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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> First National Bank Plc v Walker [2000] EWCA Civ 3015 (23 November 2000) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/3015.html Cite as: [2001] Fam Law 182, [2001] 1 FCR 21, [2000] EWCA Civ 3015, [2001] 1 FLR 505

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDER OF HIS HONOUR JUDGE BRANDT

		(Colchester County Court) Royal Courts of Justice Strand London WC2
		Thursday, 23rd November 2000

1. THE VICE-CHANCELLOR: This is an appeal of First National Bank Plc ("the Bank") brought with the permission of Lord Justice Tuckey from the order of His Honour Judge Brandt, sitting in the Colchester County Court, made on 22nd February 2000. The judge was hearing the trial of the preliminary issue. He determined that the second defendant, Mrs Walker, ("the wife") had not affirmed, ratified or elected to confirm the transaction effected on 8th January 1991 whereby she joined with her then husband, the first defendant, ("the husband") in the mortgage of the jointly owned matrimonial home to secure a loan for use in the business he carried on in partnership with a Mr Burpitt. In other words, had the wife precluded herself from pursuing a defence based on the principles established in Barclays Bank Plc v O'Brien [1994] 1 AC 180 ("O'Brien") to the claim for possession brought by the Bank?
2. The facts of the appeal are fairly detailed and somewhat unusual. The husband and the wife were married in July 1980. Subsequently, they had two children. On 29th January 1988 they acquired the matrimonial home in question at 8 Mangapp Chase, Burnham on Crouch, Essex as beneficial joint tenants. They paid £98,000 for it. In January 1991 they charged the matrimonial home to First National Bank Plc as security for a loan for which they then applied. The property was already subject to two prior mortgages in favour of Barclays Bank in the total sum of £54,000 odd. In their application for the further loan they attributed a value to the property of £110,000. The further loan from First National Bank Plc was agreed in a credit agreement dated 22nd February 1991 whereby the husband and the wife were to be provided with a loan facility of £16,581, being £15,000 loan and £1,581 protected payment premium. The money so raised was used in the business carried on in partnership by the husband with Mr Burpitt.
3. The marriage broke down. On 25th March 1993 a decree absolute was made for its dissolution. In those proceedings the wife applied for ancillary relief. In an affidavit in support of that application, sworn by her on 5th April 1993, she admitted the charge over the home in favour of First National Bank Plc and securing the sum of, as she thought, £17,000 odd. She referred, in paragraph 12 of that affidavit, to the fact that the property was subject to three mortgages, the first, she thought, in favour of Barclays Bank Plc in the sum of £48,000, the second, as she thought, in favour of Lloyds Bank Plc for £10,000 and the third being the charge in favour of First National Bank for £17,000 odd. In paragraph 19, in answer to the question -

"Is there any other reason which you wish to urge against paying maintenance or are there any other matters which you wish to raise in connection with this application?"

4. the wife stated:

"At the present time the respondent is making no credible financial contribution whatsoever to the cost of the running of the former matrimonial home or indeed in respect of thechildren's needs. First National Securities have now served upon me a default notice and I am concerned that in the absence of any credible financial contribution via the respondent, possession proceedings will be undertaken and that I will lose our home."

5. In May 1993 the Bank demanded payment of the outstanding balance. It instituted proceedings for possession on 10th June 1993. The first hearing of the possession application came before the district judge on 3rd August 1993 at which the wife offered to pay £100 per month. In the light of that promise the district judge adjourned the application for three months on condition that the £100 per month was duly paid; which it was. A week later, on 11th August 1993, the wife obtained legal aid to defend the possession proceedings. Her husband swore an affidavit in the matrimonial proceedings in answer to hers, and on 1st February 1994 she swore a further affidavit in the matrimonial proceedings in reply to that of the husband. In that affidavit she admitted the amount secured by the charge in question to be in the sum of £25,567 odd and stated in paragraph 7:

"The respondent during the course of his business interests required at one stage substantial monies to service a capital injection into the business. It was his wish and that of his business partner a Mr D Burpitt to open up another shop. It was forthis reason that the matrimonial home was used as collateral for a further loan in favour of The First National Bank Plc. The loan was negotiated on the 22nd February 1991 in the original sum of £16,581.62. Our home and also the home of the respondent's business partner was charged with security for this borrowing. The respondent terminated his partnership some months ago. I believe that up until July of last year he was receiving payments in the region of £200 per month from Mr Burpitt."

6. She continued in paragraphs 12 and 13:

"At the present time with the aid of my parents I find that I am able to manage the outgoings on the property save for repayment of the second charge to First National Bank Plc. Originally the Bank commenced possession proceedings in June of last year. At the hearing on the 3rd August 1993 I managed to achieve an adjournment of the possession action pending the determination of my applications for ancillary relief within my original decree proceedings. The adjourned hearing of the Summons for possession has now been fixed to take place on 24th [the date is illegible] 1994. At the last hearing I offered to pay First National Bank the sum of £100 per month and I have been maintaining these payments regularly since the hearing.

It is my wish to retain the former matrimonial home for my occupation and that of my children particularly. I have, as I have sought to make clear from this affidavit, always supported the respondent throughout our marriage in his business venture. Whilst I have always been ready to assist him I now find that perhaps my eagerness to support him has led to my detriment. If there were to be an enforced sale by First National Bank Plc then repayment of the various securities and costs, I will not be able to maintainprivate independent accommodation and will be forced into council accommodation."

