Turner v Barclays Bank Plc
| Jurisdiction | England & Wales |
| Judgment Date | 1997 |
| Date | 1997 |
| Year | 1997 |
| Court | Chancery Division |
NEUBERGER, J
Property – matrimonial home jointly owned by husband and wife – husband requiring money for his business – bank agreeing to advance on the security, inter alia, of a second mortgage on matrimonial home – wife declining to take independent legal advice – not entitled to set aside charge as against herself.
The plaintiff (the wife) and her husband were the joint proprietors of their matrimonial home, subject to a building society mortgage. The husband also owned his business premises. Early in 1992 he needed to raise money on what he then regarded as a short-term basis. The defendant (the bank) granted a first mortgage on the business premises and a second mortgage (the charge) on the jointly owned matrimonial home. Before the charge was executed by the wife there were a number of conversations between the husband and wife and the bank. The bank's internal records showed that independent legal advice had been considered by both, that they did not wish to take independent legal advice and that both were "fully aware of the implications of this action". On the occasion when they both signed the charge the bank noted that the wife was offered "independent legal advice on this and the last occasion and this has been declined". The wife also signed a standard form in which she purported to confirm and acknowledge that "if the borrower does not repay the bank it may sell the charged asset" and "You have recommended that I obtain legal advice ... and I have declined to accept your recommendations". A year later both the business and the marriage were in great difficulty; the wife brought proceedings to set aside the charge as against herself on the grounds of misrepresentation and undue influence the husband, the bank claimed, inter alia, possession of the matrimonial home.
Held – dismissing the wife's claim: The principal issues in this case were (a) whether the husband made misrepresentations to the wife, (b) whether he exercised undue influence over her, and (c) if so, whether the bank was put on enquiry amounting in law to constructive notice. For the principles underlying constructive notice see Barclays Bank plc v O'Brien and Another[1994] 1 FCR 357; Massey v Midland Bank plc[1995] 1 FCR 380; Banco Exterior International v Mann[1995] 2 FCR 282; Crédit Lyonnais Bank Nederland NV v Burch[1997] 1 FCR 1. In the present case there had been no unequivocal statement amounting to a misrepresentation by the husband to the wife, although the husband had hoped that the charge would be redeemed in a short time. The wife did not rely in all financial matters on her husband. The bank had constructive notice of the husband's representations to the wife. On at least one occasion the bank had spoken to the wife in the absence of the husband and recommended that she obtain legal advice.
In all the circumstances, the bank had done enough to discharge any constructive notice even if there had been misrepresentation or undue influence.
Cases referred to in judgment:Banco Exterior International v Mann[1995] 2 FCR 282; [1995] 1 All ER 936.
Barclays Bank v O'Brien and Another[1994] 1 FCR 357; [1994] AC 180; [1993] 3 WLR 786; [1993] 4 All ER 417.
Crédit Lyonnais Bank Nederland NV v Burch[1997] 2 FCR 1; [1997] 1 All ER 144.
Goldsworthy v Brickell [1987] Ch 378; [1987] 2 WLR 133; [1987] 1 All ER 853.
Massey v Midland Bank plc[1995] 1 FCR 380; [1995] 1 All ER 999.
Tate v Williamson (1866) LR 2 Ch App 55.
Robert Levy for the wife.
Michael Sullivan for the bank.
MR JUSTICE NEUBERGER. Introduction:The plaintiff (Mrs Turner) and her husband (Mr Turner) are the registered freehold proprietors of Downland View, Bishopstone Road, Bourton, Oxfordshire ("the house"). On 24 April 1992, they executed a legal charge ("the charge") of the house in favour of the defendant ("the bank") in order to secure all sums owing by Mr Turner to the bank. By these proceedings, Mrs Turner seeks an order setting aside the charge, as between herself and the bank.
By way of counter-claim, the bank sought against Mr Turner payment of all sums due from him to the bank, and, against both Mr and Mrs Turner, possession of the house. On 7 August 1995 the bank obtained judgment on the counter-claim against Mr Turner. What I have to determine, therefore, is Mrs Turner's claim to set aside the charge and the bank's counter-claim for possession of the house against her. Subject to one point, to which I shall refer at the end of this judgment, it is agreed that whoever succeeds on the claim will also succeed on the counter-claim.
