Midland Bank Plc v Massey

JurisdictionEngland & Wales
Judgment Date18 March 1994
Judgment citation (vLex)[1994] EWCA Civ J0318-4
CourtCourt of Appeal (Civil Division)
Docket NumberCHANI 92/0607/E
Date18 March 1994
Midland Bank PLC
Teresa Maria Massey

[1994] EWCA Civ J0318-4

(His Honour Judge Maddocks QC)

Before: Lord Justice Neill Lord Justice Steyn Lord Justice Peter Gibson

CHANI 92/0607/E




MR M CASWELL (Instructed by Ben Hoare Bell & Co) appeared on behalf of the Appellant

MR T KEITH (Instructed by Hammond Suddards, Leeds) appeared on behalf of the Respondent


Friday 18 March 1994


The central question at the trial was whether the Midland Bank Plc ("the bank") was entitled to enforce against Miss Massey a legal charge granted by her over her dwelling house on 10 August 1990. It was common ground that Miss Massey was deceived by Mr Potts, a man with whom she had had a long standing sexual and emotional relationship, into providing a legal charge to the bank. The issue was whether the bank was affected by the dishonesty of Mr. Potts. After a three day trial in January 1992 His Honour Judge Maddocks, sitting as a Deputy High Court Judge at Newcastle, reserved judgment. He gave judgment in favour of the bank on 12 February 1992. He found that the bank was unaffected by the dishonesty of Mr. Potts. He ordered that Miss Massey should give up possession of her house to the bank as mortgagee. On this appeal Miss Massey challenges the ruling of the Judge that the bank was not affected by the


dishonesty of Mr Potts.


A Narrative


Since none of the primary facts found by the Judge are challenged on this appeal, a brief narrative will be sufficient. When Miss Massey executed the legal charge in August 1990 she was 42 years old. The Judge described her as not unintelligent or lacking in business knowledge. This is demonstrated by the fact that she ran a hairdressing business for some years and that in 1982 she took over her father's business of letting some fifteen bedsits. In 1985 she bought the house from her parents. The price was £43,000. She obtained a mortgage advance of £30,000 from Leamington Spa Building Society.


The relationship of Miss Massey and Mr Potts started in 1976. She had two children by him. They never lived together because her parents objected to the relationship. Mr Potts took advantage of his emotional and sexual relationship with Miss Massey. In 1985 Mr Potts was involved with two others in a business venture called House of Norica. He wanted an overdraft facility from Lloyds Bank. He asked Miss Massey to grant a legal charge over her house, limited to £25,000, in favour of Lloyds Bank. A solicitor advised her on the nature and effect of a second charge. She understood the advice. In April 1986 she executed the charge. The House of Norica collapsed. Miss Massey was liable to pay £25,000 to redeem the charge. But Lloyds Bank delayed taking legal proceedings against Miss Massey. In the meantime Mr Potts repeatedly assured Miss Massey that the principal debt would be paid off by the sale of his mother's house.


In 1989 Mr Potts embarked on a new venture, again in partnership. The objective was to offer financial services to the public. The corporate vehicle for this enterprise was Camelot Financial Services Limited ("Camelot"). In July 1990 Mr Potts sought an overdraft facility from Midland Bank Plc. Mr Potts asked Miss Massey to grant a legal charge to the bank to secure an overdraft facility of Camelot. Mr Potts deceived Miss Massey in two respects: first, he fraudulently painted a glowing picture of Camelot's financial position and prospects; secondly, he said that the second legal charge in favour of Lloyds Bank would be discharged.


Mr Potts and Miss Massey visited the branch of Midlands Bank in Leeds. Mr Dixon, the Enterprise Manager of the bank, interviewed them together. Mr Potts requested an overdraft facility in favour of Camelot on the security of a legal charge, limited to £40,000, on Miss Massey's house. One point can at once be set to one side. Miss Massey testified that the proposed charge was to be conditional on the discharge of the prior charge over her house in favour of Lloyds Bank. The Judge found that there was no agreement to this effect and there is no appeal on this point. Turning back to the narrative, Mr Dixon was taken in by Mr Potts. Mr Dixon explained, however, that the bank would require that Miss Massey should be independently advised by a solicitor before the bank would agree to proceed with the transaction.


