PORTMAN BUILDING SOCIETY v DUSANGH and Others (Defendants/Appellant)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SIMON BROWN,LORD JUSTICE WARD,LORD JUSTICE SEDLEY |
| Judgment Date | 19 April 2000 |
| Judgment citation (vLex) | [2000] EWCA Civ J0419-15 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 April 2000 |
| Docket Number | Case No: CCRTF 1999/0577/B3 |
[2000] EWCA Civ J0419-15
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MR RECORDER GOLDRING QC (FROM DERBY COUNTY COURT)
Royal Courts of Justice
Strand,
London, WC2A 2LL
lord Justice Simon Brown
Lord Justice Ward and
Andlord Justice Sedley
Case No: CCRTF 1999/0577/B3
Mr B.N. Bedford (instructed by Mushtaq & Co, 14�15 Bristol Street, Birmingham B5 7AA, solicitors) for the Appellant
Mr A. Malek QC & Mr J. Davies-Jones (instructed by Clarke Willmott & Clarke of Yeovil BA20 1EP, solicitors) for the Respondents
This is the first defendant's appeal against the order of Mr Recorder Goldring QC in the Derby County Court on 9 March 1999 declaring the claimant building society (Portman) entitled to a charge by way of legal mortgage (the mortgage) over the whole of the legal and beneficial interest in 72 Kenilworth Avenue, Derby (the property), granting them possession of the property, and ordering payment to them of �61,428.69 and costs.
Before identifying the issue now arising on the appeal, it is convenient first to set out the essential facts of the case.
The mortgage was granted on 5 December 1989 when the appellant was aged 72 and retired. It was a twenty-five year repayment mortgage. The sum advanced was �33,750 (about 75% of the value of the property), �4,383 of which went to the Halifax Building Society to pay off an existing mortgage on the property, the balance to the appellant's son, the third defendant (one of his eight children). The appellant had purchased the property on 20 June 1977 and lived there with his wife (the second defendant). This was the second property the appellant had bought in Derby. He and his wife had come to England from India in 1964. His understanding of spoken English had remained poor and he was illiterate.
The mortgage was guaranteed by the son and, moreover, the son agreed with his father to pay it off. He needed the money for a Spar supermarket in Telford which he and a friend (Mr Basi Junior) were buying together. They needed the money urgently: they had already paid �20,000 and, indeed, were already in occupation of the shop and trading.
The same solicitor acted for Portman, father and son in the transaction. He was Mr Haycocks, a sole practitioner in Telford.
The appellant's mortgage application form falsely stated that he had a private income of �9,600. Subsequently, in a self-certification form, he instead detailed income from a pension and a part-time job totalling �2,196 p.a., income which he had omitted from the application form. His son worked as a fitter at Rolls Royce and disclosed an income of �14,500 p.a. and a �22,000 mortgage of his own.
In the event the Spar was not a success. The son fell behind with the mortgage repayments. His guarantee proved worthless. He became bankrupt. It was in these circumstances that the mortgage repossession proceedings were begun.
At the trial below the appellant advanced three defences. First he invoked the doctrine of non est factum and alleged that the charge was void. Second he alleged that his son had procured his signature on the charge by undue influence and/or by misrepresentation and that Portman had actual or constructive knowledge of the resultant equity against his son. Third he alleged that in any event he was entitled to set aside the charge directly against Portman as an unconscionable bargain. The Recorder rejected all three defences. The appeal is brought solely with regard to the third, the appellant's contention being that the Recorder never dealt properly with this defence and that he is entitled to succeed upon it even despite the Recorder's many adverse findings of fact.
Before turning to the argument it is necessary first to summarise what these findings were. This I shall do by quoting short passages from the judgment below. As to the defence of non est factum, the Recorder said this:
"Although I accept [father's] knowledge of English was rudimentary, I accept Mr Haycocks' evidence when he says Mr Dusangh Senior (and Mr Basi Senior [who was entering into a similar transaction for his son]) understood the nature of the transaction. � I accept Mr Haycocks' evidence that Mr Dusangh Senior entered into this transaction to turn Mr Dusangh Junior from a labourer at Rolls Royce to the owner of a large supermarket. � It comes to this. I conclude Mr Dusangh Senior agreed to re-mortgage his house. He did so for his son's benefit."
