Abbey National Bank Plc v Stringer & Ors

This is an appeal by the claimant, Abbey National plc, against an order of His Honour Judge Medawar Q.C. made in the Central London County Court on 7 July 2005. By that order the judge dismissed a claim against the second defendant, Mrs Rosa Stringer, by which the claimant sought to enforce a mortgage dated 18 October 1989 over a property at 25 Cecil Road, Acton, London W3. The property is in the name of the second defendant and her son, Mr Anthony Stringer, the first defendant. The judge held that the second defendant’s execution of the legal charge had been procured by undue influence on the part of the first defendant, either actual or presumed, and that accordingly it was not enforceable as against the second defendant by the claimant. He also held that the whole beneficial interest in the property was vested in the second defendant, so that there was no beneficial interest of the first defendant against which the claimant could assert an equitable mortgage. The appeal is against both of those findings. The first defendant, who has been made bankrupt, played no part in the proceedings. There were other defendants to the proceedings as well and other claims against them but these are not the subject of this appeal.

The second defendant was born in Matera in Italy on 29 October 1932. She came to England with her brother in 1960. In the following year she met Mr John Stanley Stringer and they were married in 1962. On 16 December 1963 their son Anthony Mario Stringer, the first defendant, was born. Sadly Mr John Stringer died in April 1967. Mrs Stringer, with a three year old child, had to start working to keep herself and her son. She worked for an Italian family called Tedeschi. They ran an ice cream business. They provided her with accommodation at a low rent which enabled her to save some money. They gave her work, help and company, and eventually they gave the first defendant a job as well. Mrs Stringer went on working for the family until about 1985 or 1986 when they sold the business and moved back to Italy.

Mrs Stringer was and is unable to read. She can speak and understand English although at trial she gave part of her evidence through an interpreter, the need for which is apparent from the transcript.

In May 1983 Mrs Stringer bought 25 Cecil Road, Acton for £42,000. The purchase was taken in the joint names of herself and her son. It seems that the cost was met as to £20,000 from Mrs Stringer’s savings and from a gift from her mother who was then living with her, and as to £22,000 by a loan on mortgage from Halifax Building Society. The evidence was that as a widow aged fifty she was not regarded as a suitable borrower on her own. She said that her son’s name was added at the suggestion of her boss for this reason. He was only nineteen at the time, and was working for low wages as a packer in the ice cream business, but the inclusion of his name as a purchaser and a borrower made it possible for an advance of £22,000 to be obtained.

The Halifax mortgage is still outstanding but Halifax plc is not a party and no documents have been obtained from it which might cast light on the circumstances and the declared intentions, if any, of the parties at the time of the purchase. There is no restriction among the entries at HM Land Registry relating to 25 Cecil Road which would restrain dispositions of the property by the survivor of the joint proprietors, under section 58(3) of the Land Registration Act 1925. From this it is possible to infer that the Land Registrar was satisfied, when the transfer to the first and second defendants was registered, that the survivor of them would have power to give a valid receipt for the purchase price on a disposition in the future.

In 1985 or 1986 the Tedeschi family moved back to Italy and that source of employment for Mrs Stringer came to an end. She then found work with a local authority nursing home run by Westminster City Council. In 1987 her mother died. Also in 1987 a girl called Susan came to live at 25 Cecil Road. Later, on 26 August 1995, Susan married the first defendant.

In the meantime, in 1989, the transaction took place which has given rise to these proceedings. On 1 September 1989 First National Bank plc (“FNB”) addressed a facility offer letter to the first defendant, to Mrs Stringer, to Mr Sid Finlay, the third defendant, and to Mr and Mrs Peter O’Brien, the fourth and fifth defendants. They offered a loan of £222,200 on terms specified in the letter, including the requirement by way of security of mortgages on four properties, among which was a second mortgage on 25 Cecil Road. The main, but not the only, purpose of the loan was to fund the acquisition of commercial premises at Park Royal, at which the first defendant was proposing to set up and carry on a business of car repairs together with the third and fourth defendants.

The documents available do not include any earlier documents such as application forms, so that the basis on which the loan was applied for is not apparent. However, it must have been clear that it was for business purposes, not for purposes related to any of the residential properties which were to be mortgaged or for the private purposes of any individual borrower. The addressees were asked to sign the offer letter and signatures appear accordingly on it. The judge accepted that Mrs Stringer did not in fact sign it. She was abroad in Italy on 1 September 1989 visiting her sister. Late in August 1989, on 26 August, Mrs Stringer had an accident in Italy and broke her right arm. She returned to England on 2 September and went to her GP and then to hospital on 4 September. In hospital her arm was broken again and then reset and it was put in plaster to recover.

