Stanbridge v Advanced Industrial Technology Corporation Ltd

Title to 15 Whistlers Avenue, London SW11 (“the Property”) is registered at HM Land Registry in the joint names of the Claimant/Second Part 20

By her Claim Mrs Stanbridge seeks, essentially, a declaration that the Charge and the Facility Letter are void and asks that they be set aside and that the register of title be rectified.

Mr Stanbridge has played no active part in these proceedings since putting in a defence in July 2010 and three brief witness statements. He did not appear at trial and his whereabouts are unknown. In his defence Mr Stanbridge admitted that he purported to act on behalf of his wife in executing the Charge and the Facility Letter but denied that he was authorised to do so. He asserted that he had forged her signature on those documents.

As at the date of trial AITC accepted that Mrs Stanbridge had not executed either the Charge or the Facility Letter but they assert that Mr Stanbridge was authorised by his wife to execute the documents on her behalf or alternatively that she subsequently ratified the Charge and the agreement contained in the Facility Letter or that she is estopped from denying their validity. AITC allege that Mrs Stanbridge came to know of her husband’s execution of the documents at the time of or shortly after the purported execution and that by reason of her failure to challenge the validity of the documents at the time and her joint receipt and use of the proceeds raised as a result of their execution she ratified the Charge and the Facility Letter and AITC acted to their detriment (in advancing the loan monies) and she is accordingly estopped from denying the validity of those documents. Mrs Stanbridge relies on her contention that she knew nothing of the transaction prior to May 2010 and that AITC is the author of its own misfortunes.

By its Part 20 Claim AITC seeks a declaration that Mr Stanbridge’s beneficial interest is subject to an equitable charge to secure the loan. In addition they seek payment of the sum of £141,750 on dishonoured cheques which had been tendered in repayment of the loan (and interest on it), damages for deceit as against Mr Stanbridge and repayment from both Mr & Mrs Stanbridge of the sum of £135,000 advanced under the Facility Letter as money had and

Mr Stanbridge in paragraph 10 of his defence to AITC’s Part 20 Claim

As to AITC’s claim for monies had and received Mrs Stanbridge says that if the loan monies went through an account of which she was a joint holder it was without her knowledge or permission and that the account was, in any event, used as a pure conduit by her husband to pass the monies behind her back to a third party. An earlier assertion by Mrs Stanbridge that AITC is not entitled to succeed against her on its claim for money had and received because of a change of position by her had been struck out at an interim stage of the proceedings and was not pursued at trial.

The Third Defendant (“Mr Denney”) is the company secretary of AITC and when the loan to AITC went unpaid was purportedly appointed by that company as a Law of Property Act receiver over the Property pursuant to the powers purportedly conferred on AITC as mortgagee by the terms of the Charge. Mrs Stanbridge seeks no separate relief against Mr Denney and his position falls to be considered with that of AITC.

Originally AITC also sought relief against the Third Part 20 Defendant (“Ms de Plaza”) but by the time that the case came on for trial AITC and Ms de Plaza had reached an accommodation. Consequently she gave evidence in support of AITC, a change from her original position when she had supported the case being advanced by Mrs Stanbridge.

On 15 November 1999 Mrs Stanbridge, following her divorce from a Mr Greilsamer, purchased and was registered as the sole proprietor of the Property at HM Land Registry, which comprised a long leasehold interest, under title number SGL440479, having paid the sum of £292,000 of which £200,000 had been advanced by Barclays Bank Plc and was secured by a first legal charge. In 2000 she married Mr Stanbridge following which the Property was

At the time of their marriage Mr Stanbridge had led Mrs Stanbridge to believe that he also would be transferring into their joint names a property which he held in his sole name. He failed to do so. This represented a source of friction between them.

By a charge dated 15 June 2001 Mr & Mrs Stanbridge remortgaged the

In addition to the house in London Mr & Mrs Stanbridge had property in South Carolina in the United States of America to which reference was made

In around 2002 Mr & Mrs Stanbridge opened a joint account (No.20068571) (“the joint account”) with the Clydesdale Bank Plc (“the Clydesdale”). At about the same time they let the Property on the first of a series of short-term tenancy agreements and moved to Spain. It is apparent to me from the evidence which I heard, and which I accept, that Mr Stanbridge managed the letting of the Property and instructed the agents who were to do so. It was to him that they reported from time to time. I also find that it was he who was in control of the household finances, information about which he did not readily share with his wife.

