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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Watt Or Forsyth (AP) v Royal Bank Of Scotland Plc [1999] ScotCS 181 (26 July 1999)
URL: http://www.bailii.org/scot/cases/ScotCS/1999/181.html
Cite as: 2000 SCLR 61, [1999] ScotCS 181
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OUTER HOUSE, COURT OF SESSION
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CA129/14/98
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OPINION OF LORD MACFADYEN
in the cause
ELIZABETH WATT OR FORSYTH (AP)
Pursuer;
against
THE ROYAL BANK OF SCOTLAND PLC
Defenders:
________________
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Pursuer: Gale, Q.C., Porter; Wright Johnston & Mackenzie
Defenders: M. Clarke, Q.C.; McGrigor Donald
26 July 1999
Introduction
In this action the pursuer concludes for production and reduction to the extent that it purports to have been granted by her of a standard security dated 1 August and recorded in the General Register of Sasines on 6 August 1990 which bears to have been granted by her husband, Henry Rankine Forsyth, and her in favour of the defenders over subjects known as and forming 18 Churchill Drive, Bridge of Allan. The pursuer seeks reduction on two grounds, namely (1) that the attestation of her signature on the standard security is defective, in that the witnesses neither saw her sign nor heard her acknowledge her signature ("the attestation issue"); and (2) that the defenders were on notice that there was a material risk that her husband would (as, it is alleged, he did) induce her to sign the standard security by misrepresentation, that they were therefore under a duty to contact her and advise her to obtain independent legal advice, and that they failed to do so ("the duty issue"). In response to the first point the defenders plead that, since the standard security was granted for onerous causes and was delivered, the pursuer is barred from relying on any defect in the attestation of what she admits is her signature. In response to the second point the defenders aver that the solicitors who acted for them in the transaction also, to their reasonable belief, acted for the pursuer and her husband, and that they were entitled to rely on those solicitors having fulfilled their duty to advise the pursuer to be separately advised if there was a conflict of interest. Each party has stated preliminary pleas challenging the relevancy of the other's pleadings. The case was appointed to debate on the attestation issue, and on the issue of the assumptions which the defenders were entitled to make as to the role to be performed by the solicitors and the discharge of that role. I have now heard that debate.
In presenting his submissions, Mr Clarke for the defenders dealt first with the duty issue and secondly with the attestation issue. I find it convenient to approach my consideration of the parties' submissions in the same order.
The Duty Issue
The pursuer avers that she signed the standard security, having been misinformed by her husband as to its contents. The sum secured by it was advanced to her husband in connection with his business as a haulage contractor. It did not relate to borrowings on the account of the pursuer. The pursuer avers in particular that she had been informed by her husband that the deed was a formality relating to his business overdraft; he told her that the property would not be at risk. She had informed him that she would not sign it if it did put the property at risk, and in signing it she relied on his representation that it did not. She avers that in the circumstances the defenders ought to have contacted her and advised her of the risks of signing the deed. They did not do so. Nor did they advise her to obtain independent advice. She would not have signed the standard security if she had received advice that a consequence of doing so was that the property would be at risk.
The context within which this issue arises is the development of the law which took place, for English law in Barclay's Bank plc v O'Brien [1994] 1 AC 180, and for Scots law in Smith v Bank of Scotland 1997 SC (HL) 111. In O'Brien a husband and wife executed a second mortgage over the matrimonial home in security of overdraft facilities extended by the bank to a company in which the husband, but not the wife, had an interest. The wife did so in reliance on false representations made to her by her husband as to the nature of the document. The wife subsequently sought to resist the enforcement of the mortgage against her interest in the property. It was held that where a wife had been induced to stand as surety for her husband's debt by his undue influence, misrepresentation or other legal wrong, she had an equity against him to set aside the transaction; that her right to set aside the transaction would be enforceable against a third party who had actual or constructive notice of the circumstances giving rise to her equity against her husband, or for whom her husband was acting as agent; and that when a wife offered to stand surety for her husband's debt in a transaction which was not to her financial advantage and which carried a substantial risk of the husband committing a legal or equitable wrong entitling the wife to set aside the transaction, the creditor was put on inquiry and would have constructive notice of the wife's rights unless he took reasonable steps to ensure that her agreement had been properly obtained. Ordinarily the reasonable steps would be to warn the surety of the amount of her potential liability and of the risks involved, and to advise her to take independent legal advice. On the facts the bank was held to have failed to take the reasonable steps necessary to avoid being fixed with constructive notice of the husband's misrepresentation, and the wife was held to be entitled as against the bank to have the legal charge set aside.
In Smith, an action of reduction in which a wife sought to set aside a standard security over the matrimonial home which she and her husband had granted in security of a business loan to a firm of which the husband was a partner, alleging that she had been induced to sign it by misrepresentation on her husband's part, the House of Lords, recognising that the law of England had been consciously extended in O'Brien, addressed the question whether a corresponding extension should be made to the law of Scotland (per Lord Clyde at 118H). Having decided that it should, Lord Clyde (with whom the majority of the committee agreed) considered the basis on which the extension should be made, and concluded that it was preferable to find that basis in recognition of the element of good faith which is required of the creditor in the constitution of a contract of cautionary. His Lordship said (at 121E - 122C):
"The law already recognises ... that there may arise a duty of disclosure to a potential cautioner in certain circumstances. As a part of that same good faith which lies behind that duty it seems to me to be reasonable to accept that there should also be a duty in particular circumstances to give the potential cautioner certain advice. Thus in circumstances where the creditor should reasonably suspect that there may be factors bearing on the participation of the cautioner which might undermine the validity of the contract through his or her intimate relationship with the debtor the duty would arise and would have to be fulfilled if the creditor is not to be prevented from later enforcing the contract. Such a duty does not alter the existing law regarding the duty, or the absence of a duty, to make representations. Nor does it carry with it a duty of investigation. This is simply a duty arising out of the good faith of the contract to give advice. ...
In ... the first place, the duty which arises on the creditor at the stage of the negotiation of the contract should only arise on the creditor if the circumstances of the case are such as to lead a reasonable man to believe that owing to the personal relationship between the debtor and the proposed cautioner the latter's consent may not be fully informed or freely given. ...
Secondly, if the duty arises, then it requires that the creditor should take certain steps to secure that he remains in good faith so far as the proposed transaction is concerned. Whether there has in fact been or may yet be any conduct by the debtor directed at the cautioner which might vitiate the contract is not a matter necessarily to be explored by the creditor. All that is required of him is that he should take reasonable steps to secure that in relation to the proposed contract he acts throughout in good faith. So far as the substance of those steps is concerned it seems to me that it would be sufficient for the creditor to warn the potential cautioner of the consequences of entering into the proposed cautionary obligation and to advise him or her to take independent advice."
