National Westminster Bank Plc v. Amin and Another [2002] UKHL 9

House of Lords
Between
National Westminster Bank PlcAppellantAmin and AnotherRespondent
Before
Lord Nicholls of BirkenheadLord HoffmannLord Hope of CraigheadLord Scott of FoscoteLord Rodger of EarlsferryDate 28 February 2002
[1]I have had the advantage of reading in draft the speech of my noble and learned friend Lord Scott of Foscote. For the reasons he gives, and with which I agree, I would allow this appeal. LORD HOFFMANN My Lords,[2]I have had the advantage of reading in draft the speech of my noble and learned friend Lord Scott of Foscote. I agree with it, and for the reasons which he has given I would allow the appeal and make the order that he proposes. LORD HOPE OF CRAIGHEAD My Lords,[3]I have had the advantage of reading in draft the speech of my noble and learned friend Lord Scott of Foscote. I agree with, and for the reasons which he has given I would allow the appeal and make the order that he proposes. LORD SCOTT OF FOSCOTE My Lords,[4]This is a case which, in my opinion, must go to trial. It is a great pity that National Westminster Bank ('the bank'), respondent in this House, appealed against the decision to that effect reached both by Deputy District Judge Sanghera and by Judge Hindley QC. The bank appealed to the Court of Appeal and on 9 December 1998 Mummery and Clarke LJJ allowed the appeal. They held that the mortgagor, Mrs Amin, had no reasonable prospect of resisting the claim by the bank, as mortgagee, to possession of the mortgaged property, 82 Radnor Close. They applied principles set out in the judgment of Stuart-Smith LJ, giving the judgment of the Court of Appeal, in Royal Bank of Scotland plc v Etridge (No 2) [1998] 4 All ER 705. If the appeal in the present case had been heard after this House had dealt with the Etridge (No 2) appeal and the other conjoined appeals (see Royal Bank of Scotland plc v Etridge (No 2) [2001] 3 WLR 1021 ), I think it likely that the appeal from Judge Hindley would have been dismissed.[5]The relevant facts, those that are free from dispute, can be very shortly stated. Mr and Mrs Amin came to this country from Uganda in 1972. In 1980 they purchased 82 Radnor Close in their joint names. The price was £18,000. The property became their matrimonial home where they lived with their children. Mrs Amin still lives there. Mr Amin died in 1996. Mr and Mrs Amin were when they arrived in England, and remained, Urdu speakers unable to speak or understand English. Mr and Mrs Amin's youngest son, Irfan Choudhry, was educated in this country to university level. He is, of course, fluent in English. In 1988 he was the sole proprietor of a belt manufacturing and retailing business and wanted to borrow £30,000 from the bank in order to acquire some new machinery. The bank agreed to lend him the money but required security. The security took the form of a legal charge over 82 Radnor Close to secure the payment to the bank of "all present future actual and/or contingent liabilities" of Irfan Choudhry. Mr and Mrs Amin signed the charge, which was dated 2 September 1988.[6]On 26 August 1988 the bank had written to a firm of Birmingham solicitors, Messrs Christopher Miles. The letter said this:
"We have agreed to assist our customer Mr I Choudhry with loan facilities, subject to our being given a second legal mortgage by Mr and Mrs Amin over [82 Radnor Close]. In this connection we enclose the necessary mortgage document, and shall be grateful if you will attend to the following formalities on our behalf. 1. Please ensure Mr and Mrs Amin are fully aware of the terms and conditions of the mortgage document, answering any questions they may raise. 2. Obtain their signature in the space specified on page three of the mortgage document. Their signature should then be witnessed by a solicitor of FILEX who states his capacity when signing. …. 8. Your costs in this connection are to be paid by Mr and Mrs Amin. …. …. "
[7]The matter was attended to on behalf of Messrs Christopher Miles by a Mr Eyre, who was then an assistant solicitor with the firm. On 2 September 1988 he wrote to the bank enclosing the mortgage that Mr and Mrs Amin had executed. The letter said:
"I confirm that I have explained the terms and conditions to Mr and Mrs Amin."
