Habib Bank Ltd v Tufail
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Mr Justice Bennett,Lord Justice Longmore,Re |
| Judgment Date | 07 April 2006 |
| Neutral Citation | [2006] EWCA Civ 374 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B2/2005/0944 |
| Date | 07 April 2006 |
[2006] EWCA Civ 374
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE GUILDFORD COUNTY COURT
HIS HONOUR JUDGE RYLANCE
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Longmore
Lord Justice Lloyd and
Mr Justice Bennett
Case No: B2/2005/0944
Bernard Weatherill Q.C. (instructed by Messrs Schofield Sweeney) for the Appellant
Richard Mawrey Q.C. (instructed by West London Law Solicitors) for the Respondent
This appeal is brought by the claimant, Habib Bank Ltd, against an order of His Honour Judge Rylance made in the Guildford County Court on 15 April 2005. By that order he dismissed the claim and granted relief to the defendant, Nasira Tufail, on her Part 20 claim.
The claimant brought the proceedings to enforce a mortgage made by the defendant in its favour dated 14 January 1997, which was given as security for the debts of a company, Tufco International Limited, owned and run by the defendant's eldest son Basharat Tufail. The judge held that the mortgage had been procured by misrepresentation by Mr Tufail as to the amount secured by it. That is not challenged on appeal. The claimant admitted that, if this was so, it had constructive notice of the misrepresentation.
The judge also held that the defendant had affirmed the mortgage with knowledge of the relevant facts. However, he further held that it would not be inequitable, despite the acts of affirmation, to allow the defendant to assert her right to have the transaction to be set aside. That is the point challenged by the bank on appeal.
By a late respondent's notice, the defendant challenges other aspects of the finding of affirmation, including the question of whether she had adequate knowledge for affirmation at the relevant time.
The acts relied on for affirmation or acquiescence occurred in 2002. In late February solicitors acting for the defendant wrote to the bank to inform it that she had retained them with a view to the sale of the property and to the mortgage being paid off out of the proceeds of sale. Correspondence and contact continued for some time through 2002. Eventually in February 2003 the bank decided that it had waited long enough. In March 2003 it sent a letter before action to the defendant and the proceedings were commenced in April 2003. The bank had first served a demand on Tufco in November 1999 and it is necessary to consider the history of the matter from that time onwards in order to put in context the judge's findings.
Besides the mortgage executed by the defendant, which was over a property at 3 Orchard Close, Woking, Surrey, at the time let to tenants and providing an income to the defendant, the bank had other securities for the indebtedness of Tufco. It had a debenture over the company's assets, it had a lien over an account holding a credit balance in Swedish currency, and it had a personal guarantee from Mr Tufail as director.
On 2 November 1999, the bank demanded payment from Tufco of its overdraft, which then stood at rather more than £177,000. The indebtedness was reduced by stages. In January 2000, some US66,000 was credited to the account following the sale of some plant. At this stage the overdraft limit was reduced from £172,000 to £138,000. This was communicated to the company by letter dated 18 January 2000, in which the bank expressed concern at the company's continuing exposure on the overdraft having regard to the estimated value of its security. The bank said that it regarded the account as being in a default situation requiring action on the bank's behalf to cover its exposure. It noted that it had no current information on the financial position of the company nor a current stock list and could not evaluate the viability of the business. The company was asked to work within the overdraft limit of £138,000 or alternatively to make arrangements to refinance the overdraft. Later in January, the bank realised the security over the Swedish currency account, which resulted in the credit of some £23,000 to the account. The overdraft limit was reduced to £115,000. Following the credit of a further £14,800 to the account in late January the actual overdraft stood at some £110,000. Nevertheless, shortly afterwards the overdraft exceeded the limit of £115,000 and the bank asked for further action to regularise the position.
