Saunders v Anglia Building Soc (sub nom Gallie v Lee) [1970] UKHL 5

House of Lords

Between

SaundersAppellant

Anglia Building Soc (sub nom Gallie v Lee)Respondent

Before

Lord Reid

Lord Hodson Viscount Dilhorne

Lord Wilberforce

Lord Pearson

LORD HODSON VISCOUNT DILHORNE

My Lords,

I am in general agreement with the speech of my noble and learned friend, Lord Pearson. In my opinion this appeal must fail however one states the law. The existing law seems to me to be in a state of some confusion. I do not think it is possible to reconcile all the decisions, let alone all the reasons given for them. In view of some general observations made in the Court of Appeal I think that it is desirable to try to extract from the authorities the principles on which most of them are based. When we are trying to do that my experience has been that there are dangers in there being only one speech in this House. Then statements in it have often tended to be treated as definitions and it is not the function of a Court or of this House to frame definitions: some latitude should be left for future developments. The true ratio of a decision generally appears more clearly from a comparison of two or more statements in different words which are intended to supplement each other.

The plea of non est factum obviously applies when the person sought to be held liable did not in fact sign the document. But at least since the sixteenth century it has also been held to apply in certain cases so as to enable a person who in fact signed a document to say that it is not his deed. Obviously any such extension must be kept within narrow limits if it is not to shake the confidence of those who habitually and rightly rely on signatures when there is no obvious reason to doubt their validity. Originally this extension appears to have been made in favour of those who were unable to read owing to blindness or illiteracy and who therefore had to trust someone to tell them what they were signing. I think it must also apply in favour of those who are permanently or temporarily unable through no fault of their own to have without explanation any real understanding of the purport of a particular document, whether that be from defective education, illness or innate incapacity.

But that does not excuse them from taking such precautions as they reasonably can. The matter generally arises where an innocent third party has relied on a signed document in ignorance of the circumstances in which it was signed, and where he will suffer loss if the maker of the document is allowed to have it declared a nullity. So there must be a heavy burden of proof on the person who seeks to invoke this remedy. He must prove all the circumstances necessary to justify its being granted to him, and that necessarily involves his proving that he took all reasonable precautions in the circumstances. I do not say that the remedy can never be available to a man of full capacity. But that could only be in very exceptional circum- stances : certainly not where his reason for not scrutinising the document before signing it was that he was too busy or too lazy. In general I do not think he can be heard to say that he signed in reliance on someone he trusted. But, particularly when he was led to believe that the document which he signed was not one which affected his legal rights, there may be cases where this plea can properly be applied in favour of a man of full capacity.

The plea cannot be available to anyone who was content to sign without taking the trouble to try to find out at least the general effect of the document. Many people do frequently sign documents put before them for signature by their solicitor or other trusted advisers without making any enquiry as to their purpose or effect. But the essence of the plea non est factum is that the person signing believed that the document he signed had

one character or one effect whereas in fact its character or effect was quite different. He could not have such a belief unless he had taken steps or been given information which gave him some grounds for his belief. The amount of information he must have and the sufficiency of the particularity of his belief must depend on the circumstances of each case.

Further the plea cannot be available to a person whose mistake was really a mistake as to the legal effect of the document, whether that was his own mistake or that of his adviser. That has always been the law and in this branch of the law at least I see no reason for any change.

We find in many of the authorities statements that a man's deed is not his deed if his mind does not go with his pen. But that is far too wide. It would cover cases where the man had taken no precautions at all, and there was no ground for his belief that he was signing something different from that which in fact he signed. I think that it is the wrong approach to start from that wide statement and then whittle it down by excluding cases where the remedy will not be granted. It is for the person who seeks the remedy to shew that he should have it.

Finally there is the question to what extent or in what way must there be a difference between that which in fact he signed and that which he believed he was signing. In an endeavour to keep the plea within bounds there have been many attempts to lay down a dividing line. But any dividing line suggested has been difficult to apply in practice and has sometimes led to unreasonable results. In particular I do not think that the modern division between the character and the contents of a document is at all satisfactory. Some of the older authorities suggest a more flexible test so that one can take all factors into consideration. There was a period when here as elsewhere in the law hard and fast dividing lines were sought, but I think that experience has shewn that often they do not produce certainty but do produce unreasonable results.

I think that in the older authorities difference in practical result was more important than difference in legal character. If a man thinks he is signing a document which will cost him £10 and the actual document would cost him £1,000 it could not be right to deny him this remedy simply because the legal character of the two was the same. It is true that we must then deal with questions of degree but that is a familiar task for the Courts and I would not expect it to give rise to a flood of litigation.

There must I think be a radical difference between what he signed and what he thought he was signing—or one could use the words " fundamental " or " serious " or " very substantial ". But what amounts to a radical differ- ence will depend on all the circumstances. If he thinks he is giving property to A whereas the document gives it to B the difference may often be of vital importance, but in the circumstances of the present case I do not think that it is. I think that it must be left to the Courts to determine in each case in light of all the facts whether there was or was not a sufficiently great differ- ence. The plea non est factum is in sense illogical when applied to a case where the man in fact signed the deed. But it is none the worse for that if applied in a reasonable way.

I would dismiss this appeal.

Lord Hodson

My Lords,

On the 25th June, 1962, the Appellant executed an assignment of her leasehold interest in 12, Dunkeld Road, Dagenham to one Lee, the first defendant in the action.

Her case is that her intention was to give the house to her nephew Walter William Parkin upon condition that he was to permit her to reside there for the rest of her life and that she handed the title deeds to her nephew believ- ing that the house thereupon became his property. She admits that she

signed the deed of assignment to Lee but says that she believed that this was a deed of gift giving effect to the transaction in favour of her nephew. She claims accordingly that the deed is void just as if she had not signed it at all, for example as if her signature had been forged. She pleads non est factum.

On the day when the deed was signed by her she was 78 years of age and her pleaded case was that Lee came to her house with Parkin and produced a document to her. This he asked her to sign saying words to the effect that he was asking her to sign it as a deed of gift to Wally (Parkin) and everything was in order. The Appellant had broken her spectacles so that she could not use them. She could not read without them so did not read the document. Giving her evidence on commission she said that she thought Parkin and Lee were getting money on the house and that the whole purpose of giving the house to Parkin was so that he could get money on it. She said—" When they came and spoke to me about the house " I said to my nephew ' I don't mind what I do to help you along'. "

As against Lee the deed was voidable as having been induced by fraud and the learned judge accordingly held it to be void against him. Lee has not appealed.

The position of the second defendant, the Anglia Building Society, which is the Respondent to the appeal, is entirely different. The Society has ad- vanced £2,000 on a deed which on its face is good security for their loan. The learned judge, however, held that the Appellant was entitled to succeed against this defendant also. He held that the deed was void accepting the plea non est factum put forward by the Appellant on the basis that she was misled as to the character, not only as to the contents, of the deed. He held that the assignment for consideration to her was of a different character from a deed of gift to Parkin. Relying upon the long-accepted distinction between character and contents he gave judgment against the Respondent as well as against Lee.

This distinction stems from the case of Howatson v. Webb

[1907] 1 Ch 537

(affirmed in the Court of Appeal

[1908] 1 Ch 1

), a decision of Warrington J.

The majority of the Court of Appeal in this case applying the same test as the trial judge arrived at a different conclusion. Russell L. J., accepting an argument which had been rejected by the trial judge, said that the essential character of the document which the Appellant was intending to execute was such as to divest herself of her leasehold property by transferring it to another so that the transferee should be in a position to deal with the property, in particular by borrowing money on the security of the property. Her evidence showed that she understood that Lee and Parkin were jointly concerned in raising money on the security of the property. It was her intention that this should be done. This was, as Russell L. J. said, " the object of the exercise ". I agree with him that the identity of the transferee (viz. Lee instead of Parkin) does not make the deed of a totally different character from that which she intended to sign. On this ground the plea of non est factum must fail. Salmon L.J. put the matter somewhat differently, but to the same effect, in concluding from the Appel- lant's evidence that she would have executed the assignment to Lee even if the transaction had been properly explained to her. The Master of the Rolls reached the same conclusion but was not prepared to be fettered by the distinction between character and contents.

The distinction is a valid one in that it emphasises that points of detail in the contents of a document are not to be relied upon in support of a plea of non est factum. The Master of the Rolls did, however, demonstrate that using the words as terms of art for test purposes may produce ludicrous results, e.g., a mistake as to the amount of money involved may be described as a mistake as to contents although the difference between two figures may be so great as to produce a document of an entirely different character from the one the signer intended.

It is better to adopt the test which is supported by the authorities prior to Howatson v. Webb and is sound in principle. This is that the difference to support a plea of non est factum must be in a particular which goes to the substance of the whole consideration or to the root of the matter. Where, as in this case, there is an error of personality it may or may not be funda- mental ; the question cannot be answered in isolation. There is a distinction between a deed and a contract in that the former does not require consensus and the latter does. Hence, in the case of deeds error of personality is not necessarily so vital as in the case of contracts.

The plea of non est factum requires clear and positive evidence before it can be established. As Donovan L.J. said, delivering the judgment of the Court of Appeal in Muskham Finance Ltd. v. Howard [1963] 1 Q.B. 904 at page 912:

"The plea of non est factum is a plea which must necessarily " be kept within narrow limits "

. To take an example, the man who in the course of his business signs a pile of documents without checking them takes the responsibility for them by appending his signature. It would be surpris- ing if he was allowed to repudiate one of those documents on the ground of non est factum.

I agree with the robust conclusion reached by the Master of the Rolls on the facts of this case that the Appellant having signed the questioned docu- ment, obviously a legal document, upon which the building society advanced money on the faith of it being her document, cannot now be allowed to disavow her signature.

I should have arrived at this conclusion even if I had thought that the law applicable was that which had previously been accepted, namely, that the distinction between character and contents should be maintained.

Want of care on the part of the person who signs a document which he afterwards seeks to disown is relevant. The burden of proving non est factum is on the party disowning his signature : this includes proof that he or she took care. There is no burden on the opposite party to prove want of care. The word " negligence " in this connection does not involve the proposition that want of care---is irrelevant unless there can be found a specific duty to the opposite party to take care. Carlisle & Cumberland Banking Com- pany v Bragg

[1911] 1 KB 489

was on this point, in my opinion, wrongly decided and seems to be due to a confusion of thought by introducing the kind of negligence which founds an action in a tort for injury.

A person may be precluded by his own negligence, carelessness or inadver- tence from averring his mistake. The word " estoppel " has often been used in this context but, for my part, I agree with Salmon L.J. that this is not a true estoppel but an illustration of the principle that no man may take advantage of his own wrong. If it were treated as estoppel one would have to face the argument put forward by the Appellant that if there is no deed there can be no estoppel established by the document itself. If there was no estoppel by deed there was no other foundation for that doctrine to be invoked since there was no conduct by way of representation to the building society that the questioned deed was good.