[8]After a while Mr Irfan Choudhry's business encountered financial difficulties and the bank commenced proceedings for possession of the mortgaged property. The proceedings were brought in the Birmingham County Court.[9]Mrs Amin's main pleaded defence was that: "The mortgage loan should be avoided because of the undue influence exerted by the debtor over the defendant and by the failure of the plaintiff to discharge their obligations pursuant to the equitable 'Doctrine of Notice'." (para 4 of the Amended Defence and Counterclaim served in January 1998).[10]The particulars given of these allegations included the following:(i) "The defendant does not speak, read or write English and has been, and is, dependent on her children" (para 4(c)).(ii) "The plaintiff bank is situate in a district of the City of Birmingham in which there are significant numbers of citizens of Asian background. It is not uncommon that the parents do not understand English, whilst their children do and are cultural assimilated" (para 4(e)).(iii) "The plaintiffs failed to advise the defendant in the absence of (her husband and) the debtor of the amount of her potential liability and of the risks involved. In addition, the plaintiffs failed to advise the defendant to take independent legal advise (sic)" (para 6).[11]The Amended Defence alleged, also, that Mr Eyre had "acted as agent of the plaintiff and any knowledge and/or default of the said solicitor is fixed with the plaintiff principal …. "[12]There was also a counterclaim seeking an order for the legal mortgage to be set aside. The pleading in support of the counterclaim more or less mirrored the pleading in the amended defence. There was, however, an explicit allegation that:
"The solicitor failed to adequately, or at all, explain the effect of the legal mortgage and give independent legal advice. The solicitor acted as [agent] of the plaintiff." (para 15(iv)). and that "
The defendant was from an ethnic minority in which the plaintiff bank had specialist experience of conducting business." (para 16(b)).[13]The bank's response to Mrs Amin's pleaded defence and counterclaim was to apply for an order that they be struck out under County Court Rules Order 13, rule 5. The deputy district judge formed the view that Mrs Amin's case could not be described as hopeless and he dismissed the application. On appeal Judge Hindley agreed. She expressed herself as "not satisfied that the defendant's case is so manifestly and obviously unsustainable that it should be struck out under Ord 13, r 5." (p 11 of the transcript of her judgment). There was, at this stage, no evidence before the court from Mrs Amin. The legal mortgage and the correspondence between Mr Eyre and the bank were before the court but that was all. So the judge gave directions for the simultaneous filing of witness statements by 6 April 1998. This led to two important witness statements, one signed by Mrs Amin on 6 April 1998 and the other signed by Mr Eyre on 1 April 1998. Mrs Amin's statement was in English but included a certificate by an Urdu translator that it had been translated into Urdu and that she had approved the contents.[14]But, in addition, the bank appealed to the Court of Appeal, continuing to maintain that the defence and counterclaim should be struck out. The Court of Appeal, in allowing the appeal, concentrated on the confirmation that Mr Eyre had given to the bank which, said Mummery LJ, "could not have been clearer". He held that the bank was entitled to rely on that confirmation and had no need to enquire any further into Mr and Mrs Amin's understanding of the transaction they were entering into.[15]Leave to Mrs Amin to appeal to this House was given on 14 March 2000 but the appeal was stood out pending the hearing of the Etridge (No 2) and other conjoined appeals and, further, after judgment on those appeals had been given, in order to allow the effect of the judgments to be considered.