7. On 10th February 1994 the application for ancillary relief came before the district judge. He made a property adjustment order requiring the husband to convey his interest in the property and the associated endowment policy to the wife absolutely together with an order for periodical payments of a nominal amount. At that hearing the wife was represented by counsel. We have been shown, by counsel for the wife on this appeal, the instructions to counsel then appearing on her behalf. They clearly record the facts that the purpose to which the loan was applied was the separate business purpose of the husband and his partner Mr Burpitt and that the lender was seeking an order for possession. Although O'Brien was not mentioned by name, the facts necessary to rely on the principles it established were.
8. Eight days later, on 18th February 1994, the wife, through the same firm of solicitors, served her defence and counterclaim in the Bank's possession action. She admitted that she signed the charge but averred that her execution was procured by the undue influence of her husband when acting as agent for the Bank. There was no allegation that the Bank had notice that the wife's execution had been procured by such undue influence. The suggestion at that stage was that the husband had acted as agent for the Bank in obtaining his wife's signature. On 29th July 1994 the wife's solicitors wrote to those for her husband indicating that she was seeking counsel's advice on the merits of her defence to the possession action.
9. On 4th August 1994 her solicitors sought evidence from her husband to support her defence to the possession proceedings. The letter states:

"This information is of course vital to our client's stance in her seeking to successfully defend the possession action, instituted by First National Plc. We would welcome therefore, your earliest possible reply."

10. That came on 15th August 1994 when the husband's solicitors responded:

" ..... we have received our client's instructions. Our client is uncertain as to precisely what your client's motives are. Is your client in fact saying that she would wish to aviod her liability for the loan on the Boland principle.

Our client finds it remarkable that with all the proceedings which have taken place, both in relation to the property and in relation to the matrimonial, that your Client should only now raise the possibility that, as we see it, the loan ought not to be enforced against her or against the property.

Turning to the question of the conveyancing we must now insist that this property transaction is completed. You client issued the property proceedings and pursued them with the specific objective of taking the transfer of the property into her sole name. We do not think that your Client can now, at this late stage, attempt to have the best of both worlds and we are prepared if necessary to make an application to force the conveyancing to take place. Please let us hear from you inconnection with this aspect of the matter within the next seven days."

11. On 27th August 1994 the Bank served their reply and defence to counterclaim in the possession proceedings alleging that the wife had affirmed the transaction which, in her defence to counterclaim, she had sought to have set aside.
12. On 15th December 1994 the wife was apparently advised as to the inconsistency of her position. Notwithstanding that, she wished to obtain the transfer of his share of the property from her husband. Her solicitor's note of the conversation on the telephone reads as follows:

"Telephoned my client. I advised of my concerns about completing the transfer and my conversation with Mr Robson of Counsel. She is quite happy to complete the formalities in relation to the transfer. She asked whether she would have to go to court on the 22nd. I advised her that there would be no need and I would report to her shortly."

13. I add that it is plain that the Mr Robson referred to in the attendance note was acting as counsel for the wife in the possession proceedings as it is his signature which appears at the bottom of the pleadings. On the same day the wife's solicitors wrote to those for her husband, stating:

"We have spoken with our client at some length and she is now prepared to proceed with the proposed transfer. We will submit this to you within the course of the next few days, but in the meantime, we would be grateful if you would kindly confirm our agreement to an adjournment of your application for hearing on the 22nd December 1994."

14. On 6th January 1995 the wife's solicitors prepared and submitted to the husband's solicitors a draft proposed conveyance. Matters proceeded fairly slowly as between the solicitors. On 13th March 1995 the wife's solicitors informed those for the husband that the mortgagee's solicitors had approved the draft form of conveyance. The conveyance was ultimately executed and bears the date 6th September 1995. It is a conveyance from the husband to the wife. It recites the acquisition by the husband and the wife of the matrimonial home in 1998 and the first charge to Barclays Bank Plc, which in Recital B was defined as "the Bank". It then recites in Recital C:

"By a Second Mortgage (hereinafter called 'the Second Mortgage') dated 8th January 1991 and made between the Husband and the Wife of the one part and First National Bank Plc of the other part the said Property was charged to First National Bank Plc subject to the First Charge."

15. It then recited the third charge and continued in Recitals E and F in these terms:

"(E) The amount outstanding under the First Mortgage is £50,128 and the amount outstanding under the Second Mortgage is £35,252 and the amount outstanding under the Third Mortgage is £2,949.96.

(F) By an order of the Chelmsford County Court dated the 10th February 1994 in proceedings between the Husband and the Wife bearing number of matter 1992 D 1338 the Husband was ordered to convey all his estate and interest in the said Property to the Wife SUBJECT TO the First Mortgage and the Second Mortgage and the Third Mortgage."

16. Clause 1 of the conveyance proceeds in common form to convey the husband's half-share in the equity of redemption and states in terms that the conveyance was -

"subject to the First Mortgage and all principal money and interest thereby secured and the Second Mortgage and all principal money and interest thereby secured and the Third Mortgage and all principal money and interest thereby secured."

17. Clauses 2 and 3 were in common form. Clause 4 provided:

"Nothing in this Deed shall affect or prejudice the continuing nature of the First Second and Third Mortgages which shall be a security for all liabilities present and future of the Wife and the Husband to the Bank which the Wife and the Husband hereby acknowledge."

18. I would interpolate to observe that, in my view, the reference there to the bank should be in lower case initial letter so as to refer collectively to each of the first, second and third mortgagees for otherwise it does not seem to me to make much sense.
19. The conveyance having been completed on 6th September 1995, nothing relevant happened for over 2 years. On 15th September 1997 an amended defence and counterclaim was served by the wife in complete substitution for the earlier one. It raised a whole lot of fresh issues. She denied execution of the loan agreement. She raised various issues under the Consumer Credit Act 1974 as to the enforceability of the loan agreement. She raised a number of issues as to the proper execution of the charge, under the Law of Property (Miscellaneous Provisions) Act 1989 and the Consumer Credit Act 1974. She averred that the execution of the agreement and the charge had been procured by the husband's undue influence and that the Bank had actual or constructive notice of the relevant facts. She counterclaimed, so far as now relevant, for rescission of the agreement for the loan and the charge.
20. The allegation formerly made - that the husband, in procuring her signature, had acted as agent for the Bank - had been abandoned.
21. On 22nd April 1998 the Bank applied to strike out those paragraphs of the defence and counterclaim which raised the undue influence defence. That was ordered by the district judge to be tried as a preliminary issue on 22nd April 1998. On 24th May 1999 he made a further order for discovery of privileged documents if the wife wished to make a positive case that she had not abandoned her defence of undue influence. There was no appeal against that order and it was subsequently complied with.
22. The matter was heard before Judge Brandt on 22nd February 2000. The wife had given discovery in accordance with the order made in May 1999, but though given permission to do so she adduced no evidence herself. Judge Brandt rejected the contention of the Bank that the wife had affirmed the transaction. He considered that the charge was, as alleged, voidable only and so capable of being affirmed. He thought that the onus of establishing affirmation was on the Bank and he considered that the order of 3rd August 1994 alone could not found a case of affirmation. These conclusions are not disputed.
23. He proceeded to resolve three further issues. First, he concluded that neither the correspondence nor the conveyance gave rise to the defence of affirmation. In this respect it is appropriate to quote from his judgment at page 10 B where he said:

"I am afraid I do not read these documents in that way at all. I do not think that those inferences can be drawn from the document or any of the correspondence that led up to it. Clause 4 of the conveyance does absolutely nothing more than set out that which need not be set out. All that it does say is that the husband still remains liable under the mortgage. That would be the position whether Clause 4 was there or not. I think it has been put in simply to underline it for his purposes and, as I suggested in the course of the hearing, in a sense to rub his nose in it. I do not think it has any purpose other than to remind the husband that he is not releasing himself from his obligations by conveying the property. Other than that, it is simply an acknowledgment by the wife that she takes the property, warts and all. She takes it subject to the first mortgage - about which no complaint seems to have been made, as far as I am aware - and she takes it subject to the third. In my judgment, it is quite impossible to say against her that somehow or other this is to be construed as affirming the very transaction which on the 18th February 1994 - that is to say, some eighteen months before the date of this conveyance - she had in the strongest and firmest terms said that, so far from affirming, she was seeking to avoid. It seems to me to be a completely fruitless submission to suggest that somehow clause 4 - which, as I say, does nothing except remind the husband of his liabilities and for which she is not really, in my judgment, to be held responsible for the wording; that is what she has solicitors for - I simply cannot begin to accede to the proposition that somehow this is to be treated as an affirmation of that which she expressly rejected eighteen months before."

24. The judge also considered that the wife was not seeking two inconsistent remedies and he thought that she could not be criticised for failing to obtain relief against the husband in the matrimonial proceedings comparable to the relief she was seeking against the Bank in the possession proceedings.
25. As I have indicated, permission to appeal was refused by the judge but granted by Lord Justice Tuckey.
26. The case for the Bank is, quite simply, that the wife affirmed the charge by the conveyance and her conduct in these and the matrimonial proceedings, specifically by the affidavit of means she swore in the matrimonial proceedings on 5th April 1993, the payments she made following the adjournment she obtained on 3rd August 1993 and the affidavit in reply she swore on 1st February 1994. For the Bank it is suggested that the wife released her rights against the Bank because by the conveyance she released them as against the husband, and there are no words adequate to reserve her rights against the Bank. Having failed so to do, her defence has gone as against the Bank on the ground that you cannot affirm in part and maintain in part. In that connection reliance is placed on the judgment of His Honour Judge Baker (sitting as a High Court Judge) in Deanplan Ltd v Mahmood [1993] Ch 151, 170 and Suisse Atlantique Société D'Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361, 398.
27. Putting the point slightly differently for the Bank, it is also submitted that the wife should not be allowed to pursue inconsistent remedies. Having elected in the matrimonial proceedings to seek and enforce an order for the conveyance by the husband of his interest in the equity of redemption on the footing that the charge was valid, she cannot now defend the possession proceedings brought by the Bank on the footing it was voidable. Had she sought to raise the undue influence point then, she should have done so in the matrimonial proceedings as well.
28. Mr Sohanté, as counsel for the wife, sought to uphold the judge's judgment. He submitted that the conveyance had no effect because it did no more than state the true position unless and until the second charge was set aside. He relied on London and County (A & D) Ltd v Wilfred Sportsman Ltd [1971] Ch 764, 781B-782B, for the proposition that the recognition of the second charge, particularly in Clause 4 of the conveyance, was res inter alios acta and had no bearing on the position as between the wife and the Bank. He suggested that the wife had finally elected to set aside the charge in February 1994 when her first defence and counterclaim were duly served. In relation to her conduct, he submitted that there was no such effect as suggested by counsel for the Bank because the property transfer order could not amount to a choice of any kind. The Bank had failed to prove that the wife knew of her rights at the time of the conduct in question, and again because the wife had made her final election when she served her first defence and counterclaim on 10th February 1994.
29. Finally, he submitted that the rights of the wife against the husband and the Bank are not inter-dependent. He suggested that those against the husband depend on the husband's wrongdoing, but those against the Bank depend on the Bank's notice. He submitted that the remedies against the two parties are not inconsistent and that the wife was not required to elect between them.
30. This appeal is not the first in which the question of affirmation in connection with a defence to a mortgagee's possession claim has been considered (see Lloyds Bank v Lucken [1998] 4 AER 705, 748-752. But it is the first of which I am aware in which the court has had to consider the inter-relation between the court exercising the matrimonial jurisdiction to make property adjustment orders and other courts, usually the County Court, determining whether a claim or defence based on O'Brien has been made out. It is not uncommon for the breakdown of a marriage to coincide with a failure to maintain mortgage repayments in respect of a charge over the matrimonial home. Either may be the cause of the other and each is likely to give rise to litigation. It is important, therefore, that practitioners should be aware of how the two sets of proceedings may interact with each other.
31. Before further considering the submissions for the parties, it is convenient to deal with a number of separate matters which underlie them. First, it is necessary to consider the nature of the O'Brien claim or defence. The speech of Lord Browne-Wilkinson conclusively established its basis. I would refer to three passages in his speech which set it out very clearly. At page 191 B to E he said:

"Up to this point I have been considering the right of a claimant wife to set aside a transaction as against the wrongdoing husband when the transaction has been procured by his undue influence. But in surety cases the decisive question is whether the claimant wife can set aside the transaction, not against the wrongdoing husband, but against the creditor bank. Of course, if the wrongdoing husband is acting as agent for the creditor bank in obtaining the surety from the wife, the creditor will be fixed with the wrongdoing of its own agent and the surety contract can be set aside as against the creditor. Apart from this, if the creditor bank has notice, actual or constructive, of the undue influence exercised by the husband (and consequentially of the wife's equity to set aside the transaction) the creditor will take subject to that equity and the wife can set aside the transaction against the creditor (albeit a purchaser for value) as well as against the husband: see Bainbrigge v Browne (1881) 18 Ch D 188 and Bank of Credit and Commerce International SA v Aboody [1990] 1 QB 923, 973. Similarly, in cases such as the present where the wife has been induced to enter into the transaction by the husband's misrepresentation, her equity to set aside the transaction will be enforceable against the creditor if either the husband was acting as the creditor's agent or the creditor had actual or constructive notice."

32. At page 195 E Lord Browne-Wilkinson said:

"A wife who has been induced to stand as a surety for her husband's debts by his undue influence, misrepresentation or some other legal wrong has an equity as against him to set aside that transaction. Under the ordinary principles of equity, her right to set aside that transaction will be enforceable against third parties (e.g. against a creditor) if either the husband was acting as the third party's agent or the third party had actual or constructive notice of the facts giving rise to her equity. Although there may be cases where, without artificiality, it can properly be he;d that the husband was acting as the agent of the creditor in procuring the wife to stand as surety, such cases will be of very rare occurrence. The key to the problem is to identify the circumstances in which the creditor will be taken to have had notice of the wife's equity to set aside the transaction."

33. Finally, at page 196 Lord Browne-Wilkinson concluded:

"Therefore where a wife has agreed to stand surety for her husband's debts as a result of undue influence or misrepresentation, the creditor will take subject to the wife's equity to set aside the transaction if the circumstances are such as to put the creditor on inquiry as to the circumstances in which she agreed to stand surety."

34. There have been many cases since in which the precise application of those principles has been considered by judges at first instance and in this Court. None of them could or did affect the underlying principle.
35. In my view it is plain that a claim against the Bank to set aside the charge and the loan which it secures for the undue influence of one joint and several debtor over the other is secondary to and parasitic on the existence of such a claim by one such debtor against the other. Notice alone does not give rise to a cause of action against the Bank. It enables the cause of action and the claim for relief against the other debtor to be made effective against the secured creditor who has obtained an interest in the relevant property.
36. Accordingly, I reject the submission for the wife that her rights against the husband and her rights against the Bank are different in nature and are in no way inter-dependent. On the contrary, the latter is dependent on the existence of the former as well as on notice of it.
37. Second, a pleading is inherently liable to be amended. Accordingly, subject to subsequent events precluding an amendment, it cannot of itself amount to a final election as to the form of equitable relief to be sought. Where, as here, the claim is for equitable relief all relevant circumstances at the time the issue comes before the court must be taken into account. It would be inconsistent with that basic principle that the service of the pleading seeking to avoid a mortgage on the ground of undue influence should prevent that claim being amended or withdrawn. The case to which we were referred in this connection by counsel for the wife, namely Yukong Line v Rendsburg Investment [1996] 2 Lloyds Rep 604, related to the different question of when and how a party to a contract entitled to affirm or accept the repudiation of the other party as discharging it from further performance may affirm it. Were there any doubt as to the position in a claim to set aside a transaction for undue influence it would be conclusively allayed by the speech of Lord Wilberforce in Johnson v Agnew [1980] AC 367, 398C-H and 399F-G.
38. Accordingly I reject the submission for the wife that she irrevocably elected to seek an order setting aside the charge on the ground of her husband's undue influence when she served the first version of her defence and counterclaim to the possession claim on 18th February 1994.
39. Third, it follows from those two considerations that the court must give close consideration to the position as between the husband and the wife before seeking to analyse its effect on the position of the wife vis-a-vis the bank. This is relevant to the suggestion made on behalf of the wife, based on London and County Ltd v Sportsman Ltd [1971] Ch 764, 781B-782-B, that the terms of the conveyance dated 5th September 1995 are immaterial to the position as between the wife and the bank because the acknowledgment contained in it is only an acknowledgment between the husband and the wife.
40. In my view, as the conveyance is obviously relevant as between husband and wife and as a claim or defence based on O'Brien as between the wife and the Bank is secondary then the transaction between the spouses constituted by the conveyance must be relevant in considering the rights of the Bank against the wife.
41. Fourth, it is convenient at this stage to consider shortly the rights and obligations of the husband and wife as joint and several debtors to the Bank. The Bank might seek payment of the whole amount from either of them. To the extent that either paid more than half of the debt, he or she would have a right of contribution from the other. So long as the property charged as security remained in their joint ownership, then if the charge was enforced the burden of the liability would fall on husband and wife equally. But if the ownership of the property no longer coincided with the liability because one debtor had assigned his or her interests to the other, then the latter might have a further right of contribution or indemnity against the former if the creditor were repaid from the proceeds of the sale of the security. The existence and nature of the right would depend on the terms of the assignment between them.
42. Fifth, a party to proceedings is required to be consistent to some degree. There are many decisions to that effect; I will mention just two. In Hoystead v Commissioner of Taxation [1925] AC 155 the High Court of Australia determined disputed assessments for the year 1918-1919 on the footing that the testator's daughters werejoint owners of the relevant annual income. In the following year the Commissioner sought to raise assessments on the footing that they were not. The Privy Council held that he was estopped from making that case. At page 165 Lord Shaw said:

"Very numerous authorities were referred to. In the opinion of their Lordships it is settled, first, that the admission of a fact fundamental to the decision arrived at cannot be withdrawn and a fresh litigation started, with a view of obtaining another judgment upon a different assumption of fact; secondly, the same principle applies not only to an erroneous admission of a fundamental fact, but to an erroneous assumption as to the legal quality of that fact. Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the Court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted, and there is abundant authority reiterating that principle. Thirdly, the same principle - namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken. The same principle of setting parties' rights to rest applies and estoppel occurs."