The documents available include a number of internal notes of the bank dating from 2000, though no comparable ones thereafter. According to a note dated 10 August 2000, Mr Tufail had said that he wished to reschedule the overdraft into a loan. He had explained that he was spending much of his time in the Middle East where he was in the process of starting a new business. He had been told of the need to provide funds to bring the balance to within the limit of £115,000. At the date of the note it stood at £121,000. The note concludes that in the absence of any contact or funds received since the last contact the bank has to consider the commencement of legal action. The last note is dated 28 December 2000. It records that, according to the latest discussions with Mr Tufail, "he is sending us an amount of £20,000 by mid January for partial adjustment and reduction of excess over the limit." The conclusion was expressed as follows: "If the customer does not pay the amount of £20,000 by mid January 2001 as mentioned we shall start recovery proceedings by taking legal action." On 9 January 2001 the bank wrote to the company reminding Mr Tufail of his agreement to send £20,000 by the first week in January for the credit of the account and asking for a meeting to discuss the way forward once that had been done. There is no indication that £20,000 was credited to the account as promised. At various times during the year an amount of £1,000 or so was credited to the account to keep down the accruing interest. On 24 July 2001 the company wrote to the bank referring to the suggestion of refinancing the overdraft with another lender. The company said that it had started this process and gave the name of the solicitors who would be handling the remortgage. It was said that they were confident that this could be done within ninety days. The name of Asma Tufail was given as a contact in the absence on vacation of Mr Tufail. She is a sister-in-law of Mr Tufail and a solicitor. The sequence of correspondence in the bundle appears to be incomplete. However, on 30 November 2001 Mr Tufail wrote again to the bank, informing it that "the house" was being surveyed by Abbey National with a view to a mortgage, which was said to be in place. The solicitor's name was reiterated. The mortgage was said to be in the name of Mr Tufail's wife, but the bank was told that it could contact Asma Tufail or Mr Tufail's accountant, who was named, if any queries were raised. The letter asserted that the process should be complete within a few weeks and that two outstanding monthly service charges would be included in the transfer of funds on completion. Nothing transpired resulting from that. On 31 January 2002 the bank issued a further formal demand to the company to repay the amount outstanding on the overdraft, which by then stood at £125,500 odd. Failing payment of that sum by 7 February, the bank stated that it would commence legal proceedings.
By a letter dated 25 February 2002 Messrs O'Rourke Reid, solicitors, wrote to the bank as follows:
"Dear Sirs
Re3 Orchard Close Woking Surrey
Account No 3/101453.7.
We act on behalf of Mrs Nasira Tufail who has instructed us upon the sale of the above property with a view to paying off the liability under your charge.
Please let us have the title documents on your usual undertaking, so that we may prepare the sale contracts."
That letter was signed by Caroline Start, who I take to be a partner in the firm. The letter was received by the bank on 27 February. The response came from the bank's solicitors, Denison Till, on 4 March who sent the title deeds to O'Rourke Reid upon the usual undertaking. On the same day Denison Till wrote to Mr Tufail. The letter said this:
"Our clients have asked us to review the account and supporting documentation with a view to taking legal action for recovery of the monies. We are informed however that our clients have been contacted by solicitors who have advised that they are instructed to act on the sale of the property at 3 Orchard Close Woking Surrey. The property is to be sold with a view to discharging liability to our clients as secured by a charge in their favour over the property.
Our clients have asked us to emphasise that as previous promises of payment have been made, if they are not kept advised of the sale and provided with all details in respect of the same or should the sale of the property not proceed then our clients will revert to us in respect of legal proceedings to be taken for recovery of the money due to them."
That letter was sent to Mr Tufail at three different addresses. Two of them were addresses for the company and the third was the address of the mortgaged property. The bank does not appear to have had a personal address for Mr Tufail. A letter sent to the mortgaged property would not be expected to get to Mr Tufail but it may be that one of the letters addressed to the company at its Southampton address reached him. Later in March O'Rourke Reid asked for a redemption figure from the bank as at 31 March 2002. That was supplied although we do not have the figure in the papers. On 28 March 2002 the bank's solicitors telephoned O'Rourke Reid for an update on the sale. They were told that the...
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