Mr Potts arranged for Walker, Morris Scott and Turnbull, reputable solicitors practising in Leeds, to advise Miss Massey. Mr Jones of that firm, a conveyancer with some twenty years experience, was asked to deal with the matter. Mr Potts then passed on the name of the firm of solicitors, and the name of the representative dealing with the matter, to Mr Dixon. Mr Dixon sent the legal charge to Mr Jones.


Mr Potts and Miss Massey visited Mr Jones together. Mr Jones acted for Miss Massey. Mr Jones did not see Miss Massey alone. He explained the nature of a second legal charge to her. She understood the explanation. He did not ask any questions, or give any advice, about the financial standing or prospects of Camelot. Mr Jones did, however, notice that the legal charge did not contain the intended limit of £40,000. Mr Potts and Miss Massey went back to the bank where the document was amended. They returned to Mr Jones. Miss Massey then executed the charge. Mr Jones despatched the legal charge to the Midland Bank.


The Midland Bank subsequently advanced funds to Camelot. But by November 1990 it was clear that the enterprise was doomed. By a resolution dated 28 January 1991 Camelot went into creditor's voluntary liquidation. The estimated deficiency was £108,000. The bank served demands on the principal debtor and Miss Massey. In correspondence Miss Massey's solicitors contested the validity of the legal charge.


In June 1991 the Midland Bank issued a summons for possession. Miss Massey filed a defence and a counterclaim against the bank and Mr Potts. She pleaded in the defence that she had been induced to sign the Legal Charge by the misrepresentation and undue influence of Mr Potts. She pleaded that the bank was affected by the wrongdoing of Mr Potts. That was her defence against the claim for possession. By her counterclaim she claimed damages for deceit against Mr Potts, and cancellation of the Legal Charge against the bank.


The shape of the case before the Judge


Mr Potts did not dispute the allegations of fraudulent misrepresentation. The Judge accepted the evidence of Miss Massey that Mr Potts deceived her. He found that the legal charge was procured by the wrongdoing of Mr Potts. He gave judgment for damages to be assessed in favour of Miss Massey and against Mr Potts.


Turning to the position of the creditor bank, the Judge had to consider the matter before the speeches in the House of Lords in Barclays Bank Plc v O'Brien were delivered on 21 October 1993; O'Brien is now reported at [1994] 1 AC 180. The terrain of the debate before the Judge was confined to the issue whether the debtor was the agent of the creditor bank. The Judge found that the debtor was not the agent of the bank. Accordingly, he gave judgment in favour of the bank.


The issues on this appeal


The Judge's finding of fact that Mr Potts procured the execution of the Legal Charge by fraudulent misrepresentation is not challenged on appeal. The Judge's finding of fact that Mr Potts was not the agent of the bank in obtaining the charge from Miss Massey is also not challenged. Instead the focus of the appeal has shifted to the application of the doctrine of notice. There was no evidence that the bank had actual knowledge of any misrepresentation or undue influence on the part of Mr Potts. It is therefore to the doctrine of constructive notice that we must turn. Due to the way in which the case was presented before him, the Judge did not directly consider this aspect. However, his judgment is detailed and careful. And the bank realistically accepts that on this appeal the Appellant is free to canvass the issue of constructive notice.


Taking the law enunciated, as opposed to the guidance offered, in Barclays Bank plc v O'Brien, supra, it is clear that two questions must be considered, namely

(a) Was the bank put on enquiry as to the circumstances in which Miss Massey agreed to provide the security?

(b) If so, did the bank take reasonable steps to ensure the agreement of Miss Massey to the charge was properly obtained?