The uncontentious historyMr Turner owned and ran a steel fabrication business under the name of AJ Turner & Son ("the business"), which had been started by his grandfather, carried on by his father, and then had passed to him. He had two accounts in the name of the business at the main Swindon branch of the bank; it would seem that the business had had an account at the bank since before 1940. One of the accounts was an ordinary account ("the account"); the other was a loan account.
Before her marriage Mrs Turner had been for five years a clerical assistant with the Inland Revenue; she ceased working after marrying, but at some point before 1991 she took a job as a teacher's assistant in a nursery school; this continued until 1994 when she became a driver for a local motor car dealer. Mr and Mrs Turner have four children who are now aged 22, 20, 17 and 14. The house has been the family home since they acquired it in 1977 with the assistance of a loan (secured
by way of a first mortgage) from the Portman Building Society ("Portman"). In addition to Mr Turner's account with the bank, to which I have already referred, he and Mrs Turner had a joint account with Portman. Mrs Turner had a separate account in her own name with Portman. She also had two other building society accounts in her own name, one with the Nationwide Building Society ("Nationwide") and the other with the Halifax Building Society ("Halifax"). Finally, she had her own account with Lloyds Bank plc ("Lloyds").
Mrs Turner's Portman account was opened when she received a legacy in about 1986 of about £18,000. The money in this account was used to pay the children's school fees, and was supplemented by payments made from time to time by Mr Turner, mostly out of his account at the bank.
The joint account with Portman normally had a credit balance of around £600. Mr Turner regularly paid £200 a month into this joint account, and Mrs Turner very occasionally made withdrawals from it for family purposes; the primary use of the account for the paying of the mortgage instalments on the house.
The account with Halifax was the subject of regular small monthly payments, and was kept by Mrs Turner for the purpose of meeting one-off items of household expenditure such as repairs to the washing machine. Her account with Nationwide received regular monthly payments from Mr Turner's account with the bank. These payments were at the rate of £200 per month until April 1990, and thereafter at the rate of £400 per month until November 1992, when they ceased, no doubt due to the financial problems faced by the business. During 1990 and 1991, Mrs Turner made withdrawals twice or three times a year from her Nationwide account in sums of around £2,000; during 1992, she made more frequent withdrawals, albeit for rather smaller sums. Those sums in the main were used for school fees.
Mrs Turner's account at Lloyds had a credit balance which rarely exceeded £300, and was the subject of fairly numerous small withdrawals; its principal source of receipts was Mrs Turner's income of about £200 per month from her work as a teacher's assistant. Mrs Turner took out an insurance policy (which was either on her life or that of the joint lives of herself and her husband) in 1981 to help with school fees.
Mrs Turner described the running of the home as a joint enterprise. She accepted that she exercised her own skill and judgment in relation to domestic matters. She organized the payment of the children's school fees. She said she was "not entirely responsible" for the domestic budget; she said that she and her husband discussed it. However, it was her decision as to when to withdraw sums, and how much to withdraw, from the various accounts in her name. I formed the clear view that, while Mr Turner was also involved, it was Mrs Turner who was primarily responsible for organizing the family and, in particular, the family finances.
Mrs Turner had hardly any involvement with the business. Some time ago, for a period of about six months, she would ring up overdue debtors of the business with a view to persuading them to pay. However, at least in general, she and her husband regarded the business as very much his responsibility, in which she was not involved. Nonetheless, the accounts of the business show that she was paid about £70 per week which was treated as a business expenditure.
Until 1991, it appears that the business traded satisfactorily. Indeed, to quote from the records of the bank, until June 1991 the trading performance of the business had been "excellent" and its account at the bank had been "well conducted". In 1991 the overdraft limit on the account was £100,000, and until the end of September, the business's borrowing on the account did not get near that figure.
Unfortunately during 1991, the business encountered difficulties over a particular contract, involving the supply of steel for a building contract at Horfield Prison ("the prison contract"). This led to serious cash flow problems, which Mr Turner specifically raised in about November 1991 with Mr Mobley, who was the manager at the bank's Swindon branch responsible for Mr Turner's account from some time in 1988. Mr Mobley requested further information, and this was some time in coming. On 3 December 1991, the bank's internal records for the account (contained in information cards) state that it was made clear to Mr...
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