Husband remortgaging matrimonial home to finance business – Husband and wife’s interests in property charged – Business in voluntary liquidation – Bank obtaining order for possession – Wife seeking to set aside charge as against her share of property – Whether husband having misrepresented effect of charge – Whether wife executing charge under undue influence – Claim dismissed
The plaintiff’s husband, T, ran a steel fabrication business which had an account at the Swindon branch of the defendant bank. The business traded well until June 1991 when it ran into a serious cash flow problem resulting in its overdraft exceeding its limit of £100,000. The defendant agreed to T’s request to extend the overdraft limit to £150,000 on the provision of a first charge over the business premises and a second charge on the plaintiff and T’s matrimonial home. A request form was sent to T and the bank, which had the first charge over the matrimonial home. The plaintiff and T signed the charge at the bank. At the top of the final page of the charge were the words, ‘Warning. This [mortgage] covers the liabilities of somebody else. If they do not repay, the bank might sell the charged asset. You are STRONGLY recommended to seek independent advice before signing.’ At a subsequent meeting the plaintiff signed a standard form document in which she purported to ‘confirm and acknowledge’ that she had been strongly recommended to obtain legal advice before signing the charge and had declined to accept the recommendations (‘the acknowledgement’). The charge was executed. The financial position of the business did not improve and in 1993 it went into voluntary liquidation.
The plaintiff issued proceedings and claimed that the charge as against her share of the property should be set aside on the basis that she had executed the charge pursuant to misrepresentations or under T’s undue influence. The bank counterclaimed for possession of the house and obtained summary judgment against T.
Held The plaintiff’s claim was dismissed.
1. The plaintiff had read the request form, and would have read the acknowledgement before signing it, and would therefore have known that it was the whole of the house which was being remortgaged. Accordingly T had not misrepresented to the plaintiff that it was only his interest in the house which was being remortgaged.
2. Although T had told the plaintiff that the mortgage was only for a short time or a couple of months, these were expressions of his belief and were not assurances which amounted to misrepresentations.
3. Although T had influenced the plaintiff in relation to the transaction, the influence could not be categorised as undue. She had applied her own judgment to T’s assessment of the business’ cash flow problem and decided that she would accept his assessment as accurate. In addition there was an obvious benefit to the plaintiff if the business continued to trade profitably. Therefore the plaintiff’s claim against the bank failed: see Barclays Bank plc v O’Brien [1994] 1 AC 180.
4. There was to be a further hearing of the issue whether the bank’s counterclaim against the plaintiff succeeded despite the bank’s representation to the plaintiff that it would enforce any security against the business premises before enforcing against the house.
Robert Levy (instructed by Bevirs, of Swindon) appeared for the plaintiff; Michael Sullivan (instructed Lawrence Tucketts, of Bristol) appeared for the defendant.