[16]The hearing of the appeal before this House has been somewhat of a dog's dinner. First, an affidavit sworn by Mr Eyre that was before the Court of Appeal has not been placed before your Lordships. Your Lordships have had to gather its content from the references to it made by Mummery LJ (see p 5 of the transcript of his judgment). Second, the witness statements signed by Mrs Amin and Mr Eyre have been placed before your Lordships but, apparently, were not shown to the Court of Appeal. Third, Mr DeMello, counsel for Mrs Amin, has taken as his main point that Mr Eyre was never Mr or Mrs Amin's solicitor, a proposition that is based upon the contents of Mrs Amin's witness statement, in particular paragraph 13. He has taken this point notwithstanding that in the agreed Statement of Facts and Issues, which he signed, it is clearly stated that Mrs Amin "had the benefit of independent legal advice prior to execution of the charge."[17]Mr Cottle, counsel for the bank, understandably protested that Mrs Amin should be held to the agreed statement that had been signed by her counsel. But I have very much in mind that there has not yet been a trial at which Mrs Amin's assertions can be made the subject of findings of fact and that her assertions regarding Mr Eyre, contained in a statement supplied to the bank as long ago as April 1998, may turn out to be correct. In my opinion, Mrs Amin would suffer an injustice if she were to be debarred from prosecuting a defence based upon the proposition that Mr Eyre was not her solicitor. I would propose, therefore, that in considering the merits of her case, the House should base itself upon the pleadings, upon the two witness statements and upon Mr Eyre's affidavit.[18]For the purpose of the striking-out application it has been accepted by the bank that Mrs Amin has an arguable case of undue influence exerted over her and her husband by their son, Irfan. The bank accepts, also, that unless it can show that it took reasonable steps to satisfy itself that Mr and Mrs Amin understood the nature and effect of the transaction and knew what they were doing in entering into it, it (the bank) may find itself affected with constructive notice of Irfan's impropriety and of Mr and Mrs Amin's lack of effective consent to the transaction. The bank relies on its request to Messrs Christopher Miles expressed in paragraph 1 of its letter of 26 August 1988 and on Mr Eyre's confirmation given in his letter of 2 September 1988. The question is whether, for striking-out purposes, that is enough.[19]The first critical issue relates to the status of Mr Eyre. It is common ground that he convened a meeting attended by Mr and Mrs Amin and by Mr Irfan Choudhry and that at this meeting Mr and Mrs Amin signed the legal mortgage. Mrs Amin says that they did so without receiving any advice from Mr Eyre about the legal mortgage or its effect. She says "Nothing was explained to us by the solicitor or by Irfan". At this stage it must be assumed that this is true. It is not suggested that Mr Eyre could speak Urdu. No solicitor's note of the meeting, recording what had taken place, has been produced. The only evidence to the contrary is Mr Eyre's own evidence, expressed in his letter of 2 September 1988 to the bank, in paragraph 3 of his written statement and in the passage from his affidavit referred to by Mummery LJ. This is an issue that can only be resolved at trial.[20]So where does that leave the bank? If Mr Eyre was acting for Mr and Mrs Amin when meeting them in his office and when writing the letter to the bank of 2 September 1988, it may be that the right conclusion is that, as Mr Cottle has submitted, the bank had taken all reasonable steps to satisfy itself that Mr and Mrs Amin had understood and freely entered into the transaction. In Etridge (No 2) [2001] 3 WLR 1021 , 1046, para 80 Lord Nicholls of Birkenhead said:
"In respect of past transactions, the bank will ordinarily be regarded as having discharged its obligations if a solicitor who was acting for the wife in the transaction gave the bank confirmation to the effect that he had brought home to the wife the risks she was running by standing as surety."
