Habib Bank Ltd v Tufail [2006] EWCA Civ 374

Case No B2/2005/0944[2006] EWCA Civ 374
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE GUILDFORD COUNTY COURT
HIS HONOUR JUDGE RYLANCE
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Friday, 7 th April 2006
Before
LORD JUSTICE LONGMORELORD JUSTICE LLOYDMR JUSTICE BENNETT
Between
HABIB BANK LTDAppellantNASIRA TUFAILRespondent
(Transcript of the Handed Down Judgment ofSmith Bernal WordWave Limited190 Fleet Street, London EC4A 2AGTel No: 020 7421 4040 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Bernard Weatherill Q.C.(instructed by Messrs Schofield Sweeney) for AppellantRichard Mawrey Q.C.(instructed by West London Law Solicitors) for Respondent
Judgment
[1]This appeal is brought by the claimant, Habib Bank Ltd, against an order of His Honour Judge Rylance made in the Guildford County Court on 15 April 2005. By that order he dismissed the claim and granted relief to the defendant, Nasira Tufail, on her Part 20 claim.[2]The claimant brought the proceedings to enforce a mortgage made by the defendant in its favour dated 14 January 1997, which was given as security for the debts of a company, Tufco International Limited, owned and run by the defendant’s eldest son Basharat Tufail. The judge held that the mortgage had been procured by misrepresentation by Mr Tufail as to the amount secured by it. That is not challenged on appeal. The claimant admitted that, if this was so, it had constructive notice of the misrepresentation.[3]The judge also held that the defendant had affirmed the mortgage with knowledge of the relevant facts. However, he further held that it would not be inequitable, despite the acts of affirmation, to allow the defendant to assert her right to have the transaction to be set aside. That is the point challenged by the bank on appeal.[4]By a late respondent’s notice, the defendant challenges other aspects of the finding of affirmation, including the question of whether she had adequate knowledge for affirmation at the relevant time.[5]The acts relied on for affirmation or acquiescence occurred in 2002. In late February solicitors acting for the defendant wrote to the bank to inform it that she had retained them with a view to the sale of the property and to the mortgage being paid off out of the proceeds of sale. Correspondence and contact continued for some time through 2002. Eventually in February 2003 the bank decided that it had waited long enough. In March 2003 it sent a letter before action to the defendant and the proceedings were commenced in April 2003. The bank had first served a demand on Tufco in November 1999 and it is necessary to consider the history of the matter from that time onwards in order to put in context the judge’s findings.[6]Besides the mortgage executed by the defendant, which was over a property at 3 Orchard Close, Woking, Surrey, at the time let to tenants and providing an income to the defendant, the bank had other securities for the indebtedness of Tufco. It had a debenture over the company’s assets, it had a lien over an account holding a credit balance in Swedish currency, and it had a personal guarantee from Mr Tufail as director.[7]On 2 November 1999, the bank demanded payment from Tufco of its overdraft, which then stood at rather more than £177,000. The indebtedness was reduced by stages. In January 2000, some US$66,000 was credited to the account following the sale of some plant. At this stage the overdraft limit was reduced from £172,000 to £138,000. This was communicated to the company by letter dated 18 January 2000, in which the bank expressed concern at the company’s continuing exposure on the overdraft having regard to the estimated value of its security. The bank said that it regarded the account as being in a default situation requiring action on the bank’s behalf to cover its exposure. It noted that it had no current information on the financial position of the company nor a current stock list and could not evaluate the viability of the business. The company was asked to work within the overdraft limit of £138,000 or alternatively to make arrangements to refinance the overdraft. Later in January, the bank realised the security over the Swedish currency account, which resulted in the credit of some £23,000 to the account. The overdraft limit was reduced to £115,000. Following the credit of a further £14,800 to the account in late January the actual overdraft stood at some £110,000. Nevertheless, shortly afterwards the overdraft exceeded the limit of £115,000 and the bank asked for further action to regularise the position.[8]The documents available include a number of internal notes of the bank dating from 2000, though no comparable ones thereafter. According to a note dated 10 August 2000, Mr Tufail had said that he wished to reschedule the overdraft into a loan. He had explained that he was spending much of his time in the Middle East where he was in the process of starting a new business. He had been told of the need to provide funds to bring the balance to within the limit of £115,000. At the date of the note it stood at £121,000. The note concludes that in the absence of any contact or funds received since the last contact the bank has to consider the commencement of legal action. The last note is dated 28 December 2000. It records that, according to the latest discussions with Mr Tufail, “he is sending us an amount of £20,000 by mid January for partial adjustment and reduction of excess over the limit.” The conclusion was expressed as follows:
“If the customer does not pay the amount of £20,000 by mid January 2001 as mentioned we shall start recovery proceedings by taking legal action.”
