England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BOURNEMOUTH COUNTY COURT
DEPUTY CIRCUIT JUDGE WROATH.

		Royal Courts of Justice Strand, London, WC2A 2LL Thursday 3rd May 2001

LORD JUSTICE MANTELL:

Introduction.

1. This appeal is concerned with the right of a wife to set aside a legal charge against her home given as security for a debt to a bank and said to have been entered into as a result of the husband's misrepresentations and/or undue influence, and also with the effect of a subsequent agreement purporting to affirm the mortgage.

Background.

2. Varenka Colombo Goff was a native of Gibraltar. In 1985 she married Robert Roy Goff, an English mining engineer and businessman, who had moved to Spain in 1976 for business and tax reasons. He was then forty eight years of age and her senior by ten years. Both Mr and Mrs Goff had been married previously. Mrs Goff had a son by her first husband. At the date of Mrs Goff's second marriage he was at school in England. Mr Goff had two sons from the earlier marriage, the elder being James Roy born in 1956 known as and hereafter referred to as "Roy".
3. In 1987 or 1988 Mrs Goff purchased a house at 15 Moorland Gate, Ringwood with money which had been given to her by her mother. The purchase price was £120,000. Although the house served as a base for Mr & Mrs Goff when in England, there was no question of Mr Goff ever acquiring an interest in the property and indeed he retained his own house in Marbella as did Mrs Goff the tenancy of her mother's flat in Gibraltar. It was because the Gibraltar flat was rented and she had no interest in her husband's house in Marbella that Mrs Goff was anxious to have the security which came from owning the house in England.
4. At about the same time, that is in the late 1980s, Mr Goff's son, Roy, was much involved in the double glazing business. He was the principal shareholder in, and chief executive of, a company known as Perfectbuy Ltd., which sold double glazing units under the trading name "Total Home Improvements". Mr Goff senior also became interested in the double glazing business and agreed to enter into a joint venture with his son through the medium of a company called Ventlute Ltd which it was considered might profitably exploit the overspill of any business generated by Perfectbuy. The trading name for Ventlute was to be "British Window Company".
5. In August 1989 Perfectbuy had a substantial overdraft with Lloyds Bank at its branch in Southampton. For reasons which are not entirely clear but which have been described as "local differences" Mr Goff and Roy decided to change bankers. To that end they secured an introduction to Barclays in Cardiff through the good offices of the well known Cardiff solicitors, Hugh James Jones & Jenkins. On 24th August 1989 they met with Mr Gareth Jones, the branch manager. The Goffs described the nature of the business, indicated the present level of borrowing and the requirements for the future and described what they considered to be the company's prospects for the future. They predicted a turnover of £6M within the current trading year with two hundred double glazing frames being sold per week building up to four hundred in time. They mentioned the fact that the double glazing penetration of the market was only 20% of the potential and how it was envisaged that Ventlute using the name 'British Window Company' would attack a different segment of the market. They told Mr Jones that an overdraft facility of £225,000 was required for Perfectbuy and £10,000 for Ventlute.
6. Mr Jones was concerned about the possible saturation of the market as he was also by what he considered to be the under capitalisation of the business. However, subject to the Goffs coming up with adequate security for the proposed borrowings he was nevertheless prepared to consider the proposal.
7. Roy offered security over his and his wife's house at Lymington. He estimated its value at £300,000 subject to a first charge of £80,000 in favour of Lloyds Bank. The estimate of value proved to be over optimistic and fell short by £55,000 of the security required. On 13th September 1989 Mr Goff offered a charge over his wife's house at Ringwood. He had told her that it was to support a borrowing of £10,000 for his company, Ventlute. He said nothing about Perfectbuy or the sum of £55,000 or any larger sum. Even so, Mrs Goff was reluctant to agree because in due course the house was intended for her son and was the only property she owned in the world. But eventually she was persuaded by her husband's assurance that the £10,000 would never be called in and agreed to the charge on that basis.
8. In fact the bank was not prepared to countenance a limit of £55,000 on its security let alone the £10,000 which was what Mrs Goff thought was involved. What the bank required was an all moneys charge limited only to the value of the property and that was the offer contained in the Bank's facility letter sent on 18th September 1989 to be countersigned by Mr & Mrs Goff and by Roy and his wife Gillian. The letter provided for an overdraft of £225,000 for Perfectbuy and £10,000 for Ventlute. Both were repayable upon demand. As security both companies were to provide debentures and there was to be a second legal charge over Roy and Gillian Goff's home and a first charge over 15 Moorland Gate.
9. It was, of course, apparent to Barclays Bank that Mrs Goff had no interest in Perfectbuy or Ventlute save through her connection by marriage and if things went badly for Perfectbuy she would be at risk of losing her home. Accordingly, having been informed that Gore Wood and Co. were solicitors acting for both families and more particularly a Miss Alexandra Lewis, the bank wrote to Miss Lewis enclosing legal charge forms in relation both to Roy and Gillian Goff's house and 15 Moorland Gate. The letter stated:

"Please arrange to offer Mrs Verenka Goff independent legal advice before she is asked to sign the documentation."

