“108. Ms Halker is right to say on behalf of the Claimant that the property swap in itself did not call for an explanation. Indeed, Ms Waller-Edwards’ own evidence on that point, concurs. However, what does call for an explanation is the retention of Mr Higgins' charge. In reality, Ms Waller-Edwards was taking ownership of a property with a mortgage. That is a fairly startling proposition in itself and cries out for an explanation. From then on, there are a series of remortgage transactions involving Mr Higgins or MSP. If these were simply extending the existing borrowing in terms of duration, that would be one thing, but what was actually happening was successive increases in the borrowing. None of the proceeds of which went to Ms Waller-Edwards. In effect, Mr Bishop was extracting more and more cash from Ms Waller-Edwards' property and that again, in my judgment, plainly calls for an explanation.”
“110. Ms Halker argues that this has a very straightforward explanation, being primarily the need to redeem the MSP mortgage [the MSP Charge]. If that was the only purpose of the Claimant's charge, then I would undoubtedly agree. However, that was only part of the story. At least in equal measure, this was another money-raising venture for Mr Bishop. It was a vehicle for him to be able to pay off his former wife. If raising a substantial sum on Ms Waller-Edwards' property for the benefit of Mr Bishop's ex-wife does not call for an explanation, I am not sure what would.”
“111. Accordingly, in my judgment, on the available evidence, both limbs of presumed undue influence are well met. This means that the evidential burden of showing a satisfactory explanation for what transpired falls to the Claimant. 112. The Claimant has no evidence of its own in this respect and cannot displace that burden. I am therefore satisfied that Ms Waller-Edwards' case of undue influence as between herself and Mr Bishop is made out.”
“47. He accepted that the Bank well knew that£20,000 was needed for redemption of car finance and£19,000 to Mr Bishop's credit card. Indeed, that was a condition of the mortgage offer. He said it was not uncommon for a joint application to be made to consolidate debts and for debts to be in one party's name, or greater debt to be attributable to one party than the other. In this case, Mr Bishop was the major wage earner, so it was not unusual that debts were in his name.”
“48. As far as he was concerned, or as far as the Bank was concerned, the parties were in a relationship with joint expenditure. He expected that anything untoward to the contrary would have been identified by the brokers who put the package together before it came to the Bank. 49. He said based on the documents that he had seen he did not see this as a transaction caused by undue influence. He said the only debts that the Bank knew about were the car finance and the credit card loan 1 together with the existing borrowing that was secured. He accepted the Bank had not checked that the balance of the mortgage advance was in fact used to buy another property and, as I say, he did not know that those proceeds in fact had gone to Mrs Bishop. It was not what the Bank was told the money was being used for. He had expected that the credit debts would have been cleared by the solicitors as part of the mortgage condition. 50. The Bank did not know about and had not seen the Declaration of Trust at the time, giving Ms Waller-Edwards 99% of the beneficial interest and did not know that the MSP loan, by the time of completion of the mortgage advance, was two months in arrears. He said if they had known there were arrears, then they would not have “done the loan". 51. When he was asked about the likelihood of a further purchase, he said the balance of the mortgage proceeds in this case could well have been used as a deposit and possibly the Defendants, as far as the Bank were concerned, were using another mortgage on the property to be bought. He accepted he had not seen any evidence of that. He said the current practice in similar circumstances was to require proof of any new mortgage, but regulations have changed since 2013, and that was not the position then. I think the regulations changed in 2016 or 2017. 52. He was taken finally to page 99, the mortgage application, or taken back to that in re-examination. He was referred to box 42 which set out what the Bank was being told the re mortgage was about. It also referred to an existing mortgage in the sum of£200,000 . The credit cards were put at£16,000 and the bank loan at£24,000 , relating to the car. That is how the Bank understood the debt consolidation figure of£240,000 arose, as opposed to being anything to do with a divorce settlement.”
