Lloyds Bank Plc v Egremont and Another
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LLOYD,MRS JUSTICE BOOTH |
| Judgment Date | 23 February 1990 |
| Judgment citation (vLex) | [1990] EWCA Civ J0223-1 |
| Date | 23 February 1990 |
| Docket Number | 90/0152 |
| Court | Court of Appeal (Civil Division) |
[1990] EWCA Civ J0223-1
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE WEYMOUTH COUNTY COURT
(HIS HONOUR JUDGE BEST)
Royal Courts of Justice
Lord Justice Lloyd
Mrs Justice Booth
90/0152
MR JAMES MUNBY Q.C., instructed by Messrs Scott Bailey & Co. (Lymington), appeared for the Appellant (Second Defendant).
MR S. BROWNE-WILKINSON, instructed by Messrs Cameron Markby Hewitt, appeared for the Respondent (Plaintiff).
This is an appeal from a decision of Judge Best given on 29th June 1989 in the Weymouth County Court whereby he affirmed an order of the Registrar that the defendants do deliver up possession of a house known as Easthill House, Church Lane, Piddletrenthyde, Dorset.
The basic facts are simple. Mrs and Mrs Egremont married in 1975. In 1981 they bought Easthill House as joint tenants with the benefit of a mortgage ("the first mortgage") from Lloyds Bank. In January 1982 Mr Egremont wrote to the bank saying that he wished to start up business on his own account in the grain trade. His plan was to buy grain direct from farmers, and sell it on to processors, such as BOCM, Sainsbury's and others. He set up a company for the purpose known as Egremonts Ltd. What he needed was working capital. He hoped the bank would provide the necessary facilities. He saw the bank manager in March 1982. At first his ideas were ambitious. He hoped to borrow up to about £250,000. But the bank manager regarded this as unrealistic. On 19th April 1982 the bank manager wrote, offering a facility up to a maximum of £40/50,000. As security the bank would require Mr Egremont's personal guarantee, and a second charge over the house.
In the event the overdraft limit agreed was £25,000. On 20th May 1982 Mr Egremont signed a guarantee on the bank's standard form of guarantee. Mrs Egremont was in hospital at the time. On 7th June Mr Egremont telephoned the bank manager to tell him that he and his wife would now like to sign the second charge over their home. There must have been some discussion on the telephone as to where the document would be signed. At all events, Mr Egremont wrote on 7th June asking the bank manager to send the documents to his solicitors, care of Mr Watts, at whose office they would both sign. The bank manager duly sent the documents to Mr Watts and on 11th June Mr and Mrs Egremont both signed a legal charge on the bank's standard form, charging the home as security for "all monies…now or hereafter due and owing from Mr Egremont…whether as principal or surety…". There was a provision whereby the bank could increase Mr Egremont's facilities without discharging or affecting the security. Mrs Egremont signed in the presence of Mr Watts as witness, who added in manuscript that he had explained to her the contents of the document.
Unfortunately things went badly wrong for Mr Egremont, both with his business and his marriage. In September 1986 he brought his mistress to live with him in the matrimonial home. Not surprisingly Mrs Egremont moved out, together with the two children. She spent 18 months with her parents, and then moved into a rented house. The bank learned of the separation in June 1987. At the time of the separation Mr Egremont owed £18,000 on his current account. The company owed £141,000 on three different accounts, all guaranteed by Mr Egremont. By 19th February 1990 the companies owed £456,000 and Mr Egremont owed £748,000. Mr Egremont's total indebtedness to the bank was thus not far short of one and a quarter million pounds.
It only remains to add that Mr and Mrs Egremont are now divorced and Mr Egremont is bankrupt.
When the case came before Judge Best it was common ground (1) that neither the bank nor Mr Egremont had exercised undue influence over Mrs Egremont; (2) Mrs Egremont had an arguable counterclaim for unliquidated damages in respect of certain alleged misrepresentations by the bank and (3) the existence of her counterclaim did not provide her with a defence to the claim for possession under the mortgage: see Samuel Keller (Holdings) Ltd v. Martins Bank Ltd [1971] 1 W.L.R. 43. In those circumstances it is difficult to see how the judge could have done anything other than make an order for possession. Mrs Egremont had not lived in the matrimonial home since 1986. Mr Egremont had moved out during 1988, if not before. So the house had been altogether empty for some time. A sale was the obvious solution. Mrs Egremont would then be free to pursue her counterclaim against the bank.
