UCB Bank plc v Sharif (deceased)

Mortgagee’s action for possession – Defence based on undue influence exercised over mortgagor by borrower son – Mortgagee claiming mortgagor independently legally advised – Whether that argument applicable where mortgage executed and solicitor appointed by same son acting under power of attorney In 1988 the late Muhamid Sharif (the father) charged certain property in Oxford to secure a loan of £12,000 to his son Hussein, who was starting a business. Later that year the father moved permanently to Pakistan and in May 1989 executed a power of attorney which enabled the son to deal, inter alia, with the father’s property in England. In December 1989 the son, acting under the power and using the services of M&G solicitors, charged the same property with the respondent bank to secure a loan intended to discharge the earlier loan and to provide funds for an expansion of the son’s business. By the same deed the father (acting through the son) gave an unlimited guarantee in respect of the son’s future indebtedness to the bank. In 1996 the father, defending an action for possession by the bank, alleged undue influence on the part of his son and contended, in reliance upon Barclays Bank plc v O’Brien [1994] 1 AC 180, that the bank was fixed with notice of the pertinent facts. Making a summary order for possession, the judge ruled that that defence had no real prospect of success as the father had been advised by his own solicitors at all material times. The father’s executors obtained leave to appeal. Held The appeal was dismissed. 1. Given the evidential difficulties facing banks in cases of alleged undue influence, the court strongly endorsed the general rule that such a defence will seldom succeed where the prospective chargor or guarantor deals with the lender through a solicitor retained by him: see per Hoffman LJ in Bank of Baroda v Rayarel [1995] 2 FLR 376 at p385. Save in exceptional cases, the lender is entitled to assume proper performance of that solicitor’s duties, including the professional duty, where also acting for the borrower, to suggest the taking of independent advice. 2. Neither the addition of the collateral guarantee nor the grant of the power of attorney afforded circumstances sufficiently exceptional to take the father’s case outside the general rule. 3. Despite the leading role played by the son, the bank had been entitled to assume that M&G were acting for the father if only because of various references made to the ownership of the property in correspondence with the bank’s solicitors. Malcolm Stitcher (instructed by Danbys, of Oxford) appeared for the appellant executors of the defendant; Timothy Hill (instructed by Mishcon de Reya) appeared for the respondent bank.