Royal Bank of Scotland Plc v Etridge (No 2); Kenyon-Brown v Desmond Banks & Company (Undue Influence) (No 2); Bank of Scotland v Bennett; UCB Home Loans Corporation Ltd v Moore; National Westminster Bank Plc v Gill; Midland Bank Plc v Wallace; Barclays Bank Plc v Harris; Barclays Bank Plc v Coleman
| Jurisdiction | England & Wales |
| Judge | Lord Justice Nourse,Lord Justice Pill,Lord Justice Mummery |
| Judgment Date | 21 December 1999 |
| Neutral Citation | [1999] EWCA Civ J1221-1,[1998] EWCA Civ J0731-20,[1999] EWCA Civ J1221-22 |
| Judgment citation (vLex) | [1999] EWCA Civ J1221-74 |
| Docket Number | CCRTF 1998/1642/B3,LTA 98/5735/1 QBENF 98/0388/1 FC3 98/5616/3 CHANF 97/0449/3 CCRTI 98/0221/2 CCRTF 97/1713/2 LTA 98/6059/2 FC3 98/6301/2 CCRTF 98/0218/2 CCRTF 97/1014/2 UCB CCRTI 98/0812/2a |
| Court | Court of Appeal (Civil Division) |
| Date | 21 December 1999 |
Before Lord Justice Nourse, Lord Justice Pill and Lord Justice Mummery.
COURT OF APPEAL
Mortgage - matrimonial home - presumed undue influence of husband - disadvantage of wife still an essential ingredient
Manifest disadvantage, in the sense of clear and obvious disadvantage, remained a necessary ingredient of a wife's challenge on the ground of presumed undue influence of her husband to the validity of a bank's charge over the matrimonial home. But the House of Lords had signalled that it might not continue to be an essential ingredient indefinitely.
However, to avoid being fixed with constructive notice of a wife's right as against her husband to have the mortgage set aside, the lender could rely on a certificate of independent legal advice given to the wife not by a solicitor but by a legal executive acting with the authority of his principal.
The Court of Appeal so held in a reserved judgment when, inter alia, dismissing an appeal by the wife, Miriam Mara Coleman, but for different reasons, from the decision of Judge Wakefield in Central London County Court making a possession order in favour of Barclays Bank plc in respect of a house at 52 Ashtead Road, Clapton, London.
Miss Hazel Williamson, QC and Mrs Helene Pines Richman for the wife; Mr Nicholas Elliott, QC and Mr Jonathan Marks for the bank.
LORD JUSTICE NOURSE said that appeals by both the husband and wife arose out of a mortgage of the jointly owned matrimonial home created in order to secure the husband's indebtedness.
The wife's defence was that her execution of the mortgage had been procured by the husband's presumed undue influence over her of which the mortgagee had notice: see Barclays Bank plc v O'BrienELR ((1994) 1 AC 180).
The wife's case was that:
1 There existed between herself and the husband at the material time a relationship of trust and confidence which enabled him to influence her into effecting the charge;
2 The charge was manifestly disadvantageous to her;
3 It was not established on the evidence that she had entered into it only after full, free and informed thought about it;
4 She was thus entitled to have the legal charge set aside as against the husband by reason of his presumed undue influence over her;
5 The bank, in relying on an inadequate certificate of independent legal advice, had not taken reasonable steps to avoid being fixed with constructive notice of the wife's right as against the husband. The certificate had been signed not by a solicitor but by a legal executive.
6 She was therefore also entitled to have the legal charge set aside as against the bank.
The judge had held all the elements of the wife's case were established except the second: manifest disadvantage.
The judge concluded that he was bound to hold that manifest disadvantage was a necessary ingredient in a case of presumed undue influence. On authority binding both judges of first instance and the Court of Appeal, he was correct.
But the authorities were in a very unsatisfactory state and the concept of manifest disadvantage was elusive and often difficult to apply to the facts of individual cases. Observations by Lord Browne-Wilkinson in CIBC Mortgages plc v PittELR ((1994) 1 AC 200) had put a serious question mark over the future of the requirement of manifest disadvantage in cases of presumed undue influence. The House of Lords had signalled that it might not continue to be a necessary ingredient indefinitely.
In the meantime, in continuing to look for manifest disadvantage the court had to ask itself what it really meant. In the circumstances stated, its significance was not to be enlarged.
To some judges "manifest" seemed to have connoted substance, not appearance. In Cheese v ThomasWLR ((1994) 1 WLR 129, 134) Sir Donald Nicholls, Vice-Chancellor, had held, correctly, that it meant "clear and obvious". Thus there had to be a disadvantage and it had to be clear and obvious.
But that did not mean that it had to be large or even medium-sized. Provided it was clear and obvious and more than de minimis, the disadvantage might be small.
In deciding whether a transaction was manifestly disadvantageous an objective view had to be taken of it and that view had to be taken as at the date at which the transaction was entered into.
The form of the legal charge had enabled the husband, without resort to the wife, to subject the house to much greater financial risks than she could ever have known. That was a clear and obvious disadvantage to the wife.
