Husband and wife entering into loan secured by way of legal charge over matrimonial home – Wife not denying validity of legal charge for purposes of ancillary relief proceedings – Wife claiming undue influence in defence of possession proceedings – Judge refusing application to strike out undue influence defence as abuse of process – Appeal allowed
The respondents, a husband and wife, were the owners of 8 Mangapp Chase, Burnham-on-Crouch, Essex. In February 1991 they entered into a loan agreement with the appellant bank in order to raise money for the husband’s business. The loan was secured by way of a second charge over the property. The marriage subsequently failed and the respondents fell into arrears under the loan agreement. In June 1992 the bank issued proceedings seeking possession of the property. The wife petitioned for divorce and in February 1994 she applied for ancillary relief, giving evidence by way of affidavit admitting the existence of a number of charges over the property including that of the claimant bank. A property adjustment order was made transferring the husband’s interest in the property to the wife. Meanwhile, the wife served a defence to the bank’s possession proceedings claiming that the bank’s legal charge should be set aside on the ground of undue influence. The husband duly transferred his interest in the property to the wife by executing a conveyance which was stated to be subject to the bank’s legal charge.
In April 1998 the bank applied for the wife’s defence of undue influence to be struck out on the basis that the wife had affirmed the legal charge for the purpose of the divorce proceedings and therefore she could not seek relief from the charge for the purpose of the possession proceedings. The judge refused the application holding that the evidence had not disclosed that the wife had affirmed the legal charge. The bank appealed.
Held: The appeal was allowed.
1. This is the first case involving the interrelation between ancillary relief proceedings in which a property adjustment order has been made and possession proceedings where a defendant is claiming undue influence. It is important that practitioners understand how the two sets of proceedings are interrelated because it is not uncommon for the breakdown of a marriage to lead to the arrears of mortgage repayments and possession proceedings.
2. It could be inferred from the facts that the wife’s solicitor had known at the date of the ancillary relief proceedings that she intended to defend any possession proceedings on the ground of undue influence. Any claim for equitable relief required all the relevant circumstances to be taken into account and therefore the conveyance between the husband and wife, which was expressly subject to the bank’s legal charge, was relevant to the possession proceedings. Accordingly, the wife had been under a duty to tell the court in the ancillary relief proceedings that the assets and liabilities were not as they appeared to be. She had not done so and it would be an abuse or process to allow the wife to pursue an inconsistent defence in the possession proceedings.
Josephine Hayes (instructed by Davis & Co, of High Wycombe) appeared for the appellant; Rajinder Sahonte (instructed by Palmers, of South Woodham Ferrers) appeared for the respondent.
Thomas Elliott, barrister
