Guarantee — Legal charge over matrimonial home — Wife acting surety — Bank seeking possession of property — Assumption of presumed undue influence by husband — Whether bank took sufficient steps to avoid construction notice of assumed undue influence — High Court holding bank took reasonable steps and was entitled to order for possession — Court of Appeal dismissing appeal — Judgment for bank
The defendants were married when they purchased the leasehold interest of 36 Litchfield Way, London NW11, but later separated. In 1987 the husband, who was up until then a sponsored member of Lloyds had to make his own arrangements to continue his Lloyds membership. To that end he arranged with the plaintiff a bank guarantee, which was to be supported by a charge on the property. C was the solicitor acting on behalf of both defendants and the plaintiff in connection with registering the legal charge. He witnessed the husband’s signature, but as the wife was abroad until after the deadline he telephoned her to explain the nature of the arrangement. The husband then secured the wife’s signature on the charge.
The husband defaulted in payments under the guarantee and when both husband and wife failed to comply with the plaintiff’s demands the plaintiff sought to enforce its security. It applied for final judgment under Ord 88 of the Rules of the Supreme Court for possession of the property. The master refused that application, but the plaintiff appealed to the High Court. The wife resisted the order on the ground that the bank had failed to comply with its duty to explain the legal charge to her. The bank’s appeal was allowed and the wife was ordered to give up possession of the property: see [1994] EGCS 45. The wife appealed.
Held The appeal was dismissed.
1. A solicitor, like any other agent, might be instructed specifically to act for a party for one particular purpose in relation to a transaction, but not to act for him generally for other purposes. Thus, it was only knowledge which he acquired when carrying out that part of the transaction in which he was instructed to act as agent, which was to be imputed to the party who for that purpose was his principal: see Saffron Walden Second Benefit Building Society v Rayner (1880) 14 ChD 406; Blackburn Low & Co v Vigors (1887) 12 App Cas 531.
2. The evidence showed that C was the agent of the bank to register the security, but there was no evidence that he was expressly appointed to take any antecedent step. In the ordinary way, in advising the wife as he did, he was either acting for her or was acting for her husband and advising her in pursuance of what he properly perceived to be his general professional duty.
3. The bank was entitled to believe that he acted in one or other of those capacities. In neither capacity was what he knew to be imputed to the bank. There was nothing in the evidence from which it could reasonably be argued that C was the agent of the bank for the purpose of speaking to and advising the wife.
Richard Salter (instructed by Eversheds Jaqcues & Lewis) appeared for the bank; Leolin Price QC and Dennis Sharpe (instructed by Kenwright Lake & Co, of East Moseley) appeared for Mrs Serter.