43. The second case to which it is appropriate to refer is Nurcombe v Nurcombe [1985] 1 AER 66. In that case husband and wife were shareholders in a private company. In matrimonial proceedings it was disclosed that the husband had obtained secret profits in breach of his fiduciary duty to the company. The wife was awarded a lump sum computed on the footing that the means of the husband included the secret profits. Having received two instalments of the lump sum, the wife, as a minority shareholder of the company, commenced proceedings against the husband requiring him to account to the company for those secret profits. The judge dismissed the action on the ground that the wife had elected to treat the profits as belonging to her husband and could not sue as a minority shareholder on the contrary basis. His decision was upheld by this Court. At page 70 Lord Justice Browne-Wilkinson said, and I quote from letter J:

"Vinelott J held that, as a result of the proceedings in the Family Division, the plaintiff had sufficient information to put her to her election whether to pursue the claim for a lump sum payment in the matrimonial proceedings (the anticipated profit to the first defendant from the property transaction being taken into account) or to pursue the claim of CHN by a minority shareholder's action against the first defendant. For the reasons given by Lawton LJ I agree that, if this were strictly a case of election, the plaintiff had sufficient information by 22 July 1977 to put her to her election. Moreover, she made her election by persisting in her claim for a lump sum payment on the basis that the profit from the property dealing was to be taken into account as part of the first defendant's assets.

But this is not strictly a case of election. A duty to elect only arises where someone has two alternative rights both of which belong to him. In this case, although the right to claim a lump sum payment was the plaintiff's, the right to complain of the wrong done to CHN belonged to CHN, not to her: in a minority shareholder's action the shareholder who is the plaintiff is asserting not the shareholder's individual right but the right of the company. The question is whether this technical objection precludes the court from giving effect to the elementary concepts of justice on which the doctrine of election is founded."

44. Lord Justice Browne-Wilkinson proceeded to consider that point and to determine that she was nevertheless bound to elect. At page 72 Sir Denis Buckley added at letter J:

"In these circumstances the wife was confronted with two alternative and mutually exclusive causes of action, the choice of either of which would be likely substantially to affect both her financial position and the husband's. She could embark on a minority shareholder's misfeasance action against the husband, which would probably delay the outcome of her application for financial provision in the matrimonial proceedings pending the trial of the action, or result in her getting no lump sum or a much reduced lump sum on that application; or she could proceed with that application, which was then already at the stage of hearing by the court, on the basis that the husband's conduct in relation to dealing with the Pontypridd land would remain unchallenged, and that her shares in CHN were consequently valueless. She could not, in my opinion, do what she has sought to do, that is pursue both courses."