At the outset of his submissions, Mr Clarke drew attention to the fact that this case was concerned with a point which had not been decided in O'Brien or Smith, because in neither of those cases had there been any involvement on the part of a legal adviser acting on behalf of the person who sought to have the security deed set aside. In the present case the defenders make the following averments:
"The defenders instructed G.W.T. Murphy & Company, Solicitors, ... to act on their behalf in the constitution of the security by the pursuer and her husband. Said firm also acted, to the defenders' reasonable belief, for the pursuer and her husband. In terms of the Solicitors (Scotland) Practice Rules 1986 ... said firm had a duty not to act for two or more parties whose interests conflict. The said firm also had an obligation to advise the pursuer of the consequences of granting the security in favour of the defenders and, if a conflict existed, to advise the pursuer and/or the defenders to seek separate legal advice. ... G.W.T. Murphy & Company did not advise the defenders that any such conflicts existed. The defenders were thus entitled to rely on G.W.T. Murphy & Company fulfilling the obligations imposed on them and which they owed to the defenders and the pursuer. By instructing said firm in the reasonable belief that they acted for the pursuer the defenders were in good faith."
The pursuer admits that the defenders instructed the firm of solicitors to act on their behalf, but avers that she did not give instructions to the firm to act on her behalf in relation to the constitution of the standard security. In the course of the debate, however, Mr Gale for the pursuer made certain additional concessions as to matters of fact. He accepted that for the purpose of the duty issue what mattered was not whether the solicitors had actually received the pursuer's instructions to act for her in relation to the standard security, but whether the defenders reasonably perceived the solicitors to be acting on the pursuer's behalf. He accepted that it was the case that the solicitors were Mr Forsyth's solicitors. He accepted, too, that in their dealings with the defenders in relation to the standard security, the solicitors gave the appearance of representing both the pursuer and her husband as granters of it. The defenders aver that the pursuer has raised an action against the solicitors averring that they were in breach of duties owed to her under the Practice Rules. The pursuer admits that such an action has been raised. Mr Gale explained, however, that that had been done simply to guard against the possible operation of prescription.
Mr Clarke submitted that it was important to recognise that what was seen as arising from the circumstance of a wife offering to grant a security over her property in respect of her husband's debts was a duty on the part of the lender to advise the wife, not a duty of inquiry into the circumstances. The reasonable steps sufficient to secure that the lender remains in good faith were the issuing to the granter of the security of (i) a warning of the consequences of the proposed transaction, and (ii) advice that she should take independent advice. The English courts have recognised that what is involved is a balancing exercise, maintaining proper equilibrium between, on the one hand, the protection of those who may be susceptible to misrepresentation or undue influence, and on the other hand the desirability of certainty in commercial transactions and the avoidance of the stifling of the legitimate use of resources to support borrowing. The lender goes far enough if he warns the granter of the proposed security of the need to take independent advice. If the granter already has an independent adviser, the lender is entitled to assume that that adviser will gave such advice as is necessary to protect the granter. The lender is entitled to assume that a solicitor will duly perform his duty to his client. That is so even when the solicitor who is advising the granter also acts for the lender and/or the borrower. That is because, in the event of there being a conflict, it is the duty of the solicitor to advise one client to seek advice elsewhere. If he does not do so, the lender is entitled to assume that he has decided that there is no such conflict as to prevent his advising both clients. Thus, in a case such as the present, in which the pursuer appeared to the lender to be advised by solicitors of her own (albeit shared with her husband), it was necessary, before the pursuer could make a relevant case for reduction of her part of the standard security, for her to aver circumstances to displace the presumption, and show that the lender was aware that she had not had the benefit of independent advice.
In support of those submissions Mr Clarke referred to a series of English cases. The first of these was Bank of Baroda v Rayarel [1995] 2 FLR 376, in which the family home, owned jointly by the husband, the wife (the appellant) and their son, was charged in security of overdraft facilities made available by the bank to a company in which the shares were owned by the husband and son. The execution of the charge was witnessed by a solicitor who acted for all three members of the family in connection with its preparation. The charge document contained a certificate to the effect that the granters of the charge had been advised of the effect of the deed and acknowledged their right to independent legal advice. The bank subsequently brought an action based on the charge against all three granters of the charge. The recorder who heard the case at first instance was not satisfied that the presumption of undue influence, which applied in the case of the appellant, had been rebutted, and found that the transaction was manifestly to her disadvantage. He concluded, however, that the bank had not been put upon inquiry that the matter was not being dealt with normally and competently, and that the bank had been entitled to rely on the solicitor giving his client correct advice. On appeal, it was held that the bank had been aware that the granters of the charge were being advised throughout by a solicitor; that the bank was entitled to assume that each of the three would be properly advised and in particular that the appellant would be advised of the importance for her of separate legal advice; and that the bank was not required to question the correctness of the certificate or the nature and extent of the solicitor's advice to the appellant. Hirst LJ (at 382E-383A) quoted the following passage from the judgment of the recorder:
"The question in the present case is: was the bank put on inquiry so that it had to take reasonable steps to satisfy itself that the wife's agreement to stand 'surety' had been properly obtained? Here you have a wife who was always acting apparently through solicitors. In those circumstances, in my judgment, it is very doubtful that the bank was put on inquiry. The bank was entitled to rely upon the competence of the solicitor. I find that it was an arm's length relationship between the two solicitors concerned exchanging documents in the normal conveyancing form, making inquiries as to title, and there was nothing to put the bank on notice that the matter was not being dealt with in the normal competent manner with full advice as to the meaning and effect of the charge.
Even if I am wrong in that and the bank were put on inquiry, the question is: what reasonable steps should it have taken? Given the certificate at the end of the charge, which was duly signed, that, in my judgment would remove any doubt which might have lingered in the bank's mind.
The solicitors' profession is an honourable profession. The solicitors' profession is a competent profession. The solicitors' profession, with those attributes, enables business transactions to be carried out in a straightforward manner without unnecessary steps or inquiries being taken. The intervention of solicitors 'oils the wheels of business', and the plaintiff bank in the present case is entitled to rely on that fact in the circumstances of this case. So I hold that in relation to the presumption of undue influence, and the vitiating effect of that influence which would otherwise apply, the bank had no actual notice of it and they had no constructive notice. Further if they had any constructive notice, such constructive notice, with the duty to make further inquiries, ceased to have effect as soon as the certificate ... became apparent to them."