The requirement for a second mortgage on 25 Cecil Road was satisfied by the legal charge dated 18 October 1989. Mrs Stringer did sign this document. She and her son signed in the presence of a witness, a Mr Lumley, at 42 Park Street, Camberley, the offices of Messrs Foster Harrington, solicitors. The solicitors wrote on 12 October 1989 to Messrs Mills Chody, solicitors for FNB, saying among other things this:

“Four forms of legal charge duly executed. We would explain that Mrs Stringer’s signature is rather poor as her right arm is currently in plaster”.

The claimant’s witness for the trial said that a valuer had inspected 25 Cecil Road in order to carry out a mortgage valuation on 24 August 1989. Since Mrs Stringer’s accident occurred on 26 August it seems almost certain that she was already away at this time.

The loan was made to assist in a business intended to be carried on by the first defendant, Mr Finlay and Mr O’Brien. It made it possible for the business premises at Park Royal to be purchased. The three associates undertook the business but it did not prosper. By 1997, FNB was issuing demands for payment to all the defendants. The first defendant paid £3,000 towards the amount outstanding, which he borrowed from the second defendant. Also in 1997 Mrs Stringer reached the age of 65 at which she had to leave her job with Westminster City Council. After that, however, possibly after a short interval, she continued working part time with a private employer.

Also in 1997 the first defendant’s marriage broke down and Mrs Susan Stringer left 25 Cecil Road where she and the first defendant had been living. In November of that year, prompted by information from her daughter-in-law, Mrs Stringer turned for help to a neighbour and friend, Mr Barry Morgan. On 3 November 1997, she signed a letter addressed to FNB, presumably prepared by him, saying that she had just discovered from her daughter-in-law that the first defendant was in arrear in payments under the FNB mortgage and the Halifax mortgage and had been since June. She asked FNB to clarify things with Mr Morgan. Following this, on 5 November 1997, someone at FNB spoke to Mr Morgan. He noted that Mr Morgan explained that the first defendant had been withholding information from both his wife and his mother about his business and personal mortgage problems and that there were arrears on both accounts including £18,000 due to the Halifax. He also recorded that Mrs Stringer had recently cleared a rates bill for the business premises.

The first defendant’s position became more and more serious. He ended up being sentenced to a prison term of one year and serving an appropriate part of that term in prison from 1998 to 1999, apparently on charges of dealing in stolen cars. He, and his associates as well no doubt, owed large sums to the Inland Revenue, to the Customs and Excise, in respect of National Insurance Contributions, and to other creditors. He was made bankrupt in March 1999. The second defendant made several payments to Halifax to stave off execution of a possession order. According to a note dated January 1999 of a conversation between Mr Morgan and FNB, the second defendant was not then earning but was in a position to get her old job back so as to be able to service the first mortgage again from her earnings.

In 1997 Mrs Susan Stringer had started divorce proceedings. In 2002 she applied for a property adjustment order with a view to obtaining part of the value of 25 Cecil Road. At that stage, Mrs Rosa Stringer obtained assistance from a solicitor for the first time. She applied to intervene in the matrimonial proceedings on the basis that the first defendant had no interest in the property. We were told that eventually those proceedings were dismissed.

In 1998 FNB started possession proceedings in relation to 25 Cecil Road and also in relation to the property mortgaged by Mr and Mrs O’Brien. In October 2002 all rights of FNB in relation to the debts and the security for them were assigned to Abbey National, the present claimant. In the meantime the business premises at Park Royal had been sold and the net proceeds were applied to reduce the debt, but there is still a substantial debt outstanding. In April 1998, FNB had obtained a possession order in respect of 25 Cecil Road. The second defendant’s first active involvement in these proceedings was in June 2002 when, with the help of solicitors, she applied to the Uxbridge County Court to suspend the warrant of execution and then to set aside the possession order. By then Mrs Stringer was seventy years of age and she was still working for her private employer.

The order for possession was set aside in August 2002. The particulars of claim were amended in 2004 and Mrs Stringer served a defence and Part 20 claim to which the claimant served a reply and defence to Part 20 claim. The claimant claimed to enforce the mortgage and in the alternative to have the benefit of an equitable mortgage over the first defendant’s beneficial interest in the property. After some doubt and uncertainty as to what it was that she had signed, Mrs Stringer admitted having signed the legal charge but said that she could not read English and that the contents of the document were not read over or explained to her. She asserted that she was induced to sign it by the first defendant’s undue influence and gave particulars in support of that. She said that the claimant had constructive notice of the undue influence and had taken no steps to discharge that notice. She also denied that the first defendant had any beneficial interest of his own. She asserted that the transaction was manifestly disadvantageous to her, in that she was charging her home to secure the repayment of a business loan to the first defendant and his business associates. In its reply, the claimant put all these matters in issue except that, if there was any undue influence, the claimant was on notice of that. This was admitted.