On 9 January 2001 the bank wrote to the company reminding Mr Tufail of his agreement to send £20,000 by the first week in January for the credit of the account and asking for a meeting to discuss the way forward once that had been done. There is no indication that £20,000 was credited to the account as promised. At various times during the year an amount of £1,000 or so was credited to the account to keep down the accruing interest. On 24 July 2001 the company wrote to the bank referring to the suggestion of refinancing the overdraft with another lender. The company said that it had started this process and gave the name of the solicitors who would be handling the remortgage. It was said that they were confident that this could be done within ninety days. The name of Asma Tufail was given as a contact in the absence on vacation of Mr Tufail. She is a sister-in-law of Mr Tufail and a solicitor. The sequence of correspondence in the bundle appears to be incomplete. However, on 30 November 2001 Mr Tufail wrote again to the bank, informing it that “the house” was being surveyed by Abbey National with a view to a mortgage, which was said to be in place. The solicitor’s name was reiterated. The mortgage was said to be in the name of Mr Tufail’s wife, but the bank was told that it could contact Asma Tufail or Mr Tufail’s accountant, who was named, if any queries were raised. The letter asserted that the process should be complete within a few weeks and that two outstanding monthly service charges would be included in the transfer of funds on completion. Nothing transpired resulting from that. On 31 January 2002 the bank issued a further formal demand to the company to repay the amount outstanding on the overdraft, which by then stood at £125,500 odd. Failing payment of that sum by 7 February, the bank stated that it would commence legal proceedings.[9]By a letter dated 25 February 2002 Messrs O’Rourke Reid, solicitors, wrote to the bank as follows:
“Dear Sirs Re: 3 Orchard Close Woking Surrey Account No 3/101453.7. We act on behalf of Mrs Nasira Tufail who has instructed us upon the sale of the above property with a view to paying off the liability under your charge. Please let us have the title documents on your usual undertaking, so that we may prepare the sale contracts.”
That letter was signed by Caroline Start, who I take to be a partner in the firm. The letter was received by the bank on 27 February. The response came from the bank’s solicitors, Denison Till, on 4 March who sent the title deeds to O’Rourke Reid upon the usual undertaking. On the same day Denison Till wrote to Mr Tufail. The letter said this:
“Our clients have asked us to review the account and supporting documentation with a view to taking legal action for recovery of the monies. We are informed however that our clients have been contacted by solicitors who have advised that they are instructed to act on the sale of the property at 3 Orchard Close Woking Surrey. The property is to be sold with a view to discharging liability to our clients as secured by a charge in their favour over the property. Our clients have asked us to emphasise that as previous promises of payment have been made, if they are not kept advised of the sale and provided with all details in respect of the same or should the sale of the property not proceed then our clients will revert to us in respect of legal proceedings to be taken for recovery of the money due to them.”

Re: 3 Orchard Close Woking Surrey

[10]That letter was sent to Mr Tufail at three different addresses. Two of them were addresses for the company and the third was the address of the mortgaged property. The bank does not appear to have had a personal address for Mr Tufail. A letter sent to the mortgaged property would not be expected to get to Mr Tufail but it may be that one of the letters addressed to the company at its Southampton address reached him. Later in March O’Rourke Reid asked for a redemption figure from the bank as at 31 March 2002. That was supplied although we do not have the figure in the papers. On 28 March 2002 the bank’s solicitors telephoned O’Rourke Reid for an update on the sale. They were told that the purchasers were still waiting for their mortgage offer but that there were no other problems. Asma Tufail was the person who gave the information and said that she would call with dates for completion and would also inform the solicitors if there was going to be a delay. On 25 April 2002 there was a further telephone conversation with Asma Tufail who said that there was some delay in the mortgage but that she hoped that the approval of the mortgage would be forthcoming the next week. The bank’s solicitors again spoke to Asma Tufail on 17 May 2002 and they were told that all the paperwork from her side was completed and had been sent to the other solicitors. She was just waiting for a completion date to be fixed and said that it should be a done deal by next week. In June the bank was asked for and sent a redemption figure as at 28 June. That appears to be the last that the bank heard from the Tufail family or from O’Rourke Reid until January 2003.[11]However, on 12 September 2002 O’Rourke Reid wrote a letter which was addressed to Mr Hayward, who was the head of credit and risk for the bank at its London Office. For some reason this letter did not get to Mr Hayward until late January 2003 and it seems that it may have been sent, or at least a copy may have been sent, to the bank’s Head Office in Pakistan. The letter refers to some recent telephone conversations as to which there is no evidence of their content. O’Rourke Reid was said to be acting for Mrs Tufail in the sale of the property and it was said that the sale had been proposed to a member of the family, but that this sale was being delayed and had still to be resolved. Accordingly a new proposal was put forward which was, essentially, that the property be sold rapidly on the open market through local estate agents and the bank was invited to consider reducing the redemption figure in view of the amount already paid and various other considerations mentioned. These considerations included Mrs Tufail’s age and relative frailty and her dependence on the property for an income. The letter included this sentence:
“We understand the bank’s position, however, it may not be advisable for you to pursue a case through the courts against an elderly widow whose only income is generated through the property.”
