Barclays Bank plc v Boulter and another
Lord Slynn of Hadley, Lord Nolan, Lord Steyn, Lord Hoffmann, Lord Hutton
Husband and wife joint owners of house charged to secure husband’s indebtedness – Wife opposing possession action on ground that husband had misrepresented scope of charge – Whether wife’s pleading defective for failure to allege constructive notice on part of chargee bank – Whether bank required to show lack of notice
In 1979 a husband and wife executed a charge over their jointly owned house, the charge being expressed to secure the present and future indebtedness of the husband to the chargee bank. In June 1994, following the failure by the husband to comply with a demand for £122,881, the bank obtained an order for possession. As she was about to be evicted, the wife, relying on the then recently decided Barclays Bank v O’Brien [1994] AC 180, applied to have the order set aside on the ground that she had been induced to sign the charge by undue influence and misrepresentation on the part of her husband.
An order was made for a fresh trial; however, before making that order, the recorder set out the conditions on which the bank would be considered to have constructive notice of the material facts. The wife then filed a defence in which she pleaded the alleged misconduct of her husband with respect to the charge, and stated that she reposed trust and confidence in him at all material times. The pleading did not expressly allege that the bank had actual or constructive notice of the matters alleged. The trial judge held that the pleading was defective. The wife, anxious to avoid the costs of amendment, appealed to the Court of Appeal, where it was held that no amendment was required on the particular facts of the case. However, the court went on to advance a wider ground for allowing the appeal, holding that since a plea of purchaser without notice operated as a single defence, it was a matter for the bank to raise by pleading and establishing, inter alia, that nothing had occurred to put it on inquiry. The bank appealed to the House of Lords.
Husband and wife joint owners of house charged to secure husband’s indebtedness – Wife opposing possession action on ground that husband had misrepresented scope of charge – Whether wife’s pleading defective for failure to allege constructive notice on part of chargee bank – Whether bank required to show lack of notice In 1979 a husband and wife executed a charge over their jointly owned house, the charge being expressed to secure the present and future indebtedness of the husband to the chargee bank. In June 1994, following the failure by the husband to comply with a demand for £122,881, the bank obtained an order for possession. As she was about to be evicted, the wife, relying on the then recently decided Barclays Bank v O’Brien [1994] AC 180, applied to have the order set aside on the ground that she had been induced to sign the charge by undue influence and misrepresentation on the part of her husband.
An order was made for a fresh trial; however, before making that order, the recorder set out the conditions on which the bank would be considered to have constructive notice of the material facts. The wife then filed a defence in which she pleaded the alleged misconduct of her husband with respect to the charge, and stated that she reposed trust and confidence in him at all material times. The pleading did not expressly allege that the bank had actual or constructive notice of the matters alleged. The trial judge held that the pleading was defective. The wife, anxious to avoid the costs of amendment, appealed to the Court of Appeal, where it was held that no amendment was required on the particular facts of the case. However, the court went on to advance a wider ground for allowing the appeal, holding that since a plea of purchaser without notice operated as a single defence, it was a matter for the bank to raise by pleading and establishing, inter alia, that nothing had occurred to put it on inquiry. The bank appealed to the House of Lords.
Held: The appeal was dismissed, but the wider ground was untenable.
1. Ordinarily, the defence filed by the wife would be regarded as inadequate as she had neither pleaded the allegation of constructive notice nor alleged any fact from which such an allegation could be deduced. Concealed and referential allegations did not perform the function of giving the other party fair notice of the case that he had to meet. However, the facts were exceptional in that it had been made quite clear at the hearing before the recorder that the wife would be relying on constructive notice. The bank could not have seriously concluded from the pleading that she was abandoning what was, in practical terms, her only defence. Against that known background, no amendment was required to the pleaded defence.
2. The wider ground could not be supported because it drew a false analogy with the defence of a purchaser in good faith for value of a legal estate without notice of a prior equitable interest. Since such a purchaser could not , prima facie, obtain a better title than his vendor, it was for him to establish all the elements of that defence: see In re Nisbet and Potts’ Contract [1905] 1 Ch 391. Here, however, given that the bank had taken the charge directly from the wife, there was no prior interest that the bank had to defeat. A better analogy was the case of the purchaser of a chattel whose vendor’s title was vitiated by the fraud of a third party. In such a case it was for the defrauded owner to prove that the purchaser had actual or constructive notice of the fraud: see Bainbrigge v Browne (1881) 18 ChD 188, which was the case principally relied upon by Lord Browne-Wilkinson in O’Brien for the doctrine of vitiation by notice of the misrepresentation or undue influence of a third party. Furthermore, a rule that generally put the burden upon the bank to show that it had no notice of vitiating circumstances could operate very unreasonably.
Michael Brindle QC and Michael Sullivan (instructed by Lovell White Durrant) appeared for the appellant; Terence Etherton QC and Christopher Coney (instructed by Comptons) appeared for the respondent; Stephen Moriarty (instructed by the Treasury Solicitor) appeared as amicus curiae.
Alan Cooklin, barrister
