Cornish v Midland Bank Plc and Another
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE KERR,LORD JUSTICE CROOM-JOHNSON,LORD JUSTICE GLIDEWELL |
| Judgment Date | 17 July 1985 |
| Judgment citation (vLex) | [1985] EWCA Civ J0717-6 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 85/0449 |
| Date | 17 July 1985 |
[1985] EWCA Civ J0717-6
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BOURNEMOUTH DISTRICT REGISTRY
Royal Courts of Justice
Lord Justice Kerr
Lord Justice Croom-Johnson
Lord Justice Glidewell
85/0449
MR R.K.EVANS, instructed by Messrs. G.A.Mooring, Aldridge & Brownlee (Bournemouth), appeared for the Appellants (Defendants).
MR J.D.GRIGGS, instructed by Messrs. M.W.Bailey & Co. (Dorset), appeared for the Respondent (Plaintiff).
MR T.J.HUMES, the Respondent (Third Party), appeared in person.
I invite Lord Justice Croom-Johnson to deliver the first judgment.
On 18th April 1984 Mr Justice Taylor awarded the plaintiff £7,034.06 plus interest of £4,107.89 against the defendants as damages for negligence, a total of £11,231.95. The learned judge also set aside a second mortgage signed by the plaintiff in favour of the defendants on the ground that it had been obtained by undue influence. The third party is the former husband of the plaintiff. The judge held that the defendants were entitled to recover from him the £11,231.95 which they were adjudged to have to pay to the plaintiff. Both the defendants and the third party appeal against the judgments. The plaintiff sued under her maiden name. She and the third party (whom I will call "the husband") were married in 1972. In 1973 they bought 252 Bournemouth Road, Charlton Marshall in joint names for £10,000 with the help of a mortgage of £9,000 from the Nationwide Building Society. At about that time the husband opened an account in his own name with the defendants (whom I will call "the bank") at their Blandford Forum branch.
In 1975 the husband and the plaintiff formed the intention of selling 252 Bournemouth Road and buying a property called Dominey's Farmhouse at Fiddleford in Dorset. The farm was bought for £16,000 in joint names with £10,000 on mortgage from the Ramsbury Building Society. It needed renovation at a cost of £2,000. On 14th January 1976 the husband visited the bank and saw the manager, Mr Winslow. Mr Winslow arranged for him to open a house loan account with a limit of £2,000 to pay for the renovations at the farm, and also to overdraw up to £200 on his current account. These loans were to be repaid when 252 Bournemouth Road was sold. In addition the bank was to have a second mortgage on both the properties and the plaintiff was to sign them. She was also to transfer her own account from the National Westminster Bank at Liverpool to the Midland Bank at Blandford Forum.
Accordingly, the next day the plaintiff called on Mr Winslow and arranged for the transfer of her account. It was an account she seldom used and it was a few pounds overdrawn. From then on she was a customer of the bank.
The two second mortgages were executed. That on 252 Bournemouth Road was dated 29th January 1976 and was signed by the plaintiff at the bank on a date in January. That on Dominey's Farmhouse was signed by her on a date between 2nd March and 3rd May 1976. It was dated 18th May 1976. The principal allegation of negligence against the bank, and the suggestion of the exercise of undue influence, arise out of the later visit.
Both the mortgages were on the bank's printed form. Each charged the relevant premises as security for advances made to the husband and contained a guarantee for any loans made to the husband then or later. The plaintiff's case was that she never appreciated that the security was to cover more than the loan of up to £2,000 intended to cover the renovations.
On 2nd March the farm was conveyed to the husband and the plaintiff in joint names, and on 5th March the house loan account was opened. At this time the husband was stating to both the plaintiff and the bank that £2,000 was the limit of what he was going to spend on the renovations.
On 5th May 1976 the plaintiff left her husband and went to Italy to live with Roberto Gallo, by whom she later had two children. By then the husband's current account was overdrawn by substantially more than the £200 which had been arranged, and the house loan account had been drawn on for more than £900.
According to the bank's reference book, on 28th June 1976 the husband telephoned Mr Winslow and told him that his wife had left him. He also said that he wanted the money which was due to come in from the sale of 252 Bournemouth Road to be credited to a separate account and the house loan account to be left "as it stands in case there is a claim in respect of his marital problem."
