Midland Bank v Cooke and Another

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
Judgment Date07 July 1995
Judgment citation (vLex)[1995] EWCA Civ J0707-19
Date07 July 1995
Docket NumberNO: CCRTF 92/0263/G

[1995] EWCA Civ J0707-19




(His Honour Judge Hamilton)

Before: Lord Justice Stuart Smith Lord Justice Waite and Lord Justice Schiemann

NO: CCRTF 92/0263/G

Midland Bank Plc
(1) Graham Edward Cooke
(2)Jane Marie Cooke

MR A GORE (instructed by Pictons, DX 5614 Bedford) appeared on behalf of the Appellant (Second Defendant)

MR T BERGIN (instructed by Phillip Ross & Co, DX 7100, Hitchin) appeared on behalf of the Respondent


Friday 7th July 1995


This appeal, concerning the disputed beneficial interests in a matrimonial home, was heard during the week in which the Law Commission published its Sixth Programme of Law Reform. Item 8 of the Programme recommends an examination of the property rights of home-sharers. The Report comments that "the present rules are uncertain and difficult to apply and can lead to serious injustice." Though that was a reference to the problems of unmarried home-owners, the rights of married occupiers can be equally problematic —as the present case shows —when the claims of third parties such as creditors or mortgagees become involved. The economic and social significance of home-ownership in modern society, and the frequency with which cases involving disputes as to the property rights of home-sharers (married or unmarried) are coming before the courts, suggest that the Law Commission's intervention is well-timed and has the potential to save a lot of human heartache as well as public expense.


Mr and Mrs Cooke were married on 31 July 1971. After the wedding they moved into their new home "Thatchatty, 58 High Street, Abbotsley Cambridgeshire (to which I shall refer as "the property"). On 1 July 1971, shortly before the marriage, Mr Cooke, who is the first defendant in the proceedings but has played no part in the current appeal, had taken a conveyance of the property in his sole name. He was then 19 years of age and his fiancée was a little older. The purchase price was £8500, of which £6540 was provided by way of a mortgage from the Leeds Permanent Building Society. The balance of the purchase price and costs was paid in cash provided as to £1100 by Mr Cooke's parents, and as to the remainder by a contribution in the region of £1000 by Mr Cooke out of his own savings. The mortgage was of the conventional Building Society type providing for repayment by monthly instalments of capital and interest.


Mrs Cooke, who is the second defendant in the action and appellant in this appeal, was a student teacher at the time of the wedding and qualified soon afterwards. Virtually from the outset husband and wife were both working —she as a teacher and he as a self-employed proprietor of a business selling kits for the making of lampshades. Mrs Cooke did not make any direct payments of mortgage instalments but was discharging other household outgoings out of her earnings. She remained in work, although there were brief spells of part-time working when their three children were born in 1972, 1974 and 1984 respectively.


On 27 September 1971 a second mortgage was taken out on the property in favour of the National Westminster Bank. It was executed jointly by Mr and Mrs Cooke (who were described in it as together constituting the mortgagors) to secure their overdraft with the Bank. This second mortgage was redeemed on 18th May 1972.


The Building Society Mortgage was replaced from 26 June 1978 by a general mortgage of that date in favour of the Midland Bank ("the Bank") who are plaintiffs in the proceedings and Respondents to this appeal. This mortgage (which I shall call "the mortgage") was granted by Mr Cooke in his sole name and charged the property to the Bank to secure repayment on demand of the business overdraft of Mr Cooke's company.


From the outset of their occupation the wife devoted much time and energy to the improvement of the house and garden. The judge's finding about that was:

"Quite plainly the wife was engaged in a considerable amount of work on the property, with or without the assistance of contractors, on the interior of the property and in particular the garden. The works she has described in her evidence —and I do not propose to go through it in detail —could be described as falling into the three categories of redecoration, alterations/improvements and repair."


It is common ground that the evidence which the judge was there summarising included undisputed evidence that she had paid a number of contractors' bills out of her own earnings. It will be convenient to refer to Mrs Cooke's efforts in this respect as "the maintenance and improvement contribution".