Hirst LJ then went on to list (at 383E-G) the further inquiries which, according to the appellant's submissions, it was incumbent on the bank to carry out. He expressed his own conclusion (at 384H-385F) as follows:
"Ably as those arguments were addressed, I am unable to accede to them substantially on the ground upheld by the recorder. Here the bank knew throughout that all three defendants, including the third defendant [the appellant] were being advised by a solicitor throughout all the relevant stages of the transaction. It follows that, in my judgment, they were entitled to assume that each of those three clients individually ... would be properly and separately advised in accordance with the duty of Mr Bird as the solicitor to each of them, and in particular the bank were entitled to assume that the solicitor would properly advise the third defendant as to the risk she was running and as to the advisability of her obtaining separate legal advice. ...
Here, indeed, the matter goes even further because of the terms of the certificate which was proffered by the bank to all three defendants, ... and which was signed individually by each of them ... When that came back to the bank, duly signed, any doubt as to its correctness would have involved, in effect, questioning the probity and honesty of the solicitor ... There is, in my judgment, no obligation on the bank to proceed on such an unreasonable degree of suspicion as to a solicitor's honesty."
Hoffmann LJ's judgment (at 386D-F) was in the following terms:
"I agree. If a prospective surety deals with a bank through a solicitor, the bank is entitled to assume that the solicitor has given her appropriate advice. If there is a possibility of a conflict of interest between the surety and the other parties whom the solicitor is also advising, the bank is entitled to assume that the solicitor will have told her that she was entitled to take independent advice. The bank's legal department is not obliged to commit the professional discourtesy of communicating directly with the solicitor's client and tendering such advice itself. Nor is it obliged to inform the solicitor of his professional duties. This will be a fortiori the case when the documents submitted by the bank to the surety's solicitor contain a certificate that she has been advised of the effect of the document and her right to have independent legal advice. The bank was therefore not in the circumstances fixed with constructive notice of the undue influence which the judge found to have been exerted by the husband. I do not think that one needs to say that this is because the bank has taken reasonable steps to ensure that the wife was separately advised. It is true that the bank did take the step of including the certificate in its draft document, but I would not regard this as essential.
For my part, I would be inclined to say, as the recorder did in his admirable judgment, that in a case in which the bank is dealing with the surety through her solicitor, it is not ordinarily required to take any special steps at all."
Glidewell LJ agreed with both of the other judgments.
Mr Clarke then referred to a series of three cases, the facts of which do not require to be set out at length. They were Massey v Midland Bank plc [1995] 1 All ER 929, Banco Exterior Internacional v Mann [1995] 1 All ER 936 and Barclays Bank v Thomson [1997] 4 All ER 816. In Massey, Steyn LJ said (at 935f):
"The bank do not know what happened between Mr Jones [the solicitor] and Miss Massey [the surety], or how the interview was conducted. And it was under no duty to inquire. But the bank had every reason to believe (as was the case on the judge's findings) that Miss Massey had received independent advice. Relying on observations of Dillon LJ in Bank of Baroda v Shah [1988] 3 All ER 24 at 29, the judge observed that the bank was entitled to assume that the solicitors would act honestly and give proper advice to Miss Massey. I agree. How far the solicitor's advice went was essentially a matter for Miss Massey and Mr Jones. The law does not generally require the creditor to stipulate the nature and extent of the advice. It will be for the solicitor to discuss with the wife (or a surety in an equivalent position) what further advice, if any, she ought to take."
In Mann, Morritt LJ said (at 943e):
"The essence of the matter [whether the creditor has done enough to avoid being fixed with constructive notice] is that the creditor should take reasonable steps to ensure in so far as he can that the undue influence of the husband is counteracted by ensuring that the wife is aware of the consequences to her of entering into the proposed transaction for the benefit of the husband."
and (at 944c):
"In Bank of Baroda v Shah ... this court held that there was no obligation on a creditor to ensure that the surety received entirely independent advice, for it was entitled to assume (in the absence of clear indications to the contrary) that the solicitor who did advise was honest and competent. I do not think that the authority of that decision has been shaken by the decision of the House of Lords in Barclays Bank v O'Brien. The proposition was reaffirmed by the decision of this court in Massey v Midland Bank plc."
Sir Thomas Bingham MR said (at 950a-d):
"The merits of this criticism [of the adequacy of a declaration that the nature and effect of the charge had been explained to the granter, when that had been done by the solicitor acting for the debtor company] turns, in my opinion, on what it was reasonable for the bank to expect from a solicitor signing this form, since I think it reasonable to have expected that it would be a solicitor who would sign. Was it reasonable to expect a solicitor, regardless of who was paying his fee, to regard himself as owing a professional duty to Mrs Mann alone in performing his task in relation to this declaration? In my view it was. If he felt himself torn between conflicting duties, he would feel obliged to make way for another solicitor not subject to that conflict. If he did not feel so torn, it would be because nothing impeded the performance of his task, which was to be performed for the benefit of Mrs Mann and no one else. Was it reasonable to expect a solicitor, in explaining the nature and effect of the document, to give appropriate advice? In my view it was. It is an ordinary incident of a solicitor's duty to explain the obvious potential pitfalls of legal transactions to those about to take part in them, and there is no clear dividing line between explanation and advice. If the certifying solicitor did his job with reasonable competence, as the bank was entitled to expect, Mrs Mann would appreciate quite clearly that if the worst happened she could lose her rights in the house and that it was for her to decide whether she was willing to take that risk or not. It was no part of the solicitor's duty to advise her not to sign. It was enough if she would receive such advice as would leave her in no doubt of her right to decide whether she was willing in all the circumstances to take a risk which had been explained to her."
Next Mr Clarke referred to Royal Bank of Scotland v Etridge (No. 2) [1998] 4 All ER 705, in which the Court of Appeal had before it appeals in a series of separate cases which all raised examples of the general issue. The judgment of the court, which was delivered by Stuart-Smith LJ, dealt first with the general issue, then with the application of the principles which had been identified to the circumstances of the individual cases. Mr Clarke relied on the following passages from the general part of the judgment (at 720e-722j):
"41. It is now settled law that the question whether the bank can exercise its legal rights against the wife depends in the first instance on whether the wife has an equity to set aside the transaction and in the second on whether, at the time when it gave value, the bank had notice, actual imputed or constructive, of the wife's equity. In relation to the first question, the issue is whether the advice actually given was sufficient to rebut the presumption of undue influence. In relation to the second, the issue is different: it is whether, in 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 first question depends on what actually happened between the wife, her husband, and the solicitor. The second depends on how the transaction appeared to the bank. ...
