Castle Phillips Finance v Piddington
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE McCOWAN,LORD JUSTICE PETER GIBSON,SIR JOHN MAY |
| Judgment Date | 08 December 1994 |
| Judgment citation (vLex) | [1994] EWCA Civ J1208-2 |
| Docket Number | CCRTI 93/0877/F |
| Court | Court of Appeal (Civil Division) |
| Date | 08 December 1994 |
[1994] EWCA Civ J1208-2
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE SOUTHAMPTON COUNTY COURT
(His Honour Judge Chalkley)
Before Lord Justice Mccowan Lord Justice Peter Gibson Sir John May
CCRTI 93/0877/F
MR M NORMAN (Instructed by Lamport Bassitt, Hants SO9 3JB) appeared on behalf of the Plaintiff/Respondent.
MR N GERALD (Instructed by Michael Turner Garrett, Woking, GU22 7QF) appeared on behalf of the 2nd Defendant/Appellant.
I will ask Lord Justice Peter Gibson to give the first judgment.
We have before us an appeal by the second defendant, Kate Piddington ("the Wife"), and a cross-appeal by the plaintiff, Castle Phillips Finance Co Ltd ("CP"), from the orders of His Honour Judge Chalkley in the Southampton Court on 25 March and 2 June 1993. The relevant facts are of some complexity and I summarise them from the careful reserved judgment of the judge.
The Wife was born on 19 January 1921. She was first married to a Mr Wiseman who died in 1957. On his death the matrimonial home, 42 Bishops Road, Woolston, Southampton ("the Property"), which was held on a long lease subject to a ground rent, vested in her unencumbered. In 1962 the Wife married the first defendant, Brian Piddington ("the Husband"), who is 12 years her junior.
In 1964 the Husband was convicted on four charges of forgery and put on probation. The Wife did not learn of this until 1985. The Husband is a long distance lorry driver who also ran a small car repair business from the Property and dealt in cars. In 1978 the Husband was convicted of theft in Scotland and sentenced to 3 months' imprisonment. He convinced the Wife that he had been framed. On 23 June 1978 the Wife bought the reversion to the leasehold interest in the Property, thereby becoming the owner of the unencumbered freehold. The Wife earned some income through needlework, and breeding and dealing in pedigree poodles. For the poodles business there was a bank account with Lloyds Bank ("Lloyds"), but the Husband operated it at her request. He had his own bank accounts with Barclays Bank ("Barclays").
In 1981 the Husband wanted a loan of £1,000 to purchase a car with a view to reselling it at a profit within 2 weeks or so. He wanted Lloyds to take over his accounts from Barclays and to make him the loan. The Wife requested Lloyds to help and agreed to assist the Husband by charging the Property as security.
On 15 December 1981 the Husband and the Wife attended Lloyds. She took her Land Certificate and executed a charge in favour of Lloyds. Her evidence at the time was that she thought that Lloyds was lending £1,000 for only 14 days, and that she executed the charge without independent advice from a solicitor. The judge found that Lloyds had sent her to see a solicitor and that everything had been done properly.
By the charge, she charged the Property as security for all the monies due on all the Husband's bank accounts with Lloyds, including a loan account of £1,000 and an overdraft liability of £1,700. The Wife showed no particular interest in the operation of the Husband's accounts with Lloyds, even though the overdraft limited was exceeded. She took no steps to secure the return of the Land Certificate which she had left with Lloyds. The Lloyds' charge was duly registered.
In 1982 the roof of the Property required complete renovation. The Husband spoke to a jobbing builder occasionally employed by the Wife. The builder estimated the work would cost £1,400. It may be that the figure was inflated by the Husband when reporting to the Wife, but she thought £2,500 would be the cost. Whatever sum was needed, she did not have the money and had to borrow it.
At that time the Husband wanted to change from Lloyds to another bank. He saw an Assistant Manager at Barclays, Mr Suter, in November 1982. The Husband wanted an overdraft of £5,000 and a loan of £2,000 to pay for the roof repairs. Mr Suter agreed to help, but required to see the Wife because Barclays would need a first mortgage on the Property. The Husband and the Wife accordingly met Mr Suter on 18 November 1982. Most of the discussion related to the loan for the roof repairs. The Wife understood that the meeting was to arrange a loan of £2,500 for that purpose, that because she had no account with Barclays the loan would have to be through the Husband's bank accounts and that the Property was to be used as security. But, as the judge found:
"She thought that in case of a default all the bank would do would be to seize goods. She did not think that the bank would take recourse to the house for such a small amount."
