Yorkshire Bank Plc v Tinsley
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Peter Gibson,Lord Justice Rix |
| Judgment Date | 25 June 2004 |
| Neutral Citation | [2004] EWCA Civ 816 |
| Docket Number | Case No: 2003 2340 B2 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 June 2004 |
[2004] EWCA Civ 816
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM WARRINGTON COUNTY COURT
(His Honour Judge Moseley QC)
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Peter Gibson
Lord Justice Rix and
Lord Justice Longmore
Case No: 2003 2340 B2
ALEX HALL TAYLOR Esq
(instructed by Addleshaw Goddard) for the Respondent/Claimant
PETER KNOX Esq
(instructed by Freemans) for the Appellant/Defendant
This is an appeal which raises an undecided point about second or subsequent mortgages given in circumstances when an earlier mortgage is, for some reason, a voidable security. I can gratefully take the facts from the judgment of HHJ Moseley given at Warrington before he made his order of 3rd October 2003.
Facts
Mr and Mrs Tinsley married on 18th September 1982. They first lived at a house in Hughes Street in Warrington and then moved in 1984 to 16 Lumbrook Road, Appleton, for which they paid £20,000 with the help of a mortgage from the Halifax Building Society. Mrs Tinsley contributed some money of her own to the purchase. On 10th February 1988 they sold the house in Lumbrook Road and bought "Hillcrest" in Grappenhall for £68,000 with the assistance of a Halifax mortgage in the amount of £40,000.
Mr Tinsley was a self-employed electrician who also acquired light industrial buildings in the area which he converted into units either renting them out or selling them. Some of these units were at Parkdale and acquired in 1984. In 1988 he acquired a building at the Bridgefoot Business Centre for £210,000 with the help of a loan from Yorkshire Bank Plc ("Yorkshire") . Yorkshire required a mortgage over both the industrial buildings and over Hillcrest. Mr and Mrs Tinsley executed an "all monies" mortgage over Hillcrest on 10th February 1988 which the judge called "the 1988 mortgage". This was a second mortgage ranking after the Halifax mortgage and constituted security for all Mr Tinsley's current and future borrowings.
In 1990 Mr Tinsley told Mrs Tinsley that he had a large tax bill to pay and it would be necessary to re-mortgage Hillcrest. A mortgage was procured from the Confederation Bank to secure a loan of £90,000 which sufficed to pay off the Halifax mortgage. The 1988 mortgage with Yorkshire was discharged at the same time and replaced by what the judge called "the 1991 mortgage". This was, again, a second mortgage and likewise constituted security for all Mr Tinsley's current and future borrowings.
In 1992 the marriage began to disintegrate. On 21st December 1993 Mrs Tingley discovered that her husband had committed adultery. On 17th March 1994 she consulted Mr Hadfield of Colin Watson & Co who noted that the matrimonial home was on the market. She informed him in May 1994 that the house was mortgaged to the Confederation Bank and on 23rd May she filed a divorce petition. In June 1994 Mr Tinsley left Hillcrest and went to live with friends called Foden at 113 London Road in Stockton Heath, a long leasehold property divided into two flats. On 16th August 1994 Mr Hadfield recorded that Mrs Tinsley had told him that the Bridgefoot units had been bought in 1988 and that the matrimonial home had then been charged. Mr Hadfield communicated with the Confederation Bank and found that they required £101,496.25 to redeem their mortgage on Hillcrest; he also checked with the Land Registry and found that there was a second charge in favour of Yorkshire. On 14th September he told Mrs Tinsley that he had written to Yorkshire to find out the amount needed to repay their charge.
Mrs Tinsley had filed her affidavit of means on 6th September 1994; on 20th September Warrington County Court ordered Mr Tinsley to file his affidavit within 28 days of service of their order so to do. On 17th October Mr Hadfield had to apply for a penal notice as Mr Tinsley had failed to serve his affidavit of means. He never did so; instead he persuaded Mrs Tinsley to deal with the financial aspects of the divorce without further involvement from Colin Watson & Co. What was arranged was that Mr and Mrs Tinsley would exchange Hillcrest for 113 London Road plus about £110,000. Mr Tinsley said this would redeem the mortgage on Hillcrest and that Mrs Tinsley would be able to have 113 London Road free of mortgage. The conveyancing would be in the hands of Mr Jordan of the solicitors Riley & Co who was a golfing partner of Mr Tinsley. This did not appeal to Yorkshire, however; they insisted that they would have to have a mortgage on 113 London Road. It is not clear when or how this insistence was communicated to Mrs Tinsley but it was around the time that the county court issued its decree nisi on 23rd November 1994.