A similar request was made in relation to Mrs Gillian Goff. There were separate meetings at the offices of Gore Wood and Co. on 29th September attended by Mr & Mrs Goff and Roy and Gillian Goff respectively. At the meeting with Mr & Mrs Goff, Miss Lewis attempted to explain the effect of the legal charge and the nature of the offer contained in the facility letter of which she had a copy albeit not supplied by the bank. Mr Goff affected to be surprised that the charge was to be unlimited up to the value of the house rather than to £55,000 being the amount by which the security offered by Roy was deficient. He insisted on telephoning the bank. Both he and Miss Lewis spoke to somebody who may or may not have been Mr Gareth Jones' assistant, a Mr Davies. Following the telephone conversation Mr Goff seemed to accept that the charge was to be unlimited and both he and Mrs Goff signed the legal charge. It is not clear when the facility letter was signed by the Goffs, but signed it was at some stage and returned to the bank.

10. Mrs Goff remembered going to a solicitors' office in Southampton and signing some documents but otherwise had no recollection of the meeting and had left with the impression that matters stood as had been explained to her by husband beforehand, namely that her property was at risk to the extent of £10,000 and no greater sum.
11. Miss Lewis returned the signed legal charge to the bank on the same day as the meeting.
12. On 3rd October 1989 in a telephone call from the bank Miss Lewis confirmed that she had given independent legal advice to Mrs Goff. She further confirmed the fact and the telephone call in a letter dated 23rd October 1989. She wrote:

"We confirm that the writer attended Mrs Varenka Goff and Mrs Gillian Goff and both parties were advised of the nature and effect of the document they were being asked to sign."

13. By that date, indeed by 3rd October 1989, the bank had made the facility available and on 11th October cleared the amount outstanding to Lloyds.
14. The double glazing business did not prosper. The borrowing increased to £246,000. Having received information that the bailiffs had attended Perfectbuy's premises the bank called in the debt. On the same date it wrote to Mrs Goff as follows:

"We advise that the bank has this day made formal demand upon its customer Perfectbuy Ltd t/a as Total Home Improvements for repayment of the said customers liabilities to the bank, the present amount of which is in excess of the value of the freehold deeds relating to plot 5 Moorland Gate Christchurch Road Ringwood, which you have charged to the bank as security for the said customers liabilities.

Please take notice unless we receive from you within the next seven days a sum in our view equivalent to the current value of the said security (on receipt of which sum we are prepared to release such security), the bank may proceed with the sale thereof without further notice to you."

15. On 11th January 1990 Perfectbuy was wound up.
16. Proceedings were not issued straight away. Instead an attempt was made to settle. On 2nd July 1992 the bank entered into an agreement with Mr & Mrs Goff and James and Gillian Goff the recitals of which referred to the two legal charges, the formal demands for payment, the amounts owing and the fact that the bank had agreed to forego payment of the whole of the moneys now due and owing from the parties on the terms thereafter set out. Those terms recorded an agreement whereby in consideration of the bank agreeing to forego payment of the sums outstanding and upon Mr Goff paying the sum of £150,000 by three annual payments of £50,000 the bank would after receiving £100,000 release the charge against Mrs Goff's property and upon receipt of the balance release the charge against the property of Roy and Gillian Goff. The agreement further recorded that in the event of either the first or second annual payment not being made,

"the rights of the bank to enforce payment of such sum shall include the right to enforce the power of sale contained in the legal charges given by Mrs Goff and Mr & Mrs Goff and in the event of default being made by Mr Goff of the third annual payment or in the payment of accrued interest the right of the bank to enforce such sum or sums shall include the right to enforce the power of sale contained in the legal charge given by Mr & Mrs Goff."

17. Mr Goff failed to make any one of the annual payments and in 1993 the bank commenced proceedings against Mrs Goff for possession of 15 Moorland Gate. In its final form the claim also relied on the agreement of 2nd July 1992.
18. By her defence Mrs Goff asserted that she had signed the legal charge as a result of misrepresentation and/or undue influence by or on the part of her husband of which the bank was fixed with constructive notice and in consequence the bank was not entitled to an order for possession; rather she claimed to be entitled to a declaration that the charge was void and/or unenforceable and to an order setting it aside and requiring the bank to return the title deeds.
19. In February 1999 the matter came on for hearing in the Bournemouth County Court before His Honour Deputy Circuit Judge Wroath. The hearing lasted several days, at the conclusion of which on 19th February 1999 the deputy circuit judge dismissed the bank's claim and set aside the legal charge. It is that order which is the subject of the present appeal by the bank, the trial judge himself having granted permission.
20. On 12th March 1999 the judge supplied further reasons for his decision in the form of an "addendum".
21. Unhappily on 26th October 1999 Varenka Goff died. On 27th February 2001 Mr Robert Goff was substituted as respondent in the appeal.

The judgment under appeal.

22. Before considering the issues on appeal it may be convenient to look a little more closely at the judgment below.
23. The transcript runs to some twenty two pages. Over the first twelve pages the deputy judge set out the background, referred to what he considered to be the relevant legal principles and sought to identify the matters for decision.
24. At p.11C of the transcript he said,

"The first matter I have to decide is whether this transaction was harsh and unconscionable as far as Mrs Goff was concerned."

He had earlier stated the test of a harsh and unconscionable contract or bargain as being,

"That it was manifestly to the disadvantage of the surety and, as it was suggested an 18^th Century judge would have expressed it, it "shocks the conscience of the court"."