“119. The instant case that I am dealing with is not on the face of it what would be called a surety-type case. 120. Indeed, it is only a surety, or only has an element of a surety case at all, if one takes into account the intended payment of Mr Bishop's credit debts. Those credit debts were in respect of the car finance and the credit card, and they totalled£39,000 . That was in contrast to the total lending of£385,000 , of which£233,000 was being used to discharge the existing MSP mortgage, which was a joint liability. 121. Therefore, the credit debts of Mr Bishop represented not much more than 10% of the borrowing. To my mind, whilst to a limited extent the instant situation could be described as hybrid, overall, the pattern of borrowing is much more consonant with what was being considered in Pitt than the straightforward surety case in Etridge.”
“137. The question in the end is whether the fact that the re-mortgage was, to a minor extent, in part, to repay Mr Bishop's credit debts should have put the Bank on inquiry. This is a matter of fact and degree but in the end, I do not accept that the fact that just over 10% of the total borrowing was to go to Mr Bishop's credit debts, tip this case into one akin to a surety case. 138. As far as the Bank knew, in the main this joint remortgage was to pay off an existing joint mortgage and to free up funds that go towards another purchase. This was very far from an Etridge surety situation. The Bank knew nothing of the history going back to the house swap and had no idea that the excess funds were destined to go to Mr Bishop's ex-wife, or indeed any idea of the Declaration of Trust that existed as to beneficial interests in Spectrum. Therefore, for all those reasons, I am driven to conclude that the Bank was not put on inquiry.”
“(1) A purchaser shall not be prejudicially affected by notice of— (i) any instrument or matter capable of registration under the provisions of the Land Charges Act, 1925, or any enactment which it replaces, which is void or not enforceable as against him under that Act or enactment, by reason of the non-registration thereof; (ii) any other instrument or matter or any fact or thing unless— (a) it is within his own knowledge, or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him; or (b) in the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of his counsel, as such, or of his solicitor or other agent, as such, or would have come to the knowledge of his solicitor or other agent, as such, if such inquiries and inspections had been made as ought reasonably to have been made by the solicitor or other agent.” (i) any instrument or matter capable of registration under the provisions of the Land Charges Act, 1925, or any enactment which it replaces, which is void or not enforceable as against him under that Act or enactment, by reason of the non-registration thereof; (ii) any other instrument or matter or any fact or thing unless— (a) it is within his own knowledge, or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him; or (b) in the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of his counsel, as such, or of his solicitor or other agent, as such, or would have come to the knowledge of his solicitor or other agent, as such, if such inquiries and inspections had been made as ought reasonably to have been made by the solicitor or other agent.”
“142. Despite originally accepting in his skeleton that (2)(b) did not avail Ms Waller-Edwards because the solicitor, Mr Clake, was acting both for the Bank and her simultaneously, Mr Beaumont has revised that view in closing, of course, as he is entitled to do and submits that because the Claimant's standard instructions to the solicitor required Mr Clake to report any information that may affect the Claimant's ability to lend, and that is at page 250 of the bundle, and because the solicitor came to know latterly that the excess funds were destined to go to Mrs Bishop, then the Bank was fixed with constructive knowledge of that, in effect a form of imputed knowledge.”
“144. Here it is plain that the solicitor knew of the divorce proceedings and the financial settlement between Mr and Mrs Bishop, by reason of the solicitor's retainer with Mr Bishop and accordingly, that knowledge, it seems to me, is not to be imputed to the Bank. The solicitor's instructions to dispense the excess proceeds to Mrs Bishop, again, it seems to me comes from their retainer with Mr Bishop and/or Ms Waller-Edwards. Again, that is not to be imputed to the Bank. I accept that by the time of the final instructions, the Bank's retainer was in place but the information as to the divorce proceedings and the financial settlement, was plainly was acquired long before the solicitors were instructed by the bank.”
“146. In this case, plainly the information that is relevant for this purpose all came to be acquired, as I say, by reason of the retainer between the solicitor and Mr Bishop and/or Ms Waller-Edwards, so section 199 in either respect does not therefore avail Ms Waller-Edwards' case.”
“150. Therefore, in the end, whilst the Court clearly has great sympathy for Ms Waller-Edwards' situation, and having been through it in great detail, and accepts her case as against Mr Bishop, the Court has no option but to accede to the Claimant's case for a Possession Order and to enter Judgment for the sum outstanding under the mortgage. That leaves a situation probably still to be resolved as between Mr Bishop and Ms Waller-Edwards as to the eventual net proceeds, but that is not for these Proceedings.”