The Court of Appeal decision in Williams & Glyn's Bank v Boland (later to be affirmed on appeal to the House of Lords in [1981] AC 487) was reported in April 1979. Soon afterwards the Bank requested Mrs Cooke to sign a form of consent to any present or future right or interest which she might have in the property being postponed to the Bank's security under the mortgage. I will refer to that as "the consent form". She did so sign it on 12th July 1979 at a meeting with officials of the Bank attended by her husband and herself. The judge's findings as to what transpired at that meeting were firstly that Mr Cooke stated to her in front of the Bank officials that she had no alternative but to sign the consent form, and secondly that she was visibly upset by the whole transaction.


On 28 May 1981 Mr and Mrs Cooke together executed a second charge on the property to secure their liability under a joint guarantee they had executed as security for a business loan to Mr Cooke's company.


In about 1984 Mrs Cooke brought Married Womens Property Act proceedings against Mr Cooke in the county court in which an order was made by consent declaring that the property was held by the spouses jointly. That order was recited in a Conveyance of 12th March 1985 made between the spouses and transferring the property into their joint names, holding beneficially as tenants in common.


On 15 July 1987 the Bank brought these present proceedings against Mr and Mrs Cooke as first and second defendant respectively in the Bedford County Court claiming payment of the sum of £52,491 then claimed to be due under the mortgage and possession in default of payment.


On 4 November 1987 Mrs Cooke served a defence in the action. It contained firstly a plea that the mortgage was statute-barred, secondly a claim that her signature to the consent form had been procured to the knowledge of the Bank by Mr Cooke's undue influence, and thirdly an assertion that she was entitled to a one half beneficial interest in the property over-riding any interests of the Bank under the mortgage. She counterclaimed for declarations against the Bank that she was the joint legal owner of the property and entitled to one half of the beneficial interest free of any claim or interest of the Bank. The Bank joined issue by their Reply and Defence to Counterclaim of 25 January 1988.


It does not appear that any defence was served by Mr Cooke, who by this time was living apart from his wife, she remaining in occupation of the property with the children. The litigation moved extremely slowly, but eventually the action was listed for trial before Judge Hamilton in the Hitchin County Court on 5th February 1992. Mr Cooke attended in person and protested that he had not been given notice of the hearing, of which he had learned only the previous day when Mrs Cooke told him about it. There is no transcript of the exchanges which then took place, but it seems clear that the judge, who was understandably alarmed at the prospect of further adjournment of proceedings that had taken so long to come trial, took the view that the action could be dealt with in two bites —with the issues between the Bank and Mrs Cooke being tried at once, and those between the Bank and Mr Cooke on some future occasion at which Mr Cooke could be represented. In the meantime Mr Cooke would be allowed to attend the first stage as a party in person.


The primary issue before the court was the allegation of undue influence upon the signing of the consent form, and the greater part of the evidence was devoted to that issue. Evidence was also given, however, by Mr and Mrs Cooke as to the terms on which the property was first purchased. It was common ground that at the time of purchase there had been no discussions between them as to the name in which the property should be taken, and both stated positively that there had been no discussion and no agreement as to how the property should be owned beneficially. It was also common ground that they each had their own separate bank accounts, that there was no joint account, that Mr Cooke made the payments on the Building Society mortgage until it was redeemed and replaced by the mortgage, and that Mrs Cooke made no savings from her earnings as a teacher, but applied them in the payment of household and decoration bills. It has been common ground at this appeal hearing that although it is undisputed that Mr Cooke paid the mortgage instalments under the original Building Society mortgage and also some of the household bills and that Mrs Cooke paid other bills out of her own earnings, there was insufficient evidence before the judge as to the earnings of the parties and the amount of the outgoings to enable any conclusion to be drawn as to whether (and if so to what extent) Mr Cooke's ability to pay the instalments under the Building Society mortgage was dependent upon the contribution made by Mrs Cooke to other outgoings.


Mr Cooke gave evidence about the...

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