44. [The] cases establish the following propositions.
(1) 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: see Rayerel's case. ...
(5) 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: see Mann's case and Rayerel's case. 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: see Rayerel's case. ...
47. 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. ...
49. 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."
Mr Clarke relied in general on those passages, although he submitted that in what was said in paragraph 49 with reference to a transaction which no competent solicitor could advise the wife to enter the Court of Appeal had gone too far.
Mr Clarke also drew on what was said in relation to several of the individual cases under consideration in Etridge. In Etridge itself (at 728j - 729a) it was said:
"... We agree with the judge ... that both the bank and the trustees [the two creditors] were entitled to assume that the solicitors had discharged their professional duties to Mrs Etridge whether or not either of them had actually seen the certificate indorsed on the respective legal charges before authorising the release of the money. In particular we would support his disapproval of the suggestion that the question is one of fact alone on which fine distinctions may be drawn dependent on the wording of the instructions to the solicitors or of the certificates they give."
In UCB Home Loans Corp Ltd v Moore (at 730g-731h), in which the borrowing was for the purpose of the husband's business, but was secured over the jointly owned matrimonial home, the application for the loan was signed by both the husband and the wife, and in it a firm of solicitors was named as their solicitors. The bank instructed those solicitors to act for it in relation to the completion and registration of the charge. The bank did not ask the solicitors to advise Mrs Moore, as it believed that they were acting for her. Mrs Moore alleged that she had never instructed the solicitors to act on her behalf, having signed the loan application in blank. The bank contended that they were not fixed with constructive knowledge of the husband's undue influence or misrepresentation because they reasonably believed that Mrs Moore had solicitors acting for her and, this being so, they were entitled to expect that reputable solicitors would have given her appropriate advice. There was nothing to put them on notice to the contrary. It was not necessary for them to give instructions to the solicitors to do what was already their duty; nor was it necessary to require certification that that had been done. Those submissions were accepted by the judge of first instance, and his decision was upheld on appeal. Mr Clarke submitted that the facts of Moore were very close to those of the present case, and that the same result should follow. Finally reference was made to Midland Bank v Wallace (at 737b) where it was said:
"If no instructions had been given by the bank to Mr Samson [the solicitor] it would have been entitled to rely on Mr Samson doing his professional duty by his client, Mrs Wallace. Such duty would have involved giving her such advice as would ensure that her execution of the charge was the product of her own volition if there were circumstances to suggest that it might not be. We do not think that the lender should be in any worse position if he indicates that he wishes the solicitor to attend to the legal formalities in the execution of the legal charge or is told by the solicitor that the customer has had the nature of the document explained to him or her."
The only other case to which Mr Clarke made reference was Cooke v National Westminster Bank plc [1998] TLR 480. The report is very brief, but I was also provided with the approved transcript of the judgment of the Court of Appeal. Summary judgment had been given in favour of the bank, the judge having held that:
"the Bank was entitled to assume that the solicitors would ensure that Mrs Cooke received separate advice, both because they had been asked to do so by the Bank and because even in the absence of such a request it was the solicitors' duty to do it. In these circumstances the absence of an express confirmation from the solicitors that they had done that which it was their duty to do does not in my judgment affect the position."
The Court of Appeal allowed the appeal, holding that it was arguable in the circumstances that the bank was affected by constructive notice of undue influence. The essential facts supporting that conclusion were summarised as follows:
"On 13 March 1989 Mr French, on behalf of the bank, requested the second defendants [the solicitors], first, to see that Mrs Cooke was given separate advice on the import of the guarantee and the very real liability she was entering into and, secondly, to confirm that that advice had been given. On its face, Mr French's letter contemplated that the separate advice would be given by the second defendants, though whether that would have been practicable in the case of a two-partner firm is questionable. In any event, the second defendants did not respond to the letter and the executed guarantee was not returned by them until 8 November 1989.
In the meantime, on 10 August, Mr Harris of the bank had been told that Mrs Cooke was not over-anxious to give the guarantee. When it was returned, it was only because Mr Smith of the bank (who was clearly concerned about the serious defects in its security position) had asked for it at his meeting with Mr Cooke at the beginning of November, and there was nothing to show that Mrs Cooke had consented to its being returned."
In light of those authorities Mr Clarke submitted that the pursuer's averments, in so far as they asserted that the defenders were in breach of duties owed by them to the pursuer, were irrelevant. It was matter of admission by the pursuer that the firm of solicitors mentioned in the pleadings was instructed by the defenders to act on their behalf in connection with the constitution of the standard security. It was a matter of concession that those solicitors were already acting for the pursuer's husband, and that in their communings with the defenders they appeared to be acting for the pursuer as well. The defenders were therefore reasonably entitled to believe that the solicitors were acting for the pursuer. They were therefore entitled to assume that the solicitors would not have had the standard security executed by the pursuer and would not have allowed it to be delivered to the defenders without first having fulfilled their duties to the pursuer to advise her of the nature and effect of the document and, if there was a conflict of interest, to draw to her attention the desirability of her obtaining separate legal advice. In the absence of anything which brought to the defenders' attention that those things had not been done, they were entitled in good faith to assume that they had. The averment that the solicitors did not in fact receive any instructions from the pursuer to act on her behalf was not relevant. Unless the bank were aware that that was the case, it was not a matter into which they had any obligation to inquire. In the circumstances the requirements of good faith did not demand of the defenders that they themselves take any steps to inform or advise the pursuer in relation to the nature and effect of the standard security or the need for separate advice.
Mr Gale for the pursuer accepted at the outset of his submissions that the House of Lords in Smith was dealing with a case in which there was no question of the pursuer having had the benefit of legal advice. He submitted, however, that that case nevertheless afforded relevant guidance as to how to approach the question of what duties were incumbent on a lender when a wife granting a security over her property for the debts of her husband did ostensibly have the benefit of legal advice. He submitted that it was the need for good faith on the part of the lender, identified by Lord Clyde in Smith at 121D-G, which subsisted throughout the period of negotiation of the loan and the security up to the point where the security was granted, that dictated the extent and nature of the duties incumbent on the lender. He submitted, as I understood him, that the Scottish approach of founding the lender's duties on the requirement of good faith might lead to a different result in some circumstances from that reached in English law on the basis of constructive notice.
Mr Gale drew attention to the way in which the matter was set out in the defenders' pleadings. They made it clear that it was the pursuer's husband who was their customer, and that they extended overdraft facilities to him in connection with his business. They averred that:
"As these overdraft facilities increased it was agreed between the defenders and the pursuer's husband that the defenders would obtain a second security in respect of these facilities over [the property]".