The plea of non est factum was originally available, it seems, only to the blind and the illiterate (cf. Thoroughgood's case 2 Co. Rep. 9 (b) ) but by the middle of the last century the modern approach to the matter is illustrated by the leading case of Foster v. Mackinnon (1869) L.R. 4 C.P. 704 at pp. 711-12, in which the judgment of the Court was delivered by Byles J. I need not cite the whole passage but note that the judgment extends the scope of the doctrine to a person " who for some reason (not implying negligence) " forbears to read, has a written contract falsely read over to him, the reader " misreading to such a degree that the written contract is of a nature alto- " gether different from the contract pretended to be read from the paper " which the blind or illiterate man afterwards signs ; then, at least if there be " no negligence, the signature so obtained is of no force. And it is invalid " not merely on the ground of fraud, where fraud exists, but on the ground " that the mind of the signer did not accompany the signature ". It is, I think, plain that the word " negligence " is not used in this passage in the restricted sense of breach of duty.

The case for the Appellant stands or falls by her evidence. On no reason- able interpretation of this can she, in my opinion, succeed. I would dismiss the appeal.

Viscount Dilhorne

My Lords,

I have had the advantage of reading the speeches of my noble and learned friends with which I am in general agreement, and I only desire to add a few observations.

I entirely agree with the reasons given by Russell, L.J., in the Court of Appeal for rejecting Mrs. Gallie's claim. Her evidence was both unsatisfac- tory and inadequate to sustain her plea of non est factum. In the course of the argument in this House some criticism was made of his observations with regard to corroborative evidence. I do not understand him to have said that such evidence was essential if the plea was to succeed but merely that it would facilitate the discharge of the burden of proof resting on anyone putting forward such a plea.

I also think that Salmon, L.J., was right when he said that if Parkin had explained the true nature of the document to her and had told her that the solicitors had advised that it should be in that form and had asked her to sign it, there can be no real doubt that she would have done so. She wanted to make it possible for money to be raised on the house for the benefit of her nephew and she knew that the document she signed was a legal document dealing with her property. She did not read it. Perhaps she would have been no wiser if she had. She said that she had broken her spectacles and could not read without them. She never asked for the document to be read to her or that it should be explained to her. True it is that the assignment of the lease was to Lee and not to her nephew but in the circumstances of this case that did not, in my opinion, make the docu- ment wholly different in nature and character from that which she supposed it to be, and she took no care to find out what exactly it was that she was signing. She was content to trust her nephew and Lee and, sad though it is that an old lady should suffer as a result of the misconduct of Lee, she cannot relieve herself of the consequences at the expense of the Respon- dents who advanced money on the faith of the document.

Lord Denning, M.R., after reviewing the cases, endeavoured to state the principle to be applied in relation to a plea of non est factum. I agree that a man of full age and understanding who can read and write cannot be allowed to repudiate his signature to a document which he knows will have legal consequences if he signs it without reading it, but with the greatest respect I think that this is more an example of a case where the plea will fail than a rule of general application.

What are the matters which have to be established for the plea to succeed? First, in my opinion, it must be shown that the document signed was radically different in character from that which the signer thought it was. In Foster v. Mackinnon (1869) L.R.4 C.P. 704 the defendant had been deceived into indorsing a bill when he believed it to be a guarantee. Byles J., delivering the judgment of the court, said at p.711:

" It seems plain, on principle and " on authority, that, if a blind man, or a man who cannot read, or who for " some reason (not implying negligence) forbears to read, has a written " contract falsely read over to him, the reader misreading to such a degree " that the written contract is of a nature altogether different from the " contract pretended to be read from the paper which the blind or illiterate " man afterwards signs ; then, at least if there be no negligence, the signature " so obtained is of no force. And it is invalid not merely on the ground " of fraud, where fraud exists, but on the ground that the mind of the signer " did not accompany the signature; in other words, that he never intended " to sign, and therefore in contemplation of law never did sign, the contract " to which his name is appended."

It is to be observed that Byles, J., did not say that failure to read the contract by a person who could read was of itself negligence debarring him from repudiating his signature. He recognised that there might be cases where a person forebore to read without being negligent.

Later on that page Byles, J., said:

" But the position that, if a grantor or " covenantor be deceived or misled as to the actual contents of the deed, " does not bind him, is supported by many authorities."

And at p. 713:

" The defendant never intended to sign that contract, or any such contract. "

He never intended to put his name to any instrument that then was or " thereafter might become negotiable. He was deceived, not merely as to " the legal effect, but as to the actual contents of the instrument."

There is nothing in his judgment to indicate that a distinction is to be drawn between the nature and character of a document, on the one hand, and its contents, on the other.

In Howatson v. Webb

[1907] 1 Ch 537

, the defendant, a solicitor's clerk, pleaded that a mortgage deed executed by him was not his deed, he having executed it in the belief that it transferred property which he held as a nominee of the solicitor. The mortgage deed contained a personal covenant for the payment of principal and interest.

Warrington, J., cited the passages from Byles, J.'s judgment, which I have cited above, and after citing the first passage said:

" I pause there for " a moment to remark that it seems to me to be essential to the proposition " which is there stated that the contract which the signer means to execute " should be of a nature entirely different from the contract in dispute."

He then said:

" It will not be contended that if, in reading over a contract " to a blind or illiterate person, the reader merely omits or misstates some " material clause, the contract is altogether void."

He then cited the other two passages from Byles, J.'s judgment which I have cited and said:

" Reading that with reference to the first passage "

I have quoted I think he means ' deceived as to the actual contents' as " expressing the nature and character of the document."

He said, at p. 549, that the defendant was told that they were deeds relating to the property to which they did in fact relate. " His mind was " therefore applied to the question of dealing with that property. The deeds " did deal with that property. The misrepresentation was as to the contents " of the deed, and not as to the character and class of the deed. He knew " that he was dealing with the class of deed with which in fact he was " dealing, but did not ascertain its contents. The deed contained a covenant " to pay. Under those circumstances I cannot say that the deed is " absolutely void."

His judgment was upheld in the Court of Appeal

[1908] 1 Ch 1

, Cozens-Hardy, M.R.. saying that he accepted and approved every word of his judgment.

One cannot tell the nature and character of a document without having regard to its contents, but what I think Warrington, J., was endeavouring to do was to distinguish between cases where there is deceit as to the actual contents to such a degree as to be deceit as to its nature and character and cases where there is not deceit as to the nature and character of the instru- ment but deceit as to some provision in it. But he was, I think, wrong to say that misstatement of a material clause will never render a document void. Whether it does so or not must depend on whether it appears that the document as described is so far different from what it in fact is as to amount to a misrepresentation of its nature and character.

The distinction that Warrington, J., drew has frequently been adopted as a touchstone in relation to the plea of non est factum. I agree with Lord Denning's powerful criticisms of it, though I somewhat doubt whether Warrington, J., ever intended the interpretation which has been placed upon his words.

I agree with my noble and learned friend, Lord Pearson, that the difference between what a document is thought to be may be in substance or in kind. It will not suffice if the signer thought that in some respect it would have a different legal effect from what it has; nor will it suffice if in some respects it departs from what he thought it would contain. The difference, whether it be in kind or substance, must be such that the document signed is entirely—the word used by Byles, J.—or fundamentally different from that which it was thought to be so that it can be said that it was never the signer's intention to execute the document.

It is, I think, clearly established that the plea of non est factum cannot succeed if the signer of the document has been careless. In Foster v. Mackinnon (supra) Byles, J., spoke of "negligence". The use of this word may have led to the decision in Carlisle & Cumberland Banking Co. v. Bragg

[1911] 1 KB 489

, where it was held that there could not be negligence in the execution of a document unless a duty was owed to the person who acted upon it. I agree with the many criticisms of that decision, and I think it was wrong. Perhaps it is better to use the word " careless ".

Is it possible to define what will amount to a lack of care in the signing of a document? While I agree with Lord Denning that a man who signs a document without reading it, whether he does not read it because of the trust he places in another or on account of pressure of business, cannot, if of full age and understanding, repudiate his signature by reliance on the plea non est factum, I do not think it can be said that in every case failure to read a document by a literate person amounts to carelessness. Should the same standard of care be expected of an elderly spinster who might, if she read the document, be none the wiser and who might not be able to distinguish between a mortgage and a conveyance? I am inclined to think not. In National Provincial Bank v. Jackson

[1886] 33 Ch D 1

, two sisters executed deeds relating to their property without reading them and without having them read to them and explained. They did so in reliance upon their brother, a solicitor. Cotton, L.J., said that they could not have been said to have been guilty of negligence in so doing. It was held that their plea of non est factum failed as they knew that the deeds they signed dealt in some way with their houses. In every case the person who signs the document must exercise reasonable care, and what amounts to reasonable care will depend on the circumstances of the case and the nature of the document which it is thought is being signed. It is reasonable to expect that more care should be exercised if the document is thought to be of an important character than if it is not.

I would dismiss the appeal.

Lord Wilberforce

My Lords,

The present case is fairly typical of many where a person, having signed and had witnessed his signature to a formal legal document, contends that the fact of signing should not bind him to the effect of it. Such situations, in many legal systems, are regulated by the requirement of execution before a notary who, if he is competent and honest, as he usually is, can do much to ensure that the signer understands and intends what he is doing. In other systems, such as ours, dependence has to be placed on the level of education and prudence of the signer and on the honesty and competence of his professional adviser. But as, inevitably, these controls are sometimes imperfect, the law must provide some measure of relief. In so doing it has two conflicting objectives: relief to a signer whose consent is genuinely lacking (I expand upon this later): protection to innocent third parties who have acted upon an apparently regular and properly executed document. Because each of these factors may involve questions of degree or shading any rule of law must represent a compromise and must allow to the Court some flexibility in application.

The plea of non est factum has a long history. In mediaeval times, when contracts were made by deeds, and the deed had a kind of life in the law of its own, illiterate people who either could not read, or could not under- stand, the language in which the deed was written, were allowed this plea (that is what " non est factum " is—a plea): the result of it, if successful, was that the deed was not their deed. I think that three things can be said about the early law. First, that no definition was given of the nature or extent of the difference which must exist between what was intended and what was done—whether such as later appeared as the distinction between " character " and " contents " or otherwise. (See Thoroughgood's case 2 Co. Rep. 9 (a) when the decision was based on the reading of the deed " in other words " than in truth it is ", and the 16th century case recorded in Keilway 70 pi. 6 — difference between one acre and two acres. See also the 19th century note C to Whelpdale's case 5 Co. Rep. 119 (a) referring to the inconsistency of the cases: Shulter's case 12 Co. Rep. 90—of a man aged 115 years.) Secondly, these cases are for the most part as between the original parties to the deed, or if a third party is concerned (e.g. Thoroughgood's case) he is a successor to the estate granted. Thirdly, there is some indication that the plea was not available where the signer had been guilty of a lack of care in signing what he did: there is no great precision in the definition of the disabling conduct. If Fleta is to be relied upon, there was an exception of negligentia or imperitia —sec Holdsworth vol. 8 p. 50 Note (2).