[12]That letter reached Mr Hayward at the end of January or the beginning of February 2003. He spoke to a solicitor at O’Rourke Reid. By then Asma Tufail was no longer with that firm. He followed up the conversation by a letter of 14 February referring to the fact that the bank had been waiting for completion of the sale for over twelve months and had had a number of assurances that completion was due shortly. The bank was said to have exhausted its patience and unless a firm written commitment as to a sale to be completed within the next ten days could be given the bank was intending to instruct its solicitors to commence proceedings for possession. On 26 February, Denison Till followed this up by asking for the return of the title deeds and on 5 March O’Rourke Reid duly returned them.[13]On 27 March 2003, Denison Till sent a letter before action to Mrs Tufail at 3 Orchard Close warning her that unless proposals for payment of the total sum outstanding, which was by then just short of £140,000, were received within seven days possession proceedings would be commenced without further reference. Since she did not live at that address, it is not clear how soon the letter got to her. The proceedings were issued in the Guildford County Court on 8 April 2003, for a first hearing on 9 June. On 4 June solicitors acting for the defendant, the Wood Glaister Partnership, served a defence and a counterclaim. By the defence it was alleged that the execution of the mortgage had been procured by misrepresentation or undue influence or both on the part of Mr Tufail and that the charge ought to be set aside. By the counterclaim the defendant claimed a declaration that the mortgage be set aside and consequential orders. On 23 June the bank served its reply and defence to counterclaim. It did not admit the allegations of misrepresentation or undue influence. In the alternative it asserted that the defendant could not seek that the mortgage be set aside due to her conduct which amounted to affirmation, estoppel and / or acquiescence. The pleading on this point was set out in paragraph 3 of the reply and defence to counterclaim as follows: “The claimant refers the court to previous acknowledgements of the debt and the mortgage received from the defendant and her legal advisers. In particular the claimant relies on two offers by the defendant to sell the property in order to clear the acknowledged debt under the mortgage. Both offers were made by the legal advisers acting for the defendant. The undue influence had therefore ceased. Yet despite the communications lasting over a year no challenge was ever made to the mortgage. Such contact amounted to acquiescence. In fact both sales did not occur and the claimant has been left to seek possession of the property”.[14]At the trial in November 2004 evidence was given on behalf of the bank by Mr Hayward and by the defendant on her own behalf. We were told that Asma Tufail was present in court during the trial but she did not give evidence. Mr Hayward had made a witness statement in August 2003, after service of the defence and the reply and defence to counterclaim, but he said nothing in that of any relevance to the question of acquiescence. Accordingly his witness statement was supplemented by further evidence in chief. On behalf of the bank Mr Weatherill Q.C., who did not appear before the judge, took issue with a number of the judge’s findings of fact as not being properly based on the evidence given. I shall refer to some particular passages in the evidence later. Before I come to that it is appropriate to consider the legal basis of the debate before us.[15]The case was not put to the judge as one of contractual affirmation by a party having a right to rescind for misrepresentation and with the necessary knowledge of the facts and of her rights, but as one of conduct amounting to estoppel or acquiescence. Before us, as before the judge, reference was made to the decision of this court in Goldsworthy v. Brickell [1987] Ch. 378, in particular to passages in the judgments of Nourse LJ and Parker LJ. That was an undue influence case in which the judge had accepted that an agreement had been procured as a result of presumed undue influence but refused to set it aside on the basis of a successful defence of promissory estoppel, although not a defence of acquiescence. The plaintiff’s appeal succeeded.[16]At page 409 Nourse LJ said this:
