Midland Bank Plc v Serter and Another
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE GLIDEWELL,LORD JUSTICE PILL,LORD JUSTICE ALDOUS |
| Judgment Date | 02 March 1995 |
| Judgment citation (vLex) | [1995] EWCA Civ J0302-1 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | CHANI 94/0455/B |
| Date | 02 March 1995 |
[1995] EWCA Civ J0302-1
(Mr. David Young QC)
Before: Lord Justice Glidewell Lord Justice Pill Lord Justice Aldous
CHANI 94/0455/B
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
MR. L PRICE QC & MR. B DEVLIN (Instructed by Kenwright, Lake & Co, Surrey) appeared on behalf of the Appellant
MR. R SALTER & MISS A GREEN (Instructed by Jacques & Lewis, EC4 4JL) appeared on behalf of the Respondent
Thursday 2 March 1995
This is an appeal against a decision of Mr David Young QC sitting as a Deputy High Court Judge in the Chancery Division who, on 3 March 1994, allowed an appeal by the bank against a decision of District Judge Lipton sitting as a Chancery Master dated l June 1993. The Deputy Judge ordered the Appellant, Mrs Serter, the Second Defendant in the action, to deliver up to the plaintiff bank possession of the dwelling house 36 Litchfield Way, London NW11. The Judge gave leave to appeal to Mrs Serter, and stayed execution of his Order pending this appeal. This is another case which concerns the extent to which a bank, which wishes to obtain security for a loan by taking a charge on a house owned jointly by husband and wife, must satisfy itself that the wife's agreement to executing the charge has been properly obtained.
The basic facts are not disputed. On 3 February 1982 Mr and Mrs Serter, the First and Second Defendants, were married. By 1987 their matrimonial home was at 36 Litchfield Way, London NW11 in which they jointly owned the leasehold interest, subject to a first mortgage in favour of Chemical Bank Home Loans Ltd.
The First Defendant, Mr Serter, was a "sponsored" name at Lloyds. He learned that his sponsorship would cease on 3l October 1987. If he was to continue his membership of Lloyds, it was essential that he should before that date obtain some other security satisfactory to Lloyds. For that purpose he sought guarantees from the Plaintiff Midland Bank, and instructed his solicitor, Mr Colley, to act on his behalf in the transaction. The proposal was that the bank would issue two guarantees each in the sum of £50,000. As security for granting these guarantees, the bank required a second charge on the property, 36 Litchfield Way.
In paragraph 4 of an Affidavit sworn on 15 December 1992, Mr Colley deposed:
"I understood that arrangements had been agreed with the Plaintiff that a bank guarantee would be given and that this would be supported by a charge on 36 Litchfield Way. I was originally instructed on 27 October 1987 and arrangements with Lloyds had to be concluded by 3l October 1987. In this connection I was instructed to act on behalf of the Plaintiff in connection with registering their charge."
Since Mr and Mrs Serter jointly owned the property it was necessary that they should both execute the charge. The charge required was in the bank's standard form. This provided that the charge would be security for the payment and discharge of all monies and liabilities which at the time of execution were or at any time thereafter would be due or owing or incurred to the bank by Mr Serter, whether solely or jointly with any other person. In practice in this case these liabilities were of two kinds:
(i)any liability of Mr Serter to the bank under his counter-indemnities given in consideration of the bank entering into the guarantee; and
(ii)the amount by which the joint account of Mr and Mrs Serter with the bank was overdrawn at any one time.
On 28 October 1987 Mr Colley witnessed Mr Serter's signature under seal to a copy of the charge. However, there was a problem about obtaining Mrs Serter's signature, and indeed about giving her any relevant advice. She was at that time in Holland with her children, and did not intend to return to England until after 3l October 1987. Accordingly, to quote Mr Colley's words:
"Arrangements had to be made to secure execution of the charge by her."
Mr Colley already knew Mrs Serter. In his own words, he was primarily Mr Serter's solicitor, but he had acted for both Mr and Mrs Serter in connection with the purchase of 36 Litchfield Way and on the transfer of their first mortgage from an earlier mortgagee to the Chemical Bank. He says
"She is an intelligent person and I felt satisfied that she would understand an explanation that I gave her over the telephone and that I would recognise her voice."
