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Cite as: [2002] EWCA Civ 1081

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Neutral Citation Number: [2002] EWCA Civ 1081

(His Honour Judge Geddes)

The Royal Courts of Justice
The Strand
Thursday 11 July 2002

B e f o r e :



LINDA CAROL TUDOR 2nd Defendant/Appellant


MR J DE WAAL (instructed by Tyndallwoods, Windsor House, Temple Row, Birmingham) appeared on behalf of the Appellant
MR W BOJCZUK (instructed by Eversheds, PO Box 473, Fitzalan House, Fitzalan Road, Cardiff ) appeared on behalf of the Respondent



Crown Copyright ©

    Thursday 11 July 2002

  1. LORD JUSTICE ROBERT WALKER: This is a second appeal in a case in which a wife has relied on a claim of undue influence and duress by her husband as the basis of her defence and counterclaim in proceedings for possession brought by a mortgagee bank. The wife is Ms Linda Tudor who, although separated and using her own surname, was still married to Mr Roger Hill when the proceedings were commenced on 3 October 2000. We were told that there has since been a decree nisi but not a decree absolute. The mortgagee is the Governor and Company of the Bank of Scotland ("the bank").
  2. The first round of litigation was in the Redditch County Court. On 9 January 2001 the bank applied for the striking out of Ms Tudor's defence and counterclaim or, alternatively, for summary judgment under CPR Part 24 in respect of the counterclaim. On 15 February 2001 Deputy District Judge Sheldrake dismissed the application with costs. An important part of his reasoning was based on rule 24.3(2)(a), which prevents summary judgment being given against a mortgagee in proceedings for possession of residential premises (which the mortgaged premises were). These procedural points are no longer in issue on this appeal.
  3. The bank appealed from that order and the second round of the litigation was heard by His Honour Judge Geddes, sitting in Worcester County Court, on 10 April 2001. He allowed the appeal and struck out Ms Tudor's defence and counterclaim as having no reasonable prospect of success. He had made clear that the court still retained its discretion under section 36 of the Administration of Justice Act 1970. He made a suspended order for possession.
  4. The judge also included in his order a grant of permission to appeal which he had no power to grant. This led to a regrettable waste of time and costs. There was an abortive hearing before Mitting J at Birmingham on 19 November 2001. That was about five weeks after the House of Lords had delivered judgment on 11 October 2001 in eight conjoined appeals most easily recognised as Royal Bank of Scotland v Etridge (No 2) [2001] 3 WLR 1021 ("Etridge"). Ms Tudor's appeal has come before this court with permission, which I granted on paper on 4 March 2002, primarily because of the House of Lords' decision in Etridge.
  5. I must now go back to time to summarise the facts. Many of the facts are not in dispute. Those which are disputed are largely irrelevant for present purposes, since they could not be decided on a strike-out application.
  6. Ms Tudor and her husband owned a freehold property, consisting of a barn conversion house and about two hectares of surrounding land, known as Hillfields Farm, Greenhill, Blackwell, near Bromsgrove. They had purchased it in 1981. Ms Tudor kept a variety of livestock, including small numbers of horses, cows, sheep, goats and pigs. She has described it as an animal sanctuary.
  7. Ms Tudor's evidence was that during the 1990s there were matrimonial difficulties and that she suffered threats and violence. Her husband has denied that and made counter-accusations. It seems to be common ground that Mr Hill finally moved out of the house in 1997 at the latest. Ms Tudor says it was in 1995. Mr Hill says that he left in 1994 but then returned. Mr Hill had a business on another nearby site, that is the Aston Fields Service Station, New Road, Bromsgrove. He had a business there as a tenant of Mobil Oil since the early 1970s. I should perhaps add that Mr Hill was born in 1949 and Ms Tudor is two and half years younger. They have one daughter, who was about 16 at the time of the mortgage.
  8. Ms Tudor's essential case in her defence and counterclaim was that Mr Hill put improper pressure on her to remortgage Hillfields Farm for a much larger sum than the existing mortgages in order to enable him to purchase the freehold interest in the service station, and that the bank was put on inquiry as to that possibility and failed, on the tests laid down by the House of Lords in Etridge, to take adequate steps to discharge the duty of inquiry laid on it.
  9. This court is not concerned with any findings of fact as to whether Mr Hill did exercise undue influence or duress against his wife. That possibility must be assumed. The court is concerned solely with whether the bank, being (as is conceded) on inquiry as to the validity of the transaction, took adequate steps to satisfy itself as to the position in the period before 19 February 1997. That was the date on which Mr Hill and his wife mortgaged Hillfields Farm to the bank to secure a loan of £111,000. £50,000 of that sum was applied towards the purchase of the service station. Contrary to Ms Tudor's pleaded case, the service station was in fact acquired in the parties' joint names. There is some evidence that this was at the suggestion of a solicitor, Mr Michael Clarke, whose involvement in the matter I must mention in a short while. However, it seems that Ms Tudor was no longer involved in any way in the garage business, although she had been involved in it, it seems, at some stage before the separation.