“The characteristics of the right which are material for present purposes were these. First, it was an equitable right and as such liable to be defeated by equitable defences. Secondly, although it was a right to set aside a contractual transaction, it arose outside of and not under the contract. Thirdly, it was in substance no different from other equitable rights to set aside completed transactions, for example a beneficiary’s right to set aside a purchase by his trustee of the trust property. The equitable defences which would usually be regarded as being available to defeat such a right are laches, acquiescence and confirmation: see for example the judgment of Lindley L.J. in Allcard v. Skinner, 36 ChD. 145, 186-189. By any of these means the transaction could have been affirmed, in the first two cases impliedly and in the third expressly. These expressions are not uniformly used. Sometimes laches is taken to mean undue delay on the part of the plaintiff in prosecuting his claim and no more. Sometimes acquiescence is used to mean laches in that sense. And sometimes laches is used to mean acquiescence in its proper sense, which involves a standing by so as to induce the other party to believe that the wrong is assented to. In this sense it has been observed that acquiescence can bear a close resemblance to promissory estoppel: see for example Holder v. Holder [1968] Ch. 353, 403, per Sachs L.J.; compare also the approach of Bowen L.J. in Allcard v. Skinner, 36 ChD. 145, 192. This is not an occasion for a close analysis of the differences between acquiescence and promissory estoppel. I would merely observe, first, that promissory estoppel is usually concerned with rights under a contract whose validity is not in dispute and, secondly, that the conditions for its operation have almost certainly become more formalised than those on which acquiescence depends.”
[17]The judge then pointed out that, at first instance, the case had not been put on the basis of acquiescence but of promissory estoppel as such. He then went on to consider the ingredients of promissory estoppel and to point out that they had not been properly established. He made further reference to the question of acquiescence, which had not been relied on below on the basis that it required the plaintiff to have had knowledge of his right to rescind. At page 411 he said this:
“I am exceedingly doubtful whether the assumption made below that it was not open to the defendant to rely on the defence of acquiescence was correct. It seems to me that that plea was open to the defendant on paragraph 21 of his defence and I do not think that the contrary has been suggested. Moreover, it was held by this court in Holder v. Holder [1968] Ch. 353, following Wilberforce J. in In re Pauling’s Settlement Trusts [1962] 1 W.L.R. 86, that in the analogous case of a right to set aside a purchase by a trustee of the trust property there is no hard and fast rule that ignorance of the right is a bar to the defence of acquiescence, but that the whole of the circumstances must be looked as to see whether it is just that the complaining beneficiary should succeed.”
[18]Parker LJ said this on the question of acquiescence, at 416-7:
“With regard to the question of affirmation, were we not differing from the judge, I would add nothing to the judgment of Nourse L.J., with which I wholly agree. As it is I add only this: (1) Upon whatever precise basis it is sought to uphold a transaction which was originally obtained by undue influence it is an essential ingredient that it would be inequitable to allow the influenced party to set aside the transaction. I can see no possible inequity in allowing the plaintiff to set aside the transaction in the present case.”