“In my judgment, if the doctrine of notice is properly applied, there is no need for the introduction of a special equity in these types of cases. A wife who has been induced to stand as a surety for her husband's debts by his undue influence, misrepresentation or some other legal wrong has an equity as against him to set aside that transaction. Under the ordinary principles of equity, her right to set aside that transaction will be enforceable against third parties (e.g. against a creditor) if either the husband was acting as the third party's agent or the third party had actual or constructive notice of the facts giving rise to her equity. Although there may be cases where, without artificiality, it can properly be held that the husband was acting as the agent of the creditor in procuring the wife to stand as surety, such cases will be of very rare occurrence. The key to the problem is to identify the circumstances in which the creditor will be taken to have had notice of the wife's equity to set aside the transaction.”
“The doctrine of notice lies at the heart of equity. Given that there are two innocent parties, each enjoying rights, the earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice). In particular, if the party asserting that he takes free of the earlier rights of another knows of certain facts which put him on inquiry as to the possible existence of the rights of that other and he fails to make such inquiry or take such other steps as are reasonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it. Therefore where a wife has agreed to stand surety for her husband's debts as a result of undue influence or misrepresentation, the creditor will take subject to the wife's equity to set aside the transaction if the circumstances are such as to put the creditor on inquiry as to the circumstances in which she agreed to stand surety.”
“Therefore in my judgment a creditor is put on inquiry when a wife offers to stand surety for her husband's debts by the combination of two factors: (a) the transaction is on its face not to the financial advantage of the wife; and (b) there is a substantial risk in transactions of that kind that, in procuring the wife to act as surety, the husband has committed a legal or equitable wrong that entitles the wife to set aside the transaction. It follow that unless the creditor who is put on inquiry takes reasonable steps to satisfy himself that the wife's agreement to stand surety has been properly obtained, the creditor will have constructive notice of the wife's rights.”
“I have hitherto dealt only with the position where a wife stands surety for her husband's debts. But in my judgment the same principles are applicable to all other cases where there is an emotional relationship between cohabitees. The "tenderness" shown by the law to married women is not based on the marriage ceremony but reflects the underlying risk of one cohabitee exploiting the emotional involvement and trust of the other. Now that unmarried cohabitation, whether heterosexual or homosexual, is widespread in our society, the law should recognise this. Legal wives are not the only group which are now exposed to the emotional pressure of cohabitation. Therefore if, but only if, the creditor is aware that the surety is cohabiting with the principal debtor, in my judgment the same principles should apply to them as apply to husband and wife.”
“By reason of the O'Brien case, I must accept that in a case where a wife provides security for a husband's debts, the creditor, unless it takes steps to ensure that the wife understands the transaction and that her consent was true and informed, may be affected by any undue influence exerted by the husband to procure the wife's actions, even if the creditor has no knowledge of the undue influence; but that is explicable on the basis that such a transaction, favouring a husband at the expense of his wife, on its face puts the creditor on notice of the possibility of undue influence by the husband. By parity of reasoning, if there is a secured loan to a husband and wife but the creditor is aware that the purposes of the loan are to pay the husband's debts or otherwise for his (as distinct from their joint) purposes, the creditor, without taking precautionary steps, may be affected by the husband's misconduct.”
“What, then, was known to the plaintiff that could put it on inquiry so as to fix it with constructive notice? So far as the plaintiff was aware, the transaction consisted of a joint loan to husband and wife to finance the discharge of an existing mortgage on 26 Alexander Avenue, and as to the balance to be applied in buying a holiday home. The loan was advanced to both husband and wife jointly. There was nothing to indicate to the plaintiff that this was anything other than a normal advance to husband and wife for their joint benefit. Mr. Price, for Mrs. Pitt, argued that the invalidating tendency which reflects the risk of there being Class 2(B) undue influence was, in itself, sufficient to put the plaintiff on inquiry. I reject this submission without hesitation. It accords neither with justice nor with practical common sense. If third parties were to be fixed with constructive notice of undue influence in relation to every transaction between husband and wife, such transactions would become almost impossible. On every purchase of a home in the joint names, the building society or bank financing the purchase would have to insist on meeting the wife separately from her husband, advise her as to the nature of the transaction and recommend her to take legal advice separate from that of her husband. If that were not done, the financial institution would have to run the risk of a subsequent attempt by the wife to avoid her liabilities under the mortgage on the grounds of undue influence or misrepresentation. To establish the law in that sense would not benefit the average married couple and would discourage financial institutions from making the advance.”