As to undue influence, the Recorder referred to the relevant authorities and, having correctly directed himself that this was a class 2B case within the Barclays Bank v O'Brien [1994] 1 AC 180 formulation and observed that father therefore had to prove "by affirmative evidence that [he] was accustomed to repose trust and confidence in" his son, concluded:
"I am afraid that I do not accept that. Such evidence as there is tends to suggest that Mr Dusangh Senior did not have trust and confidence in his son."
Although, as the Recorder rightly observed, those findings were sufficient to dispose of the undue influence (and misrepresentation) defence, he nevertheless turned to consider what the position would have been had he found on the contrary that father had been subject to undue influence by his son such as to give rise to an equity in his favour. Under the heading of "constructive knowledge" the Recorder made these findings:
"I conclude it is probable she [Mrs Gray, Portman's branch manager who dealt with the appellant's application] did speak to Mr Robson [the mortgage agent who introduced the appellant and his son to Portman] about the loan and its purpose. He would probably have said something to the effect that the re-mortgage was to raise finance for a business or family business. �.
It does not seem to me that an application for a re-mortgage by an elderly man of probable Asian origin, guaranteed by his son, was something which should have put Portman on notice of a possible equity the father might have against the son. Such things as an application containing different writing, a shaky signature, how access to the property is to be arranged seem to me of little significance. None of those things say anything about the relationship between Mr Dusangh Senior and Junior. Neither, in my view, does the fact that Portman probably knew the purpose of the re-mortgage was in respect of a business or family business. In short, I would have concluded that Portman did not have notice of any equity as between father and son."
That, therefore, was a second fatal impediment to the defence of undue influence. The Recorder then proceeded to find a third such impediment, namely that arising from the solicitor's involvement in this transaction. The Recorder held:
"From 18 November 1989, Portman was entitled to proceed on the basis that Mr Dusangh Senior was receiving legal advice. It was entitled to assume the advice was competent. It was entitled to believe that Haycocks would give Mr Dusangh Senior any advice which it was a solicitor's duty to give in relation to the transaction. �
In my view, it could not be said that the transaction was 'so extravagantly improvident that it was difficult to explain in the absence of impropriety' [ Royal Bank of Scotland v Etridge [1998] 4 AllER 705, 719]. It could reasonably be explained on the basis of a borrower/father's wish to help his son purchase and run a small business, that he was doing this out of natural love and affection. The notion that it is common for parents to make financial sacrifices for their children, whether or not within the Asian community, is commonplace. Indeed that is what I conclude happened here. In short, this was not a sort of transaction which Portman ought to have known was one into which no competent solicitor could properly advise Mr Dusangh Senior to enter."
The Recorder then turned to the third defence, which he dealt with in the following short passage in his judgment:
" Unconscionable Bargain
Finally, reliance was placed on the notion of an unconscionable bargain. Mr Bedford sought to suggest that this doctrine was quite unlike that of undue influence: it was not necessary for Portman to have constructive notice of the unconscionable bargain between Mr Dusangh Senior and his son. Again, I am afraid I cannot agree.
As Millett LJ said in Burch [Credit Lyonnais Bank Nederland NV v Burch] [1997] 1 AllER 144], the circumstances in which the doctrine of unconscionable bargains would apply were similar to those of undue influence: 153 c-d. In my view for the reasons expressed, this case falls short of that. Moreover, again for the reasons expressed, not least in view of the independent legal advice received from Mr Haycocks, Portman was not fixed with constructive knowledge of it. Because the transaction was capable of reasonable explanation on the basis of parental affection, it was not necessary for Portman to make further enquiry once it knew that Mr Haycocks was acting for Mr Dusangh."
The authority upon which Mr Becket Bedford principally relies in this appeal is Credit Lyonnais Bank Nederland v Burch. When considering the judgments in that case, however, it is as well to have its facts in mind. Miss Burch was a junior employee of the principal debtor (a one-man company whose alter ego was a Mr Pelosi). She had a salary of between �12,000 and �14,000 p.a. She lived in a flat valued at �100,000 with a mortgage of �30,000. The company wished to increase its bank overdraft limit from �250,000 to �270,000. To that end Miss Burch entered...
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...159 The principles that determine when a bargain can be set aside as unconscionable were considered by the Court of Appeal in Portman Building Society v Dusangh [2000] 2 All ER (Comm) 221 (' Dusangh'). There the Court upheld the rejection of the defence by an elderly illiterate man who had ......