Mumford v Bank of Scotland; Smith v Bank of Scotland
| Jurisdiction | Scotland |
| Judgment Date | 02 June 1995 |
| Date | 02 June 1995 |
| Court | Court of Session (Inner House - First Division) |
Inner House of the Court of Session
Before the Lord President (Lord Hope), Lord Weir and Lord Abernethy
Scots law - matrimonial property - security - bank's duty to wife
Where a wife was induced by her husband's misrepresentations to grant real security over her property or personal security as a cautioner, for his debts, in the absence of actual knowledge of the misrepresentations, the creditor was under no duty either to explain to the wife the nature of the transaction into which she was entering or its consequences, or to require her to take independent advice.
The fact that the creditor knew that the granter was the spouse of the debtor did not mean that the creditor had constructive notice of the misrepresentation. The decision of the House of Lords in Barclays Bank plc v O'BrienTLRELR (The Times October 22, 1993; (1994) 1 AC 180) was not the law in Scotland.
The First Division of the Inner House of the Court of Session so held, refusing reclaiming motions by Mrs Elizabeth McNulty or Mumford and Mrs Kathleen Smith against interlocutors of the Lord Ordinary (The Times August 4, 1994) dismissing as irrelevant actions brought by them against the Governor and Company of the Bank of Scotland in which Mrs Mumford sought reduction of her consent in terms of the Matrimonial Homes (Family Protection) Scotland Act 1981 to the granting by her husband of a heritable security over their home, and in which Mrs Smith sought reduction of a heritable security granted by her and her husband over property owned by them in common.
Miss Leeona Dorrian, QC, for the reclaimers; Mr Neil David, QC, for the respondents.
THE LORD PRESIDENT, delivering the opinion of the court, said that the Lord Ordinary had found no authority outwith the context of agency where constructive notice or bad faith could be inferred in the mind of a person wholly ignorant of the material fact, namely in this case the misrepresentation by the husband, simply because of the surrounding circumstances.
His Lordship had held that what Barclays Bank plc v O'Brien seemed to achieve was a presumption in favour of the wife of a wrong having been committed by her husband against her, in the appropriate circumstances, particularly where the actual transaction was to her financial disadvantage.
The Lord Ordinary had not been prepared against the background of the long established authorities with regard to the duty, or...
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