[19]Sir John Megaw agreed with both judgments.[20]In this case the bank’s case can be and is put on the basis of acquiescence, not only on the basis of promissory estoppel as such. It is accepted that the bank cannot rely on the statements made on behalf of the defendant without more, as it could in the case of express affirmation, since for that purpose it is undoubtedly the law that knowledge of the right to rescind is essential. The bank must therefore show also that the circumstances are such that it would be inequitable for the defendant to rely on her right to have the transaction set aside for misrepresentation. In effect it must show that, in reliance on the defendant’s conduct, it acted to its detriment. Mr Weatherill submitted that reliance will be inferred readily.[21]There was some debate about the burden of proof. The judge said that the burden of proof on this issue lay on the bank. I agree with him. Plainly it was for the defendant to establish misrepresentation but if the bank then wishes to deny her right to rely on that on equitable grounds, it must prove the necessary facts.[22]On the defendant’s behalf, Mr Mawrey Q.C., who also did not appear below, took issue with the judge’s finding of affirmation, on the basis that it was not proved that the defendant knew enough about the circumstances in February 2002 for the statement on her behalf to amount to a representation that she would not seek to set aside the transaction. It seems to me that the judge was well entitled to come to that conclusion. He accepted that the solicitors did have instructions on behalf of the defendant to write in the terms in which they did. That letter must have been prompted by the final demand served on the bank in January. It must have been known that the indebtedness to the bank was well in excess of £100,000. On that basis the defendant knew the facts on which her misrepresentation defence could be based even if she did not know that she had a good defence. Mr Mawrey also questioned whether a further ingredient of acquiescence was made out, that the representation by the defendant in the letter of 25 February 2002 was intended to be relied on by the bank by not pursuing other remedies. The judge did not expressly consider that point. It seems to me that it is not necessarily a separate and distinct ingredient of an acquiescence case. But in any event it seems to me plain that the letter was intended to have that effect on the bank. That was the whole point of the letter being written. Whatever may have been the substance behind the proposal that the property be sold, it seems to me that it must have been intended to persuade the bank to hold off from enforcement steps such as it would otherwise have taken.[23]He also submitted that knowledge of the relevant facts was necessary not only on the part of the defendant but also on the part of the bank, if the ingredients of estoppel or acquiescence are to be established. That cannot be right. It is inconsistent with all the cases on proprietary estoppel.[24]Accordingly, although we permitted Mr Mawrey to serve his respondent’s notice late in order to take these additional points, in my judgment none of them is valid.[25]Therefore, the question is whether the judge was right to conclude that the bank did not alter its position to its disadvantage in reliance on the representations made on the defendant’s behalf. The letters dated 4 March from Denison Till show that the bank did hold off from taking enforcement steps in response to the letter dated 25 February 2002. The question is what would the bank have done, other than that which it in fact did, if it had not received the letter from O’Rourke Reid?[26]The bank did nothing to enforce the debenture, but it was accepted at trial that the debenture was worthless and that accordingly is irrelevant. The only alternative remedy would have been to pursue Mr Tufail on his guarantee.[27]Before the judge it was submitted that, in consequence of the letters from O’Rourke Reid, the bank stayed its hand in three respects. The first was by taking proceedings for possession later than it otherwise would have done in the hope of a voluntary sale. As a result more interest had accrued and was unpaid. The force of that seems to me to depend entirely on whether the bank had, or would have had, some other effective remedy on which, but for the delay, a greater recovery could have been achieved. That therefore takes one straight to the question of the guarantee.[28]The second reliance is said to have been holding off from enforcing its other securities. That as it seems to me is the real point. The third point is expressed in this way:
“Consequently it bought Basharat enough time to leave this country to one where he could not be pursued or judgments enforced.”
Mr Weatherill for the bank criticised the judge’s formulation of the point in that way at paragraph 86, but it seems to me that it is realistic. The point is that, because the bank did not enforce its guarantee, Mr Tufail was able to leave the country, as he did during 2002, and he now resides in Abu Dhabi, so that enforcement proceedings would be difficult if not impossible.[29]I have referred to indications in the evidence that Mr Tufail was spending time in the Middle East. The matter was touched on in the defendant’s evidence at trial. Towards the end of her cross examination, Miss Richardson for the bank asked her a number of questions about where Mr Tufail had lived. From 1998 until 2000 he had lived at an address in Chandler’s Ford in Hampshire but he then sold the house, according to her. He was said to have had two successive addresses in Woking where he lived in 2001. Then he was said to have had an address in Addlestone which, according to her evidence, may have been an address belonging to a friend of his. At the end of the cross-examination there was this question:
“And it was not until 2002 that he moved to Abu Dhabi on a full time basis, was it? Yes.”
That is the whole of the evidence as to when he emigrated. Yes.”[30]The judge decided that the bank had not acted to its detriment for two reasons. First, he held that it had been very inactive in pursuing its rights and remedies before February 2002 and questioned whether, even apart from the letter, it would have been more active thereafter. Secondly, he was not satisfied on the evidence that it had altered its position to its disadvantage. At paragraph 70, the judge referred to the first demand for payment in November 1999 and said this:
“It is clear that the bank was concerned about its position from then on. But apart from taking the Swedish Krone in January 2000 it took no steps towards recovery either from Tufco or under any of its securities.”