After moving to Spain Mr & Mrs Stanbridge set up a legal and accountancy business (primarily aimed at non-Spanish clients) which became known as

Despite Ms de Plaza’s assertions to the contrary in the course of her testimony

Ms Sue Greenwood, from whom evidence was sought only during the course of the trial, acted as managing agent for the Property, having been appointed by Mr Stanbridge alone. Douglas & Gordon were appointed by Mr Stanbridge to act as letting agents for the Property. On the third day of the trial Ms Greenwood provided a witness statement, was called to give evidence by Mrs Stanbridge and was cross-examined by counsel for AITC with a view to showing that she had been in contact with Mrs Stanbridge in relation to the events that this case concerned at a much earlier stage than Mrs Stanbridge asserted and that therefore Mrs Stanbridge knew about the Facility Letter and the Charge prior to May 2010 (which was the date when Mrs Stanbridge asserts that she first knew of them). However, in my judgment Ms Greenwood was a transparently honest witness with no agenda. I find that she was at all material times concerned to perform her role as managing agent, instructed by Mr Stanbridge alone, as best she could. It seems to me that she was scrupulous in her approach to that role and in the evidence which she gave at trial. I unhesitatingly accept the evidence which she gave. Among the tasks that Ms Greenwood performed was the irregular collection of mail from the

Further, Ms Greenwood’s credibility and evidence supports Mrs Stanbridge’s credibility on a material issue.

The Property appears to have been continuously let and the rent which those lettings generated was paid directly into the joint account with the Clydesdale. The payments due in respect of the mortgage to Alliance & Leicester Plc from time to time were paid by direct debit from the same joint account. Mrs Stanbridge asserts that although the account had been opened jointly she had never used it and that prior to May 2010 she had never seen any statements relating to it. In paragraph 20 of her Reply and Amended Defence to Part 20 Claim she pleads that she was not aware “prior to May 2010, that the Joint Account was still open”.

However, in the course of his cross-examination of her counsel for AITC took Mrs Stanbridge to a bank statement entry dated 15 April 2009 which showed a credit to the account in the sum of £3,490.71 and to a corresponding fax notification from the Clydesdale to Mr Stanbridge of receipt of those funds which purports to show that the remitter of those funds was Mrs Stanbridge who appeared to have sent €4,000 from a Spanish bank account to the English joint account. In evidence Mrs Stanbridge could give no satisfactory explanation of these two documents. Even though her husband plainly concealed matters from her and arranged his business affairs behind her back the inference which I draw is that she could not have been telling the entire truth about her knowledge of the account and that it was, in effect, an active account which she used from time to time, albeit infrequently and albeit that it remained, essentially, under the control of her husband. The inference which I draw as to Mrs Stanbridge’s knowledge of the existence of the joint account is supported by a further piece of evidence relating to the subsequent use by Mrs

I heard a certain amount of evidence about an apparently unlimited power of attorney which Mrs Stanbridge had executed in favour of her husband before a notary in Granada on 30 June 2006. I have not been asked to construe it or make findings as to its true effect. Mrs Stanbridge’s case is that her husband did not know of the power and had never used it. She told me that it was hidden among her personal possessions in a place where her husband would not have come across it. On the other hand Ms de Plaza gave evidence that Mr Stanbridge had to her knowledge used it on at least 3 occasions before various notaries, whose details she provided. However, none of these notaries were available to give evidence to support Ms de Plaza’s assertions.

In 2008 and 2009 Mrs Stanbridge appears to have spent a considerable part of each year out of Spain and no doubt there were documents which required her signature in her absence. It seems to me highly unlikely that Mr Stanbridge did not know of the existence and whereabouts of the document. There would otherwise have been little point in its existence. But I am not satisfied that it was in fact ever used. In any event it adds little, if anything, to the evidence in respect of the real issues between the parties: there is no suggestion that it was pursuant to this power that Mr Stanbridge executed in his wife’s name the documents at the heart of this case. The dispute about the document has limited relevance to Mrs Stanbridge’s credibility as a witness.

It is apparent that there was a downturn in the business of CCG which began to manifest itself in about 2008.

It is also apparent that, behind Mrs Stanbridge’s back, Mr Stanbridge was conducting transactions in the course of which he incurred substantial

Mr Stanbridge alleges that in May or June 2008 he borrowed €140,000 from Mr Samir Bouyakhrichan, a Dutch national who lived in Spain. In a letter dated 23 November 2010 written in compliance with an order of this Court he stated:

“I do not have any documentation as no documents were signed at the time. The loans were made exclusively to me without the knowledge of Lauri Ann Stanbridge and were for my personal living and entertaining expenses. The loans were required to be repaid as quickly as possible and Mr Bouyakhrichan asked me to make the repayment of the loans to Michael Read. ”

There is no evidence that Mrs Stanbridge knew Mr Bouyakhrichan or Mr Read or had any dealings with them despite Ms de Plaza’s contention that “it would surprise me if she was unaware of them”. I find that Mrs Stanbridge did not know of the arrangements that Mr Stanbridge apparently entered into with Mr Bouyakhrichan and Mr Read. Nor do I accept the contention that the borrowing was by or for the business of CCG. In my judgment such evidence as there is in relation to these transactions supports the contention that Mr Stanbridge was on a frolic of his own.