The case came to trial on 4 July 2005. The second defendant was represented by Mr J David Cook and the claimant by Miss Julia Smith, as before us. The second defendant gave evidence of which we have a transcript. The judge held that the first defendant had no beneficial interest in the property and that he had procured the second defendant’s signature of the mortgage by actual undue influence, alternatively that undue influence could be presumed. The claimant had argued that the second defendant could not deny that the first defendant had some beneficial interest in the property because his having such an interest was represented to the Halifax at the time of the original mortgage and if that were not true that mortgage would have been obtained by fraud. The judge also rejected that submission.

The judge also found in favour of Mrs O’Brien, the fifth defendant, on the basis of undue influence but in her case it was presumably not in issue that the fourth defendant had a beneficial interest in the property and the claimant was held to have had an equitable charge over that beneficial interest. Permission to appeal was refused by the judge on all points and by Lord Justice Neuberger as regards the findings in favour of Mrs O’Brien. He gave permission to appeal, however, as regards the claims against Mrs Stringer.

The judge described the second defendant’s position after the purchase in 1983 in the following terms:

“6.

This vulnerable, illiterate woman continued to shoulder her responsibilities but in fact increasingly relying on her son to take care of things. Letters and matters in general were left to him and he was, as I find, to take advantage of her, although much time was to pass before she came to realise, if indeed she really has done so yet, that her reliance upon him was misplaced. Mrs Stringer was not confident or able to deal with anything on her own. Prior to and up to the purchase of the property she was, as I find, relying heavily on the father of the Italian family who employed her and who continued to do so for two or three years after the purchase. Increasingly she placed her reliance on her son and he was the person in whom she placed most trust or confidence until his criminal activities in the late 1990s which was to lead to his imprisonment in December 1999.”

He went on to describe how the 1989 transaction came about.

“7.

Ten years earlier in 1989 her son and his friends became involved in business discussions. It is plain that Mrs Stringer was never aware of exactly what was being discussed or intended by them. In fact, Tony Stringer, Sid Finlay and Peter O’Brien were intending to go into business together. Stringer’s expertise was in spraying vehicles, Finlay was a panel beater and O’Brien was a coachbuilder. They had little or no business experience. A property -- Unit 6, 57-61 Gorst Road, London NW10 -- came up for sale as a freehold property and the three men decided to purchase it if they could and to set up business to be known as Spray-Tone, a car crash specialist business. Under pressure to complete the purchase of the proposed business premises quickly, the three partners were anxious to raise the money necessary to buy the property for £190,000 and, as Mr O’Brien agreed in evidence, £10,000 to cover expected costs and £20,000 to cover starting up the business with all necessary equipment.”

“9.

Mrs Rosa Stringer’s position is that she knew her son and Mr Finlay and Mr O’Brien were going to set up what she called “a mechanic business”. Her son told her that he had obtained the loan from the bank but never told her that it was secured on her house. “I would never have agreed to this because all my life I have always worked for my house.” … It is plain, and I so find, that at all times she did repose trust and confidence in her son from when the property 25 Cecil Road was purchased by her with her money and a mortgage the repayments of which were made by her and the burden of looking after which and maintaining the property was hers. She had obtained an improvement grant and put in double-glazing and as I find all mortgage instalments and other outgoings were paid by her. As she put it, “If there was any occasion when Tony paid the mortgage, which was very rare, I always reimbursed him fully.” Even during the time when Tony was married to Susan, and from about 1995 to 1997 (when she left him and he suffered a nervous breakdown) they both lived in the house and, as I find, they did not contribute to the outgoings or towards the mortgage instalments.”

I propose to deal first with the question whether the first defendant had any beneficial interest in 25 Cecil Road, since that depends on the first transaction in time, the purchase in 1983. There is no evidence from the first defendant and no documents relating to the transaction are in evidence. On the basis of Mrs Stringer’s witness statements and oral evidence the judge was satisfied that her son’s involvement was nominal only. He made no contribution to the price or to the mortgage instalments or to any outgoings. Despite his being a joint owner, from which a beneficial interest might normally be presumed, he held that the whole cost was provided by Mrs Stringer and that any presumption of advancement was rebutted by the facts. He held at paragraph 11 that there never was an intention by either first or second defendant that the first defendant should share in the beneficial interest in the mother’s house and that their understanding or agreement that he should not was acted upon and illustrated by the history of the matter.