  10. In her second witness statement, dated 3 April 2001, Ms Tudor stated that in October 1996 she was contacted by Mr Stuart Franklin, a mortgage broker acting for her husband. He told her that a new mortgage had been arranged to cover Hillfields and the service station, and that that would work out cheaper than separate mortgages. She stated that she was asked to sign a blank form but refused do so. However, she was on her case pressed by her husband and Mr Franklin, who said that if she is not agree to cooperate, the mortgage offer and the service station would be lost. Her evidence was that she was scared and so she signed the mortgage application and later the mortgage.
  11. The bank's case is that Mr Hill and his wife jointly instructed a solicitor, Mr Michael Clarke of Stallard & Co of Worcester, to act for them in the mortgage. Mr Clarke was also acting (initially, it seems, for Mr Hill alone) in the purchase of the service station. Mr Hill made a witness statement dated 6 February 2001 admitting his liability under the mortgage and challenging Ms Tudor's account of much of what had happened. He obtained and exhibited copies of the letters and attendance notes on Mr Clarke's file.
  12. Mr Clarke's first letter to Ms Tudor (then Mrs Hill) was addressed to her alone and was dated 14 November 1996. On the following day, according to Mr Clarke's attendance note, he spoke to her on the telephone and mentioned that she might consider taking separate legal advice. On 14 January 1997, in a letter addressed to both of them at Hillfields, Mr Clarke reported the exchange of contracts for the purchase of the service station. On 17 February 1997, again according to his attendance note, Mr Clarke had a 40-minute meeting with Mr Hill and his wife and daughter.
  13. The first part of the attendance note is as follows:
  14. "Attended Mr RF Hill and Mrs LC Hill, who were accompanied by their daughter, when I again went through in great detail all aspects of the re-mortgage of Hillfields Farm, Greenhill, Blackwell and the purchase of Aston Fields Service Station.
    I explained in detail what was to happen with regard to the discharge of the NFU mortgage and to the discharge of a second secured loan to National Westminster Bank, and Mr Hill told me that the figure to National Westminster would be approximately £16,500.
    I then explained the mortgage deed to the Bank of Scotland and I handed copies of the Mortgage Conditions to both Mr and Mrs Hill, and I emphasised to Mrs Hill that if she felt there was any conflict of interest she should seek separate advice. She, however, indicated that she was perfectly happy for me to deal with matters.
    I also explained the transfer of Aston Fields Service Station to Mr and Mrs Hill, pointing out that the property would be vested in their joint names but would be free of mortgage, and I urged Mr Hill to make the necessary arrangements to insure the Station with effect from the completion date.
    Both parties then signed the documents and I witnessed them."
  15. I must add that Ms Tudor, in her first witness statement, has disputed much of that account, especially the reference to independent advice.
  16. The mortgage application form which had been signed by Mr Hill and his wife (described in the form as "Mrs Hill") is exhibited to a written statement dated 1 February 2001 of Miss Rebecca Bigmore, the bank's solicitor. The couple are described as "Married" (not "Separated", another possible heading on the form). The address of each is given as Hillfields Farm, described as the current address where each had lived for 14 years 9 months. Mr Hill was described as a self-employed garage proprietor and mechanic, owner of the business at the service station for 24 years, and his wife as "Part Time PA/secretary & Housewife ... Wife of Owner" also for 24 years. The purpose of the loan and its destination was shown on the form as £41,000 to redeem the NFU loan on Hillfields, £20,000 to pay off the National Westminster Bank loan, also secured on Hillfields, and £50,000 for the purchase of the service station from Mobil. Stallard & Co were named as the solicitors acting for the borrowers. In relation to "Accountant or financial adviser", Mr Hill named his accountants but Ms Tudor put N/A.
  17. If Ms Tudor read the application form with any attention, she must have realised that it gave an impression of a stable and united couple living together at the matrimonial home and working together at the service station. On the undisputed evidence, such an impression would have been wrong.
  18. Stallard & Co provided the bank with a report on title in a standard printed form dated 19 February 1997. Paragraph 9 is of particular importance. It was in the following terms:
  19. "We confirm that, where necessary, in accordance with the Instructions to Solicitors provided to us by the Bank, all joint borrowers, joint owners and occupiers aged 18 or over have received legal advice independent from the Bank and from any other person who signed the Legal Charge. We hold a letter in the form prescribed by the Bank signed by an independent solicitor confirming that such advice has been given."
  20. It was the terms of paragraph 9 of the report on title which the circuit judge treated as decisive. After referring to Barclays Bank v O'Brien [1994] 1 AC 180 and to Etridge in the Court of Appeal [1998] 4 All ER 705, he said near the end of his judgment:
  21. "In my judgment, the Bank were entitled to rely on that paragraph -- as, indeed, they intended they should be able to rely -- to allay any suspicions that they may have had in relation to the undue influence that the husband may have had on the wife. It seems to me that it was not for the Bank to go behind that paragraph and to enquire what advice was given or, indeed, to ask to look at the letter which is referred to. They were entitled to take that paragraph at face value that the solicitors, who were advising the borrowers, had indeed given advice -- legal advice -- independent from the Bank and from any other person who signed the legal charge."
  22. Ms Tudor's grounds of appeal in their original form were exiguous -- simply unspecified error of law -- but they have been clarified in a skeleton argument dated 19 December 2001 and a supplementary skeleton dated 13 March 2002 prepared by Mr John de Waal.
  23. Indeed, the appeal has finally focussed on what both counsel (in their admirably concise submissions) have identified as a very short point, which is essentially a point as to the meaning of paragraph 9 of Stallard & Co's report on title. In a sense, all the other factual matters which I have gone through are merely background, but they are, I think, necessary background in order to understand the single point on which Mr de Waal has taken his stand.
  24. Paragraph 9 begins with the words: "We confirm that, where necessary, in accordance with the Instructions to Solicitors provided to us by the Bank ... " Mr de Waal told us that no instructions from the bank to the solicitors had been in evidence below but (without any opposition from Mr Bojczuk for the bank) he invited us to look at a standard form letter of instructions and a printed booklet of general instructions which are agreed to have been the documents which the bank would have sent to the solicitors. I should perhaps add that the standard form letter refers to "detailed instructions and the relevant documents", but those have not been placed before us and indeed may no longer be available.
  25. Coming back to the documents which we were shown, as so often happens with a multiplicity of standard form documents, they are not entirely consistent. In particular, the printed booklet contains two paragraphs (numbered 7 and 12) which refer to adult occupiers (not being owners or borrowers) who must sign a postponement form after having taken independent legal advice. But there is nothing in the booklet (apart from a definition of "owner" in paragraph 25 as including joint owners) which addresses the very common case of joint owners who are husband and wife.
  26. Mr Bojczuk accepted that there was some degree of mismatch (though that is my expression, rather than his) but he relied, if necessary, on paragraph 27 of the booklet, the first two subparagraphs of which are as follows:
  27. "Kindly note that these instructions are not intended to be exhaustive. The Bank would expect you to deal with any other matters, relevant to the transaction but not specifically provided for herein, in the manner in which good conveyancing practice and your professional judgment would dictate [then the following words are heavily emphasised] bearing in mind the Bank's overriding requirement to obtain a readily realisable security over the Property.
    In considering your advice to the Bank you should not attribute to the Bank's staff handling the matter any particular knowledge of the law."
  28. Mr Bojczuk also relied on the natural meaning of the language used in paragraph 9 of the report on title, construed in its commercial context, and on the observations of Stuart-Smith LJ in Etridge in this court, [1998] 4 All ER 705 at page 720, paragraph 42:
  29. "Although these issues raise questions of fact, the structure of the underlying transaction is so commonplace and the efficient funding of small busineses is so dependent on its validity, that the parties, and in particular the lending institutions, must be entitled to proceed in accordance with a settled practice which is effective to secure the validity of the transaction while at the same time affording the wife the protection of proper legal advice. It is highly undesirable that the validity of such transactions should depend on fine distinctions, particularly on distinctions in the wording of the instructions to the solicitors or the certificates they give."
  30. Those observations were not disapproved by the House of Lords. On the contrary, they seem to me well in line with the approach taken by the House of Lords.
  31. Mr Bojczuk also relied on what Lord Nicholls said in Etridge in the House of Lords at paragraph 80:
  32. "These steps will be applicable to future transactions. In respect of past transactions, the bank will ordinarily be regarded as having discharged its obligations if a solicitor who was acting for the wife in the transaction gave the bank confirmation to the effect that he had brought home to the wife the risks she was running by standing as surety."
  33. I should perhaps add that the reference to standing as surety is because that was regarded by the House of Lords as the paradigm case in which a lending institution would be put on inquiry. The present case is not a surety case, but Mr Bojczuk has conceded that it should be treated as a case in which the bank started off by being on inquiry.
  34. Lord Bingham, Lord Clyde and Lord Hobhouse all agreed with Lord Nicholls, and Lord Scott expressed similar views on this point at paragraph 191(4).
