Gallie v Lee
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE RUSSELL,LORD JUSTICE SALMON |
| Judgment Date | 25 February 1969 |
| Judgment citation (vLex) | [1969] EWCA Civ J0225-3 |
| Date | 25 February 1969 |
| Court | Court of Appeal (Civil Division) |
Appeal by the Defendants from order of Mr. Justice Stamphon 29th March, 1968.
[1969] EWCA Civ J0225-3
The Master of the Rolls (Lord Denning)
Lord Justice Russell and
Lord Justice Salmon
In The Supreme Court of Judicature
Court of Appeal
Mr. H.J. ALBERY, Q.C., and Mr. A.E. HOLDSWORTH (instructed by Messrs. Hunt & Hunt) appeared on behalf of the Plaintiff.
Mr. PETER OLIVER, Q.C., and Mr. H.F.J. TEAGUE (instructed by Messrs. Sharps, Pritchard & Co., London, agents for Messrs. Shoosmith & Harrison, Northampton) appeared on behalf of the Second Defendants.
Mrs. Gallic is now an old lady of 84 years of age. She is a widow who lost her husband many years ago. She has no children of her own. She has a nephew, Walter Parkin, who is 46. She has made a Will leaving everything to him and she relies very much on his advice.
Over thirty years ago Mrs. Gallie bought a house - No. 12 Dunkeld Road, Goodmayes, Essex. It was leasehold with over 900 years to go, at a small ground rent. She has lived in it herself ever since and has carried on there the business of a boarding-house. For the last 8 or 9 years she has been helped greatly by her nephew, Walter Parkin. She has given him the money to pay the bills for repairs, the insurance, and so forth. Some years ago she raised some money on mortgage from a building society but this was paid off by the end of 1961 and she got the deeds back. On getting the deeds, she handed them over to her nephew. She did it, because, in her own words: "I had made my Will already and everything I possessed belonged to him". She knew that he wanted to raise money on it: and she was quite content for him to do so, so long as she could stay in the house during her life. When she handed the deeds, she said to him: "Here you are, so as I can continue to live here". She was asked: "The whole purpose of giving the house to your nephew in your lifetime was so that he could get money on it, was it not?" She answered: "Yes".
Now Walter Parkin had a friend called William Lee. He told Lee that his aunt had a house - No. 12 Dunkeld Road - and she had left it to him in her will. Lee was heavily in debt and wanted money to pay off his creditors. There were conversations between them to see how money could be raised on No. 12 Dunkeld Road. Lee went to his solicitors, Lincoln a Lincoln, where he saw a managing clerk - Mr. Bertram Hall. Mr. Hall was unlike most managing clerks. He was dishonest, and has since been sent to prison. He advised Lee that documents should be drawn up by which Mrs. Gallie would sell the house to lee, for £3,000, butthat sum would not be paid, and then Lee would mortgage it for £1,500. He wrote a letter on 19th May, 1962, in these terms:
"Mr. Lee, C/o Mr. W.M. Parkin:
The simplest way of dealing with the matter would he for you to purchase the property for £3,000. No stamp duty would be payable and it would not affect Mrs. Gallie from a tax angle, the could then arrange a mortgage without any difficulty for, say, £1,500, Lincoln & Lincoln".
Lee a dopted this suggestion. The solicitors drew up a document ready for signature, whereby Mrs. Gallie was to sell the house to Lee. It contained the recital:
"The vendor has agreed with the purchaser for the sale to him of the premises comprised in and demised by the lease for the sum of £3,000".
and the habendum:
"In pursuance of the said agreement and in consideration of the sum of £3,000 now paid by the purchaser to the vendor (the receipt whereof the vendor hereby acknowledges) the vendor as beneficial owner hereby assigns unto the purchaser all the premises comprised and demised by the lease TO HOLD the same unto the purchaser for all the residue of the term granted therein".
On receiving that document from the solicitors on 15th June, 1962, Lee took it round to Mrs. Gallie and got her to sign it. Mr. Parkin witnessed her signature, so presumably he was there at the time. The old lady did not read the document as she had broken her glasses. She said to Mr. Lee: "What is it for?" He said: "It is a deed of gift for Wally for the house". So she signed it thinking it was a deed of gift to her nephew Walter. She thought that her nephew was going to borrow money on the deeds through Mr. Lee. She said: "I done it to help my nephew with his business. I thought I was signing it over to"Wally…I would not have made it over to Mr. Lee…You wouldn't do that for a man you hardly knew". She understood that she was still going to live in the house herself rent free. She said to her nephew: "I don't mind what I do, Wally, to help you along".