Miss Smith criticised this finding on the basis that there was no evidence of any discussion between the first and second defendant, or of any representation by first to second defendant, that she was to be the sole beneficial owner dating back to 1983. So, she submitted, there was no evidence to support a case based on agreement or one of estoppel. She relied on Lloyds Bank v. Rosset [1991] 1 AC 107 at 132. In that case the question was as to the circumstances in which, where a property was in the name of one person only, another could establish that he or she had a beneficial interest in it. That is, therefore, the reverse of the question in the present case, but the passage cited is nevertheless relevant in principle. In that case the property was in the name of Mr Rosset and there was express evidence showing that, before the acquisition, there was a clear understanding between him and his wife that the property would be his only, not least because he provided the whole of the funds and did so with the benefit of assistance from a relation who had released funds for the purpose on the express basis that it would belong to him and not to the two jointly. Nevertheless Mrs Rosset claimed that she had a beneficial interest under a constructive trust as a result of assisting with the renovation of the property after it had been acquired.

Lord Bridge gave the principal speech, and the other members of the House of Lords agreed with him. At page 132 he made observations about what he described as a “critical distinction which any judge required to resolve a dispute between former partners as to the beneficial interest in the home they formerly shared should always have in the forefront of his mind”.

“The first and fundamental question which must always be resolved is whether, independently of any inference to be drawn from the conduct of the parties in the course of sharing the house as their home and managing their joint affairs, there has at any time prior to acquisition, or exceptionally at some later date, been any agreement, arrangement or understanding reached between them that the property is to be shared beneficially. The finding of an agreement or arrangement to share in this sense can only, I think, be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been. Once a finding to this effect is made it will only be necessary for the partner asserting a claim to a beneficial interest against the partner entitled to the legal estate to show that he or she has acted to his or her detriment or significantly altered his or her position in reliance on the agreement in order to give rise to a constructive trust or a proprietary estoppel.

In sharp contrast with this situation is the very different one where there is no evidence to support a finding of an agreement or arrangement to share, however reasonable it might have been for the parties to reach such an arrangement if they had applied their minds to the question, and where the court must rely entirely on the conduct of the parties both as the basis for which to infer a common intention to share the property beneficially and as the conduct relied on to give rise to a constructive trust. In this situation direct contributions to the purchase price by the partner who is not the legal owner, whether initially or by payment of mortgage instalments, will readily justify the inference necessary to the creation of a constructive trust. But, as I read the authorities, it is at least extremely doubtful whether anything less will do.”

Miss Smith submitted, fairly, that there was no evidence in what Mrs Stringer said in her witness statements or her oral evidence about any express discussion between herself and her son as to the beneficial interest in the property. Accordingly, she submitted, it was not open to the judge in this case to proceed on the basis of an agreement, arrangement or understanding. She said the case fell into the second category of situation described by Lord Bridge, namely that the court must rely upon the conduct of the parties as the basis from which to infer the alleged intention that Mrs Stringer should own the property beneficially to the exclusion of her son.

The matters which are in evidence about the acquisition in 1983 are these. It was Mrs Stringer’s decision to buy the property. She was then fifty years old and her son nineteen. With the help of her boss she applied to Halifax Building Society for a mortgage to make the purchase possible. It was her boss who took her to the Halifax to make the necessary arrangements. The Halifax would not lend to Mrs Stringer alone because of her age. Her boss discussed with the manager at the Halifax what to do about this. He suggested that the first defendant’s name should be added to the purchase and the mortgage application. Her evidence was that her son could not pay towards the mortgage instalments at that time and moreover that he did not pay. She said the intention was that the property was for herself and her mother, not for her son “because he was young he can always go”. Later she said “no, never because I think that one day he has got to go because he has a girl friend”. Somewhat later Miss Smith asked her the following question: “If you were to die, because the house is in the joint names of yourself and your son, do you understand that your son will own the house?” That question was interpreted to her and the answer was yes.

The particular significance of that last exchange goes back to the question of the absence of a joint proprietor restriction. Miss Smith submitted that the inference which can be drawn from this is the only directly relevant material. She relied on Re Gorman [1990] 1 WLR 616, 621-2, as authority for the proposition that a declaration such as is necessary to allow the Land Registry not to enter a joint proprietorship restriction is evidence of an agreement between the purchasers that the beneficial interests in the property should be as joint tenants even if the document is not signed by them. In that case the inference to that effect was supported by evidence from the wife, who was contending she had a greater share than fifty per cent, as to the actual discussions between herself and her husband before the purchase and her actual intention which was that there should be a joint tenancy. It seems to me that the present case is very different on the facts. We do not have the documents so can only draw inferences as to their content. It is a fair inference, as Miss Smith submitted, that the transfer did include a declaration, whether or not signed by the purchasers, which permitted the Land Registry to conclude that they owned the property as beneficial joint tenants. But there is no evidence that Mrs Stringer in fact intended that there should be a joint tenancy, unless it be that which is derived from the last answer quoted in paragraph 24 above. Everything else in her evidence indicates clearly that she intended that she should be the sole beneficial owner of the property and her son should have no beneficial interest in it himself. The surrounding circumstances, against which that needs to be interpreted, were very different from that of a matrimonial joint acquisition and it seems to me that they support the proposition that it is highly improbable that Mrs Stringer would have wished to give her son a half share in the house. I have in mind the difference in age, her dependence on the property as her home, and for the time being that of her mother, her anticipation that her son would at some point move elsewhere to live with a girlfriend or wife and the fact that in 1983 he was unable to, and was plainly not expected to, pay any amount towards the mortgage contributions or any general outgoings on the property.