In the 19th century, the emphasis had shifted toward the consensual contract, and the courts, probably unconscious of the fact, had a choice. They could either have discarded the whole doctrine on which non est factum was based, as obsolete, or they could try to adapt it to the prevailing structure of contract (" these cases apply to deeds but the principle is equally applicable " to other written contracts" Foster v. Mackinnon (1869) L.R. 4 C.P. 704, 712). They chose the course of adaptation, and, as in many other fields of the law this process of adaptation has not been logical, or led to a logical result. The modern version still contains some fossilised elements.

We had traced, in arguments at the bar, the emergence of the distinction, which has come to be made between a difference (of intention from result) of character, which may render a document void, and a difference of contents which at most makes it voidable. As it emerged (see Edwards v. Brown (1831) 1 Cr. & J. 307) it was expressed as being between the actual contents, on the one hand, and its legal effect on the other (see p. 312 per Bayley B.). Here "actual contents" evidently means "character". In this form it was taken into the leading case of Foster v. Mackinnon (L.R. 4 C.P. 704). In the well-known passage from the judgment of the Court, Byles J. used the words " to such a degree that the written contract is of a nature altogether different " from the contract pretended to be read" (page 711) and later in his conclusion: " He was deceived, not merely as to the legal effect, but as to " the actual contents of the instrument" (page 713). The language used may have been imperfect; but I think that the courts were groping for the test of what should enable a man to say that the document was not his document, his consent no consent, the contract no contract. It was really the language used in the second leading case of Howatson v. Webb

[1907] 1 Ch 537

which has given rise to difficulty. There, in a judgment of Warrington J which has carried much conviction and authority, we find that, although the judgment of Byles J. in Foster v. Mackinnon is quoted, the use of the word " contents " is switched to mean what the deed actually (as a matter of detail) contains, and contrasted with what is called its legal character (see page 549 " the misrepresentation was as to the contents of the deed, and not " as to the character and class of the deed ").

The distinction, as restated, is terminologically confusing and in substance illogical, as the judgments in the Court of Appeal demonstrate. On the one hand, it cannot be right that a document should be void through a mistake as to the label it bears, however little this mistake may be fundamental to what the signer intends: on the other hand, it is not satisfactory that the document should be valid if the mistake is merely as to what the document contains, however radical this mistake may be and however cataclysmic its result.

The existing test, or at least its terminology, may be criticised, but does it follow that there are no definable circumstances in which a document to which a man has put his signature may be held to be not his document, and so void rather than merely voidable? The judgment of the learned Master of the Rolls seems at first sight to suggest that there are not and that the whole doctrine ought to be discarded, but a closer reading shows that he is really confining his observations to the plainest, and no doubt commonest, cases where a man of full understanding and capacity forbears, or negligently omits, to read what he has signed. That, in the present age, such a person should be denied the non est factum plea I would accept: so to hold follows in logical development from the well-known suggested question of Mellish L.J. in Hunter v. Walters L.R. 7 Ch. 75, and from what was said by Farwell L.J. in Howatson v. Webb

[1908] 1 Ch 1

, 4. But there remains a residue of difficult cases. There are still illiterate or senile persons who cannot read, or apprehend, a legal document; there are still persons who may be tricked into putting their signature on a piece of paper which has legal consequences totally different from anything they intended. Certainly the first class may in some cases, even without the plea, be able to obtain relief, either because no third party has become involved, or, if he has, with the assistance of equitable doctrines, because the third party's interest is equitable only and his conduct such that his rights should be postponed (see National Provincial Bank v. Jackson 33 Ch. D. 1 and cf. Hunter v. Walters L.R. 7 Ch. 75, 89). Certainly, too, the second class may in some cases fall under the heading of plain forgery, in which event the plea of non est factum is not needed, or indeed available (cf. Swan v. North British Australasian Land Co. 2 H. & C. 175) and in others be reduced if the signer is denied the benefit of the plea because of his negligence. But accepting all that has been said by learned judges as to the necessity of confining the plea within narrow limits, to eliminate it altogether would, in my opinion, deprive the courts of what may be, doubtless on sufficiently rare occasions, an instrument of justice.

How, then, ought the principle, on which a plea of non est factum is admissible, to be stated? In my opinion, a document should be held to be void (as opposed to voidable) only when the element of consent to it is totally lacking, i.e., more concretely, when the transaction which the document purports to effect is essentially different in substance or in kind from the transaction intended Many other expressions, or adjectives, could be used —" basically " or " radically " or " fundamentally ". In substance, the test does not differ from that which was applied in the leading cases of Thorough- good (1581 2 Co. Rep. 9b) and Foster v. Mackinnon (1869) L.R. 4 C.P. 704, except in moving from the character/contents distinction to an area in better understood modern practice.

To this general test it is necessary to add certain amplifications. First, there is the case of fraud. The law as to this is best stated in the words of the judgment in Foster v. Mackinnon where it is said that a signature obtained by fraud " is invalid not merely on the ground of fraud, where fraud exists, " but on the ground that the mind of the signer did not accompany the " signature ; in other words, that he never intended to sign, and therefore in " contemplation of law never did sign, the contract to which his name is " appended" (I.c. page 711). In other words, it is the lack of consent that matters, not the means by which this result was brought about. Fraud by itself may do no more than make the contract voidable.

Secondly, a man cannot escape from the consequences, as regards innocent third parties, of signing a document if. being a man of ordinary education and competence, he chooses to sign it without informing himself of its purport and effect. This principle is sometimes found expressed in the language that " he is doing something with his estate " (Hunter v. Walters L.R. 7 Ch. 75, Howatson v. Webb

[1907] 1 Ch 537

) but it really reflects a rule of commonsense based on the exigency of busy lives.

Thirdly, there is the case where the signer has been careless, in not taking ordinary precautions against being deceived. This is a difficult area. Until 1911 the law was reasonably clear: it had been stated plainly in Foster v.

Mackinnon that negligence—i.e. carelessness—might deny the signer the benefit of the plea. Since Bragg's case was decided in 1911 (Carlisle & Cumberland Banking Co. v. Bragg

[1911] 1 KB 489

) the law has been that, except in relation to negotiable instruments, mere carelessness is not disabling: there must be negligence arising from a duty of care to the third person who ultimately relies on the document. It does not need much force to demolish this battered precedent. It is sufficient to point to two major defects in it. First, it confuses the kind of careless conduct which disentitles a man from denying the effect of his signature with such legal negligence as entitles a person injured to bring an action in tort. The two are quite different things in standard and scope. Secondly, the judgment proceeds upon a palpable misunderstanding of the judgment in Foster v. Mackinnon: for Byles, J., so far from confining the relevance of negligence to negotiable instruments (as Bragg's case suggests), clearly thought that the signer of a negotiable instrument would be liable, negligence or no negligence, and that negligence was relevant in relation to other documents than negotiable instruments: for example (as in the actual case before him) to a guarantee.

In my opinion, the correct rule, and that which in fact prevailed until Bragg's case, is that, leaving aside negotiable instruments to which special rules may apply, a person who signs a document, and parts with it so that it may come into other hands, has a responsibility, that of the normal man of prudence, to take care what he signs, which, if neglected, prevents him from denying his liability under the document according to its tenor. I would add that the onus of proof in this matter rests upon him, i.e., to prove that he acted carefully and not upon the third party to prove the contrary. I consider therefore that Carlisle & Cumberland Banking Co. v. Bragg

[1911] 1 KB 489

, was wrong, both in the principle it states and in its decision, and that it should no longer be cited as an authority for any purpose.

The preceding paragraphs contemplate persons who are adult and literate: the conclusion as to such persons is that, while there are cases in which they may successfully plead non est factum, these cases will, in modern times, be rare.

As to persons who are illiterate, or blind, or lacking in understanding, the law is in a dilemma. On the one hand, the law is traditionally, and rightly, ready to relieve them against hardship and imposition. On the other hand, regard has to be paid to the position of innocent third parties who cannot be expected, and often would have no means, to know the condition or status of the signer. I do not think that a defined solution can be provided for all cases. The law ought, in my opinion, to give relief if satisfied that consent was truly lacking but will require of signers even in this class that they act responsibly and carefully according to their circumstances in putting their signature to legal documents.

This brings me to the present case. Mrs. Gallie was a lady of advanced age, but, as her evidence shows, by no means incapable physically or mentally. It certainly cannot be said that she did not receive sympathetic consideration or the benefit of much doubt from the judge as to the circumstances in which the assignment was executed. But accepting all of this, I am satisfied, with Russell, L.J., that she fell short, very far short, of making the clear and satisfactory case which is required of those who seek to have a legal act declared void and of establishing a sufficient discrepancy between her intentions and her act. I am satisfied to adopt, without repetition, the analysis of the facts which appears in the judgment of the learned Lord Justice as well as that of my noble and learned friend, Lord Pearson.

I would dismiss the appeal.

Lord Pearson

My Lords,

This appeal raises questions of law as to the limits of the plea of non est factum, in a case where the person who signed the deed of assignment of a long lease of a house alleges that she was deceived by the assignee as to the nature and character of the deed, so that it was not her deed, and she relies on the plea not only against the assignee who is alleged to have deceived her but also against an innocent third party, the defendant building society, who afterwards in good faith and with no knowledge of any defect affecting her signature lent money to the assignee on the security of the house. There are also questions of fact on which two members at least of the Court of Appeal took different views from that of the learned trial judge.

In 1962 the plaintiff, Mrs. Gallie, was 78 years of age. She owned a long lease of a house, where she resided and earned her living by taking in lodgers. The ground rent was small, so that in broad effect she was the owner of the house. The only one of her relatives who frequently visited her was her nephew, Walter Parkin, aged about 40. He had a small garage at which he did motor repairing work. He had a friend and business associate, named William Robert Lee, whom he trusted, although in the event Lee proved to be untrustworthy.

The plaintiff told Parkin that she had made a will leaving her house to him. Later she handed over to him the deeds of her house, thinking apparently that she was thereby transferring to him the ownership of the house or at any rate enabling him to raise money on the security of the house. She made it a condition that she would have the use of the house for the rest of her life. Parkin needed money for his business, and she wished to help him in this way. If a further step, such as the making of a deed of gift, was required, she would be willing to do this.