45. The inconsistent rights relied on in this case are (1) the right of the wife to pursue her claim for ancillary relief in the matrimonial proceedings on the footing that the mortgage was valid so as to affect the liabilities of herself and her husband to the Bank and as between themselves and the value of the equity of redemption, and (2) the right of the wife to defend the possession proceedings on the footing that the loan and charge were voidable and should be avoided because of her husband's undue influence. The former has the effect that each party shares the liability equally and the equity of redemption is reduced by the amount of the liability. The latter throws the entire liability to the Bank on the husband and increases the value of the equity of redemption by a sum equal to the wife's share of the liability.
46. In the light of those preliminary considerations, it is now necessary to consider the effect of the course of dealing between all three parties, that is the say, the wife, the husband and the Bank on a chronological basis.
47. The first relevant point of time is the date the order was made in the matrimonial proceedings, that is 10th February 1994. There can be no doubt that the wife pursued her claim for ancillary relief at the hearing on 10th February 1994 on the footing that the loan and charge were valid and not liable to be set aside by her. That was the plain import of both her affidavits, to which I have referred. It is clear from the instructions to counsel who appeared on her behalf - to which we were referred at the express invitation of her counsel on this appeal - that she had instructed her solicitors as to all the facts necessary to make out an arguable defence to the Bank's possession proceedings based on O'Brien. The possession proceedings had been commenced 8 months earlier. In August
48. 1993 the wife had been granted legal aid to defend them. There is no evidence that by 10th February 1994 the wife had been advised as to her defence as to the possession claim. But given the fact that the defence and counterclaim were served only 8 days later and assuming, as I do, that her solicitors were reasonably competent, I infer that her solicitors, albeit by different partners, had appreciated that the defence of undue influence was available to her as against both the husband and the Bank.
49. I do not think that it is necessary to consider further whether it is necessary to establish that the wife knew of her rights as opposed to the facts which gave rise to them for her solicitors plainly did and their knowledge was her knowledge. I would leave for further consideration in a case in which it arises the question whether the knowledge required in cases such as this is the same as that established as necessary by the decision of this Court in Peyman v Lanjani [1985] 1 Ch 457.
50. In these circumstances it is incumbent on the party to the matrimonial proceedings to draw the attention of the court in those proceedings to the fact that the liabilities and assets of the parties to the marriage may not be all that they seem to be. If she does not then she cannot complain if thereafter she is found to have precluded herself from asserting in other proceedings a contrary claim or defence. If she did not know of the inconsistent right until after the order of the matrimonial court, then she may be unable to enforce it without first bringing the matter back before the matrimonial court so that, if it has jurisdiction to do so, it may reconsider its original order or its effect in the light of the new material. In this case I understand that such a jurisdiction existed because the order contained a nominal periodical payments order. But it is not necessary to reach any final conclusion on that point in this case.
51. It is clear that between July 1994 and January 1995 the wife obtained advice from counsel as to the merits of her claim and the defence under O'Brien. The correspondence shows beyond doubt that she then decided to enforce the order in her favour made on 10th February 1994 by obtaining the transfer from the husband of his interest in the equity of redemption. Had there been any doubt as to the sufficiency of her knowledge at the earlier date - and for my part I do not think that there was because the knowledge of her solicitors is to be imputed to her - there can be none at this later stage. From 5th January 1995 onwards her solicitors maintained pressure on the husband to perform his obligations under the property transfer order the wife had already obtained.
52. The draft conveyance was prepared by the wife's solicitors. It was at their suggestion that Clause 4 was included. No doubt the intention behind it was to make it plain that the wife was not accepting any obligation to procure the husband's release from liability to the Bank. But in specifically acknowledging the existence and validity of the second charge, as between her and the husband, she was necessarily acknowledging that it was not voidable at her instance.
53. It was submitted on behalf of the wife that the terms of the conveyance were immaterial for the conveyance would have taken effect subject to the charges anyway. It was suggested that the conveyance was merely declaratory of the position which would obtain without the additional words.
54. For my part I do not accept this submission. If the conveyance had been silent about incumbrances then it would have taken effect subject to such of them as were valid and enforceable. But Clause 4 showed that, irrespective of the previously existing state of affairs, the second charge was recognised as valid by both the wife and the husband. Thus, if and to the extent that the charge had previously been unenforceable, the husband and the wife agreed that it should now be treated as enforceable. At the time she executed the conveyance, if not before, the wife precluded herself from asserting the contrary.
55. In summary, therefore, I conclude that by 5th September 1995, at the latest, the wife had precluded herself from asserting as against her husband that the charge was voidable because of his undue influence. I do not think that the label to be attached, whether estoppel, approbation and reprobation, abuse of the process, affirmation or release is of any importance, though on the facts of this case I am inclined to think that all of them apply.
56. I doubt if any reservation by the wife of her rights as against the Bank could have been of any effect, but there was no attempt to do so. It follows from the nature of the O'Brien claim or defence and the absence of any attempted reservation that any rights the wife might have had against the Bank also determined on 5th September 1995 at the latest. In my view, the judge came to the wrong conclusion and this appeal should be allowed.
57. It may be that there is a tendency on the part of those advising spouses in this field to think that deals may be made between the spouses without affecting an O'Brien defence as against the secured lender. Indeed, such an attitude was apparent in this case when the wife's solicitors sought evidence from the husband, for use by the wife, in pursuing her O'Brien defence against the Bank. In my view, that is not so. A spouse must pursue his or her remedy in both the matrimonial and the possession proceedings consistently with each other for fear, otherwise, of losing one or other of them. It is not acceptable to pursue a claim for ancillary relief on the footing that the charge is valid and to defend a claim for possession on the footing that it is voidable, the more so as the bank will seldom know of the course of events in the matrimonial proceedings.
58. Subject to any further arguments as to the form of order, I would allow the appeal and make an order in the form sought in the notice of appeal.
59. LORD JUSTICE CHADWICK: Mr and Mrs Walker were married in 1980. There are two children of the marriage, born in 1980 and 1984. In 1988 Mr and Mrs Walker purchased a house known as 8 Mangapp Chase at Burnham-on-Crouch in Essex. The house was purchased in their joint names with the help of a mortgage from Barclays Bank Plc. It was to be their home for the next four years.
60. Mr Walker had started his own business, with a partner, in or about 1982. By 1991 the partnership had decided to open additional premises. Capital was needed for that purpose. A loan was available from First National Bank Plc. But, rather than lend direct to the partnership, the bank preferred to lend to Mr and Mrs Walker. It offered to lend them £15,000 on the security of their house. Mrs Walker says that she was unwilling to put their home at risk. Her husband sought to persuade her. At first she resisted but eventually, as she says, she was unable to withstand the pressure Mr Walker was putting upon her, and she agreed. They signed a credit agreement dated 11 February 1991. The amount of the loan, which included some £1,500 in respect of "protected payment premium", was £16,581. The rate of interest was high: 1.92 per cent per month. The covenant to repay was joint and several. The loan was secured by a legal charge over 8 Mangapp Road. That charge pre-dates the credit agreement. It is dated 8 January 1991. It ranked second, behind the existing charge to secure the Barclays Bank loan. A few weeks later, further money was borrowed on the security of a third charge in favour of Lloyds Bank Plc.
61. The business ran into difficulties. The partnership was determined. By August 1992 Mr and Mrs Walker had fallen into arrears on the monthly interest payments. On 14 April 1993 First National Bank served default notices on each of them. On 10 May 1993 the bank made formal demands for repayment. On 10 June 1993 it commenced proceedings against them in the Maldon County Court, seeking possession of the mortgaged property.
62. Sadly, the marriage had also run into difficulties. Mr Walker left home. Mrs Walker petitioned for divorce. On 25 March 1993 the marriage was dissolved by decree absolute. On 5 April 1993 she applied in the matrimonial proceedings for ancillary relief. In her application Mrs Walker set out particulars of the mortgages or charges to which she thought the property at 8 Mangapp Road was then subject: "Barclays Bank Plc - first charge £48,000; second charge, Lloyds Plc £10,000; third charge, First National Securities £17,000". She was wrong about the ranking of the second and third charges; but nothing turns on that.
63. The first hearing of the bank's possession summons was fixed for 3 August 1993. Very shortly before that, on 30 July 1993, Mrs Walker had obtained an emergency legal aid certificate to enable her to defend those proceedings. That was confirmed by a certificate dated 11 August 1993. The solicitors named in the certificate were those who were already acting for her in the matrimonial proceedings.
64. At the hearing on 3 August 1993 the possession proceedings were adjourned on condition that payments of £100 per month were made to the bank. It does not appear from the papers before this Court that there was any further progress in those proceedings until 18 February 1994; but it may be that there were further formal adjournments upon the same condition in the interim.
65. The ancillary relief claim in the matrimonial proceedings was due to be heard on 10 February 1994. On 1 February, in preparation for that hearing and, as she put it, "to bring the Court up-to-date with my present circumstances" Mrs Walker swore an affidavit. In paragraph 9 she put the value of the former matrimonial home at £89,500. But there were to be set against that figure the amounts secured by four charges: (i) the Barclays Bank charge to secure £50,672; (ii) the First National Bank charge to secure £25,567; (iii) the Lloyds Bank charge to secure £7,196; and (iv) a charging order to secure a debt of £563 owed by Mr Walker. On the basis of those figures the equity in the property was about £5,500; of which she was entitled to about £3,000. In paragraph 12 of her affidavit she referred to possession proceedings which had been commenced by First National Bank. She said that she was maintaining the monthly payments of £100 and pointed out that there was to be a further hearing of the summons for possession on 24 February 1994. In paragraph 13 she expressed her wish to retain the former matrimonial home for the occupation of herself and her family. She said this:

"If there were to be an enforced sale by First National Bank Plc. then repayment of the various securities and costs, I will not be able to maintain private independent accommodation and will be forced into Council accommodation."

66. There is no indication in that affidavit that Mrs Walker intended to challenge, or had identified any grounds upon which she could challenge, the First National Bank charge.
67. It was on the basis of that material that, on 10 February 1994, the Chelmsford County Court made a property adjustment order in the matrimonial proceedings. It was ordered that Mr Walker transfer to his former wife, within 28 days, all his share and interest in 8 Mangapp Road, and all his benefit and interest in an endowment policy. There was included an order for nominal periodic payments (at the rate of 5p per annum) by Mr Walker to his former wife until her remarriage or further order. As I understand it, the purpose of that nominal provision was to make it possible for either party to return to the court for a variation of the order.
68. The order of 10 February 1994 was not expressed to have - and, as a matter of law would not have - any effect on the respective liabilities of Mr and Mrs Walker under the various charges; nor would it affect the rights of the chargees. In particular, Mr and Mrs Walker remained jointly and severally liable to First National Bank; they retained inchoate rights of contribution and indemnity against each other in respect of any payments made to discharge that liability; and the whole of the debt remained secured on 8 Mangapp Road. It must have appeared to the court, when that order was made, that Mrs Walker would seek to reach some accommodation with the bank so that she could remain in occupation; and that, if she could not do so, the bank would enforce its security by possession and sale and would apply the proceeds of sale in repayment of the loan.
69. Eight days later, on 18 February 1994, Mrs Walker's solicitors filed on her behalf a defence in the possession proceedings. In paragraph 2 of that defence Mrs Walker admitted execution of the Legal Charge dated 8 January 1991; but she asserted that she had been prevailed upon to do so by the undue influence of her husband. As she put it, her husband had badgered and cajoled her until such time that she submitted to his will. She asserted that, in procuring her to sign the charge (wrongly described in the pleading as a guarantee), Mr Walker had acted as agent for First National Bank. She sought an order that the charge be set aside.
70. The effect, if the charge were set aside as against Mrs Walker, would be that the bank could not enforce its security against the property as a whole. It could treat the charge as security over the interest Mr Walker had had in the property at the time when the charge was executed. That is to say, it could treat the equitable joint tenancy as severed on the execution of the charge and enforce its security against the one half share which Mr Walker would then have had as tenant in common in equity. That would remain the position notwithstanding the subsequent transfer of that share to Mrs Walker pursuant to the property adjustment order made on 10 February 1994. Further, if the charge were set aside, it is unlikely that the bank would be able to rely, as against Mrs Walker, on the joint and several covenant for payment in the credit agreement dated 11 February 1991. Although the defence and counterclaim are, perhaps, less than explicit, it is, I think, reasonably clear that Mrs Walker seeks to set aside the whole transaction, and not merely the legal charge. Accordingly, the bank could look only to Mr Walker for repayment of the loan which it had made.
71. If Mrs Walker were entitled to have the 1991 transaction set aside, it would follow that, as at the date when the court made the order of 10 February 1994, Mr Walker's one half share in 8 Mangapp Road was valueless. The value lay in Mrs Walker's equitable half share - which, on this hypothesis, was not encumbered with the debt owed by Mr Walker to the bank. On the figures disclosed in her affidavit of 1 February 1994, the value of her half share would have been £16,000 or thereabouts, after taking account of the charges in favour of Barclays Bank and Lloyds Bank. Mr Walker would have been left with the liability for the whole of the First National Bank debt, with no right of contribution over against Mrs Walker.
72. It is impossible to say whether, if when it considered Mrs Walker's application for ancillary relief at the hearing on 10 February 1994 the court had known that she would contend that the First National Bank charge should be set aside, it would have made the property adjustment order which it did make. It might well have done. But it might have thought that the sensible course was to adjourn the application for ancillary relief until it was known whether the claim to set aside the charge had been successful; or to hear the two matters together. And, if Mrs Walker's claim to set aside the charge were successful, the court might have thought that some other property adjustment order - at least in respect of the endowment policy - would be more appropriate. The point is not that the court would necessarily have made a different order on 10 February 1994. The point is that it was not given the full information which it needed in order to decide what order to make.
73. Counsel appearing on this appeal for Mrs Walker has sought to persuade us that it was not the fault of either Mrs Walker or her advisers that the court was not told, on 10 February 1994, that she was intending to challenge the legal charge in the possession proceedings which were then pending. It is accepted that, she must have known, before 10 February 1994, the facts upon which the allegations of undue influence and agency were made in the pleading signed by her solicitors on 18 February 1994. But it is said that she did not know that those facts gave rise to a claim to have the legal charge set aside. It is said, or we are asked to infer, that she had not thought it necessary, on or before 10 February 1994, to acquaint her solicitors with the facts which led to those allegations being made in the defence and counterclaim. The suggestion, implicit in those submissions, is that she disclosed the relevant facts to her solicitors for the first time on some date between 10 and 18 February 1994.
74. There is no evidence on the point. Such evidence as exists may be expected to be on the file maintained by her solicitors in relation to the possession proceedings. She has not chosen to disclose the contents of that file. That is her privilege. But, in the absence of evidence, we are left to make such inferences as seem appropriate. For my part, if it were necessary to do so, I would infer from the proximity of the dates that Mrs Walker's solicitors did know, before the hearing on 10 February 1994, that she would be challenging the First National Bank charge on the grounds of undue influence. I would regard it as unrealistic to assume that that point first emerged, by coincidence, between 10 and 18 February 1994. But it is not, I think, necessary in the present case to decide that point. The point had emerged by 18 February 1994 and it was then incumbent upon Mrs Walker and her advisers to bring to the attention of both Mr Walker and the court that the order of 10 February had been made on the basis of incomplete information. If that had been done, the court would have had the opportunity to reconsider its order in the light of the facts which ought to have been put before it on 10 February 1994.
75. But the matter does not stop there. Mr Walker's solicitors were pressing for the order of 10 February 1994 to be carried into effect. That led to the execution of a conveyance dated 6 September 1995. The conveyance recited the three charges and the order of 10 February 1994. Clause 4 of the conveyance is in these terms:

"Nothing in this Deed shall prejudice the continuing nature of the First Second and Third Mortgages which shall be a security for all liabilities present and future of the Wife and the Husband to the Bank which the Wife and the Husband hereby acknowledge."

76. "The Bank", written there with a capital B, is defined in Recital (B) of the conveyance to mean Barclays Bank Plc. But, in the context of clause 4 it must, I think, be construed to mean each bank in respect of its respective charge. To consture "the Bank" in clause 4 as meaning only Barclays Bank Plc would be to attribute to the parties anintention which they couldnot have had. Be that as it may, whether or not Clause 4 itself can be relied upon as an acknowledgment that, vis a vis her former husband, Mrs Walker was accepting liability under the First National Bank charge, the conveyance does, clearly, reflect an intention to rely on and give effect to the order of 10 February 1994; an order which - by the date of the conveyance - Mrs Walker and her advisers knew had been obtained on a basis which was inconsistent with the contention which she was making in the possession proceedings.
77. For Mrs Walker to pursue the possession proceedings to a successful conclusion would lead to the result that her former husband would lose the right to contribution and indemnity against her and out of any proceeds of the realisation of 8 Mangapp Road which both he and the court were entitled to expect existed and would be preserved at the time of the order of 10 February 1994. Mrs Walker is asserting, in the possession proceedings, a case which is inconsistent with the basis upon which the order of 10 February 1994 was made. It is plain that, even if she and her advisers were not aware of that at the time when that order was made, she has decided, with knowledge of the inconsistency, to rely upon the order of 10 February 1994. In my view it would be an abuse of the process of the court to allow her, now, to pursue the inconsistent case which she asserts in the possession proceedings.
78. I agree that the appeal should be allowed.
79. LORD JUSTICE RIX:I agree with both judgments.
80. When on 10 February 1994 the wife, if I may for convenience so call Mrs Walker, obtained an order in ancillary relief proceedings for the transfer to her of her husband's interest in the matrimonial home, it may be, and it is a fair inference, that she or her solicitors already knew enough about her right to avoid the bank's second charge on the ground of her allegation of undue influence against he husband coupled with an allegation of constructive notice against the bank, to regard her as electing to affirm the transaction or otherwise to make it inequitable for her to maintain her plea of undue influence in the face of the order which she had obtained. After all, she had obtained that order on the basis of her own evidence recognising the second charge and her responsibility to discharge its outgoings. And yet a mere 8 days later, on 18 February, she served a defence and counterclaim in the possession action in which she asserted her right to avoid the charge.
81. Whatever the position may have been as of the date of the property transfer order, however, certainly as of the date of her defence and counterclaim, she knew all she had to know to put her to her election as to the course down which she wished to proceed. Shewas facing in two directions. She had obtained relief in the matrimonial proceedings on the basis that the charge was a subsisting charge which bound her as well as her husband. However, in the possession action, she sought to set that charge aside on the basis that it did not bind her but only her husband. As such her stand might be said to be equivocal.
82. In my judgment she could not in good conscience maintain both those positions. Either she had to return to the court seised of the matrimonial proceedings and inform it that there was a change in circumstances, as she now understood them, or she had to give up her defence in the possession action based on her husband's undue influence. When, however, she did neither but proceeded pursuant to the property transfer order to take a transfer of her husband's interest in the matrimonial home under the conveyance of 6 September 1995, under Clause 4 and the general tenor of which she expressly acknowledged the second among the other two charges as a continuing security for all liabilities of not only her husband but herself as well, she had, in my judgment, finally elected, if she had not done so already, to go down the route of absolving her husband of any wrong of undue influence. In those circumstances, she had abandoned, or must be treated as abandoning, the claim of vitiating wrong which was a necessary pre-condition of her assertion of a right as against the bank to have its charge avoided. That right was parasitic on her claim of undue influence on the part of her husband, and could no longer exist when once that claim had been abandoned. In these circumstances her attempt to persevere in her defence of undue influence was what at any rate at one time would have been called a case of approbation and reprobation. Nurcombe v Nurcombe [1985] 1 All ER 65 is an example of this court's refusal to accept the feasibility of such conduct. There too the wife in the second set of proceedings was trying to set up the invalidity of a transaction which she had accepted as valid in her matrimonial proceedings, and this court did not permit her to do so.
83. Mr Sohanté, on behalf of the wife, submitted that on the contrary pleading her right to avoid the charge in her defence and counterclaim in the possession action was the irrevocable election which determines the outcome of any plea of affirmation once and for all. That is not so. A right to avoid, even when asserted, can always be withdrawn as long as another party has not acted in reliance on the assertion of that right. In this case the wife did not expressly withdraw her claim to avoid the charge, at any rate not in the possession action, but by entering into the conveyance in the terms in which she did she clearly abandoned any right to invoke her husband's undue influence against him, and it follows against the bank as well.
84. I too would allow this appeal.
Order: Appeal allowed