Miss Smith submitted that, because the mortgage was a joint liability of Mr Stringer and his mother, he was to be taken to be contributing half of the amount of the advance. It is true that he made himself liable jointly with her to pay the sums due under the mortgage advance. There was, however, no real prospect in 1983 that he would pay any of the mortgage instalments. Nor did he at the early stage. Much later, it seems that he did assume some responsibility for payments. This is consistent with what was said on Mrs Stringer’s behalf to FNB in 1997 and 1999. By then Mrs Stringer had had to leave her job with Westminster City Council. Although the evidence is not altogether clear it seems that there may have been a hiatus in her employment and her earnings at that time. That would provide a reason why, at long last, the first defendant should be expected to pay some of the mortgage contributions. It is unclear whether he did pay any such contributions since the evidence which shows that he was expected to also shows that he did not or at least that he defaulted to a substantial extent. It does not seem to me that any of this provides an adequate basis for an inference that he was expected, intended or agreed to pay anything towards the mortgage or the outgoings in 1983. Miss Smith showed us some documents, and in her skeleton relied on others, as showing that the first defendant was, she said, intended to bear sole responsibility for repaying the mortgage. All of these documents emanate either from third parties or from a much later date. None of them seem to me to cast any light on the true basis of the acquisition as between the first and second defendants in 1983. The judge did not mention this evidence at all. He made a comment on it in the course of the cross-examination of Mrs Stringer. I infer from that, and from his silence in the judgment, that he thought this material of no significance. That is certainly my view.

The present case has some similarities with Wilson v. Wilson [1969] 1 WLR 1470. There a property had been acquired in the name of two brothers, with an express declaration of a joint tenancy, but the evidence showed that one brother provided all the cash funds and the other’s name was only used in order to satisfy the lender’s requirements as regards the part of the cost that was met by an advance on mortgage, and the first made all the payments due under the mortgage. It was also clear that the solicitor who included the declaration as to a beneficial joint tenancy had done so without instructions and that the declaration was inconsistent with the true basis of the transaction as agreed between the two brothers. Buckley J said that the transfer was subject to rectification by deleting the declaration. He held that the two brothers held the property on trust for the defendant alone. Even without rectification he said that the court could declare that trust notwithstanding the terms of the transfer.

Miss Smith submitted in her skeleton argument that it was not open to the judge to accept Mrs Stringer’s evidence that her son’s name was only brought into the transaction because of the lending criteria imposed by Halifax Building Society. I do not understand the basis for that submission. There was nothing to contradict her evidence to that effect on this point.

I do understand, but would reject, Miss Smith’s submission that it is not open to the second defendant to assert that the first defendant has no beneficial interest. I agree with the judge that the fact that a lender requires the security of an additional repayment covenant does not give rise to any inference that the lender is interested in what the beneficial interests in the property are as between the two joint owners and borrowers. I see no basis for the argument that any misrepresentation was involved in the application to Halifax Building Society for a mortgage if the first defendant’s involvement as purchaser and borrower was not backed by a beneficial interest. Either way the building society had a valid security over the whole property for the whole of its advance and had recourse to two borrowers rather than only one on the personal covenant. They might have done better to look only to the second defendant but that is beside the point.

It seems to me that the judge was plainly justified on the evidence in holding that the basis on which the first and second defendants undertook the purchase and the borrowing from Halifax Building Society was that the son’s involvement was merely nominal, was no more than was required to satisfy the lender, and that he was not to be expected to make any contribution towards the cost nor entitled to any beneficial interest. Miss Smith was right to say that there is no evidence of an actual conversation between the two to that effect. She was therefore able to submit, going back to Lord Bridge’s words in Rosset, that there was no “evidence of express discussions between the partners however imperfectly remembered and however imprecise their terms may have been”. Nevertheless it seems to me that it is possible and entirely legitimate to infer from the circumstances which I have described that there must have been a discussion between mother and son, which may also have involved her boss, on the basis of which it was clear that the son’s involvement was purely nominal and that he was neither expected to bear any financial burden nor intended to acquire any financial benefit. If that is a case which falls into the second of the situations that Lord Bridge describes in the passage quoted above from Rosset, namely the court inferring the relevant intention from the conduct of the parties in the context of the relevant surrounding circumstances, rather than by inferring an agreement, arrangement or understanding within the first of those two situations, so be it. Either way it seems to me that the evidence fully justifies the judge’s finding that there was an agreement or understanding that the beneficial interest was to belong wholly to Mrs Stringer. The judge drew that inference, as he said in paragraph 11, in a passage referred to at paragraph 20 above. It was for the judge to consider what significance, if any, to attach to Mrs Stringer’s affirmative answer to the question quoted at the end of paragraph 24 above. An intention that she and her son should hold the property as joint tenants beneficially, and an understanding of the implications of that, are not the only possible explanations for her agreement to the proposition put to her. Therefore, this answer is not necessarily inconsistent with the judge’s conclusion.