In fact when she executed a Legal charge in favour of Barclays at that meeting, it was to secure payment of all sums due to Barclays on all accounts of the Husband with Barclays. The judge said:
"It is far from probable that it was made clear to her that she was charging the Property to secure not only the Lloyds payment off and the roofing loan, but all moneys due in future from the Husband on his new accounts at Barclays."
The judge further said:
"[Barclays] knew the relationship between [the Husband and the Wife] and must be taken to have realised the possibility of the Husband's influence in obtaining the security for all his accounts and borrowings."
Barclays' charge contained a provision that interest should be computed and compounded according to the usual mode of Barclays, and in clause 9 a provision for the recovery of Barclays' costs, charges and expenses. Barclays did not suggest that she went to a solicitor for independent advice. This was considered unnecessary because the Wife had already agreed a similar arrangement with Lloyds. By the time of that meeting Barclays had already paid off the Husband's debts to Lloyds on 11 November 1982 in a sum of £3,114, and Lloyds had sent the Land Certificate to Barclays with a completed form of discharge of its charge for lodgement at the Land Registry. On 9 December 1982 Barclays gave the Land Registry notice of the deposit of the Land Certificate.
The result of these arrangements was that while the Husband was the principal debtor to Barclays, the Wife had charged the Property as security for his debts, including the roofing loan. She did not trouble to learn the terms of that loan and, as the judge found:
"Scant effort was made by Barclays to ensure that [the Wife] realised the full extent of her liability."
On the Husband's instructions, the roof was repaired at a cost of £1,400, but the builder was not paid. The Wife did not know of the failure to pay. The Husband drew on the roofing loan account, but used the money for other purposes. He exceeded limits on other accounts with Barclays.
On 27 September 1983 Barclays gave notice to the Husband, calling in all his debts. At that date he owed £1,166 on the roofing loan account and about £8,100 on his other accounts. On 3 January 1984 Barclays sued the Husband and the Wife in the Southampton County Court, but the Wife was not validly served. However, judgment for some £11,000 was obtained by Barclays in default of defences and for possession of the Property to be given on 22 March 1984. The Wife was not told of that order and had the order set aside for bad service.
The Husband sought to satisfy Barclays by obtaining fresh finance through brokers. Because a new extended mortgage with a building society would take time to arrange, the brokers secured a short term bridging loan of £15,000 from CP, a money lender. The interest rate was 48 per cent per annum. CP insisted on its loan being made to both the Husband and the Wife, the Wife undertaking primary responsibility jointly with the Husband and with the Property as security. The Wife knew nothing of these arrangements. The Husband conspired with a Mrs Snook that she should impersonate and forge the signature of the Wife. CP and the Husband instructed solicitors to act on the transfer by the Wife of the Property into the joint names of the Husband and the Wife and to charge it to CP. The Husband, and Mrs Snook purporting to be Wife, signed the memorandum of agreement for the loan, the transfer and a Legal charge on 16 March 1984. CP had no notice of the fraud.
The £15,000 was released to the solicitors in a series of cheques of CP which were payable to the Husband and the Wife, each cheque being for a particular debt of the Husband. The Husband and Mrs Snook then endorsed each cheque, which the solicitors passed to the particular creditor. Thus Barclays was paid £11,181.04. Included in that sum was the balance of the roofing loan account, £1,564.94, and £4,735.39 representing the up to date balance for paying off Lloyds, totalling £6,300.33. On 27 April 1984 CP obtained the cancellation of the entry of Barclays' charge at the Land Registry. The transfer of the Property into the joint names of the Husband and the Wife was registered, as was the charge in favour CP.
The Husband defaulted under the loan agreement with CP. On 1 August 1984 CP commenced proceedings against the Husband and the Wife seeking payment of £16,718.52 and possession of the Property. Again the Wife had no notice of the proceedings, the Husband intercepting her post. At a hearing on 1 October 1984 he confessed to what he had done. He and Mrs Snook were charged and confessed. Only then was the Wife informed of what had occurred. On 11 November 1985 the Husband and Mrs Snook were convicted on their own pleas and he received a...
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