Parkin consulted with Lee. Parkin was in a difficulty. He had left his wife and three children, and for years had been living with another woman who had become known as " Mrs. Parkin ". He was in arrear with main- tenance payments to his wife, and he was afraid that if he became the owner of the house his wife might be able to force him to pay the maintenance. Lee needed money in order to purchase a house for himself and his family, as they were still living in his father's house. He saw the opportunity of raising money on the security of the plaintiff's house if he could become the owner of it. It was arranged, or at any rate proposed, between Parkin and Lee that the plaintiff should transfer the house to Parkin by deed of gift, and when she had done so Parkin should sell the house to Lee at a price of £2,000 or £2,500 (the evidence is not clear as to the amount of the proposed price) and Lee should raise money from a building society on the security of the house and should pay the price of £2,000 or £2,500 by making monthly payments to the woman known as " Mrs. Parkin ". Lee consulted a firm of solicitors about the proposed transaction and was advised that a recent deed of gift on the title would be likely to deter a building society from lending money on the security of the house and that a direct sale by the plaintiff to Lee would be preferable. Accordingly, the solicitors drafted a deed of assignment of the house from the plaintiff to Lee at a stated price of £3,000. It may be that the conduct of the solicitors or their managing clerk fell below professional standards, but it is not necessary to investigate that aspect of the matter.

Lee and Parkin went to see the plaintiff. Lee had the deed, and he put it before the plaintiff for her to sign. The plaintiff had broken her spectacles and could not read effectively without them. She asked what the deed was, and Lee said, in the presence of Parkin and without any dissent from him, that the deed was " to do with the gift by deed to Wally for the house ". The plaintiff, not having asked Parkin to read the deed to her or give his

explanation of it, but assuming that Parkin and Lee knew what they were doing, and desiring to help Parkin in the way that he wished, signed the deed. Parkin witnessed the plaintiff's signature to the deed. The price of £3,000 was not paid or intended to be paid, so that in practical reality the assignment from the plaintiff to Lee was for no consideration. As between Lee and Parkin the intention was that £2,000 or £2,500 was to be made available in some way by Lee to Parkin: he might pay monthly instalments to the woman known as " Mrs. Parkin " or he might from time to time put money into the business of Parkin, in which Lee had some interest. It is not easy to gather from the evidence exactly what the arrangement was, and it probably was somewhat indefinite in its details, but I think that was the broad effect of it. If this arrangement, or something on these lines, had been duly carried out, the plaintiff's signature to the deed would have enabled Parkin through Lee to raise money on the security of the house in the way that Parkin considered most beneficial to himself.

Lee made to the defendant building society an application containing some false statements and supported it with a testimonial, drafted by him and signed by Parkin, also containing some false statements. The defendant building society, in response to the application, and in reliance on the title deeds including the plaintiff's assignment to Lee, and having no notice of any defect in the assignment or of anything unusual affecting it, and acting in complete good faith, lent £2,000 to Lee on the security of the house.

Then things went wrong. Lee failed to carry out his arrangement with Parkin. Lee was heavily indebted, and the sum which he had borrowed from the defendant building society was used up in paying his debts, and probably his other resources were insufficient to enable him to make any money available to Parkin. At any rate, he did not make the sum of £2.500 or £2,000 or any sum available to Parkin in any way. Thus, in the event the plaintiff's execution of the deed of assignment did not bring any benefit to Parkin, although it would have done if his arrangement with Lee had been duly carried out by Lee.

The plaintiff commenced her action in July 1964. By her amended state- ment of claim she claimed(1) against Lee a declaration that the assignment of the house to him was void, return of the title deeds or their value and damages for their detention, and damages for fraudulent misrepresentation, and

(2) against the defendant building society a declaration that the assign- ment of the house to Lee was void, and the delivery up of the title deeds or their value and damages for their detention.

The plaintiff's evidence was owing to her age and infirmity taken on commission, so that the learned judge did not have the advantage of seeing and hearing her as she was giving her evidence. Evidence was given at the trial by Parkin, Lee and a witness named Hall who had been managing clerk of the solicitors concerned. The learned judge found that Lee and Hall had told lies in the witness box and he could not rely on their evidence. As to Parkin, he found that he had told some lies in the witness box and that his evidence showed a high degree of confusion and inaccuracy, but nevertheless there were times in his evidence when he was saying simple things when the learned judge had the conviction that he was telling the truth. With regard to the plaintiff's evidence the learned judge said:

"It " is apparent from the transcript of that evidence first that she must have " been a difficult witness, that her evidence is not very clear in a number " of respects and in some respects it is contradictory "

. He did, however, find as a fact that the plaintiff did not read the document, that Lee represented it to be a deed of gift to Parkin and that the plaintiff executed it in the belief that that was what it was. He also found as a fact that the plaintiff had no idea that the document took the form of an assignment on sale from her to Lee and that a sale or gift to him was something which she did not and would not for one moment have contemplated.

As at least two members of the Court of Appeal did not accept these findings of the learned judge, and I prefer their views to his (though un- doubtedly these questions of fact are difficult), I will set out a few extracts

from the plaintiff's evidence taken on commission, in order to shew in outline what was the basis of their views:

" Q. Do you know that Mr. Parkin—that is Wally—gave the building " society a testimonial about Mr. Lee so that he could get a mortgage " on this house? Do you know that?

" A. I did not know what they were doing when they came to see " me. I only said to my nephew—I didn't refer to Mr. Lee; I referred " to my nephew, and I said to my nephew—' I don't mind helping " ' you at all. I have helped you in the past and I will still help you " ' as long as I can; but mind you are doing the right thing'. I have " always trusted my nephew.

" Q. And if he told you a document was all right you believed him? " A. I believe my nephew. I don't believe Mr. Lee.

" Q. And, of course, when your nephew and Mr. Lee came along " with the document you thought it must be all right?

" A. I did.

" Q. And it was because your nephew was there that you were willing " to sign it?

" A. Yes.

" Q. Did you know that Mr. Lee stated that he would buy the " house from Mr. Parkin?

" A. No, I did not know he was buying the house. I just thought " he was having a loan on my house.

" Q . Mr. Lee was?

" A. Yes. But if my nephew had have come to me and said, ' Auntie, " ' I am in difficulties ', I would have got him the money instead of " bothering Mr. Lee.

" Q. But the money was to be borrowed on your deeds through Mr. " Lee. Is that right? "A. Yes.

" Q. And you were quite satisfied about that? " A. Yes. I done it to help my nephew with his business.

" Q. Have you brought this action to help your nephew? " A. I have, Sir.

" Q. Did it occur to you to ask Wally to read the document to you? " A. I never thought of that. Sir.

" Q. You thought it was all right. If Wally was there, it must be " all right?

" I did."

The learned judge(1) made a declaration as against Lee that the alleged assignment of 15th June, 1962, was void and of no effect, and directed an enquiry as to damages;

(2) made a declaration in the same terms as against the defendant building society, and ordered them to deliver up the title deeds.

There was no appeal by Lee. There was an appeal by the defendant building society, and it was allowed by the Court of Appeal.

The Master of the Rolls decided the case on a broad principle to which I will refer later.

Russell, L.J., carefully examined the facts of the case and made two comments on the plaintiff's evidence, and these were in effect his grounds of decision. He said—(1) "It is inadequate to establish the minimum facts

" necessary to establish the plea of non est factum, assuming that it would " be sufficient for that plea to show that the plaintiff was induced wholly " by Lee's falsehood to think that she was signing a deed of gift to " Parkin whereas she executed an assignment in terms for value to Lee. I " think that the plaintiff's evidence in this regard was unsatisfactory, and " was inadequate to discharge the burden of proof that is laid by law " on this plea, which requires strong and clear evidence for its discharge...."

(2) " At first sight, of course, it is easy to see the difference between a " voluntary assignment of a leasehold property to A and an assignment " for value of that property to B. But what upon the plaintiff's own evidence " was the essential character of the document she was intending to execute? " It was a document intended by her to divest herself of her leasehold " property by transferring it to another, not as mere trustee for her, but " so that the transferee should be in a position to deal with the property " and in particular by borrowing money on the security of the property. Her " evidence in my view makes it plain that she understood that Lee and Parkin " were jointly concerned in a project of raising money on security of the " property and this was her intention. In those circumstances I do not " consider that it is correct to say that, for the purposes of the plea of " non est factum. a transfer by her to Lee is to be regarded as of a totally " different character or nature from a transfer to Parkin. The learned judge " relied on the identity of the transferee as constituting the essential nature " or character of the instrument. In so doing I think that he paid insufficient " regard to what I may call the object of the exercise. Suppose that Lee " had carried through the arrangement that Parkin had understood was " made—had in fact paid Parkin. This would have fulfilled the plaintiff's " purpose in executing the document put before her."

I respectfully agree with the reasoning of Russell L.J. and in particular with the principle that importance should be attached to the " object of the " exercise". when dissimilar legal documents may have similar practical effects. Another example of this will be found in Mercantile Credit Com- pany Limited v Hamblin [1965] 1 Q.B. 242, 267. In that case the defendant had signed hire purchase documents, and there was some evidence that she intended to raise money by means of a mortgage of her car, and she had pleaded non est factum. It became plain, however, that the object of the proposed hire purchase transaction was to produce the same practical effect as a mortgage of the car would have produced (if it had been lawful). She would sell the car through a dealer to a finance company, and take it back from the finance company on hire purchase, with the results that she would receive a lump sum down and would repay it with additions by instalments over a period, so that she would for practical purposes be in much the same position as if she had mortgaged the car. The plea of non est factum failed.

I think Salmon L.J.'s view of the facts in the present case was consistent with that of Russell L.J.. but his main conclusion on the facts was this:

" In the present case it seems plain from Mrs. Gallic's evidence, which was " given before an examiner and which we are therefore in just as good a " position to evaluate as was the learned judge, that Mrs. Gallie would have " executed the conveyance even if its true character and class and the nature " of the transaction had been properly explained to her and she had under- " stood the explanation. Certainly she was not induced to sign by any " false representation made to her by Lee."

In a later passage Salmon L.J. said:

" If Parkin had taken the trouble to explain the true nature of the " document to her and told her that the solicitors had advised that it should " be in that form and asked her to sign it, there can in my view be no real " doubt but that she would have done so."

I think that conclusion of Salmon L.J. is probably right but there may be an element of doubt as to what the plaintiff would have done if she had been given a full explanation of the document. I would dismiss the appeal for the reasons given by Russell L.J. because they seem to me free from doubt.

In the judgments of the Court of Appeal in this case there was an elaborate and, if I may respectfully say so, illuminating and valuable discussion of the law relating to the plea of non est factum. It is not practicable in this opinion to examine what they have said at length and in detail, dealing with every point. It seems to me that the right course here is to examine the law on this subject with the aid of the judgments in the Court of Appeal and to endeavour to arrive at clear general propositions for the future on the basis of the earlier law which I think has become distorted in some respects.