There was no suggestion that the pursuer was involved in the business or was a party to the negotiations which led to the agreement that the standard security would be granted. The defenders were nevertheless aware, as they averred, that the property was owned jointly by the pursuer and her husband. It was in that knowledge that they instructed the solicitors, who were the pursuer's husband's existing solicitors, to act for them in the constitution of the standard security by the pursuer and her husband. The defenders averred that it was their reasonable belief that the solicitors also acted for the pursuer and her husband. On the foundation of that averment, the defenders went on to make averments about the duties which the solicitors owed to the pursuer by virtue of the Solicitors (Scotland) Practice Rules 1986. Reference was made in particular to Rules 3, 5 and 7. So far as material for present purposes those rules were in the following terms:
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"3. |
A solicitor shall not act for two or more parties whose interests conflict. |
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5. |
(1) Without prejudice to the generality of rule 3 hereof, a solicitor ... shall not at any stage, act ... for lender and borrower in a loan to be secured over heritable property; provided, however, that where no dispute arises or might reasonably be expected to arise between the parties ... this rule shall not apply if:- (f) in the case of a loan to be secured over heritable property, the terms of the loan have been agreed between the parties before the solicitor has been instructed to act for the lender, and the granting of the security is only to give effect to such agreement. |
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7. |
A solicitor acting on behalf of a party or prospective party to a transaction of any kind specified in rule 5 hereof shall not issue any deed, writ, missive or other document requiring the signature of another party or prospective party to him without informing that party in writing that:- (a) such signature may have certain legal consequences, and (b) he should seek independent legal advice before signature." |
Mr Gale submitted that the Rule 5(f) exception could not apply, because the pursuer was not a party to the agreement as to the terms of the loan, and that Rule 7 applied where a solicitor issued a document for signature to a party for whom he was not acting. The real significance of those averments about the Practice Rules was that they showed that the defenders were informed clients who had knowledge of solicitors' professional responsibilities. This was not a case (as some of the English cases cited by Mr Clarke were) in which the lender instigated the giving of advice to the granter of the security by instructing a solicitor to give her appropriate advice. They dealt with the pursuer as a party who came to the transaction with the benefit of legal advice, albeit from solicitors who also acted for her husband. There was no averment that in instructing the solicitors to act for them, the defenders made any request that they should tender advice to the pursuer. Nor was there any suggestion that the defenders sought confirmation from the solicitors that the pursuer had received appropriate advice. The defenders averments went no further than saying that the solicitors did not advise them that any such conflict as would have prevented their acting for the pursuer existed. On that basis the defenders maintain that they were entitled to rely on the solicitors having fulfilled their professional obligations to the pursuer, and were thus in good faith.
Mr Gale submitted that those averments showed that in their dealings with the pursuer the defenders had been entirely passive. They had made no direct contact with her. They did nothing, by way of instructions to the solicitors, to procure that she had the benefit of appropriate advice about the nature and possible consequences of the transaction. They made no inquiry as to what steps had been taken to provide her with such advice. They relied on their belief that the solicitors were acting for the pursuer, and on the absence of any indication from the solicitors that they had been unable to do so. Mr Gale submitted that, in the circumstances and in particular in light of the defenders' averred knowledge, their obligation to act in good faith throughout the transaction disabled them from such passive reliance on the solicitors' silence.
Lord Clyde's speech in Smith provided, Mr Gale submitted, the legal framework for the imposition of certain obligations on the lender where he obtained security over property belonging to a person who was not the borrower but was in a close relationship with the borrower. In Smith the pursuer was not legally represented, but the reasoning adopted could be seen to fall into two stages. The first stage was recognition of "the element of good faith which is required of the creditor on the constitution of a contract of cautionary" (121E). The second, arising from that requirement of good faith, was the acceptance of the existence of "a duty ... to give the potential cautioner certain advice ... in circumstances where the creditor should reasonably suspect that there may be factors bearing on the participation of the cautioner which might undermine the validity of the contract through his or her intimate relationship with the debtor" (121E-F). In Smith the relationship between the cautioner and the principal debtor was of the sort contemplated, and the cautioner was without independent legal advice. In those circumstances Lord Clyde identified the particular duty incumbent on the creditor as being a duty "to warn the potential cautioner of the consequences of entering into the proposed cautionary obligation and to advise him or her to take independent advice" (122C). Mr Gale submitted, however, that where such a cautioner came to the transaction ostensibly with legal advice, the general requirement of good faith on the part of the creditor remained. Lord Clyde said nothing to restrict the creditor's obligation to act in good faith to the case where the cautioner was not legally advised. The creditor required to act in good faith throughout the transaction, from the moment when he became aware of the involvement of the cautioner until the security deed had been executed and delivered. That obligation was undiminished by the fact that the cautioner had, or appeared to have, the benefit of legal advice. It remained an overriding obligation by which the creditor's actings should be regulated.
Mr Gale then turned to a passage in Etridge dealing with independent legal advice. Stuart-Smith LJ (at 715b) said:
"A solicitor who is instructed to advise a person who may be subject to the undue influence of another must bear in mind that it is not sufficient that she understands the nature and effect of the transaction if she is so affected by the influence of the other that she cannot make an independent decision of her own. It is not sufficient to explain the documentation and ensure that she understands the nature of the transaction and wishes to carry it out... His duty is to satisfy himself that his client is free from improper influence, and the first step must be to ascertain whether it is one into which she could sensibly be advised to enter if free from such influence. If he is not so satisfied it is his duty to advise her not to enter into it, and to refuse to act further for her in the implementation of the transaction if she persists. In this event, while the contents of his advice must remain confidential, he should inform the other parties (including the bank) that he has seen his client and given her certain advice, and that as a result he has declined to act for her any further. He must in any event advise her that she is under no obligation to enter into the transaction at all and, if she still wishes to do so, that she is not bound to accept the terms of any document which has been put before her ...".