  35. In this case there is in my view no possible doubt but that Mr Clarke of Stallard & Co was instructed to act, and did act, for Ms Tudor. There is some evidence (although it is hotly disputed) that he performed his task properly and conscientiously. It is common ground that it was not for the bank to tell Mr Clarke what advice he should give to Ms Tudor.
  36. So ultimately it comes back to the wording of paragraph 9 of the report on title. Having seen the standard instructions in the booklet, we can see that paragraph 9 was not at all happily worded. I am not much impressed by Mr Bojczuk's point on paragraph 27 of the booklet, which was (as my Lord, Lord Justice Pill observed in the course of argument) really only stating the obvious. Nevertheless, I have come to the conclusion that Mr de Waal's point, although ingenious in concept and skilfully presented, has a high degree of unreality. In this context, every bank and every solicitor is now only too well aware of the problem at which provisions such as paragraph 9 are directed. Paragraph 9 refers expressly to "all joint borrowers, joint owners", as well as "adult occupiers" as having received legal advice. On the modern approach to the construction of documents, in my view it would be, as the judge said, fanciful to suggest either that the solicitors might have come to the conclusion that independent advice for Ms Tudor was not necessary in this case, or that the bank might have thought it possible that the solicitors had come to that conclusion.
  37. For these reasons, it seems to me that it would be a waste of resources for this case to go to trial, since the defence and counterclaim could not possibly succeed. I would therefore dismiss this appeal.
  38. SIR MARTIN NOURSE: I agree.
  39. LORD JUSTICE PILL: I also agree. In Royal Bank of Scotland v Etridge (No 2) [2001] 3 WLR 1021, Lord Nicholls of Birkenhead stated at paragraph 54:
  40. "The furthest a bank can be expected to go is to take reasonable steps to satisfy itself that the wife has had brought home to her, in a meaningful way, the practical implications of the proposed transaction."
  41. At paragraph 56, Lord Nicholls stated:
  42. "Ordinarily it will be reasonable that a bank should be able to rely upon confirmation from a solicitor, acting for the wife, that he has advised the wife appropriately."
  43. Such confirmation apparently appears in paragraph 9 of the report on title which was provided to the bank by a firm of solicitors. Lord Justice Robert Walker has read the relevant paragraph.
  44. I add a few words because of the specific submission made by Mr de Waal that paragraph 9 is insufficient to establish that the practical implications of the proposed transaction had, in a meaningful way, been brought home to the appellant, in the absence of evidence that the solicitor had previously been instructed by the bank to ensure that independent legal advice had been provided to her. There is a breach in the evidential chain, it is submitted. The bank can only be reassured if they have instructed the solicitors to ensure that the risks involved are brought home to the wife.
  45. In my judgment that submission cannot succeed. At paragraph 80 in Etridge Lord Nicholls stated:
  46. "In respect of past transactions, the bank will ordinarily be regarded as having discharged its obligations if a solicitor who was acting for the wife in the transaction gave the bank confirmation to the effect that he had brought home to the wife the risks she was running by standing as surety."
  47. At paragraph 191 Lord Scott of Foscote stated, at 191D:
  48. "Unless the case has some special feature, the bank's knowledge that a solicitor is acting for the wife and has advised her about the nature and effect of the transaction will provide a good reason for [believing that she understands the nature and effect of the transaction]. That will also be so if the bank has a reasonable belief that a solicitor is acting for her and has so advised her. Written confirmation by a solicitor acting for the wife that he has so advised her will entitle the bank to hold that reasonable belief."
  49. Mr de Waal accepts that the written confirmation is not negated by the fact that the bank had not told the solicitors what steps they should take in advising the wife. The scope of the solicitor's responsibilities is considered by Lord Nicholls at paragraph 64 in Etridge. Neither, in my judgment, and on the same basis, is the confirmation negated by the absence of evidence of an instruction by the bank to ensure that legal advice is provided. It does not thereby become something less than a confirmation. In present circumstances, it is the confirmation to the bank by the solicitor which provides the reassurance contemplated by Etridge. If given, it provides that reassurance without there having to be evidence of a request to the solicitor to ensure that the risks involved are brought home to the wife.
  50. For those reasons, and the reasons given by Lord Justice Robert Walker, I too would dismiss this appeal.
  51. ORDER: Appeal dismissed, the date for possession to be Friday 11 October 2002. There will be no order for costs on the appeal. The orders for costs below remain. Application for a transcript of the judgments today at public expense refused. The appellant to have a direction for legal aid assessment.
    (Order not part of approved judgment)

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