I must, however, deal specifically with the broad principle stated by the Master of the Rolls as his conclusion from his investigation of the law. It was this:

" Whenever a man of full age and understanding, who can read " and write, signs a legal document which is put before him for signature— " by which I mean a document which, it is apparent on the face of it, is " intended to have legal consequences—then, if he does not take the trouble " to read it, but signs it as it is, relying on the word of another as to its " character or contents or effect, he cannot be heard to say that it is not " his document. By his conduct in signing it he has represented, to all " those into whose hands it may come, that it is his document; and once " they act upon it as being his document, he cannot go back on it, and say " it was a nullity from the beginning."

In applying the principle to the present case, the Master of the Rolls said:

" Mrs. Gallie cannot in this " case say that the deed of assignment was not her deed. She signed it " without reading it, relying on the assurance of Lee that it was a deed of " gift to Wally. It turned out to be a deed of assignment to Lee. But it " was obviously a legal document. She signed it: and the building society " advanced money on the faith of it being her document. She cannot now " be allowed to disavow her signature."

There can be no doubt that this statement of principle by the Master of the Rolls is not only a clear and concise formulation but also a valuable guide to the right decision to be given by a Court in any ordinary case. The danger of giving an undue extension to the plea of non est factum has been pointed out in a number of cases. For instance in Muskham Finance Ltd. v. Howard [1963] 1 Q.B. 904 at page 912 Donovan L.J. delivering the judgment of the Court said:—" The plea of non est factum is a plea which " must necessarily be kept within narrow limits. Much confusion and " uncertainty would result in the field of contract and elsewhere if a man " were permitted to try to disown his signature simply by assertaing that " he did not understand that which he had signed." In Hunter v. Walters (1871) L.R. 7 Ch. App. 75 at page 87, Mellish L.J. said:—"Now, in my " opinion, it is still a doubtful question at law, on which I do not wish to " give any decisive opinion, whether, if there be a false representation " respecting the contents of a deed, a person who is an educated person. " and who might, by very simple means, have satisfied himself as to what " the contents of the deed really were, may not, by executing it negligently " be estopped as between himself and a person who innocently acts upon " the faith of the deed being valid, and who accepts an estate under it." This passage was referred to by Farwell L.J. in Howatson v. Webb

[1908] 1 Ch. 1

at page 3, where he said:

" I think myself that the question suggested, " but not decided, by Mellish L.J. in that case will some day have to be " determined, viz., whether the old cases on misrepresentation as to the con- " tents of a deed were not based upon the illiterate character of the person " to whom the deed was read over, and on the fact that an illiterate man was " treated as being in the same position as a blind man: see Thorough good's " case and Sheppard's Touchstone page 56 ; and whether at the present " time an educated person, who is not blind, is not estopped from availing " himself of the plea of non est factum against a person who innocently acts " upon the faith of the deed being valid."

The principle stated by the Master of the Rolls can and should be applied so as to confine the scope of the plea of non est factum within narrow limits. It rightly prevents the plea from being successful in the normal case of a man who. however much he may have been misinformed about the

nature of a deed or document, could easily have ascertained its true nature by reading it and has taken upon himself the risk of not reading it.

I think, however, that, unless the doctrine of non est factum, as it has been understood for at least a hundred years, is to be radically transformed, the statement of principle by the Master of the Rolls, taken just as it stands, is too absolute and rigid and needs some amplification and quali- fication. Doubts can be raised as to the meaning of the phrase " a man of " full age and understanding, who can read and write ". There are degrees of understanding and a person who is a great expert in some subjects may be like a child in relation to other subjects. Does the phrase refer to under- standing of things in general, or does it refer to capacity for understanding (not necessarily in more than a general and elementary way) legal docu- ments and property transactions and business transactions?

In my opinion, the plea of non est factum ought to be available in a proper case for the relief of a person who for permanent or temporary reasons (not limited to blindness or illiteracy) is not capable of both reading and sufficiently understanding the deed or other document to be signed. By " sufficiently understanding " I mean understanding at least to the point of detecting a fundamental difference between the actual document and the document as the signer had believed it to be. There must be a proper case for such relief. There would not be a proper case if(a) the signature of the document was brought about by negligence of the signer in failing to take precautions which he ought to have taken, or

(b) the actual document was not fundamentally different from the document as the signer believed it to be. I will say something later about negligence and about fundamental difference.

In the present case (he plaintiff was not at the material time a person who could read, because on the facts found she had broken her spectacles and could not effectively read without them. In any case her evidence (unless it was deliberately false, which has not been argued) shows that she had very little capacity for understanding legal documents and property transactions, and I do not think a reasonable jury would have found that she was negligent. In my opinion, it would not be right to dismiss the plaintiff's appeal on the ground that the principle stated by the Master of the Rolls is applicable to her case. I do not think it is.

The principle as stated is limited to a case in which it is apparent on the face of the document that it is intended to have legal consequences. That allows for possible success of the plea in a case such as Lewis v. Clay [1897] 67 L.J. Q.B. 224. where Clay had been induced to sign promissory notes by the cunning deception of a false friend, who caused him to believe that he was merely witnessing the friend's signature on several private and highly confidential documents, the material parts of which had been covered up.

I wish to reserve the question whether the plea of non est factum would ever be rightly successful in a case where(1) it is apparent on the face of the document that it is intended to have legal consequences;

(2) the signer of the document is able to read and sufficiently understand the document;

the document is fundamentally different from what he supposes it to be;

he is induced to sign it without reading it. It seems unlikely that the plea ought ever to succeed in such a case, but it is inadvisable to rule out the wholly exceptional and unpredictable case.

I have said above that the statement of principle by the Master of the Rolls needs to be amplified and qualified unless the doctrine of non est factum, as it has been understood for at least a hundred years, is to be radically transformed. What is the doctrine, and should it be radically transformed?

As to the early history, the authorities referred to in the judgment of Byles J. in Foster v. Mackinnon (1869) L.R. 4 C.P. 704 at pages 711-12 (and also referred to in Holdsworth's History of English Law, vol. 8 at pages 50-51) were cited in the argument of this appeal. Having considered

them I think they show that the law relating to the plea of non est factum remained in an undeveloped state until the judgment in Foster v. Mackinnon, and the modern development began with that judgment. It was the judgment of the Court (Bovill C.J., Byles, Keating and Montague Smith JJ.) delivered by Byles, J. He said at page 711:

"It seems plain, on principle and on authority, that, if a blind man, or a man who cannot read, or " who for some reason (not implying negligence) forbears to read, has a " written contract falsely read over to him, the reader misreading to such a " degree that the written contract is of a nature altogether different from " the contract pretended to be read from the paper which the blind or " illiterate man afterwards signs; then, at least if there be no negligence, the " signature so obtained is of no force. And it is invalid not merely on the " ground of fraud, where fraud exists, but on the ground that the mind of the " signer did not accompany the signature ; in other words, that he never " intended to sign, and therefore in contemplation of law never did sign, " the contract to which his name is appended."

In my opinion, the essential features of the doctrine are contained in that passage and the doctrine does not need any radical transformation. A minor comment is that the phrase " who for some reason (not implying negligence) forbears to " read " is (to use a currently fashionable word) too " permissive " in its tone. If a person forbears to read the document, he nearly always should be reckoned as negligent or otherwise debarred from succeeding on the plea of non est factum.

The passage which I have set out from Byle's J's judgement, though I think it contains the essential features, was only a brief summary in an leading judgment, and there are further developments which need to be considered .

Ascertainment of the intention : I think the doctrine of non est factum inevitably involves applying the subjective rather than the objec- tive test to ascertain the intention. It takes the intention which a man has in his own mind rather than the intention which he manifests to others (the intention which as reasonable men they would infer from his words and conduct).

There are, however, some cases in which the subjective test of intention can be applied so as to produce the same result as would be produced by the objective test. Suppose a man signs a deed without knowing or enquiring or having any positive belief or formed opinion, as to its nature or effect: he signs it because his solicitor or other trusted adviser advises him to do so. Then his intention is to sign the deed that is placed before him, whatever it may be or do. That is the intention in his own mind as well as the intention which by signing he manifests to others. Examples of this will be found in Hunter v. Walters [1871] 7 Ch. App. 75; National Provincial Bank v Jackson

(1886) 33 Ch D 1

; King v. Smith

[1900] 2 Ch 425

. In King v. Smith Farwell, J. at page 430 cited and relied upon a passage in the judgment of Mellish L. J. in Hunter v. Walters, where he said:

" When a " man knows that he is conveying or doing something with his estate, but " does not ask what is the precise effect of the deed, because he is told it " is a mere form, and has such confidence in his solicitor as to execute the " deed in ignorance, then, in my opinion, a deed so executed, although it " may be voidable upon the ground of fraud, is not a void deed."

Farwell J. said at page 430 that Mr. King " had absolute confidence in his solicitor, " and executed any deed relating to his property that Eldred put before him." I think this principle affords a solution to a problem that was raised in the course of the argument. Suppose that the very busy managing director of a large company has a pile of documents to be signed in a few minutes before his next meeting, and his secretary has arranged them for maximum speed with only the spaces for signature exposed, and he " signs them blind ", as the saying is, not reading them or even looking at them. He may be exercising a wise economy of his time and energy. There is the possibility of some extraneous document, involving him in unexpected personal liability, having been fraudulently inserted in the pile, but this possibility is so improbable that a reasonable man would disregard it. Bolton v. Stone [1951] A.C. 850, 858. Such conduct is not negligence in any ordinary sense of the

word. But the person who signs documents in this way ought to be held bound by them, and ought not to be entitled to avoid liability so as to shift the burden of loss on to an innocent third party. The whole object of having documents signed by him is that he makes them his documents and takes responsibility for them. He takes the chance of a fraudulent substitution. I think the right view of such a case is that the person who signs intends to sign the documents placed before him, whatever they may be, and so there is no basis on which he could successfully plead non est factum.

Negligence: It is clear that by the law as it was laid down in Foster v. Mackinnon a person who had signed a document differing fundamentally from what he believed it to be would be disentitled from successfully pleading non est factum if his signing of the document was due to his own negligence. The word " negligence " in this connection had no special, technical meaning. It meant carelessness, and in each case it was a question of fact for the jury to decide whether the person relying on the plea had been negligent or not. In Foster v. Mackinnon (supra) the Lord Chief Justice had told the jury that, if the indorsement was not the defendant's signature, or if, being his signature, it was obtained upon a fraudulent representation that it was a guarantee, and the defendant signed it without knowing that it was a bill, and under the belief that it was a guarantee and if the defendant was not guilty of any negligence in so signing the paper, the defendant was entitled to the verdict. On appeal this direction was he'd to be correct. In Vorley v. Cooke (1857) as reported in 1 Gifford at page 230 Stuart V.C. said:

" It cannot be said " that Cooke's conduct was careless or rash. He was deceived as anyone with " the ordinary amount of intelligence and caution would have been deceived, " and he is therefore entitled to be relieved."