“What distinguishes the case of the joint advance from the surety case is that, in the latter, there is not only the possibility of undue influence having been exercised but also the increased risk of it having in fact been exercised because, at least on its face, the guarantee by a wife of her husband's debts is not for her financial benefit. It is the combination of these two factors that puts the creditor on inquiry.”
“44 In O'Brien the House considered the circumstances in which a bank, or other creditor, is "put on inquiry". Strictly this is a misnomer. As already noted, a bank is not required to make inquiries. But it will be convenient to use the terminology which has now become accepted in this context. The House set a low level for the threshold which must be crossed before a bank is put on inquiry. For practical reasons the level is set much lower than is required to satisfy a court that, failing contrary evidence, the court may infer that the transaction was procured by undue influence. Lord Browne-Wilkinson said[1994] 1 AC 180 ,196: "Therefore in my judgment a creditor in put on inquiry when a wife offers to stand surety for her husband's debts by the combination of two factors: (a) the transaction is on its face not to the financial advantage of the wife; and (b) there is a substantial risk in transactions of that kind that, in procuring the wife to act as surety, the husband has committed a legal or equitable wrong that entitles the wife to set aside the transaction." In my view, this passage, read in context, is to be taken to mean, quite simply, that a bank is put on inquiry whenever a wife offers to stand surety for her husband's debts.” "Therefore in my judgment a creditor in put on inquiry when a wife offers to stand surety for her husband's debts by the combination of two factors: (a) the transaction is on its face not to the financial advantage of the wife; and (b) there is a substantial risk in transactions of that kind that, in procuring the wife to act as surety, the husband has committed a legal or equitable wrong that entitles the wife to set aside the transaction." In my view, this passage, read in context, is to be taken to mean, quite simply, that a bank is put on inquiry whenever a wife offers to stand surety for her husband's debts.”
“45 The Court of Appeal, comprising Stuart-Smith, Millett and Morritt LJJ, interpreted this passage more restrictively. The threshold, the court said, is somewhat higher. Where condition (a) is satisfied, the bank is put on inquiry if, but only if, the bank is aware that the parties are cohabiting or that the particular surety places implicit trust and confidence in the principal debtor in relation to her financial affairs: see Royal Bank of Scotland pic v Etridge (No 2)[1998] 4 All ER 705 ,719. 46 I respectfully disagree. I do not read (a) and (b) as factual conditions which must be proved in each case before a bank is put on inquiry. I do not understand Lord Browne-Wilkinson to have been saying that, in husband and wife cases, whether the bank is put on inquiry depends on its state of knowledge of the parties' marriage, or of the degree of trust and confidence the particular wife places in her husband in relation to her financial affairs. That would leave banks in a state of considerable uncertainty in a situation where it is important they should know clearly where they stand. The test should be simple and clear and easy to apply in a wide range of circumstances. I read (a) and (b) as Lord Browne-Wilkinson's broad explanation of the reason why a creditor is put on inquiry when a wife offers to stand surety for her husband's debts. These are the two factors which, taken together, constitute the underlying rationale. 47 The position is likewise if the husband stands surety for his wife's debts. Similarly, in the case of unmarried couples, whether heterosexual or homosexual, where the bank is aware of the relationship: see Lord Browne-Wilkinson in O'Brien's case, at p 198. Cohabitation is not essential. The Court of Appeal rightly so decided in Massey v Midland Bank pic[1995] 1 All ER 929 : see Steyn LJ, at p 933.”