Indeed, so obvious and apparently uncontroversial was the order made by the judge that when the 14 days' stay which he ordered ran out there was no attempt to renew it. On 17th August the bank obtained a warrant for possession, and on 17th October the warrant was executed. Thereafter the bank put the house on the market. They obtained an offer, subject to contract, of £165,000, which they have now accepted. The contracts were sent out on 29th January 1990.
It was at this point that Mrs Egremont appeared to change her mind. The case came before me last week on Mrs Egremont's application for a last minute stay. In her affidavit in support she explained that since 3rd February 1990 she had had to vacate her rented accommodation. She has not been able to find alternative accommodation, so she proposes to move back into the house she left in 1986. She says that she has now been advised—that the charge is wholly unenforceable against her. If so, then so far as the charge is concerned she is entitled to resume occupation. As for the first mortgage, she says that if she can find the money to pay the outstanding instalments of just under £5,000, she believes that the D.H.S.S. will pay the current interest on her behalf. That would solve all her problems. I say no more about the practicalities of her proposal since they will be considered more fully by Mrs Justice Booth. I turn instead to Mr Munby's submissions on the law.
His first submission was that the bank were under a duty to disclose to Mrs Egremont the existence of the guarantee, and the fact that the charge was unlimited in scope and duration, and would continue as security even after she and her husband had separated.
Mr Munby relied on the celebrated case of Hamilton v. Watson (1845) 12 Clark and Finnelly 109, in which the House of Lords considered the extent of the duty of disclosure in commercial transactions other than transactions uberrimae fidei. The House laid down the general rule that there is no duty of disclosure. Business could not otherwise be carried on. But Lord Campbell allowed an exception with regard to "anything that might not naturally be expected to take place between the parties who are concerned in the transaction to the effect that his position shall be different from that which the surety might naturally expect". The question is whether the present case comes within the rule or the exception. I have no doubt that it comes within the rule. Mrs Egremont knew that her husband was embarking on a new business venture. She knew he had formed Egremonts Ltd for that purpose. She knew that the bank would not make funds available to the company except on security. She must therefore have known, if she thought about it, that the charge which she was signing was to secure the company's indebtedness, whether directly or indirectly, through her husband's personal guarantee. If she had read the charge she would have seen that it covered his liability whether as principal or surety. There is nothing in the least unusual about these transactions. On the contrary they are all transactions of the commonest business kind, in which there was nothing that Mrs Egremont might not naturally expect. I would reject Mr Munby's first submission.
His second submission was that the bank was under a general duty of disclosure because Mrs Egremont was a customer. He relies on the judgment of Kerr L.J. in Cornish v. Midland Bank [1985] 3 All E.R. 513. In that case the wife signed a second mortgage in favour of the bank. She brought an action against the bank claiming (1) that the mortgage be set aside on the ground of undue influence and (2) damages for negligence. The judge decided both questions in favour of the plaintiff. The Court of Appeal upheld the judge on negligence, but reversed his decision on undue influence. It was conceded on behalf of the plaintiff in the Court of Appeal that she must fail on undue influence in the light of the subsequent decision of the House of Lords in National Westminster Bank v. Morgan [1985] A.C. 686. The ground on which the Court of Appeal upheld the judge's decision on negligence was that the bank had "assumed the duty to give proper advice" and was therefore liable if the advice it gave was negligent.
Kerr L.J. went on to consider, obiter, whether even if the bank had not assumed the duty of advising her as to the scope and effect of the second mortgage, it was nevertheless the duty of the bank to proffer such advice, since she was a customer of the bank. Mr Munby argues that, by the same token, the bank here was under a duty to proffer advice to Mrs Egremont.
I regret that I am unable to see how this helps Mrs Egremont. Let me assume, for the sake of argument, that the bank was under such a duty. It has always been accepted by the bank that Mrs Egremont had an arguable counterclaim. The only question is whether the bank is entitled to possession. The duty of which Kerr L.J. spoke in Cornish v. Midland Bank was an alternative basis for the plaintiff's claim for damages. That is all. There is not the slightest...
To continue reading
Request your trial