In addressing the question he first of all noted that the property was free of charge and worth about £120,000. Further it was to be offered as security for an overdraft facility for a company in which she had no interest. There was, on his finding, no advantage in it for her at all. Any advantage, such as it was, went entirely to Roy and his company Perfectbuy. He also had regard to the fact that Mrs Goff did not particularly like Roy and, as he expressed it, "more importantly she did not trust him". He reminded himself that she had said in evidence that she would not have signed any documents or pledged her house to help Roy. He then found, having accepted her evidence, that she thought that she was signing as surety for the benefit of Ventlute Ltd and only exposing herself to a liability of £10,000. At 12C he said,

"Upon that view of the transaction on this day, it seems to me that, on the face of it, unanswerably it must be seen to be a harsh and unconscionable bargain as far as Mrs Goff was concerned."

25. The second question which the judge asked himself at 12G of the transcript was,

"Did Mr Goff use undue influence or make misrepresentations to induce Mrs Goff to enter this transaction?"

As to undue influence the judge made no direct finding save that given the disadvantageous character of the transaction and of the relationship of husband and wife there was a presumption of undue influence which should have put the bank on enquiry. He also concluded upon the evidence that Mrs Goff had been deceived by Mr Goff as to the nature of the transaction into which she was about to enter.

26. At 13E to G of the transcript he recorded the fact that the bank accepted that they were put on enquiry and then asked himself whether the bank had done enough to discharge its duty.
27. At 14B he acknowledged that on the authorities the bank had done what was generally accepted as being appropriate in arranging for Mrs Goff to have independent advice. Over the next six pages he considered the evidence as to what had happened at the meeting with Miss Lewis, and what, in his view, was required of Miss Lewis by way of fulfilling her duty to Mrs Goff. Then having remarked that Mr Goff was present at the meeting, and that, on the evidence which he had accepted, Mrs Goff was left with an erroneous impression as to the purpose and effect of the legal charge, he came to following conclusion at p.20 of the transcript,

"In my judgment Mr Goff should not have been there at all, but in the circumstances I would not fault Miss Lewis for that. Certainly the bank did not make clear to Miss Lewis in the communications they sent to her that they regarded Mr Goff and J R Goff and the two companies as basically one interwoven transaction. Had Miss Lewis endeavoured to establish that on the day from Mr Goff, she would have undoubtedly been told lies about it. But it does not alter the fact that at the end of the day the presence of Mr Goff as this meeting wholly tainted it as an exercise to establish the independence and willingness of Mrs Goff to assist Perfectbuy, and accordingly, in my judgment, the use of the solicitor on this day wholly fails to exonerate the bank and relieve them from the burden of establishing that they had not got constructive notice of the improprieties of Mr Goff in persuading his wife and using his influence over her to execute these deeds and inflate (sic) misrepresentation to her of what the effect of the deeds was."

On that basis he held that the transaction could not stand.

28. With regard to the agreement of 2nd July 1992 at p.20H and p.21A-C the judge said,

"I propose to deal very briefly indeed with subsequent negotiations and the agreement which was reached in 1992. Insofar as it was an agreement between the bank and the two Mr Goffs, it may well have been a valid agreement. As far as it was an agreement between the bank and Mrs Goff it was not valid, because we see Mrs Goff being persuaded to sign documents on the basis of a deliberate and total misrepresentation of the effect of the document by her husband, Mr Goff. In the event, it probably now has no importance in this case, because the bank rescinded the agreement at a later date, because the two Mr Goffs never complied with their side of the bargain."

29. Following delivery of the judgment on 19 February 1999, Mr Odgers, then appearing for the bank, sought permission to appeal. He indicated that among other points that he might wish to raise was the question whether the judge was right to impose a duty on the bank to make enquiry rather than to consider whether or not its actions had been sufficient to dispel the presumption of undue influence. In making his application he suggested that the question did not turn on what the solicitor had or had not done for the client. As already mentioned, the judge faxed an addendum on 12th March. There was no covering letter. It came out of the blue. To say the least the procedure was unusual. The addendum purported to deal with the matter raised by Mr Odgers in seeking permission to appeal. I believe it is necessary to set out the text in full.

"BARCLAYS BANK PLC v. VARENKA GOFF Case no. 9304838

Addendum to the judgment to be inserted at letter F on page 23 after the words "the effect of the deeds was."

In reaching that conclusion I must deal with the case of Bank of Baroda v. Rayarel and Others. Stated shortly that case ruled that a bank was entitled to assume that a solicitor had properly advised his client in accordance with his duty. It was not for the bank to question the advice given as this was not a matter for them but a matter between the solicitor and his client. However it was recognised by Lord Browne-Wilkinson in O'Brien that all cases before the O'Brien judgment had to be decided on their own facts and that there could be exceptional cases.

This case in my judgment is one where the facts are exceptional and where the Bank had to ensure the wife was not only separately advised but separately advised from her husband. They were aware from a phone call of Mr Goff on the 13th September that Mrs Goff had not at that stage been asked whether she was prepared to charge her property. They were aware that Mr Goff and his company Ventlute were closely involved with J R Goff and Perfectbuy, and that Perfectbuy was going to run Ventlute Ltd. They knew that Mrs Goff had no financial interest in Perfectbuy.

When the Bank instructed the solicitors they did not make any of those three crucial facts known to solicitors, indeed they basically did not give them any information at all. In my judgment in this case the Bank ought to have made it clear to the solicitors of the need for Mrs Goff to be seen independently of her husband because of the involvement of her husband with J R Goff and Perfectbuy. They were matters peculiarly within the knowledge of the Bank and not matters that Miss Lewis could be expected to find out. Furthermore when Miss Lewis wrote to the Bank returning the documents she made no reference to giving independent advice at all. When the Bank phoned her on the 3rd October all she said was that she had given independent advice, not that she had given independent advice to Mrs Goff. In my judgment that was not sufficient. The Bank should have established that Mrs Goff had been independently advised.

