Husband’s loan secured by way of charge over matrimonial home – Arrears – Bank seeking possession – Whether application for adjournment of trial properly refused – Whether transaction manifestly disadvantageous to wife – Whether bank relying on advice given by a legal executive had taken reasonable steps to avoid being fixed with constructive notice
In July 1986 the defendant husband and wife (H and W) purchased 52 Ashtead Road, Clapham, London E5, and the property was transferred into their joint names. Subsequently, H sought the claimant bank’s assistance in order to purchase commercial premises. In January 1991 documentation was prepared for charging the property and the defendants took the documentation to the offices of a solicitor, where they were attended by a legal executive. The defendants signed the legal charge in the presence of the legal executive. The legal executive then signed a certificate stating that he had given W independent legal advice and he gave the name and address of the solicitor with whom he practised. Subsequently, H was unable to service the loan and formal demands were made for repayments.
In July 1995 the bank issued proceedings claiming payment against H and possession against both H and W. H counterclaimed for rescission of the mortgage on the ground that he had been given advice by the bank, which had induced him to purchase the commercial premises, amounting to misrepresentation and negligence. W relied on Barclays Bank plc v O’Brien [1994] 1 AC 180; [1993] EGCS 169 and claimed that her execution of the mortgage had been procured by H’s undue influence over her of which the bank had notice.
At the commencement of the trial H applied for the matter to be adjourned on the ground that his legal aid had been withdrawn only one week previously. The judge refused the application with the effect that H had to conduct the trial in person. At the end of the hearing he gave judgment for the bank against both H and W and dismissed their counterclaims. H appealed against the judge’s refusal to grant him an adjournment and, on that basis, sought a retrial. W appealed against the judge’s finding that the transaction had not been “manifestly disadvantageous” to her. By a respondent’s notice, the bank claimed that in relying on a certificate of independent legal advice, given not by a solicitor but by a legal executive, it had taken reasonable steps to avoid being fixed with constructive notice of W’s right, as against H, to have the mortgage set aside.
Held: The appeals were dismissed and the cross-appeal allowed.
1. The predicament in which H had found himself was not so serious as to make the judge’s decision to go ahead with the trial unreasonable or plainly wrong. The judge had taken into account the prejudice to H if the trial proceeded and was evidently satisfied that the trial could be conducted without unfairness to him. In any event, even if the judge had misdirected himself, the court was not bound to order a retrial unless the refusal to grant an adjournment had occasioned some substantial wrong or miscarriage of justice, and it could not be concluded that it had: Maxwell v Keun [1928] 1 KB 645 considered.
2. Although the House of Lords had indicated that manifest disadvantage might not continue indefinitely to be a necessary ingredient in a case of presumed undue influence (see CIBC Mortgages plc v Pitt [1994] 1 AC 200; [1993] EGCS 174, the Court of Appeal and the judge were bound to hold that it was a necessary ingredient. Such manifest disadvantage had to be clear and obvious and more than de minimis but could be small. The charge on the property had been an all moneys charge that enabled H, without resort to W, to subject the house to greater financial risk than she could ever have known. That was a clear and obvious disadvantage to her that was not outweighed by any advantages of the transaction.
3. However, 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 good 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 had therefore entitled the bank to assume that the advice had been given with the authority of the legal executive’s principal and accordingly it could be concluded that the bank had taken reasonable steps to avoid being fixed with constructive notice of the W’s right to have the mortgage set aside: Royal Bank of Scotland v Etridge (No 2) [1998] 4 All ER 705 applied.
Nicholas Elliott QC and Jonathan Marks (instructed by Nicholson Graham & Jones) appeared for the claimant; Amanda Harington (instructed by Haskin & Co) appeared for the first defendant; Hazel Williamson QC and Helene Pines-Richman (instructed by Waller & Co) appeared for the second defendant.
Thomas Elliott, barrister
