Royal Courts of Justice
Strand
London WC2A 2LL
Tuesday, 1 February 2000
B e f o r e:
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MR B DEVLIN (Instructed by Messrs Wetheralls, Bournemouth,
BH1 1RX) appeared on behalf of the Appellant.
MR N LEVY (Instructed by Messrs Parker Bullen, Salisbury, Wiltshire, SP1 3SS)
appeared on behalf of the Respondent.
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1. This is an appeal from an order made by His Honour Judge Thompson QC in the Southampton County Court. By that order the judge struck out certain parts of a defence and counterclaim. This is an appeal against that order.
2. The plaintiff in the action is Lloyds TSB Bank Plc. The defendants are a husband and wife, Ronald and Sheila Gravell. Sheila Gravell has a son called Keith Grissett. Ronald Gravell is his stepfather. Keith Grissett has in the past been engaged in a number of business ventures which ultimately came to grief. In the process of those ventures falling down, Mr Grissett did what he could to prop them up with the help of the claimant bank.
3. There came a time when the claimant bank wanted some additional security for the help that it was giving. Consequently, an approach was made to the defendants to see whether or not they would stand surety. The couple, who were of modest means, allowed their home to be charged to the bank. It was worth some £55,000 or thereabouts. They also entered into successive contracts of guarantee which increased their liability to a total of £125,000.
4. Eventually the bank wished to enforce its securities. They did that by bringing an action for possession of the defendant's house and a claim for a money judgment. On the face of it, those claims might have seemed unanswerable.
5. In the event, answers were provided in a defence and counterclaim running to about 80 paragraphs and extending over some 30 pages of typescript. The defences advanced were set in the alternative. Some were perceived by the bank to be without merit or unsustainable even as pleaded. Consequently there was an application to strike out. A number of heads of defence were struck out and no appeal lies in relation to those parts of the judge's order.
6. One of the defences advanced, however, was that of undue influence. That defence, so it appears to me, was also struck out in its entirety, even though that involved picking amongst the various paragraphs of the defence and counterclaim piecemeal. The effect, it is agreed between counsel, was to strike out that line of defence in its entirety. It is in relation to that part of the striking out order against which Mr and Mrs Gravell now appeal.
7. It is necessary to rehearse a little more of the history. The Gravells, as I have said, are of modest means. Mr Gravell is a steel erector and Mrs Gravell a clerk of some description. They were, at best, wage earners and had the single asset of any value, their home. They were, so it is pleaded against them, persuaded not only by their son to provide the securities which the bank was demanding, but also by certain statements made by the manager of the bank where Mr Gravell's accounts and also their personal accounts were held.
8. According to the pleading they were told by the manager of the bank, Mr Shaw, that they were not putting themselves at risk in that the prospects of Mr Grissett's business ventures succeeding seemed bright and, in the result, he would turn out to be a very rich man. The bank advised the Gravells not to sign any of the documents leading to the charge being placed on their house and which resulted in their entering into contracts of guarantee, without first consulting independent solicitors, which they did.
9. In those circumstances, it was argued before the learned judge that the defence of undue influence could not possibly succeed because there was no basis upon which the court could hold that the bank had actual or constructive notice of any undue influence which may have been exerted against them.
10. Reliance was placed, in particular, upon the decision of this court in Royal Bank of Scotland v. Etridge [1998] 4 All ER 705 and upon the principle contained in the judgment given by Stuart-Smith LJ at page 721, which is:
11. "Where the wife deals with the bank through a solicitor, whether acting for her alone or for her and her husband, the bank is not ordinarily put on inquiry. The bank is entitled to assume that the solicitor has considered whether there is a sufficient conflict of interest to make it necessary for him to advise her to obtain independent legal advice. It is not necessary for the bank to ask the solicitor to carry out his professional obligation to give proper advice to the wife or to confirm that he has done so. The bank is ordinarily not required to take any steps at all."
12. The case of 13. However, that principle is not intended to cover every single circumstance which the court might come across following an investigation into the facts. That that much is clear is apparent from Credit Lyonnais Bank Nederland NV v. Burch [1997] 1 All ER 44. dealt with the not uncommon situation where a wife who is the joint owner of a property lends her name in support of some venture being carried out by the husband. Nevertheless, the principle would hold good in the instant case.
13. However, that principle is not intended to cover every single circumstance which the court might come across following an investigation into the facts. That that much is clear is apparent from Credit Lyonnais Bank Nederland NV v. Burch [1997] 1 All ER 44.
14. In this case the averment in the defence is that not only did Mr Shaw the bank manager make certain representations, not only did he act as Mr Grissett's amanuensis in applying, as it is alleged, the undue influence, but he must, by virtue of his role, have entertained at the very least doubts as to whether or not the Gravells had been properly advised or, if they had, that they had acted in accordance with that advice. I would consider that it is arguable, if no more, that the defence of undue influence is available to the Gravells on the basis of their pleaded case.
15. The conclusion which I reach is based on the assumption that the evidence will support what is contained in the pleaded case. It by no means follows that the result contended for will be achieved.
16. For those reasons I would allow this appeal and restore those parts of the pleading which have been struck out which relate solely to the defence of undue influence. In so far as there may be an argument based upon paragraph 41 of the defence, to the effect that the bargain which was being entered into by the Gravells was so disadvantageous as of itself to raise the presumption that they were not acting according to sound advice. I would restore also the part of the sentence beginning "The defendants repeat ... hereinbefore", so it will read, "The Defendants repeat those matters particularised in paragraph 40(ii) hereinbefore."
17. I agree.
Order: Appeal allowed with costs. Legal Aid assessment.