“48 As to the type of transactions where a bank is put on inquiry, the case where a wife becomes surety for her husband's debts is, in this context, a straightforward case. The bank is put on inquiry. On the other side of the line is the case where money is being advanced, or has been advanced, to husband and wife jointly. In such a case the bank is not put on inquiry, unless the bank is aware the loan is being made for the husband's purposes, as distinct from their joint purposes. That was decided in CIBC Mortgages v Pitt[1994] 1 AC 200 . 49 Less clear cut is the case where the wife becomes surety for the debts of a company whose shares are held by her and her husband. Her shareholding may be nominal, or she may have a minority shareholding or an equal shareholding with her husband. In my view the bank is put on inquiry in such cases, even when the wife is a director or secretary of the company. Such cases cannot be equated with joint loans. The shareholding interests, and the identity of the directors, are not a reliable guide to the identity of the persons who actually have the conduct of the company's business.”
“30. The appeal is put in this way: the learned judge erred in law in failing to find that the Respondent was "on inquiry", because in Etridge at [86], the general rule was propounded that the creditor is put "on inquiry'' where the relationship between the surety and debtor is non-commercial.”
“87 These considerations point forcibly to the conclusion that there is no rational cut-off point, with certain types of relationship being susceptible to the O'Brien principle and others not. Further, if a bank is not to be required to evaluate the extent to which its customer has influence over a proposed guarantor, the only practical way forward is to regard banks as "put on inquiry" in every case where the relationship between the surety and the debtor is non-commercial. The creditor must always take reasonable steps to bring home to the individual guarantor the risks he is running by standing as surety. As a measure of protection, this is valuable. But, in all conscience, it is a modest burden for banks and other lenders. It is no more than is reasonably to be expected of a creditor who is taking a guarantee from an individual. the bank or other creditor does not take these steps, it is deemed to have notice of any claim the guarantor may have that the transaction was procured by undue influence or misrepresentation on the part of the debtor.”
“Here, the relationship between debtor and guarantor was, on its face, non-commercial. The bank, as the judge held, was put on inquiry. The fact, that, as it happened, the undue influence which the judge found to have existed came not from Mr Owusu-Ansah (in effect the debtor) but from Mr Achampong (as one of the co-guarantors) did not the less put the bank on inquiry. Why Mr Achampong should have pressured his wife into executing the legal charge, as the judge held had happened and against which finding there is no appeal, is and must remain a matter of speculation. It may be no more than a coincidence that, shortly after the transaction was completed, Mr Achampong left this country for Ghana as did Mr Owusu-Ansah.”
“119. The instant case that I am dealing with is not on the face of it what would be called a surety-type case. 120. Indeed, it is only a surety, or only has an element of a surety case at all, if one takes into account the intended payment of Mr Bishop's credit debts. Those credit debts were in respect of the car finance and the credit card, and they totalled£39,000 . That was in contrast to the total lending of£385,000 , of which£233,000 was being used to discharge the existing MSP mortgage, which was a joint liability. 121. Therefore, the credit debts of Mr Bishop represented not much more than 10% of the borrowing. To my mind, whilst to a limited extent the instant situation could be described as hybrid, overall, the pattern of borrowing is much more consonant with what was being considered in Pitt than the straightforward surety case in Etridge.”
“137. The question in the end is whether the fact that the re-mortgage was, to a minor extent, in part, to repay Mr Bishop's credit debts should have put the Bank on inquiry. This is a matter of fact and degree but in the end, I do not accept that the fact that just over 10% of the total borrowing was to go to Mr Bishop's credit debts, tip this case into one akin to a surety case. 138. As far as the Bank knew, in the main this joint remortgage was to pay off an existing joint mortgage and to free up funds that go towards another purchase. This was very far from an Etridge surety situation. The Bank knew nothing of the history going back to the house swap and had no idea that the excess funds were destined to go to Mr Bishop's ex-wife, or indeed any idea of the Declaration of Trust that existed as to beneficial interests in Spectrum. Therefore, for all those reasons, I am driven to conclude that the Bank was not put on inquiry.”
“49 Less clear cut is the case where the wife becomes surety for the debts of a company whose shares are held by her and her husband. Her shareholding may be nominal, or she may have a minority shareholding or an equal shareholding with her husband. In my view the bank is put on inquiry in such cases, even when the wife is a director or secretary of the company. Such cases cannot be equated with joint loans. The shareholding interests, and the identity of the directors, are not a reliable guide to the identity of the persons who actually have the conduct of the company's business.”