That standard of advice was relevant, Mr Gale submitted, whether the solicitor was instructed by the bank to advise her, or was her own independent solicitor, or was a solicitor shared with her husband. Where the same solicitor acted for the husband, the wife and the lender, there could scarcely be a more obvious situation of conflict of interest. The potential for conflict was so manifest that the bank could not rely on an inference from the solicitor's silence that there was no conflict, and that the solicitor had therefore provided the wife with appropriate advice. The situation was such as to give rise in the mind of a reasonable banker to a suspicion that the wife had not been independently advised, and the bank should therefore seek confirmation from the solicitor of the way in which the potential for conflict had been resolved. That would impose no intolerable burden on the bank. If what was said in Etridge at paragraph 44(1) (page 721a) represented the law of England, the foundation of Scots law in the principle of good faith required the bank to go further and examine the actings of the shared solicitor more critically. As was pointed out in Etridge at 722f, the bank and the wife shared an interest in ensuring that the wife did not enter into the transaction without her informed consent, and (at 722g) it was recognised that the bank would not be entitled to assume that the solicitor had duly performed his duties to the wife if it knew or ought to have known that the assumption was false. Approaching the matter in the Scottish way, good faith required the bank, where the solicitor acted for all parties involved, to look for more than mere silence on the part of the solicitor before it could be satisfied that the wife had been properly advised. Express confirmation at least should be sought.
I approach the issue which I have to decide by noting in the first place that the standard security, so far as granted by the pursuer, was granted by her over her interest in the jointly owned property, although in security of a debt which was not hers, but was a business debt of her husband's. The circumstance therefore seem to me to have been such that, if no question had arisen as to her having the benefit of legal advice, the pursuer's averments would have constituted a relevant case that the good faith required of a creditor in a cautionary (or at least quasi-cautionary) obligation imposed on the defenders a duty to warn her of the consequences of granting the standard security and advise her to take independent advice, and that since they had not done so they were vulnerable to reduction of the standard security, so far as granted by her, if she succeeded in establishing that she had granted it in consequence of misrepresentation by her husband. That much would have been a simple application of the ratio of Smith, and I did not understand the defenders to argue otherwise. The question for decision is whether the position is altered by the involvement of the solicitors who, it is accepted on the pursuer's behalf, appeared to the defenders to be acting on her behalf in the transaction.
Mr Gale was, in my view, right in his submissions at least to this extent, namely that the requirement of good faith on the part of the creditor in a cautionary obligation is not dependent on the cautioner coming to the transaction without legal advice. But it does not, in my view, follow that the creditor's duty which arises from the requirement of good faith is the same towards a cautioner who appears to have the benefit of legal advice as it is towards one who does not have the benefit of legal advice. In the circumstances contemplated in Smith Lord Clyde identified the steps which it would be sufficient for the creditor to take in order to preserve his good faith in entering into a security transaction with a person whose relationship with the principal debtor was such that it was reasonable to suspect that the validity of her consent might be undermined by undue influence or misrepresentation as the giving of (i) a warning of the consequences of granting the security and (ii) advice that she should take separate advice. It can be seen that it was not suggested that good faith required the creditor to ensure that the granter of the security granted it only after being freed of the effect of any undue influence or misrepresentation. What was seen as sufficient was the taking of steps which would (a) place the granter of the proposed security in a position in which she understood the nature and consequences of the transaction, even if the principal debtor had concealed them from her, or misrepresented them to her, and (b) make her aware that it was desirable that she should have separate advice which addressed the transaction from the point of view of her interests rather than from that of those of the principal debtor. When addressing a case in which the circumstances differ from those of Smith in respect that the proposed granter of the security appears to the creditor already to have the benefit of professional legal advice, the question comes to be whether good faith still requires the creditor to take those steps. The answer to that question depends on what assumptions the creditor is entitled to make about the information and advice that the solicitor will have given or will give to the granter of the security. If it is right to infer that the solicitor will inform the granter of the security of the nature of the security and the potential consequences for her of granting it, and will give her such advice as it is appropriate for a solicitor to give to a client entering into such a transaction, it seems to me to follow that good faith does not require the creditor to take the steps identified in Smith. For the creditor to do so would simply be to replicate what the solicitor may be assumed to have done. In the circumstances of Smith, good faith required the creditor to take those steps because the creditor was in possession of information about the relationship between the granter of the security and the principal debtor that suggested that the granter of the security might not understand the nature and consequences of the transaction and might not have had the benefit of independent advice. If the granter of the security comes to the transaction with the benefit of legal advice, and that advice is to be assumed to cover these two points, the basis for concluding that good faith requires those steps to be taken by the creditor disappears.
The question therefore comes to be: what assumptions is a creditor entitled to make about the information and advice which the solicitor will have given to the granter of the security? I propose to test the matter first by reference to a case where the granter of the standard security has the benefit of a separate solicitor acting for her, who has no involvement in advising any of the other parties to the transaction. In my opinion the creditor is ordinarily entitled to assume that the solicitor will have acted in accordance with his professional obligations towards his client. The possibility exists, of course, that a solicitor will fail to fulfil his professional obligations. But if he does so fail, the client will ordinarily have recourse against him for any loss which she suffers as a result. It would, in my view, be going too far to say that good faith requires that the creditor make the assumption that the solicitor may fail to fulfil his professional duties. The position would, of course, be different if the creditor were aware of circumstances that indicated that the solicitor had not fulfilled, or would not fulfil, his professional duties to his client. In the absence of such information, however, the assumption must, in my view, be that the solicitor will act properly. The precise content of the solicitor's professional duty will vary with circumstance. It seems to me, however, that it may be taken that his duty will include making sure that his client, before she executes the security deed, understands the nature of the transaction into which she proposes to enter, and the range of potential consequences for her and her property which it will entail. I am therefore of opinion that the creditor is entitled to assume that a granter of a standard security who has the benefit of a solicitor acting for her will thereby have the benefit of separate advice, and that that advice will cover at least all the ground which he would, in the absence of a solicitor, have had to cover in order to preserve his good faith. Since he is entitled to make that assumption, the creditor is not in my opinion in breach of the requirements of good faith if he does nothing himself to advise or warn the granter of the security.
In the present case, of course, the solicitor in question was acting (so the defenders understood) not only for the pursuer, but also for her husband (the principal debtor) and the defenders (the creditors). Do those circumstances make a difference to the assumptions which the defenders were entitled to make about the receipt of information and advice by the pursuer from the solicitors? The mere fact that the solicitor is acting for more than one party in the transaction is not, in my view, sufficient to displace the creditor's entitlement to assume that the solicitor will, in his capacity as the solicitor to the granter of the security, fulfil his professional obligation to advise her about the nature and consequences of the transaction. It seems to me that part of the assumption that the solicitor will act properly is that he will pay due regard to the rules of professional conduct in relation to conflicts of interest. In the present case, the potential conflict which matters, in my view, is the one between the interests of the pursuer and those of her husband. It is not disputed that the solicitors were originally the pursuer's husband's solicitors. They came to the transaction initially in that capacity. They were instructed to act for the defenders in circumstances which would (but for the involvement of the pursuer) have been covered by Rule 5(f) of the Solicitors (Scotland) Practice Rules 1986. The sensitivity of the transaction lay in the fact that the security was to be granted by the pursuer as well as her husband, over jointly owned property, in security of a debt which was the husband's alone. In that situation the solicitors had to consider whether they could properly advise both the pursuer and her husband. It does not seem to me that the inference from the fact that they did not intimate to the defenders that they could not properly advise the pursuer is necessarily that they failed properly to discharge their professional duty to the pursuer. As was pointed out in Etridge at page 716f:
"If the marriage is secure and the indebtedness has been incurred by the business which provides the husband's livelihood and on which the prosperity of his wife and family depends, there may be no real conflict between the interests of the husband and the wife."