[31]At paragraph 79, referring to Mr Hayward’s evidence, who had joined the bank in February 1999, he said this:
“He said that the bank did nothing to enforce its other securities in 2001 and 2002. He believed that Basharat was overseas, which he was, from some time in 2002, and that there was very little that the bank could do to enforce the personal guarantee.”
[32]Then from paragraph 87, referring to the bank’s case for saying that it did alter its position to its disadvantage as summarised at paragraphs 27 and 28 above,, he said this:
“87. Whilst it is possible to construct a forensic case in support of those propositions, the bank’s difficulty is that there is no evidence to support any of them. Mr. Hayward, neither in his statements nor in the witness box, sought to say that the bank had not sought to enforce its securities because of the correspondence or that it had caused it to act in any way differently than it would have acted in the absence of such correspondence. 88. In fact it can be seen that, after its first demand in late 1999, the Bank did almost nothing, notwithstanding the lack of movement in the account which must have signalled either that Tufco was no longer trading or that it was doing so through another bank. When there was no further indication from the Defendant’s solicitors after September 2002 that any sale was proceeding, they were not asked what was happening. The matter went to sleep and proceedings were only started about nine months later. 89. It is, therefore, far from clear to me that the Bank would have acted with any greater alacrity in the absence of the correspondence. 90. As for the Bank’s other securities, the debenture was, as Mr Hayward said, worthless. There is no evidence when precisely Basharat left the United Kingdom for the Middle East. There is no evidence of any significant assets owned by him in 2002 against which the Bank could have proceeded. His home was apparently rented. The Bank had not sought to proceed under its guarantee at any earlier time. There is, therefore, no evidence that the Bank had any other security worth pursuing and, if it had, it is hard to see why the correspondence in 2002 should have influenced inaction when no action had been taken previously. 91. No other matter is urged upon me in support of the inequitable argument. The question is, therefore, whether the Defendant should be prevented from setting aside a transaction into which she entered as a result of misrepresentations of which the Bank had constructive notice by her affirmation of the transaction which did not cause the Bank to act in any way differently, let alone differently to its detriment. 92. I see nothing inequitable in permitting the Defendant to pursue the equitable rights to which she would otherwise have been entitled.”
[33]Mr Weatherill criticised the judge’s findings as being not soundly based on the evidence. But it seems to me that these observations on the judge’s part are fairly based on the evidence that was before him. We have a transcript of Mr Hayward’s evidence and Mr Weatherill took us through several passages in it. Three passages are of particular importance, one in chief, one in cross-examination and the third in re-examination, which I will set out: In chief: Q. “In late 2001/2002 what other steps, if any, did the Bank take to enforce any of its other securities?” A. “At that stage none because this correspondence clearly indicated that there was every intention that the overdraft would have been repaid from the sale of the property and, therefore, we took no other action under any other form of collateral we held.” In cross-examination: Q. “In other words, so far as Basharat would have been concerned at the time, if the indebtedness was in fact £100.000, rather than £48,000, the bank could enforce its charge against the security for £100,000 and simply not enforce either a guarantee or a lien.” A. “It would not have enforced the guarantees at that stage, but it would have dealt with the sums under lien first.” In re-examination: Q. “Why did you not call in the debenture from the Company?” A. “On the basis of the financial information available to the Bank, the debenture was worthless in financial terms and it would not have forwarded or assisted in our case.” Q. “You were asked in cross-examination - it was put to you that after the letter of demand on the 31 January 2002 you could have taken steps to enforce the personal guarantee and you did not. Can you explain why you did not?” A. “Because invariably the Bank would realise security over tangible assets primarily, whereas it would have regarded security by way of Directors’ guarantees as secondary security and contingent security. In addition, we had already been informed that Tufco were intending to repay the Bank from the sale of this property, or by re-finance.” In chief: In cross-examination: In re-examination:

Q. “Why did you not call in the debenture from the Company?”

[34]In the light of that evidence, it seems to me that it is not difficult to come to a realistic conclusion as to what would have happened if O’Rourke Reid had not written their letter of 25 February 2002 to the bank in the terms which they did and followed it up with the various communications that I have described. As Mr Weatherill pointed out, the letters of 4 March 2002 show that Denison Till had already been instructed to advise the bank with regard to enforcement. In the light of Mr Hayward’s answers in evidence, it seems to me plain that the bank would have been advised to take proceedings first in respect of the mortgage and that it would have accepted that advice. Accordingly, had O’Rourke Reid not written the letter of 25 February, it seems likely that at some point in March, Denison Till would have written a letter before action to Mrs Tufail in equivalent terms to that which they eventually wrote to her on 27 March 2003. The likelihood is that that would have been followed by the events that occurred in 2003, namely no substantive answer to the letter before action, the issue of proceedings for possession and in due course the pleading of a defence and counterclaim in which misrepresentation and undue influence were raised by way of defence. That would therefore have made it plain to the bank by, say, June 2002 that there would be a contentious issue as to whether the mortgage was enforceable. No doubt the bank would not have accepted that this was a valid defence and would have fought the case. But it may be that the raising of this defence would have led the bank to review the question of whether it should pursue its other remedies as well. But for that defence it seems clear from Mr Hayward’s evidence that the bank would not have taken steps under the guarantee until it had done what it could to enforce the mortgage.[35]Mr Weatherill submitted that, because Mrs Tufail had instructed solicitors in February 2002 to write on her behalf as they did, the court should infer that those solicitors had already taken full instructions from her in relation to the transaction and had advised her as to her right to have the transaction set aside for undue influence or misrepresentation. Accordingly, he submitted, if, instead of their taking the initiative by writing such a letter, they had been instructed on receipt of a letter before action, the court should infer that a letter in equivalent terms would have been written by way of response. That seems to me a difficult proposition for a number of reasons. Although I agree that by the end of February 2002 the defendant should be taken to have had enough knowledge of the circumstances to be able to assert an equitable defence to the claim if she had had to, it does not seem to me that the writing of the letter that was in fact written should be taken to have been the result of a full process of taking instructions and giving advice on the part of the solicitors. Such a process would however have followed the receipt of a letter before action. For that reason, as well as because of the different nature of the exercise, it seems to me that Mr Weatherill’s submission cannot be accepted. Accordingly, it seems to me that the likely course of events, had the letter of the 25 February 2002 not been sent to the bank, is such as I have described, leading to the bank considering the enforcement of its rights under the guarantee probably no earlier than June 2002.[36]If that is so, the question then is whether, if the bank had considered enforcing its rights under the guarantee in or after June 2002, it would have been in a better position to do so than it was in and after 2003. On this point the bank’s difficulty was that it did not have an address for Mr Tufail. That is plain from the three letters of 4 March 2002 addressed to him. Already for some years he had being spending a lot of time in the Middle East. At some point in 2002 he left England permanently. We do not have a date within 2002 for that. One reason for that is that Miss Richardson, when she asked the defendant the relevant question, did not go on to ask her at what stage during the year her son had moved. We have no idea what the answer would have been or whether she could have given an answer. But it is consistent with the evidence that he had already left by June 2002. If so, by that time the bank was already in the position which it found itself later on of being, in practical terms, unable to pursue him on the guarantee because it did not know where he was and he was not in fact within the jurisdiction. Accordingly, even assuming, as I would, that the bank would have had an unanswerable claim on the guarantee against Mr Tufail, and would, if it had been able to serve proceedings, have got summary judgment, and without going into the separate question as to whether there would have been any assets against which, in practice, it could enforce, it seems to me that the judge was right to reject the bank’s reliance on acquiescence because it could not show that it had altered its position to its disadvantage by showing that, but for the letter and later contact with O’Rourke Reid, it would in fact have been able to do anything effective by way of enforcement of the guarantee liability at a time earlier than it considered doing so in fact.[37]The judge was also clearly influenced by the lack of alacrity in the bank’s conduct up to early 2002. It seems to me that there is some force in Mr Weatherill’s submission that, following the formal demand at the end of January 2002 and the fact that Denison Till had been instructed to advise with regard to enforcement, it is possible to infer that the bank would have been somewhat more active in taking steps to protect its position. However, it seems to me plain that the bank’s first focus would have been on the mortgaged property, that it would not have considered doing anything about the guarantee before the moment at which it discovered that there might be a problem about enforcing the mortgage, at the earliest, and that by then, on the evidence, it may well have already left it too late to pursue the guarantor.[38]For those reasons, quite apart from the point mentioned by the judge of the lack of any evidence of any assets against which the bank could have proceeded owned by Mr Tufail, it seems to me that the judge was right to hold that the bank had not shown that it was led to act differently and to its detriment by the letter of 25 February 2002 and the subsequent communications.[39]For those reasons I would dismiss this appeal.[40]I agree[41]I also agree.