“a creditor is put on inquiry when a wife offers to stand surety for her husband's debts by the combination of two factors: (a) the transaction is on its face not to the financial advantage of the wife; and (b) there is a substantial risk in transactions of that kind that, in procuring the wife to act as surety, the husband has committed a legal or equitable wrong that entitles the wife to set aside the transaction.”
“. . . in consideration of the bank at the request of the mortgagor [that is to say, Mr and Mrs Greene] making or continuing advances or otherwise giving credit or affording banking facilities for as long as the bank may think fit to [Mr] Greene (hereinafter called “the principal”) and upon the terms that the bank shall be secured as hereinafter appearing the mortgagor'”
“I accept that I have to look at the transaction as a whole. I accept, further, that Mr Greene's primary objective, at the particular time of the 1978 and 1979 mortgages, was to procure respectively loans to purchase first the leasehold and then the freehold interests. They were not, however, his exclusive interest; as I have pointed out, there were other debts. Moreover, the actual charge that was taken was to secure not merely advances which had been made for such purposes, but also for all moneys and all future debts. And the loan, if loan it was - because in fact the money for the purchase of the freehold had been advanced before the execution of the 1979 mortgage - was only upon terms of a guarantee, both of other existing debts of the husband, apparently lent to him independently of any sums borrowed to purchase either the leasehold or the freehold of the property and, secondly, upon terms of a potential risk in regard to future debts.”
“I think that a mortgage granted on terms which included such a surety obligation, at any rate as a real element in the terms, was indeed, unless there is evidence to the contrary, to the manifest disadvantage of the wife - in this case Mrs Greene. The obligation is therefore to be treated, in this case where Mrs Greene placed reliance upon Mr Greene, as having been procured by Mr Greene's undue influence and the bank are therefore unable to enforce it because they are fixed with constructive notice of Mrs Greene's right to set it aside, unless they took reasonable steps to satisfy themselves that she entered into the transaction freely and in knowledge of the true facts. That, at least, is the general principle; its specific applicability to the circumstances of this case, I will of course have to consider more fully. I should just add this, in having set out that conclusion. Miss McAllister urged upon me that I should not confuse the issue as to whether a transaction is, indeed, manifestly disadvantageous, with the question as to whether or not the bank had constructive notice of the presumed undue influence. But it is the nature of the transaction, as being the acceptance of a surety obligation, which, without proof to the contrary, makes it, in my judgment, proper to treat the transaction as manifestly disadvantageous; and likewise, it is that same feature that fixes the bank with constructive notice of the possibility of undue influence.”
“136. That brings me back to the credit debts because in the end that is the only arguable red flag. Mr Richardson was pressed about this. His evidence, as I have outlined, was that it was not uncommon in a joint application for there to be an element of credit debts in one party's name or the other, usually the major breadwinner; here of course, Mr Bishop. Having said that, I do accept that his reference to anything untoward being identified by the brokers was unrealistic.”
“138. As far as the Bank knew, in the main this joint remortgage was to pay off an existing joint mortgage and to free up funds that go towards another purchase. This was very far from an Etridge surety situation. The Bank knew nothing of the history going back to the house swap and had no idea that the excess funds were destined to go to Mr Bishop's ex-wife, or indeed any idea of the Declaration of Trust that existed as to beneficial interests in Spectrum. Therefore, for all those reasons, I am driven to conclude that the Bank was not put on inquiry.”
“At an early stage during the trial, and as the result of late disclosure, First Plus very properly acknowledged that, having been aware that the re-mortgage was designed to secure payment of debts owed by Mr Hewett, rather than the Hewetts jointly, it was on notice of the risk of the exercise of undue influence by Mr Hewett against his wife. The Judge concluded that First Plus did nothing thereafter which came anywhere near compliance with the guidelines laid down by the House of Lords in Royal Bank of Scotland v Etridge[2001] UKHL 44 ; [2002] 2 A.C. 773, with the result that First Plus had constructive notice of any undue influence or misrepresentation practised by Mr Hewett upon his wife, if that could be proved.”