Completion on the exchange transaction took place on 8th and 9th December 1994 when Mrs Tinsley attended the office of Mr Jordan who appears to have been acting for Mr Tinsley, Mrs Tinsley and Yorkshire. Mr Tinsley never told Mr Jordan that he and his wife were getting divorced. Hillcrest was transferred to Mr Brian Foden for £160,000; 113 London Road was transferred to Mrs Tinsley for £45,000. The sum due to the Confederation Bank was paid out of the resulting £115,000 and Mr Tinsley received most of the balance of about £5,000. Mrs Tinsley signed a new mortgage in favour of Yorkshire over 113 London Road; this mortgage was, again, an all monies mortgage securing Mr Tinsley's current and future liabilities.
When Mrs Tinsley next saw Mr Hadfield and explained all this to him on 29th December 1994 he recorded that Mr Tinsley had told Mrs Tinsley that he intended to purchase his own property and would then transfer the Yorkshire charge to that property. That never happened. Mr Tinsley went into a downward spiral. He left England for Germany but later returned and from time to time according to the Bank's records occupied the flat at 113 London Road which was not occupied by Mrs Tinsley.
Mr Hadfield tried to rescue the position by asking Yorkshire how much they would require to release their charge on 113 London Road. On 11th October 1995 they said that they required £60,000. But in June 1996 Mrs Tinsley said that everything was fine and that she did not want to rock the boat. Accordingly no order was ever made in the ancillary proceedings for relief in connection with the divorce which had been made absolute in January 1995. In October 1997 Yorkshire required Mr Tinsley to discharge his indebtedness and on 14th January 1998 served a demand for £286,348.29 on both Mr and Mrs Tinsley. In the same month they said they would release the charge on 113 London Road for £75,000. The units were sold for about £216,000 later that year. On 2nd January 2001 Yorkshire (to whom I shall now refer as "the Bank") began possession proceedings on the basis of a sum of £147,063.98 currently due. Those proceedings have culminated in Judge Moseley's order for possession of 3rd October 2003.
Issues and the Judge's Decision
The judge skilfully distilled the issues from what he called Mrs Tinsley's elaborately pleaded and argued case. They were:-
(1) whether the 1988 and 1991 mortgages were void or voidable as against Mr Tinsley and, more importantly, the Bank for that species of mistake known as "non est factum", misrepresentation or undue influence;
(2) whether the 1994 mortgage was itself likewise void or voidable for "non est factum" or misrepresentation (undue influence no longer being alleged in relation to that mortgage which was executed shortly before the decree nisi was made);
(3) if (as the judge was to hold) it was not itself void or voidable for either of those reasons, whether it was nevertheless voidable because it was a replacement of or substitute for the voidable mortgages of 1988 and 1991;
(4) whether the 1994 mortgage was voidable as an unconscionable bargain either as against Mr Tinsley with the Bank having notice of such unconscionability or directly as against the Bank.
The judge held that the pleas of "non est factum" and misrepresentation in relation to all the mortgages failed on the facts as against Mr Tinsley and as against the Bank which, in any event, had no constructive notice of such matters; he held, however, that the 1988 and 1991 mortgages were voidable as against Mr Tinsley for undue influence and that, since the Bank had constructive notice of that undue influence, they were voidable as against the Bank also. The Bank do not challenge the judge's decision on this matter which he expressed as follows (para. 15) :-
"I have no reason to reject Mrs Tinsley's case that she reposed trust and confidence in her husband. Moreover the transaction is not readily explicable by the relationship of the parties. Mrs Tinsley had put money of her own into the acquisition of 16 Lumbrook Road and the proceeds of sale of that property were being used in part to finance the purchase of Hillcrest. The mortgage in favour of the bank was in an unlimited amount and was, I infer, created partly to finance the acquisition of the Bridgefoot units which were to be vested in the husband alone. Those facts seem to me to be sufficient to throw the burden of proof on the husband and since there is no evidence to displace that burden in my view a finding of abuse by Mr Tinsley of his position of trust and confidence is justified. Since whenever a wife offers to stand surety for her husband the lender is put on inquiry, the bank was in my view put on inquiry and since there is no evidence at all of any steps which the bank took to satisfy itself that Mrs Tinsley had entered freely into the transaction, I...
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