On that basis the declaration which one can infer was included in the transfer was as inappropriate as it was in Wilson v. Wilson. If necessary, if the document had been before the court, it could have been dealt with by rectification. As it is Buckley J’s decision shows that it is legitimate for the court to simply to declare the trusts affecting the property, as Judge Medawar did. I would hold that the judge was right to determine that Mr Stringer had no beneficial interest in 25 Cecil Road.

The next question is whether he was also right in his findings on the question of undue influence. He dealt with this at paragraphs 14 to 16. He started by finding some important facts as follows:

“14.

… Mrs Stringer was, as I have found her to be, a vulnerable woman of slight education, illiterate and who had little ability to communicate in English and no ability to read or understand any, let alone formal, documents. At the time of the second charge on her property, the property in which as I have found she had the sole beneficial interest, she had complete trust and confidence in her son who had, as I find, his own interests and agenda which were not closely aligned to hers.”

After referring to Royal Bank of Scotland v. Etridge (No. 2) [2001] UKHL 44, [2002] 2 AC 773,he dealt with some other relevant facts at paragraphs 15 and 16 as follows:

“15.

The second legal charge on Mrs Stringer’s home was of no benefit to her and utterly disadvantageous. This of itself is of considerable evidential value in establishing that undue influence was in fact exercised to get Mrs Stringer to enter into the legal charge. There is no evidence that she understood its purpose and there is some evidence that the truth was being concealed from her, for example as to the contents of the facility letter, the contents of which I find were never disclosed to her.”

“16.

… What needs to be shown is that Rosa Stringer’s independence of decision was substantially undermined as plainly I find that it was. She was taken to a solicitor’s office, given no explanation, any concern she might have being assuaged by her being told not to worry, it was something to do with her son’s business. Would she not wish to help her only son in whom, as I find, she placed such complete trust and confidence? I find that she was unaware of the nature and content of the papers that she did sign. She neither knew, nor appreciated, that the transaction involved her home, let alone that she could lose it. There was no opportunity to investigate matters for herself, there was no interpreter, she had no separate legal advice, and the signature on the facility letter was not hers. Thus the first defendant got the second defendant to sign the legal charge. As I find, she would not have done this or got herself involved in a transaction that risked her only asset without her son’s influence upon her. In any event undue influence is to be presumed in the finding that on the facts Mrs Stringer did place trust and confidence in her son and the transaction itself calls for an explanation. That presumption has not been rebutted or sought to be rebutted by the claimant.”

Miss Smith submitted that the judge was wrong, first, to find that Mrs Stringer’s execution of the mortgage was procured by actual undue influence, secondly to hold that she placed trust and confidence in the first defendant, thirdly, to hold that the transaction was utterly disadvantageous to her or even that it called for an explanation, fourthly to rely on the absence of evidence that she understood the transaction as being evidence of undue influence and fifthly to ignore the fact that she did not raise the issue of undue influence until 2002 although she was on notice of the existence of the mortgage from 1997.

She relied in particular on a passage in Etridge, where Lord Scott rejected a submission on behalf of Mrs Etridge that her ignorance of the nature of the documents that she signed enabled her to show that she had been induced to sign the document by a misrepresentation on the part of her husband: see paragraphs 222 to 223. She went on from that to submit that, even if (as she did not accept) Mrs Stringer did place trust and confidence in her son, there was no evidence that he took such unfair advantage of the relationship as to amount to undue influence.