As the learned judge found, the husband at this time told the plaintiff that half the surplus proceeds from the sale of 252 Bournemouth Road would go to her. The bank's records confirm that this was his view. But the money was promised to the bank under the second mortgage on that property, and when the house was eventually sold in September 1976 the sum of £2,182 (which was what was left after repaying the Nationwide Building Society) was properly credited to the house loan account. The renovation of the farm had by then cost more than the ceiling of £2,000. Besides that, transfers had been made from the loan account to the husband's current account and to a new deposit account. Its limit had been increased, and after the credit from the sale of 252 Bournemouth Road, the house loan account was still in debit. In the meantime the plaintiff, relying on the fact that the husband had told her he was going to pay £500 into her account, had drawn a cheque in Italy on that account amounting to £350. Her father Major Cornish telephoned the bank asking that the cheque should be met, but that was not possible for lack of Exchange Control approval. Altogether two cheques, totalling £520, were not met. The bank was in touch with Major Cornish about them. The bank also wrote to the plaintiff in Italy. That letter was eventually returned, in December, as wrongly addressed, but the bank (as the judge found) made no further attempt to get in touch with either the plaintiff or Major Cornish. The importance of that was that it showed the bank knew how to get in touch with the plaintiff if need be. By January 1977 her account was 15p in debit and was dormant. On 17th January Mr Winslow closed it without notice.
The husband divorced the plaintiff in 1978. In the meantime he had met a Greek lady with whom he lived and whom he subsequently married. All this was known to the bank.
In the court below the plaintiff's case was advanced on the basis that the advice given to her at the time of the execution of the second mortgage was negligent, and also the bank owed a fiduciary duty to her and so should have advised her to obtain independent advice. In addition, it was alleged that from the time when the bank knew on 28th June 1976 that the marriage was breaking up it owed her a duty to see that her interest in half the equity in Dominey's Farmhouse was not prejudiced by further loans to the husband. The farm was ultimately sold in 1979 for £27,000, by which time the bank had made further advances to the husband. It is enough to say for the present that only £748 was left over after the building society, the bank and sale expenses had been paid.
Both the husband and Mr Winslow gave detailed evidence on the husband's affairs and banking between 1976 and the sale of the farm in 1979. The learned judge formed an adverse view of the husband and his evidence. He was also very critical of Mr Winslow. The view he took of what happened was that the husband was anxious to pay as little to the plaintiff as he could and that in that he was assisted by Mr Winslow.
It is appropriate now to return to the occasion in 1976 when the plaintiff signed the second mortgage on the farm. When she went to sign she saw Mr Park, a Grade 3 clerk deputed to deal with her by Mr Winslow. Both gave evidence, and were considered by the learned judge to be honest witnesses struggling to recall a conversation held eight years previously. The effect of the plaintiff's evidence, which, so far as it went, was accepted by the judge, was that she understood that she was signing some sort of security or guarantee against the loan to a maximum of £2,000 for the cost of improving the farm. She could not remember if she was told that it was a mortgage, or whether Mr Park gave her any explanation of it. She could not remember Mr Park telling her that it would secure any further moneys borrowed by her husband. The evidence given by Mr Park was that he took it on himself to explain the effect of the document to the plaintiff. He said that in accordance with his usual practice he would have told her that it was a second mortgage on Dominey's Farmhouse, that it was almost identical to a building society mortgage and that it secured all borrowings in the name of the husband. The phrase "all borrowings" is ambiguous. It might mean all borrowings up to the £2,000 limit, or all borrowings thereafter, even above that limit. When Mr Park was asked whether he had said anything to convey the second meaning he replied "not unless I was specifically asked, no." Since the learned judge accepted the plaintiff's evidence that that possibility was not in her mind, it followed that he was satisfied that she did not ask it. Mr Park later repeated that he had not given any such explanation, but he was satisfied that the plaintiff understood what the document was, because he knew she had in the past signed two building society mortgages and had also signed the second mortgage on 252 Bournemouth Road. He agreed that the plaintiff seemed confused about the nature of this document.
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