There can be no doubt that had Miss Lewis seen Mrs Goff separately from Mr Goff and had the above information, Mrs Goff would never have given her consent or executed the charge."

The grounds of appeal.

30. As set out in the notice of appeal they are, and I summarise:

(i) that the judge was wrong to try to add to his judgment after his powers were spent and the additional reasons should be disregarded;

(ii) that the judge was in error in holding that the bank had constructive notice of undue influence exercised over Mrs Goff by Mr Goff;

(iii) that insofar as the addendum is to be regarded as part of the judgment the judge erred in law and made wrong findings of fact in holding that the case was so exceptional that the bank was not entitled to assume that Miss Lewis had advised the defendant properly;

(iv) that the judge was wrong to hold that the agreement of 2nd July 1992 was invalid as between the bank and Mrs Goff;

(v) that the judge was wrong to find as a fact that Mrs Goff signed the legal charge in the belief that it was only in respect of a £10,000 facility for the benefit of Ventlute Ltd;

(vi) that the judge was not entitled to find presumed undue influence on the part of Mr Goff without first reaching a conclusion as to whether Mrs Goff reposed trust or confidence in her husband in relation to the conduct of her financial affairs.

The Respondent's Notice.

31. This is directed to the failure of the judge, such as it was, to consider whether the fact that there had been an opportunity for Mrs Goff to receive independent advice was sufficient to displace any presumption of impropriety on the part of Mr Goff. The notice asserts that the transaction was on its face such as no reasonable and competent solicitor properly informed should have advised Mrs Goff to enter into and consequently it should have been apparent to the bank that Mrs Goff had not received proper advice or that Miss Lewis had not been fully or properly informed of the material facts. It is further asserted that the judge should have found that the bank was in possession of material which it knew or should have known was not available to Miss Lewis and which would have had a critical bearing upon the advice which she gave. Accordingly the judge should have found that the bank had failed to discharge its duty to ensure that Mrs Goff was given proper and adequate independent legal advice so as to free her from the effect of any misrepresentation or undue influence by Mr Goff. Further, if the addendum was to be disregarded, the judge should have found that the bank knowing of Mr Goff's presence at the meeting with Miss Lewis should not have assumed that sufficient steps had been taken to avoid the risk of undue influence or misrepresentation. Lastly it is asserted that the judge should have found that the bank had been alerted to the inadequacy of any advice given by Miss Lewis by the fact that her certificate only stated that she had explained the nature and effect of the legal charge.

The Law.

32. At this point I simply indicate some general propositions, quite uncontroversial I am sure, which may assist in understanding the issues of the appeal.
33. There is some blurring of the distinction, if any, between undue influence and unconscionable conduct. That is, I think, apparent from the manner in which the judge expressed himself but as was said by Mason J in Commercial Bank of Australia v. Amadio 151 CLR 447 at 461:

"relief on the ground of "unconscionable conduct" is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage, e.g., a catching bargain with an expectant heir or an unfair contract made by taking advantage of a person who is seriously affected by intoxicating drink. Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne, in the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of a party unconscientously taking advantage of that position."

34. Although, as Mason J went on to point out, the two remedies are not necessarily mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of the other, it is accepted by Mr Jarvis QC on behalf of the bank and Miss Andrews on behalf of the respondent that what the court was concerned with here were allegations of misrepresentation and undue influence on the part of Mr Goff such as to bring into play the principles of law as set out by the House of Lords in Barclays Bank v. O'Brien (1984) 1 AC 180 and further explained by this court in Royal Bank of Scotland PLC v. Etridge No. 2 (1998) 4 All ER 705. Whilst it is known that the House of Lords is shortly to hear an appeal in the Etridge case we are urged to treat the statements of principle contained in that decision as binding upon us as indeed they are. For the present it is only necessary to cite from the speech of Lord Browne-Wilkinson in Barclays Bank and O'Brien at 195-196:

"The doctrine of notice lies at the heart of equity. Given that there are two innocent parties, each enjoying rights, the earlier rights prevail against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice). In particular, if the party asserting that he takes free of the earlier rights of another knows of certain facts which put him on enquiry as to the possible existence of the rights of that other and he fails to make such enquiry or take such other steps as are reasonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it. Therefore where a wife has agreed to stand surety for her husband's debts as a result of undue influence or misrepresentation, the creditor will take subject to the wife's equity to set aside the transaction if the circumstances are such as to put the creditor on enquiry as to the circumstances in which she has agreed to stand surety."

35. The second proposition of law arising out of the agreement of 2nd July 1992 depends upon a principle to be extracted from Peyman v. Lanjani & Others (1985) 1 Ch 457 that an election to affirm a contract made with knowledge of the material facts which leads the other party to act to his detriment will deprive the affirming party of the right to rescind the earlier contract.

The issues.

36. These have been refined and restructured in the helpful skeleton arguments and opening notes. They are:-

(i) How is the addendum to be regarded in the context of this appeal?

(ii) Did Mrs Goff have an equity to set aside the charge?

(iii) Was the bank put on enquiry and, if so, did it take sufficient steps to rebut the presumption of improper conduct on the part of Mr Goff?

(iv) Was the agreement of 2nd July 1992 such as to deprive Mrs Goff of her entitlement in equity to set the charge aside?