[21]In a case such as Lord Nicholls was describing, the failure of the solicitor properly or sufficiently to advise his client, a failure not known to the bank and inconsistent with the confirmation given by the solicitor to the bank, would not place the bank under any additional obligation.[22]But if the solicitor who gives the bank the confirmation was not solicitor for the surety/mortgagor and had in fact failed, contrary to the confirmation, to give the surety a proper or sufficient explanation of the transaction in question, the case assumes a very different complexion. Who, then, was the solicitor acting for? Who gave the solicitor the instructions under which he was acting? If the answer is 'the bank', then the bank, it seems to me, cannot rely on the solicitor's inaccurate confirmation. Section 199 of the Law of Property Act 1925 would come into play.[23]The Wallace case, one of the conjoined appeals dealt with by the House in Etridge (No 2) is very much in point. The solicitor was a Mr Samson. He was asked by Midland Bank to "attend to the necessary formalities". He had a meeting in his office with Mrs Wallace, the proposed surety/mortgagor. She signed the mortgage. Mr Samson endorsed it "The same having first been explained to her and she appearing perfectly to understand it". But she contended that he had not in fact given her any advice at all. A summary judgment application was made by the bank. The trial judge and the Court of Appeal found in favour of the bank. The trial judge said "…. in this situation the risk of her not being properly advised is one which lies between her and Mr Samson and which cannot be passed on to the bank". The Court of Appeal agreed. But this House disagreed. See Lord Nicholls, at p 1049, para 90(1), Lord Hobhouse of Woodborough, at pp 1064-1065 para 125 and my own speech, at pp 1095-1096, paras 261 to 264.[24]In my opinion, the status of Mr Eyre is an issue that must be decided at a trial. There is no evidence that either Mr Amin or Mrs Amin gave any instructions to Mr Eyre or retained him as their solicitor. The only instructions known to have been given to him came from the bank. A solicitor cannot ordinarily, unless he first obtains his client's consent, inform a third party of what has transpired between his client and himself. Mr Eyre informed the bank that he had explained to Mr and Mrs Amin the terms and conditions of the legal mortgage. There is no indication that they had authorised him to give the bank this information and the letter seems to me inconsistent with the normal solicitor/client relationship. All these matters can be explored at trial. And even if the right conclusion, when all the evidence has been given and tested, is that Mr and Mrs Amin had indeed retained Mr Eyre as their solicitor, it does not seem to me that the bank will necessarily succeed. In the passage in paragraph 80 of Lord Nicholls' speech in Etridge (No 2) that I have cited, my noble and learned friend refers not to what would be an inevitable conclusion but to what would "ordinarily" be the conclusion. The present case has features which, in my opinion, raise the question whether something more might not be required of the bank before it could claim to be free of constructive notice of undue influence or of other impropriety of Mr Irfan Choudhry. The features of the case I have in mind are these:(i) The bank, it is alleged, knew that Mr and Mrs Amin could not speak English and knew of their cultural, ethnic minority background. The bank knew, therefore, that they might be specially vulnerable to exploitation in relation to transactions such as that which was being proposed.(ii) The bank's letter of 26 August 1988 gave no indication of any special care that might need to be taken in advising the Amins.(iii) Indeed the letter simply asked the solicitors to attend to "the formalities", an expression totally inapt, in my opinion, to impress upon the solicitors the importance that the Amins should receive proper and sufficient advice about the legal implications and effect of the transaction being proposed.(iv) Mr Eyre's letter of 2 September 1988 to the Bank simply said that the author had "explained" the terms and conditions. It said nothing about their apparent understanding of the explanation. In ordinary cases I think that understanding, once the explanation had been given, could be assumed. But it is arguable that with Mr and Mrs Amin such an assumption would not be a safe one. I think the bank, if they indeed knew as much about Mr and Mrs Amin and their background as they are alleged to have known, might reasonably have asked for confirmation of Mr and Mrs Amin's apparent understanding of the transaction.[25]How the matter will appear after a full trial I do not know and am not inclined to speculate about. But even if it had not been for the uncertainty as to whether Mr Eyre was ever the solicitor for Mr or Mrs Amin, this case would not, in my opinion, have been fit to be dealt with on a strike-out application. It should go to trial.[26]For these reasons I would allow the appeal and direct that the case be remitted to the County Court for trial. LORD RODGER OF EARLSFERRY My Lords,[27]I have read the speech of my noble and learned friend, Lord Scott of Foscote. I agree with it and for the reasons which he gives I too would allow the appeal and make the order that he proposes.

Cited in 2 later judgments