Widow making home available as security for a loan – Money paid to son-in-law – Son-in-law failing to pay instalments – Widow seeking declaration setting aside mortgage for undue influence and misrepresentation – Whether judge properly setting aside mortgage – Appeal dismissed
In 1965 the claimant and her husband purchased a property at 47 Telcroft Close, Corsham, Wiltshire with the assistance of a mortgage from Wiltshire County Council. The mortgage was eventually discharged. In January 1994 the husband died and the claimant was helped by her daughter (S) and the daughter’s husband (T) in relation to matters such as probate.
Within a couple of months of the husband’s death, the claimant was approached by S and asked if she would make the property available as security for a loan to raise money in order for T to buy shares in Impact Windows, the company he worked for. The claimant eventually agreed and T completed a loan application with the claimant recorded as the joint applicant. In July 1994, the first defendant’s solicitors wrote to T and the claimant enclosing a copy of the first defendant’s offer of an advance. The letter and other documents relating to the mortgage recommended that the mortgage deed should not be signed without independent or professional legal advice. In October 1994 the mortgage deed was duly executed by the claimant and T.
In the event, the directors of Impact Windows, refused to allow T to purchase shares on the grounds that he had nine county court judgments recorded against him. In May 1996 he lost his job and ceased to pay the instalments due under the mortgage. Thereafter, the claimant took over the payments. Subsequently, she issued proceedings seeking a declaration that she was not bound by the mortgage as she had entered into it as a result of undue influence and misrepresentation. The judge allowed the claim and made the declaration sought by the claimant. The first defendant appealed, contending: (i) that any undue influence did not justify the setting aside of the mortgage; (ii) that the judge had erred in finding that it had constructive notice of the grounds relied upon by the claimant to support her claim; and (iii) that it had taken sufficient steps to dispel the constructive notice.
Held: The appeal was dismissed.
1. The judge had been entitled to conclude that the claimant had entered into the mortgage as a result of undue influence and misrepresentation. She had recently lost her husband, with whom she had lived for some thirty years, and upon whom she had depended in all financial matters. She was unacquainted with commercial matters and had not appreciated that failure to pay the council under the original mortgage could result in the council taking possession of the house. Moreover, following her husband’s death, she had relied on S and T and although she had been to see a firm of solicitors, that had only been to ensure that she was registered as the sole proprietor.
2. The judge had been entitled to conclude that the first defendant was to be treated as having had notice of the misrepresentation and undue influence. The applicants for the high-interest loan were a man aged 33 with a monthly income of £2,500 and a woman aged 56 with a monthly income of £430. Although they appeared to be living together, as all the documents were addressed to the property, there was no indication on the application form as to the relationship between them. Furthermore, the application had requested that the money be paid to T alone, even though the claimant owned the property.
3. The judge had been correct to conclude that the first defendant was not entitled to avoid the consequence of the notice. Although the solicitor’s letter, the mortgage offer and the mortgage deed had all contained written warnings urging the claimant to take independent or professional legal advice, the warnings had not been read by the claimant and the first defendant had not ensured that the claimant had received independent legal advice or explained the situation to the her in a personal interview. Barclays Bank plc v O’Brien [1994] AC 180, applied.
Nicholas Sproull (instructed by Kirby Simcox, of Kingswood) appeared for the claimant; Richard Carter (instructed by Richards) appeared for the first defendant.
Thomas Elliott, barrister