Whatever may be thought of the merits of the decision in that case, this passage illustrates the simple approach to the question whether the signer of the deed had been negligent or not. Similarly, in Lewis v. Clay (supra) Lord Russell of Killowen. C.J., left to the jury the question: " Was the defendant, in signing his name as he " did recklessly careless and did he thereby enable Lord William Nevill to " perpetrate the fraud?

Unfortunately this simple and satisfactory view as to the meaning and effect of negligence in relation to the plea of non est factum became distorted in the case of Carlisle and Cumberland Banking Co. v Bragg [1911] 1 K.B. 489. The defendant was induced to sign the document by fraud, and did not know that it was a guarantee, but thought that it was a mere proposal for insurance. The jury found that he had been negligent. Pickford J. considered that the finding of negligence was immaterial, and on appeal his view was upheld. Vaughan Williams L.J. said at page 494:

"I do not " know whether the jury understood that there could be no material " negligence unless there was a duty on the defendant towards the plaintiffs "

Even if they did understand that, in my opinion, in the case of this " instrument, the signature to which was obtained by fraud, and which was " not a negotiable instrument, Pickford J. was right in saying that the finding " of negligence was immaterial. I wish to add for myself that in my " judgment there is no evidence whatsoever to show that the proximate cause " of the plaintiffs' advancing money on this document was the mere signature " of it by the defendant. In my opinion, the proximate cause of the plaintiffs' " making the advance was that Rigg fraudulently took the document to the " bank, having fraudulently altered it by adding the forged signature of an " attesting witness, and but for Rigg having done those things the plaintiffs " would never have advanced the money at all."

The reasoning of the Court of Appeal in Carlisle and Cumberland Banking Co. v. Bragg has been criticised, e.g., by Sir William Anson in the year 1912 in 28 Law Quarterly Review 190, and by Professor Guest in the year 1963 in 79 Law Quarterly Review 246. Also doubts as to the correctness of the reasoning were expressed by Donovan L.J. delivering the judgment of the Court of Appeal in Muskham Finance Ltd. v. Howard [1963] 1 Q.B. 904. 913 and by Gavan Duffy J. in Carlton and United Breweries Ltd. v. Elliot't [1960] Victoria Law Reports 320.

In my opinion, Carlisle and Cumberland Banking Company v. Bragg was wrong in the reasoning and the decision.

I think it is not right to say that in relation to the plea of non est factum negligence operates by way of estoppel. The phrase " estoppel by negligence " tends, in this connection at any rate, to be misleading in several ways:

The phrase is inaccurate in itself, as has been pointed out in Spencer Bower and Turner on Estoppel by Representation at page 69 and in the judgments of the Court of Appeal in this case. Estoppel in the normal sense of the word does not arise from negligence: it arises from a representation made by words or conduct.

The phrase tends to bring in the technicalities of estoppel, and the requirement that the representation must be intended to be acted upon may cause difficulties.

The phrase tends to bring in the technicalities of negligence as they have been developed in the tort of negligence. This is what happened in Carlisle and Cumberland Banking Co. v. Bragg, as shown by the passage cited above. The innocent third party who has paid or lent money on the faith of a negligently signed document should not have to prove the signer owed a duty to him, nor that the signer's negligence was the proximate cause of the money being paid or lent.

An estoppel must be pleaded and proved by the party relying on it. In relation to the plea of non est factum, this could put the burden of proof on the wrong party. The person who has signed the document knows with what knowledge or lack of knowledge and with what intention he signed the document, and how he was induced or came to sign it. He should have the burden of proving that his signature was not brought about by negligence on his part.

Salmon, L.J., has said in his judgment in this case ([1969] 2 Ch. at page 48)—" If ... a person does sign a document because he negligently " failed to read it, I think he is precluded from relying on his own negligent " act for the purpose of escaping from the ordinary consequences of his " signature. In such circumstances he cannot succeed on a plea of non est " factum. This is not in my view a true estoppel, but an illustration of the " principle that no man may take advantage of his own wrong.". I agree.

The degree of difference required : The judgments in the older cases used a variety of expressions to signify the degree or kind of difference that, for the purposes of the plea of non est factum, must be shown to exist between the document as it was and the document as it was believed to be. More recently there has been a tendency to draw a firm distinction between(a) a difference in character or class, which is sufficient for the purposes of the plea, and

(b) a difference only in contents, which is not sufficient. This distinction has been helpful in some cases, but, as the judgments of the Court of Appeal have shown, it would produce wrong results if it were applied as a rigid rule for all cases. In my opinion, one has to use a more general phrase, such us " fundamentally different " or " radically different " or " totally different ".

I would dismiss the appeal.

(310042) Dd. 197055 100 10/70 St.S.

HOUSE OF LORDS

SAUNDERS

ANGLIA BUILDING SOCIETY

Lord Reid

Lord Hodson

Viscount

Dilhorne

Lord

Wilberforce

Lord Pearson

Lord Reid

My Lords,

On 9th November your Lordships decided that this appeal should be dismissed and then heard counsel on the matter of costs. Questions of general importance were raised and further consideration of the case was adjourned till to-day.

The original Appellant, Mrs. Gallie, died after argument had been heard by the Appellate Committee, and her executrix was substituted as a party before 9th November. All counsel involved agreed that this fact had no bearing on any of the questions argued before your Lordships and I shall, therefore, proceed to deal with these questions as if Mrs. Gallie were still alive.

Mrs. Gallie had been granted legal aid, and the main question is whether the successful Respondents, a large building society, should have an order for payment of any of their costs out of the legal aid fund under the Legal Aid Act, 1964. But before dealing with that Act I must recall the facts of this case so far as necessary for the application of its provisions.

Mrs. Gallie had a long lease of the house in which she lived, and this was of considerable value. She was induced to assign this lease to Lee for a fictitious price and this enabled Lee to borrow £2,000 from the Respondents on the security of the lease. There was nothing to suggest any irregularity to the Respondents and there is no suggestion now that the Respondent Society acted at any time otherwise than reasonably and in good faith.

In 1965 Mrs. Gallie sued Lee, and the Respondent Society sought a declaration that the assignment to Lee was void : if that had been established the Society's security would have been worthless. That action succeeded at first instance and the Society appealed to the Court of Appeal. That Court dismissed the action against the Society and ordered that they " be " at liberty to add their costs occasioned by this appeal to their said security ".

The Mortgage deed granted by Lee to the Society provided that all " moneys " costs charges and expenses properly paid or incurred by the Society under " this mortgage or in relation to this security . . . shall be a charge on " the mortgaged property". That provision is clearly applicable to the Society's costs in this action. So the Society do not need leave of the Court to add those costs to their security. It appears to me that the only value of the part of the Court of Appeal's Order which I have quoted is to shew that those costs were " properly " incurred. This form of words appears to be in regular use and it ought, I think, to be incorporated in the Order made by this House. A considerable part of the Society's costs can be covered in this way, and they only seek to recover from the legal aid fund the remainder which is not so covered. That will probably include their costs in this House and at least a part of their costs in the Court of Appeal.

It was argued for the Appellant that such an order would conflict with section 2(2) (e) of the Legal Aid and Advice Act, 1949, which is in these terms:

" (2) Where a person receives legal aid in connection with any pro- " ceedings—

" (e) his liability by virtue of an order for costs made against him " with respect to the proceedings shall not exceed the amount (if " any) which is a reasonable one for him to pay having regard to

" all the circumstances, including the means of all the parties and " their conduct in connection with the dispute."

I do not think there is any conflict. Mrs. Gallie succeeded in her action against Lee and she therefore recovered the house but subject to the rights of the Society as bona fide holders of the mortgage for value. As I have already said, the Order of the Court gives to the Society no more than what it already had. Moreover, the Act refers to orders "against" the legally aided person. Here there is no order against the Appellant in the sense of an order which does or may require the legally aided person to make a payment. On any view, all that this Order does is to enable the successful party to operate an existing right against that person's property.

I can now come to the main question—the proper construction of the Legal Aid Act, 1964. It seemed obvious to many people when the 1949 Act was passed that granting legal aid to one party would in many cases cause serious loss to his opponent if the opponent was not poor enough also to get legal aid. By means of legal aid unsuccessful actions would be brought which otherwise would never have been brought and the unaided defendant would have either to give in or to bear his own costs. Perhaps Parliament thought that legal aid would seldom be given to plaintiffs who failed to succeed or perhaps there were other reasons for not giving any relief. By 1964 it had become clear that the existing system was causing substantial injustice. In that year Parliament enacted provisions calculated to afford a limited degree of relief. A successful unassisted party was enabled to recover part or all of his costs from the legal aid fund, if certain con- ditions were satisfied. A distinction was drawn between costs in the court of first instance and costs in an appeal. As regards costs at first instance (he unassisted party has to shew that he will suffer severe financial hardship unless an order is made, but there is no such requirement when it comes to costs in an appeal. We are not concerned in the present case with the Respondents' costs at first instance but only with their costs in the Court of Appeal and in this House. The relevant provisions in this case are :

" 1.—(1) Where a party receives legal aid in connection with any " proceedings between him and a party not receiving legal aid (in this " Act referred to as ' the unassisted party') and those proceedings " are finally decided in favour of the unassisted party, the court by " which the proceedings are so decided may, subject to the provisions " of this section, make an order for the payment to the unassisted party " out of the legal aid fund of the whole or any part of the costs incurred " by him in those proceedings.

" (2) An order may be made under this section in respect of any costs " if (and only if) the court is satisfied that it is just and equitable in all " the circumstances that provision for these costs should be made out of " public funds : and before making such an order the court shall in every " case (whether or not application is made in that behalf) consider what " orders should be made for costs against the party receiving legal aid " and for determining his liability in respect of such costs.

" . . .

" (4) An order under this section shall not be made by any court in " respect of costs incurred by the unassisted party in any proceedings in " which, apart from this Act, no order would be made for the payment " of his costs."

The first condition is that we must be " satisfied that it is just and equitable " in all the circumstances " that the successful unassisted party should get relief. I think that " just and equitable in all the circumstances " is a single composite phrase conveying one idea, and that it would be useless and might well be misleading to seek to split up the phrase. It directs the Court to consider all the circumstances and to decide on broad lines. It was argued that it cannot be just and equitable to give relief to a wealthy person to whom the loss ought to seem a trifling matter. But it must be observed that when dealing with costs at first instance the Act brings in the means

of the unassisted person whereas there is no suggestion of a means test when dealing with costs on appeal. I do not say that it could never be relevant to consider the means of the unassisted person—in unusual circum- stances it might be—but in general and in the present case I see no reason to take into account the amount of the assets of this Society.