The Addendum.

37. It is accepted by Miss Andrews that in his judgment as delivered on 19th February the judge failed to deal with a critical question of fact, namely what was known to the bank about the extent and quality of the advice offered to Mrs Goff by Miss Lewis. It is certainly possible that the judge was made aware of his oversight when Mr Odgers asked for permission to appeal. At that stage it would have been easy enough to put matters right. The judge should have been invited there and then to make the necessary findings of fact. Failing that it may have been possible at some later date with the agreement of both sides to re-open the hearing and if necessary to entertain further submissions. What was not permissible, in my view, was for the judge to supply further reasons on his own initiative at a time when his order had been perfected. It has been suggested that he was entitled to do so under the slip rule so called. CPR 40BPD/004 allows for corrections of errors in judgments and orders. 4.5 provides:

"The court has an inherent power to vary its own orders to make the meaning and intention of the court clear."

We have been shown certain authorities where use has been made of that provision or its predecessor under rules of court. It is very likely in this case that the learned deputy judge believed that he was acting within the scope of the rule. Certainly I have some sympathy for him in his wish to fill a lacuna which otherwise might have resulted in the expense of a re-hearing. Nevertheless, and however laudable the deputy judge's intentions might have been, I am of the opinion that it was not open to him to alter his judgment in a matter of this kind. What he did went far beyond a variation designed to make the "meaning and intention of the court clear".

38. Having said that, the point has assumed little importance in the appeal. Sensibly both sides have agreed to proceed as if the addendum had always been an integral part of the judgment. More than that the reasons contained in the addendum are adequately covered by the Respondent's Notice. Accordingly having allowed myself those few observations the matter of the addendum may be put on one side.

Mrs Goff's equity.

39. If Mrs Goff did not have an equity by reason of some wrongdoing on the part of her husband there was nothing of which the bank could be said to have notice. It is submitted, with somewhat less force than his other arguments, if I may say so, by Mr Jarvis on behalf of the bank that the learned deputy circuit judge was not entitled to find that Mrs Goff had signed the charge as a result of any misrepresentation. Further, the finding of undue influence was inconsistent with the assertion that her compliance came about through having misunderstood the true nature of the transaction.
40. I have attempted to reproduce the judge's findings in the course of setting out the background to the appeal. In the end, as I have recorded, the judge accepted the evidence of Mrs Goff notwithstanding those parts of the evidence which stood against her. In my judgment he was entitled to do so. That being so I would not disturb his finding that Mrs Goff signed the charge in the erroneous belief that it was limited to £10,000 and related to borrowings by Ventlute. Accordingly her equity arising out of the misrepresentations by her husband survived the meeting with Miss Lewis.
41. That being so, whether or not Mrs Goff retained an equity on the basis of undue influence is of little, if any, importance. However, out of deference to Mr Jarvis's arguments, which are nothing if not subtle, I feel the need to say a little more.
42. I take the point that if the misrepresentation was such as to lead Mrs Goff to believe that the transaction was not to her disadvantage it might be submitted that there would be no room for an additional finding of undue influence. That, however, was not the evidence. As recorded elsewhere in this judgment Mrs Goff was reluctant to sign the charge notwithstanding her belief that it was limited to £10,000. She was, as she said, prevailed upon to do so by her husband. At p.19D of the transcript the learned judge expressed his view that "Mr Goff is quite a strong personality and clearly dominated the meeting." On that basis the judge was entitled in my view to reach the conclusion, if he did, that in addition to the lies told by her husband Mrs Goff not only reposed trust and confidence in him but that her reservations were swept away by his more dominant personality.
43. Did the judge so find? This is more difficult. Mr Jarvis is correct in submitting that whether or not the findings were available on the evidence they never appear in terms. However, in my view, that would be to take a too censorious view of a judgment which was delivered immediately following the hearing and of which the import and meaning could never have been in doubt. If it were necessary to do so I would hold that the judge was entitled to and did conclude that Mrs Goff signed the charge under the undue influence of her husband.
44. Given those findings which I would uphold, it is accepted by Mr Jarvis that the bank is to be regarded as having had constructive notice of Mrs Goff's equity subject to not having taken sufficient steps to rebut the presumption of improper conduct on the part of Mr Goff.
45. Having been put on inquiry the question is whether it was sufficient for the bank to make sure that Mrs Goff received independent legal advice.
46. In Royal Bank of Scotland PLC v. Etridge (No. 2) and other appeals (1998) 4 All ER 705 at 720 para. 41 Stuart-Smith LJ identified the issues as follows:

"Whether, in the light of the facts known to the bank, including the availability of legal advice, any risk of the wife having an equity reasonably appeared to have been dispelled. The ...question depends on how the transaction appeared to the bank."

47. It is acknowledged that it was only in the addendum that the learned deputy Judge attempted to address that question.
48. Stuart-Smith LJ continued at paragraph 42:

"Although these issues raised questions of fact, the structure of the underlying transaction is so commonplace and the efficient funding of small businesses 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 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."

49. Having referred to a number of authorities Stuart-Smith LJ proceeded to extract the following propositions:

(i) Where the wife deals with a bank through a solicitor, whether acting for her alone or for her and her husband, the bank is not ordinarily put on enquiry. 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.

(ii) Where the wife does not approach the bank through a solicitor, it is normally sufficient if the bank has urged her to obtain independent legal advice before entering into the transaction. This is especially the case if the solicitor provides confirmation that he has explained the transaction to the wife and that she appears to understand it.