Mr Colley deposes that he spoke to Mrs Serter on the telephone about 10 pm on 28 October (ll pm in Holland).
Mr Colley exhibits to his Affidavit a note he made of this conversation. This reads:
"Speaking to Mrs Serter in Holland. Explaining to her the reasons for Bank Guarantee (ie Emre no longer a sponsored name). Explaining what a Bank guarantee was and how it was backed by legal charge. What the effect of legal charge was and the circumstances in which it would be enforced, ie that if guarantee called upon Bank would seek payment by enforcing security. Explaining about execution of document. Answering questions re matrimonial split. Mrs S expressed herself satisfied."
Mr Colley deposes that he advised Mrs Serter to consider obtaining other independent legal advice, because there was a potential conflict of interest between her and her husband, and he was representing her husband. He also says that Mrs Serter asked him about the effect the guarantee would have if she and Mr Serter were to divorce. He was not until then aware that there were any matrimonial difficulties. He then, he deposes, advised her that she should seek independent legal advice elsewhere in relation to her marital affairs, as he was primarily the First Defendant's solicitor. He concludes:
"I remember specifically telling the Second Defendant that if she had any doubts whatsoever she must not sign the charge. She said however that she was satisfied and would do so."
Mrs Serter in an Affidavit sworn on 15 January 1993 deposes that she remembers speaking to her husband on the evening of 28 October, but does not recall any conversation with Mr Colley. It is however noticeable that she does not deny that she spoke to Mr Colley.
On 29 October Mr Serter flew to Holland, with the charge in his possession. He also had a form of certificate prepared by Mr Colley which read:
"I, Jaroslava Serter, of 36 Litchfield Way, London NW11, confirm that I have discussed the legal charge to Midland Plc. I have signed with Graham Colley, solicitor, and that he has explained the nature and consequences of that document to me. He also explained the nature and consequences of the Bank Guarantee it supported and of my husband's membership of Lloyds."
Mr and Mrs Serter had lunch together at a restaurant in Schiedam. According to Mrs Serter she was at the time in stress, and a fair amount of alcohol was consumed during the lunch. She says that at the end of the lunch her husband produced a document and asked her to sign it, saying that he had to leave almost immediately to return to England. She accepts that she then signed the charge and that her signature was witnessed by the head waiter in the restaurant. She does not recall signing the certificate prepared by Mr Colley, though this also bears what may be her signature, witnessed again by the head waiter.
She says:
"I did not realise that it could mean that I could lose the matrimonial home. If I had known that, then I would not have signed it."
On 30 October 1987 Mr Colley signed a certificate and undertaking addressed to the bank in the following terms:
"Re 36 Litchfield Way, NW11.
(a) We have examined the title to the property described in your letter of instruction and confirm that your customers have acquired a good marketable title to the property free from encumbrances and restrictions likely to affect its value, marketability or the enforcement of the mortgage other than the first mortgage to Chemical Bank.
(b) We undertake to notify you prior to completion if our investigations, enquiries and searches reveal any matter which might affect your decision to lend against the security or which might cause any unusual steps to be necessary to protect the value of the security.
(c) We undertake to have explained to your customers the implications of the mortgage, including the fact that the mortgage secures all monies and liabilities from time to time owing or incurred to the bank.
(d) We confirm that the first mortgagee has no objection to your second mortgage and HM Land Registry confirm no prior applications."
On receipt of this certificate the bank duly executed the two guarantees.
On l July 1992 the bank demanded payment by Mr Serter of the sum of £68,901 92p. It also made demands against Mrs Serter for payment forthwith of two sums, £33,523 74p, the balance overdrawn on the joint account and £35,378 18p owed to the bank by Mr Serter arising out of the bank making payments under the guarantee to Lloyds. These sums together total the amount demanded of Mr Serter. Neither Mr or Mrs Serter paid the amounts demanded.
On 7 August 1992 the bank issued an Originating Summons claiming possession of the house. On 18 January 1993 Master Winegarten ordered that the proceedings should continue as if the action had been begun by writ, and that the Affidavit sworn on behalf of the bank by a Mr Dawber should stand as the Statement of Claim. The Master gave further directions. In her Defence and Counterclaim, Mrs Serter pleaded:
"3. … The Second Defendant does not recollect whether or not she signed the said charge. If it is found that she did, she contends as follows:
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