“(1) A purchaser shall not be prejudicially affected by notice of— (i) any instrument or matter capable of registration under the provisions of the Land Charges Act, 1925, or any enactment which it replaces, which is void or not enforceable as against him under that Act or enactment, by reason of the non-registration thereof; (ii) any other instrument or matter or any fact or thing unless— (a) it is within his own knowledge, or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him; or (b) in the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of his counsel, as such, or of his solicitor or other agent, as such, or would have come to the knowledge of his solicitor or other agent, as such, if such inquiries and inspections had been made as ought reasonably to have been made by the solicitor or other agent.” (i) any instrument or matter capable of registration under the provisions of the Land Charges Act, 1925, or any enactment which it replaces, which is void or not enforceable as against him under that Act or enactment, by reason of the non-registration thereof; (ii) any other instrument or matter or any fact or thing unless— (a) it is within his own knowledge, or would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him; or (b) in the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of his counsel, as such, or of his solicitor or other agent, as such, or would have come to the knowledge of his solicitor or other agent, as such, if such inquiries and inspections had been made as ought reasonably to have been made by the solicitor or other agent.”
“I do not accept either of these submissions. In my view the section has to be applied in accordance with its terms to the facts of this case. There is no doubt that the information as to the true purpose of the remortgage loan imparted by the husband came to the knowledge of the solicitors on12 June 1990 as the solicitors for the husband and wife alone for they were not instructed to act for the lenders until 19 June at the earliest. That knowledge once acquired remained with the solicitors and cannot be treated as coming to them again when they were instructed on behalf of the lenders. As counsel for the wife accepted, their knowledge cannot be treated as divided or disposed of and reacquired in that way. The conclusion seems to me to be inescapable, namely that knowledge of the relevant matters facts or things did not come to the solicitors as the solicitors for the lenders. Accordingly it did not come to them "as such." It was not disputed that the lender is a purchaser within the definition contained in section 205(1)(xxi) of theLaw of Property Act 1925 . Consequently section 199(l)(ii)(6) precludes the solicitors' knowledge of the relevant matters or facts being imputed to the lender.”
“Thus where, as here, the solicitor on whose certificate the bank relies was in some respects the solicitor for the bank the question of whether or not knowledge or notice is to be imputed to the bank by virtue of the knowledge of that solicitor depends on whether the section applies in the circumstances of the case. In deciding whether or not it does the principles of the law of agency will be relevant on the questions whether vis-à-vis the bank the solicitor was 'his' and if so whether the bank's solicitor was acting 'as such' when acquiring the knowledge sought to be imputed to the bank. I do not think that the extent to which, if at all, and for what purposes the law of agency imputes to the principal knowledge of the (non-fraudulent) breach of duty of his agent arises in cases in which s 199(1)(ii)(b) of the 1925 Act applies. I would prefer not to express any view on whether in circumstances where s 199 does not apply such knowledge may or may not be imputed to the principal.”
“I have no doubt that Gwynn James & Co were not acting as the bank's solicitor when advising Mrs Thomson, notwithstanding that they did so at the request of the bank. The object of the exercise was that Mrs Thomson should obtain advice independent of the bank as well as independent of her husband. The professional obligations of Gwynn James & Co in relation to the advice they gave were owed to her and not to the bank. Provided that the bank was not put on notice by other matters within their knowledge that Gwynn James & Co had not performed their professional duty to give independent advice to Mrs Thomson they were in my judgment as entitled as the banks in Massey's case, Mann's case and Rayarel's case to rely on the solicitors' representation that they had. The extra ingredient relied on by counsel for Mrs Thomson is of no avail to her for although the solicitors may have been the solicitors for the bank in certain respects they were not acting in those respects when the knowledge relied on (and for present purposes required to be assumed) was acquired by them. I do not think that the decision of this court in Aboody's case is relevant to this question for the knowledge sought to be imputed to the bank related to the conduct of the husband and not the advice tendered to the wife.