The judge came to the wrong conclusion. The wife was entitled to have the charge set aside as against the husband by reason of his presumed undue influence over her.
The success of the wife's appeal thus depended on the correctness of the judge's view that a lender who relied on a certificate of independent advice by a legal executive had not taken reasonable steps to avoid being fixed with constructive notice of a wife's right as against her husband to have the mortgage set aside.
The point was a short one. The judge's view, based as it was on public policy, deserved great respect. But it did not allow for the realities of solicitors' practice in current conditions, when the responsibility for dealing with such matters was frequently and properly delegated to legal executives.
What was required was independent legal advice, by which was meant advice independent of the lender. Advice given by a legal executive was legal advice and, provided that it was independent and given with the authority of his principal, there was no sound reason for holding it to be inadequate.
A solicitor who allowed his legal executive to give advice from the address at which he practised necessarily held him out as having the authority to do so.
The certificate therefore entitled the bank to assume that the advice had been given with a solicitor's authority, which indeed it had. The bank thus took reasonable steps to avoid being fixed with constructive notice of the wife's right, as against the husband, to have the mortgage set aside.
Lord Justice Pill and Lord Justice Mummery agreed.
[1998] EWCA Civ J0731-20
Lord Justice Stuart-Smith
Lord Justice Millett
Lord Justice Morritt
LTA 98/5735/1
LTA 98/5736/1
QBENF 98/0388/1
FC3 98/5616/3
CHANF 97/0449/3
CCRTI 98/0221/2
CCRTF 97/1713/2
LTA 98/6059/2
FC3 98/6301/2
CCRTF 98/0218/2
CCRTF 97/1014/2 UCB
CCRTI 98/0812/2a
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
Royal Courts of Justice
Strand, London, WC2A 2LL
MR RICHARD MAWREY QC and MR SIMON WHEATLEY (instructed by Messrs Collins, Watford, Hertfordshire) appeared on behalf of the Appellant (Defendant).
MR MICHAEL BRIGGS QC and MISS AMANDA HARINGTON (instructed by Messrs Fladgate Fielder, London W1H 6AD) appeared on behalf of the Respondent (Plaintiff).
MR RICHARD MAWREY QC and MR SIMON WHEATLEY (instructed by Messrs Collins, Watford, Hertfordshire) appeared on behalf of the Appellant (Defendant).
MISS ELIZABETH WEAVER (instructed by Messrs Brook Martin, London ) appeared on behalf of the Respondent (Plaintiff).
MR JAMES MUNBY QC and MR MARK LYNE (instructed by Messrs Keppe Shaw, London W1X 1RD) appeared on behalf of the Appellant (Defendant).
MR CLIVE JONES (instructed by Messrs Tarlo Lyons, London EC1M 4DB) appeared on behalf of the Respondent (Plaintiff).
MR STEPHEN WHITAKER (instructed by Messrs Evans Derry Binnion, Birmingham) appeared on behalf of the Appellant (Defendant).
MR DAVID WOLFSON (instructed by Messrs Gateley Wareing, Birmingham) appeared on behalf of the Respondent (Plaintiff).
MR BENJAMIN LEVY (instructed by Messrs Baxter & Co, Bournemouth, Dorset) appeared on behalf of the Appellant (Defendant).
MR MICHAEL LEREGO QC and MR NICHOLAS BRIGGS (instructed by Messrs Osborne Clarke, Bristol) appeared on behalf of the Respondent (Plaintiff).
MR JOHN ROBSON (instructed by Messrs Stanley Tee & Co, Bishop's Stortford, Hertfordshire) appeared on behalf of the Appellant (Plaintiff).
MR NICHOLAS STEWART QC and MISS MICHELLE STEVENS-HOARE (instructed by Messrs Coldham Shield & Mace, London E17 3HT) appeared on behalf of the Respondent (Defendant).
MR NICHOLAS YELL (instructed by Messrs Richard Wilson & Co, Reading, Berkshire) appeared on behalf of the Appellant (Defendant).
MR TOM PUTNAM (instructed by Messrs Copley Clark & Bennett, Banstead, Surrey) appeared on behalf of the Respondent (Plaintiff).
MR NICHOLAS YELL (instructed by Messrs Richard Wilson & Co, Reading, Berkshire) appeared on behalf of the Appellant (Plaintiff).
MR NICHOLAS UNDERHILL QC and MR ADAM TOLLEY (instructed by Messrs Squire & Co, London EC1V 4JL) appeared on behalf of the Respondent (Defendant).
1. This is the judgment of the Court, to which all members of the Court have contributed, in eight conjoined appeals.
The law
2. In Barclays Bank v O'Brien [1994] AC 180 the House of Lords considered the question whether a bank is entitled to enforce its security against a wife where she has been induced by the undue influence or misrepresentation of her husband to charge the matrimonial home by way of collateral security for her husband's liability to the bank. The case was one of misrepresentation but the guidance...
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