(iii) When giving advice to the wife the solicitor is acting exclusively as her solicitor. It makes no difference whether he is unconnected with the husband or the wife or is also the husband's solicitor or that he has agreed to act in a ministerial capacity as the bank's agent at completion. Whoever introduces the solicitor to the wife and asks him to advise her, and whoever is responsible for his fees, the bank is entitled to expect the solicitor to regard himself as owing a duty to the wife alone when giving her advice. If the solicitor accepts the bank's instructions to advise the wife, he still acts as her solicitor and not the bank's solicitor when he interviews her.

(iv) It follows that the bank is not fixed with imputed notice of what the solicitor learns in the course of advising the wife even if he is also the bank's solicitor. Such knowledge does not come to him in his capacity as the bank's solicitor.

(v) The bank is entitled to rely on the fact that the solicitor undertook the task of explaining the transaction to the wife as showing that he considered himself to be sufficiently independent for this purpose. The bank is not required to question the solicitor's independence, even if it knows that he is also the husband's solicitor.

(vi) The bank is not concerned to question the sufficiency of the advice and is not put on further enquiry by the fact that the solicitor was asked only to explain the transaction to the wife and ensure that she understood it and not to see that she was sufficiently independent of her husband. Nor is the bank put on enquiry by the fact that the confirmation provided by the solicitor is similarly limited.

50. At 722C-E Stuart-Smith LJ continued:

"It follows from the need to avoid subtle distinctions that we attach no importance to the fact that the solicitor may not provide the bank with a full or adequate confirmation that he has followed his instructions. Where the bank has asked him to explain the transaction to the wife and confirm that she appeared to understand it, the bank is not in our opinion put on enquiry by the fact that the solicitor has confirmed that he has explained the transaction to her but not that she appeared to understand it. In any case we do not consider that such confirmation is an essential requirement. Where the bank has asked a solicitor to explain the transaction to the wife and he fails to confirm that he has done so, the bank is not entitled to assume that he has: see Cooke v. National Westminster Bank PLC (1998) Times 27th July 1998 CA transcript 928. But at most this should put the bank on enquiry whether the solicitor has in fact advised the wife. If it fails to make further enquiry then it takes the risk that he has not done so; but if he has and merely omitted to confirm the fact, then we think that the bank should not be affected by its failure to obtain confirmation before completing the transaction."

51. It will be seen immediately that in concentrating upon the quality of the advice given by Miss Lewis the judge was aiming somewhat wide of the mark. That is not to suggest that they were irrelevant considerations. The nature and quality of the advice went directly to the question already considered as to whether or not Mrs Goff preserved her equity. But it follows from the propositions as stated by Stuart-Smith LJ that, provided that this is the ordinary case, the bank would have done enough to relieve itself of constructive notice by instructing Miss Lewis to give independent advice and thereafter by requiring her to confirm that she had done so.
52. But was this the ordinary case? In Etridge at 722 para. 49 Stuart-Smith LJ said this:

"While the bank is normally entitled to assume that a solicitor who is asked to advise the wife will discharge his duties fully and competently, and that he will not have restricted himself to giving an explanation of the transaction and satisfying himself that she appears to understand it, it cannot make any such assumption if it knows or ought to know that it is false. If the bank is in possession of material information which is not available to the solicitor, or if the transaction is one into which no competent solicitor could properly advise the wife to enter, the availability of legal advice is insufficient to avoid the bank being fixed with constructive notice."

53. In the addendum to his judgment the judge clearly regarded the facts of this case as being exceptional. Those seized upon were,

(i) that the bank was aware that Mr Goff was present at the meeting with Miss Lewis;

(ii) that Mr Goff and his company Ventlute were closely involved with Roy and Perfectbuy and

(iii) that the bank knew that Mrs Goff had no financial interest in Perfectbuy. He also placed weight upon the fact that in confirming that she had given independent advice Miss Lewis did not specifically mention Mrs Goff.

