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Abbey National plc v Stringer

[2006] EWCA Civ 338, 150 Sol Jo LB 475, [2006] All ER (D) 91 (Apr)

Court: CA

Judgment Date: 07/04/2006

Cases considered by this case
Annotations: All CasesCourt: ALL COURTS

EQUITY - UNDUE INFLUENCE - PRESUMPTION OF UNDUE INFLUENCE - MOTHER AND SON - MOTHER BUYING PROPERTY - BUILDING SOCIETY REQUIRING SON'S NAME TO BE ADDED TO MORTGAGE - SON NEVER CONTRIBUTING TO MORTGAGE - MOTHER SIGNING DOCUMENTATION FOR SECOND MORTGAGE AT BEHEST OF SON - SON'S BUSINESS FAILING - BUILDING SOCIETY SEEKING POSSESSION OF PROPERTY - WHETHER SON HAVING BENEFICIAL INTEREST IN PROPERTY - WHETHER EXECUTION OF SECOND LEGAL CHARGE PROCURED BY UNDUE INFLUENCE OF PART OF SON

The second defendant, the mother, was born in Italy in 1932. She came to England and married. She was unable to read and although she could speak and understand English there were times when she needed an interpreter. She had a son, the first defendant, in 1963. Her husband died in 1967. In 1983, the mother, decided to buy a property (the property). With the help of her boss, she applied to the Halifax Building Society (HBS) for a mortgage. The HBS would not lend to the mother alone because of her age and it was suggested to her that her son should be added to the mortgage. There was no restriction in the entry at the Land Registry which would restrain dispositions of the property by the survivor of the joint proprietors. In 1989, the son, together with the third, fourth and fifth defendants, wished to acquire commercial premises. The First National Bank plc (FNB) addressed a facility offer letter offering a loan of £222,200 on terms specified in the letter, including the requirement by way of security of mortgages on properties including that of the mother. The mother did not sign the offer but did sign the legal charge dated 18 October 1989. The son's business failed. He was eventually made bankrupt. In 1998, FNB started possession proceedings in relation to the property. In October 2002, all rights in relation to the debts and the security for them were assigned to the present claimant. The claimant claimed to enforce the mortgage and in the alternative to have the benefit of an equitable mortgage over the son's beneficial interest in the property. The mother admitted that she had signed the legal charge but said that the contents of the document were not read over or explained to her. She asserted that she was induced to sign by her son's undue influence. She also denied that the son had any beneficial interest of his own. The judge was satisfied that the son's involvement in the purchase in 1983 was nominal only. He made no contribution to the price or to the mortgage instalments or to any outgoings. Further he held that there was never any intention that the son should share in the beneficial interest in the mother's house. The judge also found that the son had procured his mother's signature on the mortgage by actual undue influence, alternatively that undue influence could be presumed. The claimant appealed. The issues on appeal were (i) whether the first defendant had any beneficial interest in the property; and (ii) whether the judge was correct to find undue influence. The claimant submitted, inter alia, that it was not open to the mother to assert that the son had no beneficial interest.
Held - The appeal would be dismissed.
(1) The fact that a lender required the security of an additional repayment covenant did not give rise to any inference that the lender was interested in what the beneficial interests in the property were as between the joint owners and borrowers. There was no basis for the argument that any misrepresentation was involved in the application to HBS for a mortgage if the son's involvement as purchaser and borrower was not backed by a beneficial interest. Either way the building society had a valid security over the whole property for the whole of its advance and had recourse to two borrowers rather than only one on the personal covenant. In the instant case, it was possible and entirely legitimate to infer from the circumstances that there had to have been a discussion between mother and son, which might also have involved her boss, on the basis of which it was clear that the son's involvement was purely nominal and that he was neither expected to bear any financial burden nor intended to acquire any financial benefit. On that basis the declaration that the mother and son were to hold the property as joint tenants beneficially, which one could infer was included in the transfer, was inappropriate and could be dealt with by way of rectification. It followed that the judge had been right to determine that the son had no beneficial interest in the property.
(2) In the circumstances the judge was correct to regard the relationship between the mother and her son as one which was capable of giving rise to the presumption of undue influence. She was a person who was plainly vulnerable towards her son and open to exploitation on his part. As he knew, she was unable to read and her understanding of English was limited. Moreover, the transaction was utterly disadvantageous to her. The judge's finding that the mother's execution of the legal charge was procured by undue influence, actual or presumed, was fully justified by the evidence.