I think we must consider separately costs in this House and costs in the Court of Appeal. Cases can only come before this House with leave, and leave is generally given because some general question of law is involved. In this case it enabled the whole vexed matter of non est factum to be re-examined. This seems to me a typical case where the costs of the success- ful Respondent should come out of public funds.

But different considerations apply to the Respondents' costs in the Court of Appeal. When the use of public funds in affording legal aid has been the direct cause of the successful unassisted party having to incur additional costs, there appears to me to be a very strong case for holding that it is just and equitable that such additional costs should be made good to him out of public funds. But in the present case the Respondents were not taken to the Court of Appeal by their legally aided opponent. They had to go to that Court because the decision at first instance was against them. They may say that the action would never have started if Mrs. Gallie had not had legal aid from the beginning. But that appears to me to be too remote. Although the Respondents have ultimately succeeded they cannot recover their costs at first instance because they are not impecunious. I cannot see any sufficient reason why they should recover from public funds costs which they chose to incur in appealing against an adverse decision at first instance.

Two other matters must be considered before an order can be made for the Respondents to have their costs in this House paid out of the legal aid fund. Section 1(4) requires us to consider whether, if Mrs. Gallie had not had legal aid, costs would have been awarded against her. I think that this is clearly a case in which costs would have followed the event. So section 1 (4) does not prevent such an order.

The other matter arises under the last part of section 1(2). I think it is clear on the facts of this case, and I did not understand it to be disputed by counsel, that no order could have been made against Mrs. Gallie or could now be made against her executrix. It is not suggested that she or her estate had any substantial asset other than her dwelling house and as I have already stated the Respondents' right to add their costs to their security deprives that asset of all value to her or her estate.

I therefore move that an order be made for payment to the Respondents out of the legal aid fund of their taxed costs in this House.

Lord Hodson

My Lords,

I concur with my noble and learned friend. Lord Reid, in the conclusion which he has reached.

Viscount Dilhorne

My Lords,

After the hearing of this appeal, and before your Lordships delivered their opinions, Mrs. Gallie, the original plaintiff, died. It was agreed by counsel that that did not affect the questions as to costs which were later argued.

Mr. Albery, for the Appellant, challenged that part of the Order made by the Court of Appeal which declared that the Respondents were to be at liberty to add their costs of the action and those occasioned by the appeal to their security comprised in the mortgage dated the 10th August, 1962 : and contended that no such declaration should, in view of section 2(2) (e)

311774 A2

of the Legal Aid and Advice Act, 1949, have been made by the Court of Appeal or should be made by this House.

Section 2(2), so far as material, reads as follows :—

" Where a person receives legal aid in connection with any pro-

" ceedings:— " . . .

" (e) his liability by virtue of an order for costs made against him " in respect to the proceedings, shall not exceed the amount (if " any) which is a reasonable one for him to pay having regard " to all the circumstances, including the means of all the parties and " their conduct in connection with the dispute."

To add their costs to the security would, he contended, increase the Appellant's liability and do so without regard to the amount which it was reasonable for her to pay.

The mortgage deed contained the following provision :—

" And all moneys expended by the Society under any of the foregoing " provisions of this clause and also all other moneys costs charges and " expenses properly paid or incurred by the Society under this Mortgage " or in relation to this security . . . shall on demand be repaid to the " Society by the Mortgagor and until such repayment shall be a charge " on the mortgaged property."

The Respondents were thus entitled to add their costs of defending the action to their security, provided that they were properly paid or incurred, without any order or declaration by the Court. It is, nevertheless, convenient that in appropriate cases such a declaration should be made, for that may avoid controversy in the future on the question whether the expenditure was properly incurred.

The question under consideration is whether this right of the mortgagees is restricted by the Legal Aid Act, 1949, section 2(2) when the other party to the litigation is an assisted person and the exercise of the right will increase the amount required to pay off the mortgage. A similar question arose under the old Poor Persons procedure in In re Leighton's Conveyance

[1937] 1 Ch. 149

. It was then provided by Order XVI r. 28 of the Rules of the Supreme Court that a person suing as a poor person should not be ordered to pay any costs. The Court of Appeal held that the Order did not prevent the mortgagee adding to her security her costs in an action brought by the mortgagor suing as a poor person.

In the course of his judgment Lord Wright, M.R., said at p. 152:

" Now what the learned judge has done is to deny the ordinary right " of a mortgagee to add to his security all costs, charges and expenses " reasonably and properly incurred in ascertaining or defending his rights, " or in recovering the mortgage debt. It is not really a matter which " arises in connection with the awarding of costs. If it had been a " question of the awarding of costs as between parties to the action the " learned judge could not have ordered Mrs. Priestman to pay any costs, " because she was proceeding as a poor person, and under the terms of " Order XVI r. 28 ' no poor person shall be liable to pay costs to any " other party '; but that is not the question at all. What the learned " judge has done here has been to do something entirely different from " ordering ordinary costs in the action : he has made an order which has " the effect, if it stands, of depriving the mortgagee in this case . . . " of the ordinary rights of a mortgagee. The mortgagee here was com- " pelled to defend her rights, or at least cannot be said to have acted " unreasonably in seeking to defend her rights."

The language of Order XVI r. 28 and of the Legal Aid and Advice Act, 1949, section 2(2) differs but in this case, as in In re Leighton's Conveyance, no order was made for the payment of costs by the Appellant. Her liability was not increased by an order for costs made against her. Section 2(2) was not, in my opinion, infringed by the declaration made by the Court of Appeal and this House can, and, in my view, should, make a similar declaration.

Mr. Oliver for the Respondents sought to obtain an order for the payment of the Respondents' costs in the Court of Appeal and in this House, in so far as they were not covered by the security, out of the Legal Aid Fund.

When the Legal Aid Scheme now embodied in the Legal Aid and Advice Act, 1949, was devised by the Committee of which my noble and learned friend Lord Hodson and I were members, it was realised that the grant of legal aid to a litigant might have unfortunate consequences to his successful unassisted opponent. If the latter's means were only just above the limits which would enable him to obtain legal aid, he might find himself though successful in the action impoverished by the burden of his own costs. The grant of legal aid might lead to appeals which might not otherwise be brought, with the result that the unassisted litigant might, though successful, have a heavy bill to pay for his own costs. Though the inequity of this was appreciated, it was not at the time possible to find a solution.

The Legal Aid Act, 1964, dealt with the problem by making it possible in certain circumstances to order the payment of the unassisted litigant's costs out of the Legal Aid Fund, where the proceedings are finally decided in his favour. Such an order can be made—

" if (and only if) the court is satisfied that it is just and equitable " in all the circumstances that provision for those costs should be made " out of public funds; and that before making such an order the court " shall in every case (whether or not application is made in that behalf) " consider what orders should be made for costs against the party receiv- " ing legal aid and for determining his liability in respect of such " costs ". (Section 1 (2).)

In this case it is clear that no order for costs should be made against the Appellant.

Where the application is in respect of costs incurred in a court of first instance further conditions have to be satisfied before such an order is made. The proceedings must have been instituted by the assisted party, and the court must be satisfied that the unassisted party will suffer sever financial hardship if the order is not made.

A defendant in an action brought by an unassisted party, may, though successful in the action, not be able to obtain payment of the costs awarded to him. It would be wrong if, as a result of being sued by an assisted litigant, he was placed in a better position than if sued by an unassisted person, by being able to have recourse to the legal aid fund. This, I think, was the reason for the requirement that severe financial hardship must be shown to result to the unassisted litigant if such an order was not made in relation to costs in the court of first instance.

In this case the Respondents had to appeal to the Court of Appeal to obtain the reversal of the Judgment given against them.

A very wide discretion has been entrusted to the courts in determining whether in all the circumstances it is just and equitable to make an order. In some cases, perhaps a case where the hearing of an appeal has taken a long time and so involves a large amount of costs, it may be just and equitable to order that some part or the whole of the unassisted litigant's costs of the appeal should be paid out of the Legal Aid Fund. The circumstances of each case will differ. I do not think that the fact that the Respondents had to appeal to the Court of Appeal to obtain judgment in their favour suffices in this case to establish that it is just and equitable to make such an order in relation to their costs in the Court of Appeal. One circumstance that has to be borne in mind is the fact that the Respon- dents can add their costs in the High Court and in the Court of Appeal to their security. In most cases a successful unassisted litigant in an appeal will not be able to obtain reimbursement of his costs in the High Court.

The words " if (and only if)" in section 1 (2) of the Act in my view show that no such order should be made unless it is patently clear that it will be unjust and inequitable not to do so. As I have said, a wide discretion is given to the courts and, although in relation to costs in the appellate

311774 A3

courts the question of severe financial hardship is not required by the Act to be considered, nevertheless that does not, in my opinion, mean that the financial position of the unassisted litigant is not one of the circumstances to which regard may properly be had.

The Appellant appealed to this House having obtained legal aid for the purpose. I do not wish to suggest that such aid was not properly granted. Difficult questions of law had to be considered. Is it just and equitable that the Respondents should, though successful in the Court of Appeal and in this House, have to pay their costs in this House? I think not, and I think that, if no such order as they seek were made in relation to their costs in this House, the Legal Aid Act, 1964, would have failed in its purpose.

In my opinion, an order should be made for the payment to the Respondents out of the Legal Aid Fund of their costs in this House in so far as those costs are not covered by their security.

Lord Wilberforce

My Lords,

i concur.

Lord Pearson

My Lords,

The substantive appeal to your Lordships' House having been dismissed, two questions have been raised with regard to costs. The first question is whether the successful Respondents, the Building Society, are entitled as mortgagees to add their costs to their security. The second question is whether an order should be made under the Legal Aid Act, 1964, for the payment out of the legal aid fund to the Building Society of the whole or any pan of their costs insofar as they are not covered by the realisation of their security.

The main facts relevant to these questions of costs can be shortly summarised.