It is to be remembered that the focus is on the impression made on the defenders, and the inferences which they were entitled to draw from events. At the time when they entered into the transaction they had no knowledge of the alleged misrepresentation by her husband on which the pursuer now founds. As Lord Clyde pointed out in Smith at 120G:
"... in many cases such transactions may be entered into with full knowledge and understanding. It is not to be supposed or presumed that simply because there is a close personal relationship the security will be given otherwise than with a full and free consent...".
It does not seem to me that the fact that the solicitors purported to act for the pursuer, and said nothing to the defenders to suggest that they were unable to act for her, ought properly to have yielded to the defenders the inference that they had failed to give the pursuer appropriate advice about the nature and consequences for her of the transaction. For all the defenders knew the solicitors might, with the consent of their original client, her husband, have explained the matter fully to the pursuer, and ascertained from her that she entirely understood the risks but because of the importance of the business to the family's prosperity was nevertheless willing to put her interest in the property at risk. They might have advised her of the desirability of her being separately advised, and have been met with the response that she did not wish to take separate advice. I am therefore of opinion that the fact that the solicitors appeared to be acting for both the pursuer and her husband was not sufficient to disentitle the defenders from assuming that it was unnecessary for them to intervene to explain the transaction to the pursuer and urge her to seek separate advice.
I have so far been discussing the issues in terms of the steps necessary for the defenders to take by virtue of the requirement of good faith incumbent on the creditor in a cautionary transaction, as discussed in Smith. I am reinforced in my conclusions, however, by the fact that they accord with the approach adopted by the English courts in analogous circumstances. Although in England the question is whether the creditor must take steps to advise the surety in order to avoid being fixed with constructive notice of the wife's equity to set the transaction aside, whereas in Scotland it is whether good faith requires the creditor to take such steps, it seems to me that in both jurisdictions, the answer to the question is influenced by the assumptions which the creditor is entitled to make in light of the involvement of a solicitor ostensibly acting for the granter of the security. It is, in my view clear that in England the creditor is regarded as being entitled to assume that if the wife has a solicitor, that solicitor will give her the advice which she requires, and will address the question of whether there is a conflict of interest which makes it necessary to advise her to seek separate advice (Rayarel per Hirst LJ at 384H-385B, and per Hoffmann LJ at 386D-G; Massey per Steyn LJ at 935f; Mann per Sir Thomas Bingham MR at 950a-d; Etridge at 721b and g). Mr Clarke was, in my view, right in his submission that the circumstances of UCB Home Loan Corp Ltd v Moore (in Etridge at 730g-731h) were for practical purposes on all fours with those of the present case.
Cooke v National Westminster Bank plc shows that there may be circumstances in which the creditor may not be entitled to draw the normal inference that the solicitor who bears to act for the granter of the security will have done so properly. I note, however, that in that case the Court of Appeal was concerned only with whether it was arguable on the plaintiff's behalf that the bank had done insufficient to avoid being fixed with constructive notice of the undue influence. The circumstances were unusual. The bank had expressly asked the solicitors to see that the plaintiff was given separate advice, and to confirm that that had been done. That request was ignored. There was a long delay in returning the security deed with the plaintiff's signature. In the meantime there was an indication that she was unwilling to sign. Further correspondence was also ignored by the solicitors. The court held that it was arguable that the bank should have taken steps to satisfy itself of the plaintiff's willingness to grant the security. I am prepared to accept that equally in Scots law there may be circumstances in which good faith demands that the creditor should not rely on the assumption that the solicitor will act, or has acted, properly. In the present case, although the pursuer's case on averment is that the defenders ought to have contacted her and advised her of the risks of the transaction and of the need for separate advice, the position ultimately adopted by Mr Gale in argument was that the potential for conflict of interest was so manifest that the defenders ought not to have relied on the solicitors' silence as indicating that they had felt able to give the pursuer proper advice, but should have sought confirmation from the solicitors that she had been properly advised. I accept Mr Gale's submission that in Scots law the question is always whether good faith requires the creditor to act in a particular way. I do not, however, accept that the mere facts that solicitors purported to act for the pursuer as well as her husband and did not declare that they were prevented by conflict of interest from acting for the pursuer were sufficient to disentitle the defenders from placing the normal degree of reliance on the solicitors to act properly, and made it necessary for them to seek express confirmation of the position in order to preserve their good faith.
For those reasons I am of opinion that the defenders were entitled to infer from the involvement of the solicitors on the pursuer's behalf that she would be properly advised as to the nature and consequences of the transaction; that consequently the defenders did not require in order to preserve their good faith themselves to undertake the task of advising the pursuer (or, as Mr Gale argued, to seek express confirmation that the solicitors had done so); and that the pursuer's averments therefore do not relevantly support the conclusion for reduction on the ground focused in her second and third pleas-in-law.
The Attestation Issue
The pursuer accepts that the standard security bears her signature. She avers, however, that although the testing clause narrates that it was executed by her on 1 August 1990 before two named witnesses, neither of those witnesses was in fact present when she signed it and she at no time acknowledged her signature to them. She therefore avers that the standard security, so far as granted by her, is invalid for want of attestation of her signature on it. That proposition is reflected in her first plea-in-law. In response, the defenders aver that the standard security is ex facie probative, that it was granted for onerous causes and delivered to them as a duly executed and attested deed, that in reliance on it they approved an extension of the pursuer's husband's credit and made further advances to him, and that the pursuer is accordingly barred from challenging the validity of the deed by relying on any latent deficiency in attestation. That point is reflected in the defenders' fourth plea-in-law.