Was the bank put on enquiry?


In Barclays Bank Plc v O'Brien, supra, Lord Browne-Wilkinson observed at 196E:

"……in my judgment a creditor is put on inquiry when a...

To continue reading

Request your trial
40 cases
  • Royal Bank of Scotland Plc v Etridge
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 31 Julio 1998
    ...and which interpreted the effect of that case in the context with which we are concerned in the present case. Those authorities are Massey v Midland Bank Plc [1995] 1 All ER 929 and Banco Exterior Internacional v Mann and Others [1995] 1 All ER 936. Banco Exterior is the closer to the prese......
  • Banco Exterior Internacional v Mann
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 23 Noviembre 1994
    ...that the test adopted by the judge was inconsistent with the decision of this court in Bank of Baroda v Shah [1988] 3 All ER 24, and Massey v Midland Bank [1994] 2 FLR 18Since the decision of the House of Lords in Barclays Bank v O'Brien [1994] AC 180, cases such as this must be resolved ......
  • Bank of Baroda v Rayarel and Others
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 13 Enero 1995
    ...our attention to another recent case which was reported in The Times newspaper on 23 March 1994 in the Court of Appeal, entitled Midland Bank plc v Masey, before Neill LJ, Steyn LJ and Peter Gibson LJ. The judgment was given by Steyn LJ in favour of the bank. The case is not factually on al......
  • Barclays Bank Plc v Thomson
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 7 Noviembre 1996
    ...even though that solicitor acts principally for the very person against whose undue influence the signatory must be guarded: Massey v Midland Bank [1995] 1 AER 929, Banco Exterior Internationale v Mann [1995] 1 AER 936, and Bank of Baroda v Rayarel [1995] 2 FLR 376. I content myself with tw......
  • Request a trial to view additional results
7 books & journal articles
  • Table of cases
    • Canada
    • Irwin Books Bank and Customer Law in Canada. Second Edition
    • 19 Junio 2013
    ...215 Marzetti v. Williams (1830), 1 B. & Ad. 415, 109 E.R. 842 (K.B.) ............. 272, 286 Massey v. Midland Bank plc, [1995] 1 All E.R. 929 (C.A.) ................................ 211 Master Charge v. Price (1977), 42 N.S.R. (2d) 244, [1977] N.S.J. No. 757 (Co. Ct.) ............................
    • Singapore
    • Singapore Academy of Law Journal No. 1998, December 1998
    • 1 Diciembre 1998
    ...the Wife and Her Signature — the Sequel”(1996) 59 MLR 675. 219 For a sampling of the many cases, sec eg, Massey v Midland Bank plc[1995] 1 All ER 929; Banco Exterior International v Mann[1995] 1 All ER 936; TSB Bank plc v Camfield[1995] 1 All ER 951; Bank of Baroda v Rayerel[1995] 2 FLR 376......
  • Duress, Undue Influence, and Unconscionability
    • Canada
    • Irwin Books The Law of Contracts. Third Edition Vitiating Factors
    • 4 Agosto 2020
    ...The presumption may arise even though the parties having an intimate relationship do not co-habit. See Massey v Midland Bank plc , [1995] 1 All ER 929 (CA) [ Massey ]. 196 Burch , above note 125. 197 Above note 102 at 474–76. 198 Ibid at 476. 199 Yorkshire Bank plc v Tinsley , [2004] 3 All ......
    • Singapore
    • Singapore Academy of Law Journal No. 1996, December 1996
    • 1 Diciembre 1996
    ...Ch 1, affd on different grounds [1996] Ch 207. 17 Supra n 15 at 196. 18 Supra n 15 at 196—7. 19 See Midland Bank plc v Massey[1995] 1 All ER 929 at 934 (Steyn LJ); Bank of Baroda v Rayarel[1995] 4 Bank LJ 333 at 335 (Hirst LJ). 20 [1895] 2 QB 539. See also in the Bills of Sale context Josep......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT