Husband and wife charging matrimonial home – Charge securing husband’s liabilities – Husband’s liabilities including guarantee in respect of business – Husband’s business failing – Bank requiring sale of home – Whether solicitor negligent – Causation – Wife’s claim and appeal dismissed
In 1978 the claimant and her husband, H, purchased Harwood House, Wassell Grove, Hagley, Worcestershire, which was registered in their joint names and occupied as the matrimonial home. H operated a civil engineering contracting business (the business) of which he was a director. In 1983 the house was charged to Barclays Bank, which was, at that time, the banker for both the claimant and H and the business. In 1986 H changed from Barclays to Lloyds, which was provided with relevant security documents, including an unlimited guarantee by H of the liabilities of the business and an all-monies charge on the house to secure his liabilities to the bank (the 1986 charge), which included the guarantee liability in respect of the business. By a new legal charge dated 10 July 1987 (the 1987 charge) the claimant and H charged the house to Lloyds in order to secure H’s liabilities to the bank. Their signatures on the 1987 charge were witnessed by the defendant firm of solicitors under the words “signed, sealed and delivered by . . . in my presence after the contents had been fully explained by me to him/her and I was satisfied that he/she fully understood the same”.
In 1991 H’s business failed, and Lloyds made a demand on the business for the sum of £491,000. In September 1991 Lloyds sent a letter of demand to the claimant and H and subsequently required the house to be put on the market. The claimant issued proceedings for professional negligence claiming that she had not been properly advised when she executed the 1987 charge. She claimed £85,000 damages, being the sum that she had paid to the bank in settlement of possession proceedings against her. The judge held that the defendant had satisfied its duties as set out in Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144 and dismissed the claimant’s claim.
Held: The appeal was dismissed.
1. Where a wife was asked to give a collateral charge over the matrimonial home to support the husband’s indebtedness, a solicitor was not necessarily disqualified from acting for the wife because he was acting for the husband. It was a matter for his professional judgment based on the facts of the proposed transaction, the amount of both the existing debt and of the new advance and of the reasons for the new advance or the bank’s request for additional security: see Royal Bank of Scotland v Etridge (No 2) [1998] 4 All ER 705.
2. The judge had correctly directed himself in law as to the defendant’s duties. The defendant had explained the 1987 charge to the claimant fully and accurately, and she had understood it. It had made the suggestion of independent advice, which she had rejected. There was no evidence of any actual undue influence or of any misrepresentation by H, and it was not a case of manifest disadvantage to the claimant. Therefore, on the facts found by the judge, the defendant had not been in breach of its duties.
3. In any event, the judge had been entitled to conclude that the claimant had failed to establish that the loss claimed was caused by any breach of the defendant in connection with the 1987 charge. It was probable that the bank would have refused to move on the question of security for H’s liabilities, and if the claimant had refused to execute the 1987 charge, her liability to the bank would have been the same by virtue of the 1986 charge.
Richard Jones QC and Paul Marshall (instructed by Willcox Lane Clutterbuck, of Birmingham) appeared for the claimant; Christopher Gibson QC and Gavin Hamilton (instructed by Pinsent Curtis, of Birmingham) appeared for the defendant.
Thomas Elliott, barrister