54. Miss Andrews for the respondent does not adopt the last of the learned judge's reasons: she does, however, embrace the others. In the Respondent's Notice she adds more of her own.
55. I deal first with those of the judge's reasons which were adopted by Miss Andrews.
56. The fact that Mr Goff and Ventlute were closely involved with Roy and Perfectbuy was something which the bank was entitled to assume would either be known or would become known to Miss Lewis. Moreover the connection was not a reason for Mrs Goff to distance herself from the transaction, rather the opposite. Of course the bank knew that Mrs Goff had no financial interest in Perfectbuy but the bank was entitled to assume that the same would be known to or become known to Miss Lewis. In any event there was nothing out of the ordinary in the fact that Mrs Goff was being asked to provide security for a company in which her husband had an interest and she had none. That was the foundation of Mrs Goff's equity and the reason why, in part, the bank was put on enquiry.
57. I can see no reason why it should have become known to the bank that Mr Goff was present at the meeting between Mrs Goff and Miss Lewis. It certainly did not follow from the fact that someone at the bank spoke to Mr Goff and Miss Lewis successively on the day in question. In any event Mr Goff's presence at the meeting does not lead to the conclusion that the advice given was inadequate.
58. But Miss Andrews has brought our attention to what she describes as Perfectbuy's parlous financial state which information, she says, was known to the bank and was not volunteered to Miss Lewis. In particular she points out that the existing borrowings exceeded the value of the security offered and also, that in the event of the loan being called in Mrs Goff was risking the whole of her property. She submits that no competent solicitor could properly advise Mrs Goff to enter into such a transaction and, to paraphrase Stuart-Smith LJ, the availability of legal advice from Miss Lewis was insufficient to avoid Barclays being fixed with constructive notice. She submits that on its facts this is a worse case than or at least on a par with Credit Lyonnais v. Burch (1997) 1 ALL ER 144 and Steeples v. Lea (1998) 76 P&CR 157.
59. I do not consider that the facts of the instant case take it outside what is acknowledged to be the general approach. This was a fairly commonplace situation where a wife was prepared to use her property to secure a business venture being undertaken by her husband. It makes no difference that it was a joint venture being carried on with his son. It is true that, as events have shown, it was a foolish thing for her to do. However, wives, husbands and parents do sometimes enter into unwise arrangements in order to assist their nearest and dearest. Moreover, it was by no means ordained that the venture would fail and had it not done so she stood to benefit along with her husband. In Credit Lyonnais v. Burch and Steeples v. Lea the facts were truly exceptional. In the former the transaction was not merely a third party charge on property but an all moneys guarantee of the debtor's liabilities to the bank and there was no family tie between the surety and the principal debtor, merely the relationship of junior employee and employer. It was truly a case to shock the conscience of the court. The facts of Steeples v. Lea were similarly extreme.
60. I confess to some little unease in applying the test as stated in Etridge at paragraph 49. The occasions on which a competent solicitor would positively advise the giving of a charge to support the debts of another would be rare indeed. Certainly on the facts of Etridge itself one would not suppose that a competent solicitor would have positively advised Mrs Etridge to pledge The Old Rectory Laverstoke Hampshire in support of her husband's debts. I prefer to regard the exception to the general rule as arising where any competent solicitor would advise against the wife entering into the transaction. That approach would seem to be consistent with the way in which law has been applied in all the cases to which we have been referred.
61. Accordingly on that ground alone I would allow the appeal and the bank's claim to possession.

The agreement of 2nd July 1992.

62. I have sufficiently set out its terms and the principle upon which the bank bases this discrete ground of appeal.
63. By the time the agreement was struck Mrs Goff appeared to the bank to be represented by solicitors other than Gore Wood & Co., and it was entitled to assume that those solicitors would have given Mrs Goff proper legal advice about the situation in which she found herself. By this time, of course, Perfectbuy had gone into liquidation. The agreement was not one which favoured her husband. It was to her advantage. There was no question of misrepresentation or undue influence. The bargain was not unconscionable. I would hold, therefore, that by signing the agreement Mrs Goff was affirming the validity of the charge. As Stevenson LJ said in Peyman v. Lanjani (1985) 1 CH 457 at 488 D-E

"In fact and in law men's intentions must be judged by their actions, and a man's acts may convey to a reasonable person standing in the shoes of the other party to a contract, as clearly as any words an intention to repudiate or to affirm the contract. If the other party, relying on acts having the latter effect, suffers detriment or prejudice, there is unequivocal, and irrevocable affirmation."

Here the bank relied upon Mrs Goff's affirmation of the validity of the charge. It refrained from seeking possession. Mrs Goff could not thereafter assert that her intention had not been to do other than what her acts had conveyed to the bank as being her intention. The case of Lloyds Bank PLC v. Lucken being one of the "others" in the case of Etridge and others is an example of this court upholding a legal charge on a similar basis to that which leads me to say that I would, if necessary, allow the appeal on this alternative ground also.

LORD JUSTICE BUXTON:

64. I agree with both judgments. There is nothing that I wish to add.

LORD JUSTICE PILL:

65. I agree, and for the reasons given by Mantell LJ. I wish to express agreement first with Mantell LJ's finding that, though in the particular circumstances both parties have been prepared to overlook the defect, it was not appropriate for the judge to alter his judgment in the manner and in the circumstances he did.
66. Second, I too, with respect, confess unease with the latter part of paragraph 49 of the judgment of this Court in Royal Bank of Scotland plc v Etridge (No 2) [1998] 4 All ER 705, which Mantell LJ has set out in his judgment, and in particular the scope of the exception contemplated by reference to transactions into which "no competent solicitor could properly advise the wife to enter". As Mantell LJ has stated, family members do sometimes enter into unwise arrangements to assist their nearest and dearest. I do not consider that the exception was intended to cover all cases in which a solicitor would be expected to decline to give positive advice to enter into the transaction or to all cases in which the solicitor would be expected to advise that the transaction was unwise.
67. The terminology in paragraph 49 appears to have its origin in the judgment of Millett LJ in Credit Lyonnais v Burch [1997] 1 All ER 144 (Millett LJ was also a member of the court in Etridge). Millett LJ stated:

"It is next necessary to consider the position of the third party who has been put on enquiry of the possible existence of some impropriety and who wishes to avoid being fixed with constructive notice. One means of doing so is to ensure that the complainant obtains competent and independent legal advice before entering into the transaction. If she does so, and enters into the transaction nonetheless, the third party will usually escape the consequences of notice. This is because he is normally entitled to assume that the solicitor has discharged his duty and that the complainant has followed his advice. But he cannot make any such assumption if he knows or ought to know that it is false."