“In order to protect the Bank as your mortgagee client, as well as your firm, the Bank looks to you for protection against possible mortgage fraud and requires you to take the following steps where appropriate:” “(b) Report to the Bank if you become aware of any information that may affect the Bank’s decision to lend or which is of concern to you. The application form contains the applicant’s waiver of the right to claim solicitor/client confidentiality in the event of an offer of advance being made. Should the borrower(s) change their mind and refuse to permit disclosure of relevant information you must immediately inform the Bank that you can no longer act for him as well as the borrower.” “(b) Report to the Bank if you become aware of any information that may affect the Bank’s decision to lend or which is of concern to you. The application form contains the applicant’s waiver of the right to claim solicitor/client confidentiality in the event of an offer of advance being made. Should the borrower(s) change their mind and refuse to permit disclosure of relevant information you must immediately inform the Bank that you can no longer act for him as well as the borrower.”
“324 The knowledge of one person may, in certain circumstances, be attributed to another person. This is generally known as imputed knowledge. However, it is not the same as constructive knowledge. The concept of imputed knowledge does not bear on the kind of knowledge possessed by one person that is attributed to another. The general rule of agency is that where in the course of any transaction in which he is employed on his principal’s behalf, an agent receives notice or acquires knowledge of any fact material to that transaction, under circumstances in which it is his duty to communicate it to his principal, the principal will be precluded from relying on his personal ignorance of that fact; and he will be taken to have known of it (or to have had notice of it) as from the time when his agent ought to have communicated it to him if he had performed his duty with due diligence.”
“In Strover v Harrington[1988] Ch 390 , 409—410, Sir Nicolas Browne-Wilkinson V-C said: “In this, as in all other normal conveyancing transactions, after there has been a subject to contract agreement the parties hand the matter over to their solicitors who become the normal channel for communication between vendor and purchaser in all matters relating to that transaction. In so doing, in my judgment the parties impliedly give actual authority to those solicitors to receive on their behalf all relevant information from the other party relating to that transaction. The solicitors are under an obligation to communicate that relevant information to their own clients. At the very least, the solicitors are held out as having ostensible authority to receive such information. Whether there be express or ostensible authority, the purchaser is in my judgment estopped from denying that he received the information relating to the transaction which has been communicated to his solicitors acting in the same transaction. In my judgment, such knowledge should be imputed to the principal.__ “In this, as in all other normal conveyancing transactions, after there has been a subject to contract agreement the parties hand the matter over to their solicitors who become the normal channel for communication between vendor and purchaser in all matters relating to that transaction. In so doing, in my judgment the parties impliedly give actual authority to those solicitors to receive on their behalf all relevant information from the other party relating to that transaction. The solicitors are under an obligation to communicate that relevant information to their own clients. At the very least, the solicitors are held out as having ostensible authority to receive such information. Whether there be express or ostensible authority, the purchaser is in my judgment estopped from denying that he received the information relating to the transaction which has been communicated to his solicitors acting in the same transaction. In my judgment, such knowledge should be imputed to the principal.__ 325 I accept, therefore, that in a conveyancing transaction a solicitor’s actual or “shut-eye” knowledge should be imputed to his client.”
“Mr Beaumont has revised that view in closing, of course, as he is entitled to do and submits that because the Claimant's standard instructions to the solicitor required Mr Clake to report any information that may affect the Claimant's ability to lend, and that is at page 250 of the bundle, and because the solicitor came to know latterly that the excess funds were destined to go to Mrs Bishop, then the Bank was fixed with constructive knowledge of that, in effect a form of imputed knowledge.”
“144. Here it is plain that the solicitor knew of the divorce proceedings and the financial settlement between Mr and Mrs Bishop, by reason of the solicitor's retainer with Mr Bishop and accordingly, that knowledge, it seems to me, is not to be imputed to the Bank. The solicitor's instructions to dispense the excess proceeds to Mrs Bishop, again, it seems to me comes from their retainer with Mr Bishop and/or Ms Waller-Edwards. Again, that is not to be imputed to the Bank. I accept that by the time of the final instructions, the Bank's retainer was in place but the information as to the divorce proceedings and the financial settlement, was plainly was acquired long before the solicitors were instructed by the bank.”
“146. In this case, plainly the information that is relevant for this purpose all came to be acquired, as I say, by reason of the retainer between the solicitor and Mr Bishop and/or Ms Waller-Edwards, so section 199 in either respect does not therefore avail Ms Waller-Edwards' case.”