According to the document, Mr. lee was to pay her £3,000 for the property, but he paid her nothing. As soon as Lee got the document signed, he let the solicitors have it. They put it before the Northampton Building Society and obtained a loan of £2,000 for Mr. Lee. Walter Parkin gave a reference for Mr. Lee, saying that he was completely reliable, and adding a good deal more of false information about Lee. The £2,000 was paid to the solicitors who paid their own costs out of it and paid the rest into Lee's Bank, where it was used up to pay his creditors. Afterwards Lee raised more money on the property by a second charge: and later on he defaulted in the instalments on both mortgages. The Building Society sought to recover possession. Whereupon Mrs. Gallie and Mr. Parkin saw solicitors. She got legal aid to bring proceedings claiming that she was not bound by the Assignment to Lee. It was, she said, not her deed. In latin - non est factum. With the result that the Building Society could not gain any rights through or under it, as it was not her deed.
Mr. Justice Stamp made these findings of fact: "I find as a fact that Mrs. Gallie did not read the document, that Lee represented it to her as a Deed of Gift to Parkin and that Mrs. Gallie executed it in the belief that that was what it was, I also find as a fact that Mrs. Gallie had no idea that the document took the form of a conveyance on sale from herto Lee and that a sale or gift to him was something which she did not and would not for one moment have contemplated".
On these facts the Judge found that the assignment was not her deed: and that she was entitled to the property free of any mortgage or charge. I must say at once that, as the case then stood, this would lead to a most unjust result. The one person to benefit would be Mr. Parkin. He would get the house under his aunt's will, free of any mortgage or charge, on the footing that the deed of assignment was not her deed: yet he was the very person who witnessed her signature to the assignment and thus vouched that it was her deed.
The case thus raises the important question: What is the effect in law when a man signs a deed, or a contract, or other legal document without reading it: and afterwards it turns out to be an entirely different transaction from what he thought it was? He says that he was induced to sign the document by the fraud of another, or, at any rate, that he was under a fundamental mistake about it. So he comes to the Court and claims that he is not bound by it.
In such a case, the legal effect is one of two: Either the deed is not his deed at all ( non est factum): Or it is his deed, but it was induced by fraud or mistake ( fraud or mistake). There is a great difference between the two. If the deed was not his deed at all, (non est factum) he is not bound by his signature any more than he is bound by a forgery. The document is a nullity just as if a rogue had forged his signature. No one can claim title under it, not even an innocent purchaser who bought on the faith of it, nor an innocent lender who lent his money on the faith of it. No matter that this innocent person acted in the utmost good faith, without notice of anything wrong, yet he takes nothing by the document. On the other hand, if the deed was his deed, but his signature was obtained from him by fraud or under the influence of mistake ( fraud or mistake), the document is not a nullity at all. It is not void abinitio.It is only voidable: and in order to avoid it, the person who signed the document must avoid it before innocent persons have acquired title under it. If a person pays out money or lends money on the faith of it, not knowing of the fraud or mistake, he can rely on the document and enforce it against the maker. It avails the maker nothing, as against him, to say it was induced by fraud or mistake.
Such being the difference in consequences between non est factum on the one hand and fraud or mistake on the other hand, the question is: How can we tell which is which? In each case the man signs the document without reading it. In each case his signature is obtained by fraud or induced by mistake. In each case his error is fundamental. Wherein, then, lies the difference between one and the other? 1. THE DISTINCTION BETWEEN CLASS AND CONTENTS
The most favoured distinction is this: If the man was mistaken as to the class and character to which the transaction belonged, that is to say, as to the essential nature of the transaction, it is not his document and he can rely on non est factum. If he was aware of its essential nature, but only mistaken as to the contents of the document, it is his document and he can only rely on fraud or mistake. Thus in Anson on Contracts, 22nd Edition (1964) p. 282, it is said that "in order for the defence of non est factum to succeed, the party executing it must show that he was mistaken, not merely as regards the contents, but as to the essential nature of the contract". And in Cheshire and Fifoot on Contracts 6th Edition (1964) p. 220, it is said that "he...
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