Millett LJ set out facts of which the bank in that case was unaware and continued at p 157c:

"But it must have been known that no competent solicitor could advise her to enter into a guarantee in the terms she did. He would be bound to inquire, of the bank if necessary, of the reason why it required additional security. Having discovered that it was to enable the limit of the company's overdraft to be increased from £250,000 to £270,000, he would be bound to advise Miss Burch that an unlimited guarantee was unnecessary and inappropriate for this purpose, and that, if she felt that she must accommodate Mr Pelosi's wishes, she should offer a limited guarantee with a limit of £20,000 or (better still) a guarantee of the company's liability in excess of £250,000 with a maximum of £270,000. The terms of Miss Burch's letter indicate that if she had been given appropriate advice of the alternatives which were legally available, she would have chosen one which was less onerous to her while still meeting the bank's ostensible requirements.

I do not, therefore, accept that a bank, in circumstances where it ought to appreciate the possibility that undue influence has been exercised, can escape the consequences by putting forward an unnecessarily onerous form of guarantee and relying on the failure of the guarantor's solicitor to advise her of the possibility of offering a guarantee on less onerous terms and more appropriate to the situation."

68. Nourse LJ, at p 150j, regarded features of the case as "truly astonishing". The unconscionably of the transaction was "of direct materiality to the case based on undue influence" (p 151h). Millett LJ stated, at p 152h, that the case was an "extreme case". "The transaction was not merely to the manifest disadvantage of Miss Burch; it was one which, in the traditional phrase, 'shocks the conscience of the court'". Millett LJ added, at p 155d:

"No competent solicitor could possibly have advised her to enter into it. He would be bound to warn her against it in the strongest possible terms, and to have refrained from acting for her further if she had persisted in it against his advice."

69. The facts in Steeples v Lea [1998] 76 P & CR 157 were also extreme. A lender sought to enforce security he had obtained upon the house of the defendant, who was a junior employee of the borrower, for a loan of £50,000. The mortgage deed had been executed, in the presence of the defendant, at the office of the lender's solicitor. The defendant had been told that she might lose her home as a result of the transaction but declined an offer of time to seek legal advice. It was held in this Court that the transaction was "extravagantly improvident" and that the "reckless improvidence of the transaction was obvious" to the lender. The Court concluded that the mortgage was obtained by an exercise of undue influence. Millett LJ stated, at p 166:

"I would end with some observations about Mr Ory's conduct. Mr Ory was Mr Steeples's solicitor. He owed no duty to advise the defendant. But his duty to his client was to ensure that he obtained good security for his advance, that is to say a security which was not liable to be impugned. In my view, as a result of what he himself witnessed in his own office, he was under a plain duty to warn his client not to make the advance unless the defendant did take independent advice. The case is unusual, for the plaintiff is fixed with imputed notice of the vulnerability of the transaction because of what took place in his own solicitor's presence."

70. In Midland Bank plc v Saleem Asghar Kidwai & Anr [1995] 4 Bank LR 303, a wife had an interest in property which was charged as security for all monies and liabilities then or thereafter due owing or incurred to the bank by her husband. The bank was permitted by this Court to enforce its security. I refer to the case primarily because of Miss Andrews' forceful submission that it was for the bank to investigate the somewhat complex financial position and prospects of Perfectbuy Ltd and Ventlute Ltd before taking security which it could hope to enforce. Morritt LJ stated, at p 307:

"It seems to me that the submissions for the wife, if accepted would cast on the bank the duties of the solicitor or other independent advisor prudent banks advise those in the position of the wife to consult. Not only is the bank not required to do so by the principles expounded by Lord Browne-Wilkinson but it cannot do so for it is interested in the transaction in question and therefore not independent. Thus, it cannot enter into questions of evaluation of the risk which lead to advice whether to enter into the transaction at all. That is a matter for the independent advisor, whose duty it is to obtain all relevant information from the bank, as well as from the husband. In my judgment the recorder was in error on this point.

I consider that the bank had taken reasonable steps to satisfy itself that the wife's agreement to the postponement of any interest she might have had had been properly obtained."

71. In Portman Building Society v Dusangh & Ors [2000] Lloyd's LR 197 a defence based on undue influence and a defence claiming that the bargain was unconscionable were rejected in the County Court in a case where a son had agreed to make repayments on a loan secured on his father's home. The father appealed against the finding on unconscionability. Simon Brown LJ, having cited Burch, stated at p 202:

"But I simply cannot accept that building societies are required to police transactions of this nature to ensure that parents (even poor and ignorant ones) are wise in seeking to assist their children."

He added:

"The building society did not act in a morally reprehensible manner. The transaction, although improvident, was not 'overreaching and oppressive'. In short, the conscience of the court is not shocked."

Ward LJ stated, at p 206:

"The family wanted to raise money: the building society was prepared to lend it. One shakes one's head, but with sadness and with incredulity at the folly of it all, alas not with moral outrage. I am afraid the moral conscience of the court has not been shocked. That is an end of the matter."

72. Thus in one of the cases cited in which the Court declined to enforce the security, a solicitor should in the view of the Court have refrained from acting further if the defendant had persisted in the transaction against his advice (Burch) and in another a solicitor did not discharge a "plain duty" (Steeples). Those cases illustrate in my view the type of situation the Court had in mind in Etridge when referring to the solicitor's conduct. In the present case the solicitor's conduct does not in my judgment come into that category and neither for my part, upon the facts, is the conscience of the Court shocked.
73. I agree that the appeal must be allowed.
ORDER: Appeal allowed; the bank to recover their costs from hearing below with no further order as to costs from hearing below; Section II order against Legal Services Commission; permission to appeal refused; stay of execution refused. (Order does not form part of approved Judgment)