It is logical to start with the question whether she did place trust and confidence in her son. It seems to me a strange proposition to say that she did not. It is plain that until 1985 or 1986 she obtained a great deal of help and advice from one or more members of the Tedeschi family and placed reliance on them, in particular in relation to the acquisition of 25 Cecil Road. Once they had moved back to Italy their place had to be taken by someone else who could read and who had some knowledge of financial matters. There was no such person, to start with, other than the first defendant, in the second defendant’s immediate circle. In her witness statement made on 6 July 2004 at paragraph 3(x) she said that she depended on him to deal with letters and so on which she received. Later in the same statement at paragraph 3(xxi) she said that she had not known about the possession proceedings which had been issued since “Tony dealt with everything”. In the course of cross-examination Miss Smith asked her some questions about this. At page 39 in the transcript (at letter f), she asked whether Mrs Stringer opened the post that came to the house addressed to her. The answer was that she did not: “I used to leave it to him to read the letters”. She then gave further evidence which appeared to suggest that he did not read the letters even though she left them for him to do so. She said then that neither at the age of nineteen, that is to say at the time of the purchase, nor when he was twenty five, that is to say at the time of the transaction with FNB, was he of any help to her. Miss Smith submitted that the evidence in the witness statement, put in the words of lawyers, should not be preferred over this evidence that she did not obtain help from him even though she hoped for it from him, and that such help that she got was from people whom she could not identify other than as “some friends”. That is a graphic, if somewhat confused, passage at the end of the cross-examination which suggests a good deal of resentment on the part of Mrs Stringer against her ungrateful and unreliable son. The judge saw her giving evidence and had to do the best he could with the rather confused evidence that emerged in the course of her cross-examination. It seems to me that it was for him to decide what weight to give to that passage, as with all other passages in the oral evidence, in context with the probabilities of the case as a whole and the evidence in the witness statements in particular. Looking at the evidence as a whole, it seems to me that the judge was well entitled to come to the finding as to Mrs Stringer’s reliance on her son which he expressed in paragraph 6 of his judgment, which I have already quoted at paragraph 18 above.

Passages from the speech of Lord Nicholls in Etridge were cited to us as they had been to the judge, including paragraphs 8 to 9 and paragraph 11 where Lord Nicholls said that “the principle is not confined to cases of abuse of trust and confidence. It also includes, for instance, cases where a vulnerable person has been exploited”.

Lord Nicholls went on to discourage the use of the label “manifest disadvantage”. At paragraph 25 of his speech he identified the correct test in the words of Lord Scarman in National Westminster Bank v. Morgan [1985] AC 686 at 703,as follows:

“The Court of Appeal erred in law in holding that the presumption of undue influence can arise from the evidence of the relationship of the parties without also evidence that the transaction itself was wrongful in that it constituted an advantage taken of the person subjected to the influence which, failing proof to the contrary, was explicable only on the basis that undue influence had been exercised to procure it”.

Lord Scott took issue with an aspect of that formulation in his speech in Etridge at paragraph 155 but this does not affect the point which is important for present purposes as regards the test, which Lord Scott referred to as the inability to explain the transaction by reference to the normal motives by which people act. Either way, this element may raise an evidential presumption, requiring evidence to rebut it to the effect that the transaction was fully understood and intended.

Thus it seems to me that the judge was correct to regard the relationship between the second defendant and her son as one which was capable of giving rise to the presumption of undue influence. More generally she was a person who was plainly vulnerable, to use Lord Nicholls’ word. She was particularly vulnerable towards her son and open to exploitation on his part. As he knew, she was unable to read and her understanding of English was limited.

The account she gave in her evidence of how she came to execute the mortgage in 1989 is set out in her witness statement. She was not cross-examined on this. The passage in the witness statement is paragraph 3(xiv) and (xv):

“(xiv)

In 1989, after I had returned from my holidays in Italy, Sid visited me at the house. I was told by my Son and Sid that we were going to Sid’s house to have a look at his house since he had then recently purchased this house and to have a cup of tea at the house. When we arrived at Sid’s house, we had tea and I was told by my Son that we were waiting for his other friends Mr and Mrs O’Brien and we had to go somewhere to sign some documents. I did not know what area the house was situated and I was not particularly concerned with this since my Son had driven me to Sid’s house.

(xv)

From Sid’s house, we went to a large Office. All of us sat in a large room which I now believe was a waiting room. We waited there for some time and then a gentleman came over to us and got us to sign some documents. All of us signed some documents and I was told by Sid and Tony to sign this document which I did as I was told and I did not question this. At the time, I believe that I signed this document believing that it had to do something with Tony’s business because he was in some business relationship with Sid and Mr O’Brien. I was not explained as to the contents of this document which I signed nor was I explained or told that I was putting my Property as a Security. Had I been explained or told that I was putting up my property as Security, then I would have never signed this document since all my life, I have worked hard for this Property and all my life I am the one who has paid all the outgoings in relation to the Property including the Mortgage repayments. There is no way I would have put this Property as Security for anyone let alone my Son or his Partners.”

Miss Smith relied strongly on the fact that there is no evidence here of any representation by the first defendant, and on the fact that Mrs Stringer signed without asking what the document was. She said later in her witness statement that her son had told her that he had obtained a loan from FNB, though he did not say the amount, to set up a garage business with two other men. It is a reasonable inference that the place that she was taken to as described in the passage quoted above was the offices of Foster Harrington, the solicitors acting for the three business associates. Mr Lumley, an associate of that firm, witnessed the signature and noted her arm being in plaster. It is not suggested that he gave her any advice or explanation about the transaction or that anyone explained the transaction to her in Italian or English. Thereby Mrs Stringer put her home at risk as security for a business loan to her son, Mr Finlay and Mr O’Brien and therefore became vulnerable to the fortunes of the business and their respective conduct of it as regards their ability to keep up the payments due to FNB.