Mrs. Gallie, the plaintiff and Appellant in the proceedings, has died and her executrix has been substituted for her as a party. In 1962 Mrs. Gallie was about 78 years of age, and she had a long lease of the house in which she lived. On the 24th June, 1962, she executed a deed assigning her lease to Mr. Lee. The price was stated to be £3,000, but it was not paid. On the 10th August, 1962, Mr. Lee obtained from the Building Society a loan of £2,000 secured by a mortgage on the property. Clause 7 (3) of the mortgage deed provided that, " all other moneys, costs, charges and expenses " properly paid or incurred by the Society under this mortgage or in relation " to their security with interest thereon . . . .shall on demand be repaid to " the Society by the mortgagor and until such repayment shall be a charge " on the mortgaged property". In July, 1964, Mrs. Gallie commenced an action against Mr. Lee and the Building Society, claiming a declaration that the assignment of the house to Mr. Lee was void, and also claiming other relief. She alleged that she had been induced to execute the deed of assignment by a fraudulent representation made to her by Mr. Lee that it was a deed of gift to her nephew, Mr. Parkin, and she alleged that conse- quently it was not her deed. Her claim against Mr. Lee was based on fraud and non est factum. Her claim against the Building Society was based solely on non est factum, there being no suggestion of any wrongful or improper conduct on the part of the Building Society. The learned trial judge, Stamp J., decided in favour of the plaintiff, Mrs. Gallie, and by his judgment(1) he made a declaration as against Mr. Lee that the assignment was void, and he directed an enquiry as to damages;

(2) he made a declara- tion in the same terms as against the Building Society, and ordered them to deliver up the title deeds and to pay three-quarters of Mrs. Gallie's costs.

There was no appeal by Mr. Lee. There was an appeal by the Building Society, and the Court of Appeal allowed the appeal, holding that Mrs. Gallie's claim against the Building Society, based on non est factum, was not established. The Court of Appeal varied the judgment of the learned judge, leaving untouched his declaration and direction as against Mr. Lee, but substituting for his declaration and orders as against the Building Society an order that the action against them be dismissed. They also ordered that the Building Society should be at liberty to add their costs of the action and their costs of the appeal to the security comprised in the mortgage dated the 10th August, 1962. Your Lordships granted leave for Mrs. Gallie to appeal to your Lordships' House. The appeal (which, as stated above, was unsuccessful) involved important questions of general law as to the nature and scope of the plea or doctrine non est factum. Mrs. Gallie was at all stages of the proceedings an assisted person under the Legal Aid Acts.

Now it is contended on behalf of Mrs. Gallie's executrix that the order of the Court of Appeal that the Building Society be at liberty to add their costs of the action and of the appeal to the security comprised in the mortgage should be set aside because it involves an infringement of section 2 (2) (e) of the Legal Aid and Advice Act, 1949.

(e) provides that:

" Where a person receives legal aid in connection with any " proceedings. . . .

" (e) his liability by virtue of an order for costs made against him with respect to the proceedings shall not exceed the amount (if any) " which is a reasonable one for him to pay having regard to all " the circumstances, including the means of all the parties and their " conduct in connection with the dispute."

In my opinion, that contention fails, because the order imposes no personal liability on the assisted person and the right of the Building Society as mortgagees to add their costs to their security arises from the mortgage and not from the order of the Court of Appeal.

Normally the mortgagees' right is being asserted against the mortgagor and is contractual, Cotterell v. Stratton (1872) L.R. 8 Ch. 295, Turner v. Hancock (1882) 20 ChD 303 . In this case Mrs. Gallie was not a party to the mortgage and so not a contracting party in relation to the mortgagees, but she has been ascertained to be the person entitled to the equity of redemption and, in my opinion, the mortgagees have by virtue of the mortgage a right as against her to add their costs to the security, unless the court otherwise orders on the ground of unreasonable conduct on their part.

That the mortgagees have such a right in relation to a person in Mrs. Gallic's position is shown by a passage in the judgment of Romer, L.J., in In re Leighton's Conveyance

[1937] 1 Ch. 149

at page 154:

"Where a " mortgagee's title is attacked by somebody who is a stranger to the " mortgagee, the circumstances in which the mortgagee is entitled to add his " proper costs in defending his title to the mortgagee's security are stated by "

Sir W. Page-Wood, V.C., in Parker v. Watkins (John 133, 137) where he " said this:

' I quite agree that, where a mortgagee has been put to expense " ' in defending the title to the estate, the defence being for the benefit of " ' all parties, he is entitled to charge those expenses against the estate; but '

' ' if some litigious person chooses to contest his (the mortgagee's) title to " ' the mortgage, that should not affect the parties interested in the equity " ' of redemption, unless they can be shown to have concurred in or assisted " ' the litigation.'' Those last words apply a fortiori to the case of Mrs. Gallie. She was herself the person who contested the Building Society's title to the mortgage, and instead of merely concurring in or assisting the litigation she started it and carried it on.

The restricted function of the court in relation to the mortgagee's right under a mortgage has been and is defined in the Rules of the Supreme Court. The former Order 65, rule 1, provided as follows:

" Subject to the provisions of the Act and these Rules, the costs of " and incident to all proceedings in the Supreme Court, including the " administration of estates and trusts, shall be in the discretion of the " court or judge: Provided that nothing herein contained shall deprive " an executor, administrator, trustee or mortgagee who has not unreason- " ably instituted or carried on or resisted any proceedings, of any right " to costs out of a particular estate or fund to which he would be " entitled according to the rules hitherto acted upon in the Chancery " Division."

That provision was replaced by Rule 6 (2) of the Supreme Court Cost Rules, 1959, which has been repeated without alteration in Order 62, rule 6 (2), of the revised Rules now in force. Rule 6 (2) provides as follows:

" Where a person is or has been a party to any proceedings in the " capacity of trustee, personal representative or mortgagee, he shall, " unless the Court otherwise orders, be entitled to the costs of those " proceedings, in so far as they are not recovered from or paid by any " other person, out of the fund held by the trustee or personal representa- " tive or the mortgaged property, as the case may be ; and the Court " may otherwise order only on the ground that the trustee, personal " representative or mortgagee has acted unreasonably or, in the case " of a trustee or personal representative, has in substance acted for his " own benefit rather than for the benefit of the fund."

In my opinion, the Court of Appeal by their order were not imposing on the assisted person any personal liability for the mortgagees' costs, nor creating any right of the mortgagees to add their costs to their security, but were declining to order otherwise, i.e., declining to deprive the mortgagees of their right arising from their mortgage. Accordingly, the Court of Appeal's

Order does not involve any infringement of section 2 (2) (e) of the Legal Aid and Advice Act, 1949. This conclusion is in line with the decision and reasoning of the Court of Appeal (Lord Wright, M.R., Romer and Greene, L.JJ.) in In re Leighton's Conveyance (supra) and appears to be in line with the decision of Pennycuick, J., in Halsall v. Egbunike, which is very shortly reported at (1963) 107 Sol. Jo. 514.

In my opinion also the Building Society as mortgagees are entitled to add to their security their costs incurred in resisting Mrs. Gallic's appeal to your Lordships' House. There is no ground for ordering otherwise, as there is no evidence or suggestion that the Building Society acted unreason- ably in any way. The right of the Building Society to add to their security these costs, as well as their costs of the trial and of the appeal to the Court of Appeal, may not be of much practical value, but in principle they have the right.

The second question is whether an order should be made for payment of any of the costs of the Building Society out of the legal aid fund. The relevant provisions are contained in section 1 of the Legal Aid Act, 1964, and are as follows:

" 1.—(1) Where a party receives legal aid in connection with any " proceedings between him and a party not receiving legal aid (in this " Act referred to as ' the unassisted party') and those proceedings are " finally decided in favour of the unassisted party, the court by which " the proceedings are so decided may, subject to the provisions of this " section, make an order for the payment to the unassisted party out of " the legal aid fund of the whole or any part of the costs incurred by " him in those proceedings.

" (2) An order may be made under this section in respect of any " costs if (and only if) the court is satisfied that it is just and equitable " in all the circumstances that provision for those costs should be made " out of public funds; and before making such an order the court shall " in every case (whether or not application is made in that behalf) " consider what orders should be made for costs against the party " receiving legal aid and for determining his liability in respect of such " costs.

" (3) Without prejudice to subsection (2) above, no order shall be " made under this section in respect of costs incurred in a court of " first instance, whether by that court or by any appellate court, unless—

" (a) the proceedings in the court of first instance were instituted by " the party receiving legal aid; and

" (b) the court is satisfied that the unassisted party will suffer severe " financial hardship unless the order is made.

" (4) An order under this section shall not be made by any court in " respect of costs incurred by the unassisted party in any proceedings in " which, apart from this Act, no order would be made for the payment " of his costs.

" . . .

" (6) In this section ' costs' means costs as between party and party; " but the costs in respect of which an order may be made under this " section include the costs of applying for that order."

In view of the provisions of subsection 3(b), the Building Society are not asking for an order for their costs of the trial at first instance to be paid out of the fund. They have very large resources, and it could not be said that they " will suffer severe financial hardship unless the order is made ".

The difficult problem arises with regard to the Building Society's costs of the appeal to the Court of Appeal. They do not have to show " severe " financial hardship ", because subsection (3) is not applicable. On the other hand, under subsection (2) the court, before making an order for payment of costs of an unassisted party out of the fund, must be " satisfied that it is " just and equitable in all the circumstances that provision for those costs " should be made out of public funds ". In my opinion, this requires some- thing more than that the Building Society succeeded in their appeal. All the circumstances have to be considered. One circumstance is the innocence of the Building Society : they have not behaved wrongfully or negligently or oppressively. Another circumstance, which I think is admissible under subsection (2), though not conclusive under that subsection as it might be under subsection (3), is that the Building Society have very large resources, so that their recovery of these costs or failure to recover them will not materially affect their financial position. Another circumstance is that they were not taken to the Court of Appeal by the legally-aided plaintiff. They themselves took the plaintiff to the Court of Appeal. I think this circum- stance is entitled to some weight, but it is far from being decisive against the Building Society on the present issue, because it was legal aid which enabled the plaintiff to gain the judgment at first instance in her favour, and the Building Society had to appeal in order to get the judgment reversed. There is another circumstance to which I think some weight should be given. It appears from tentative figures given by counsel and from the well- known increase in the level of house prices in recent years that the mortgage security is likely to be worth substantially more than the debt which, apart from the costs now under consideration, is owing under the mortgage. The Building Society are being allowed to add their costs to their security. It is likely that all or most of their costs of the trial at first instance will be recovered by realisation of the security, although they could not have obtained an order in respect of these costs under the Legal Aid Act, 1964. Thus, the Building Society are in a favourable position in comparison with most other applicants for orders under this Act. Having regard to all the circumstances which I have mentioned, I am not satisfied that it would be just and equitable that provision for the Building Society's costs of the appeal to the Court of Appeal should be made out of public funds.

Then there are the Building Society's costs of resisting the plaintiffs appeal to your Lordships' House. This was the plaintiff's appeal, and leave was given for it because it involved important general questions of law. It is not fair or equitable that a substantial part of the expense of elucidating the law should be thrown upon the successful Respondents. In my opinion, pro- vision should be made for payment out of the fund of the Building Society's costs of resisting the plaintiff's appeal to your Lordships' House, except in so far as such costs may have been recovered by realisation of the security.

(311774) Dd. 197055 80 12/70 St.S.