'Brien would guarantee the payment by the company of its indebtedness and that his liability under the guarantee would be secured by a second charge over the house which was believed to have an equity of about £100,000. In addition Mr. and Mrs. O'Brien's son, who also worked in the company, was to provide certain security, but nothing turns on his involvement and I need not go into the details.


Mr. Tucker gave instructions for the necessary security documents to be prepared. These included a guarantee to be signed by Mr. O'Brien and a legal charge of the house to be signed by both Mr. and Mrs. O'Brien. When the documents were ready, Mr. Tucker sent them to the Burnham branch (Burnham was a sub-branch of Slough) to await signature by Mr. and Mrs. O'Brien. Together with the documents he sent an important memorandum to the Burnham sub-branch. The memorandum said this:

" re: Mr. and Mrs. N.E. O'Brien 2nd Charge 151 Farnham Lane, Slough, Berkshire

Our above named customers will be calling at your sub branch Burnham on Wednesday 1st July 1987 to sign the enclosed documentation. We would be obliged if you could witness our customers' signatures where appropriate and ensure that they are fully aware of the documentation signed. The second charge over the property is to be held in support of Mr. O'Brien's balance of account guarantee liability to Heathrow Fabrications Limited who bank with us. The company is currently afforded an overdraft facility of £107,000 and we are in the process of agreeing to increase this facility in the near future to £135,000. Thus our customers should be advised of the current level of facilities granted and that soon the maximum facilities to be granted to the company will be £135,000 and we will be looking to the guarantee for this sum which in turn is supported by the charge over the above property. Please ensure that our customers are fully aware of the nature of the documentation to be signed and advise that if they are in any doubt they should contact their solicitors before signing.

Enclosed are the following forms which should be completed as follows:—

305U Original

To be signed by Mr. O'Brien and witnessed by yourselves, Mr. & Mrs. O'Brien to acknowledge receipt of copies at foot of page.

305U with side letter on reverse

Side letter to be signed to ensure that there is no doubt that charge is to be in support of the guarantee liability. Mr. & Mrs. O'Brien to sign at foot and across join at top.

305U copies

Copy guarantees for customers' records".


Mr. O'Brien was informed that the documents were ready for signing. On 1st July he attended Burnham sub-branch. The guarantee, the...

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