Miss Smith submitted that, because there is no evidence of any actual misrepresentation or other positive impropriety on the part of Mr Stringer in procuring his mother’s signature to the legal charge, the case cannot be categorised as one of actual undue influence. She went on to submit that the case cannot be brought within the principles of presumed undue influence either because even if, as I have said and contrary to Miss Smith’s submissions, there was a relationship of trust and confidence, the transaction is one which is explicable according to the ordinary motives of mankind. She submitted that it is perfectly natural that a mother should wish to support her son by setting him up in business and this was doing no more than that.

It seems to me that that categorisation does not take account of the full circumstances of the case. Mrs Stringer was unable to read at all and her understanding of English was limited. She depended and relied on her son to assist her with any kind of correspondence or documentation or financial matter and placed trust and confidence in him. The property was her home and principal asset. She was herself still responsible for the payments under the mortgage to the Halifax Building Society and for the outgoings towards which the first defendant made in effect no contribution. The transaction involved putting her home at risk by way of security for a loan not only to her son but also to two business associates of his whom she hardly knew, in relation to a proposed new business of which she knew nothing and from which she would obtain no benefit, even if it were fully successful, except such indirect benefit she might gain one day if her son came to be in a better position to support and help her in her old age. She knew that her son was obtaining a loan from the bank but she had no idea that a condition of the loan was the grant of security over the property. She was away when the property was inspected for the mortgage valuation and when the facility letter was issued and signed and her signature was forged on that document. Without any prior explanation or notice she was taken to the solicitor’s offices; without any explanation as to what was happening she had a document placed in front of her for signature and her son told her to sign it, which she did without questioning it. She believed that it had something to do with his business but she had no idea that by signing it she was putting her property up as security. If she had known that that was what the document did she would not have agreed to sign it.

That seems to me to be a very clear case of advantage being taken by way of exploitation of a vulnerable person on the part of someone who knew that he could do so and that she would not have agreed to do what he wanted if she had understood properly what she was being asked to do. I agree with the judge that the transaction was utterly disadvantageous to her. I cannot accept Miss Smith’s submission that it is no more than that which is readily explicable as a mother’s generosity to her son. As regards Mrs Stringer’s failure to ask any question about the documents, it seems to me that that is in no way comparable to Mrs Etridge’s failure to ask. The relationship between Mr and Mrs Etridge was very different from that between Mrs Stringer and her son.

In this context Miss Smith referred us to what Lord Nicholls said at paragraph 32 of his speech in Etridge where he stressed that undue influence has a connotation of impropriety and that, as between husband and wife, statements or conduct by a husband which do not pass beyond the bounds of what may be expected of a reasonable husband in the circumstances should not without more be castigated as undue influence. I do not for a moment question that but the relationship between a husband and wife such as Mr and Mrs Etridge is likely to be very different indeed from the relationship between Mr Stringer, who for all his lack of experience in business was able to read and understand and cope with business documents, and his mother, thirty years older, illiterate and with no experience of business. I have no hesitation in categorising what Mr Stringer did as having a connotation, to say the least, of impropriety. What he did is not to be regarded as conduct which does not pass beyond the bounds of what may be expected on the part of a reasonable son towards his mother.

Miss Smith also cited to us authority to the effect that the mere fact that one party to a transaction does not understand English, being the language in which the document signed is expressed, is not a defence: Barclays Bank v. Schwartz Court of Appeal 21 June 1995, The Times 2 August 1995. I would not take issue with that but it is not the point. It seems to me that in a transaction of this kind where a son as principal debtor seeks his mother’s assistance as surety, and she is illiterate and she places trust and confidence in him, there is a positive duty on him to see that she understands what the transaction is that he is asking her, or indeed telling her, to enter into. It is not sufficient for him simply to take her to the document, tell her to sign it and rely upon the fact that she asks no question about it.

It seems to me that there is also nothing in the point that Mrs Stringer did not allege undue influence until 2002. Until that time she was trying to cope with the situation herself, to stay in the property as long as she could, and relying only on lay help from her neighbour. Only in 2002 did she go to solicitors because of the double threat of the proceedings by her former daughter-in-law and by the mortgagees. Nothing she had said earlier was inconsistent with her case as to undue influence.

In my judgment, the judge’s finding that Mrs Stringer’s execution of the legal charge was procured by undue influence, actual or presumed, is fully justified by the evidence given at trial. Accordingly, notwithstanding Miss Smith’s able, clear and succinct submissions, I would dismiss the appeal on this point as well as on the decision that the beneficial interest in the property belongs entirely to Mrs Stringer.

I agree

I also agree.