In support of his argument that the pursuer is not entitled in a question with the defenders to rely on any latent deficiency in the attestation of her signature on the standard security, Mr Clarke relied on four cases. The first which he mentioned was Boyd v Shaw 1927 SC 414, in which a wife signed an ex facie absolute disposition of a house owned by her as security in favour of the prospective guarantor of the overdraft of a company of which her husband was managing director. The husband had had the disposition prepared, and produced it to his wife for her signature, explaining that its purpose was to reassure the company's creditors. The wife did not read it and did not know its nature but, having signed it, returned it to her husband. He subsequently got two of his staff to sign the disposition as "witnesses" to the wife's signature, and delivered it to the guarantor, who received it in good faith and gave the guarantee sought. The wife subsequently sought to reduce the disposition on the ground that its execution was defective because the purported witnesses had neither seen her sign not heard her acknowledge her signature, but was held to be barred from doing so. Lord President Clyde said (at 421):
"It will be observed that the defect in the execution of the disposition, of which the pursuer now wishes to take advantage, was an entirely latent defect so far as the defender was concerned. When a deed subject to a latent defect of this kind has been acted on, it is not always in the power of the granter to found on the defect for the purpose of reducing the deed. If the pursuer herself had used it for the purpose of 'reassuring' a creditor of the business in which she and her husband were interested, and if the creditor had acted on the faith of it, there is no doubt that the pursuer would have been barred from reducing it on the score of non-compliance with the solemnities of execution provided by the Act of 1681... As it was, she must be taken to have given her husband full authority to use it, and her signature to it, for that purpose. For, whatever may have been her exact state of knowledge with regard to the contents of the deed, she signed it with the intention that it should be used by her husband, as her deed, in negotiating with the creditors of the business and with the defender in particular. And it was so used. The complexion of the case depends much on the fact that the pursuer is not complaining that her conveyance of the house was in any way vitiated by fraud, fear, error or misrepresentation. She may have signed it blindly, and without appreciating its true purport; but she does not challenge its validity on that account, but solely on the ground of defective execution. No doubt her husband ought to have seen to it that the witnesses had an opportunity of hearing her acknowledging her signature; but the circumstance that he failed to do this, through ignorance or otherwise, does not appear to me to detract from the authority which the pursuer must be held to have given to him to use the deed, as her deed, in his dealings with the defender. I think, therefore, that the pursuer is as effectually barred from attacking the conveyance on the ground of defective execution as if, instead of authorising her husband to use it, she had used it herself."
Mr Clarke submitted that it made no difference that in this case the pursuer does allege that the standard security was procured by misrepresentation on Mr Forsyth's part, because the pursuer could not rely on that misrepresentation in a question with the defenders. Reference was also made to MacLeish v The British Linen Bank 1911 2 SLT 168, Young v Paton 1910 SC 63, and Baird's Trustee v Murray (1883) 11 R 153. In the last mentioned case, Lord President Inglis summed the point up in the following way (at 161):
"In short, where a man has given forth a deed of this kind as his proper act, he is not entitled to say, 'There is an informality - a technical and undiscoverable informality - in the deed, known only to myself, of which I am entitled to avail myself when I am called upon to pay or fulfil the obligations contained in the deed.'"
(See also per Lord Shand at 165.)
Mr Gale submitted that since the deed in question was a security over heritage, it required to be probative to be valid. Proper attestation was not merely evidential (Walker v Whitwell 1916 SC (HL) 75 per Lord Dunedin at 79). The pursuer had therefore made relevant averments in support of the conclusion for reduction on the ground of defective attestation. The defenders' case ought to be seen, not as a case of personal bar, but as one of waiver. If that was the nature of the case, it required averments that the pursuer, in knowledge of the defect in attestation, did something which connoted her abandonment of her right to challenge the validity of the deed on that ground. Averments of knowledge were essential to relevancy (Porteous's Trustees v Porteous 1991 SLT 129), but were absent.
In my view there is no substance in Mr Gale's submission that the defenders' case on this point is properly to be seen as a case of waiver. The defenders' fourth plea-in-law is unequivocally a plea of bar, based not on abandonment of any right by the pursuer, but on the defenders' reliance on the ex facie valid deed, and there is nothing in the way the matter is dealt with in averment which suggests that the point being taken is one of waiver. Moreover, the authorities on which Mr Clarke founded, in so far as they analyse the basis on which the granter of an ex facie valid deed is prevented from relying on a latent defect in attestation in a question with a grantee who has acted in good faith in reliance on the deed, do so in terms of personal bar. It is therefore, in my view, as a case of personal bar that the relevancy of the averments in support of the defenders' fourth plea-in-law must be examined.
It is not disputed that the standard security bears the genuine signature of the pursuer. Nor is it disputed that it is an ex facie valid deed. Nor was it disputed by Mr Gale in the course of the debate that it was delivered to the defenders for onerous causes, and that they relied upon it in making advances to Mr Forsyth. It seems to me, however, that it is necessary also to consider the role played by the pursuer in the release to the defenders of the ex facie valid onerous deed on which they relied. At one extreme, if there had been no case of misrepresentation averred against Mr Forsyth, and the pursuer had accepted that she signed the standard security knowing what it was, and authorised its delivery to the defenders understanding the purpose it was to serve and the reliance that the defenders would place on it, the case of bar against her reliance on the latent defect in attestation would have been clear. At the other extreme, if the pursuer had simply signed a blank sheet of paper which had then been used fraudulently by her husband to create an ex facie valid standard security which he, without her knowledge, delivered to the defenders, I very much doubt whether the case of personal bar would succeed, because there would be nothing that could be characterised as a representation by the pursuer. In my opinion, however, there is sufficient in the pursuer's own narrative of the circumstances to complete the case of personal bar against her. On her own account she understood the standard security to be " a formality relating to the business's bank overdraft". She may therefore in my view, like the pursuers in Boyd v Shaw and MacLeish v British Linen Bank, and notwithstanding her averments of misrepresentation on Mr Forsyth's part, be taken to have appreciated at least that the document signed by her (whatever its precise nature and effect) was going to be used in some way by her husband in his dealings with the defenders in relation to his overdraft, and to have acquiesced in such use being made of it. That is, in my opinion, when taken along with the other circumstances to which I have referred, sufficient to support the defenders' case of personal bar. Since the elements necessary to make the case of personal bar are to be found in the pursuer's own averments or in matter which she does not dispute, I can go beyond repelling the pursuer's plea to the relevancy of the averments of bar, and sustain the defenders' fourth plea-in-law.
Result
I shall therefore deal with the attestation issue by sustaining the defenders' fourth plea-in-law and consequently repelling the pursuer's first plea-in-law. That done, the remaining basis for the conclusion for reduction is to be found in the averments in support of the pursuer's second and third pleas-in-law. For the reasons which I have given, I have come to the conclusion that those averments are irrelevant. I shall therefore sustain the defenders' first plea-in-law and dismiss the action.