Mrs Stanbridge appeared to me to be a highly motivated and hard-working woman who expected high standards of those around her, including her husband. I accept unhesitatingly her evidence that had her husband come to

In about late May 2009 Mr Stanbridge appears to have contacted David Englehart of Engleharts Solicitors for a short-term loan of £175,000 for a period of two months to be secured by way of a second charge against the Property. Mr Englehart in turn appears to have contacted a Mr Karl Slack, a director of AITC, and in an email dated 27 May 2009 sent from the email account of his secretary and assistant of nearly 30 years, Ms Beryl Follows, he told Mr Stanbridge that “The Company which we shall be using will be Advanced Industrial Technology Corporation Limited”. It was apparent from Mr Stanbridge’s reply that from his perspective the matter was urgent. The precise nature of Mr Englehart’s role is unclear, at the very least it would seem that he was a very active middle-man in arranging the transaction and I infer from the material be before me that he was in regular contact with both Mr Stanbridge and the intended lender.

Mr Englehart appears to have been the sole point of contact for all parties. It is plain that he knew of the existence of Mrs Stanbridge, and that the property to be offered as security was in joint names, but even so he made no direct contact with Mrs Stanbridge. I was very surprised, and somewhat concerned, to learn that the lender and its solicitors generated and held very little documentation relating to the loan. I was told that AITC holds no file and no

AITC was incorporated in 1993. Its business is the provision of bridging finance. Its abbreviated balance sheet for the year ended 31 December 2009 shows that it had a substantial deficit for the second year running but continued to be support financially by its directors, namely Mr and Mrs Slack.

At trial I did not hear from Mr or Mrs Slack but from Mr Denney who was only able to give somewhat limited evidence, all of it hearsay, as to Mr Slack’s knowledge about the transaction. Moreover, he was unable to give any evidence about any conversations which may have taken place between Mr Slack and Mr Stanbridge. In the absence of any documentary record of the discussions I am left to infer the basis of the transaction from the surrounding circumstances. In paragraph 9 of a witness statement dated 3 June 2010 Mr Denney describes the intended borrowing as short term finance which Mr Stanbridge needed to repay certain business loans, but the source of that assertion is uncertain. He told me that Mr Englehart was not involved in the negotiations and acted in effect in an execution only role, an assertion which I find difficult to accept given the very limited role of Mr Slack and the absence of evidence from him. Nevertheless once executed Mr Denney said that the Charge and the Facility Letter were kept by Mr Englehart and neither the originals nor a copy would have been seen by anyone at AITC. There was no reference in the few relevant documents to any involvement by Mrs Stanbridge or of her knowledge of the transaction. There was no contact between AITC, or anyone on its behalf, and Mrs Stanbridge at the date of the challenged transaction. After listening to Mr Denney’s evidence I remained of the view that the borrowing was by Mr Stanbridge personally for unidentified purposes and that Mrs Stanbridge neither knew of nor was party to the arrangement.

Mr Fowler, in the course of his submissions, took me to the well-known expositions by Lord Nicholls of Birkenhead and Lord Hobhouse of Woodborough in Royal Bank of Scotland v Etridge (No.2) [2001] UKHL 44 of the steps which a bank and in turn a solicitor should take in respect of a wife who is asked to stand surety for her husband’s liabilities to a lender. If either the lender in this case, namely AITC, or the solicitors, namely Engleharts, had taken any of the steps advised in the speeches of the Law Lords in Etridge I am satisfied that the loan in this case would not have been made, the Charge would not have been granted and these proceedings would not have taken

Apparently having taken a view about the value of the Property which was to stand as security AITC offered to lend Mr Stanbridge the sum of £135,000 for two months at 5% interest per month. That offer was accepted by Mr Stanbridge on 28 May 2009. I find that Mrs Stanbridge was not informed about this agreement. Mr Denney told me that AITC had no indication that Mrs Stanbridge was not aware of the transaction, but in my judgment such a stance was naïf: there was no positive evidence to indicate to AITC that Mrs Stanbridge in fact had any knowledge of the transaction whatever. Being engaged in the type of lending undertaken by AITC, namely to borrowers who had difficulty in obtaining finance from primary lenders, the risks inherent in relying on the principal borrower to disclose either the existence or the detail of the transaction to someone apparently in the position of joint borrower or guarantor are obvious. In my judgment AITC must have known of but closed its mind to those obvious risks.

In an email dated 29 May 2009 Mr Englehart wrote to Mr Stanbridge as

There is nothing in the email correspondence which I have been shown passing between Mr Stanbridge and Mr Englehart (with the exception of the draft Facility Letter and Charge) which identifies the purpose for which the loan was intended to be made. Nor does any of the correspondence which I have seen, as opposed to the terms of the Charge and Facility Letter themselves, suggest that Mrs Stanbridge was to be a joint borrower. However, her intended role must have been the subject matter of some, albeit limited, oral discussions between Mr Stanbridge and Mr Englehart and/or Mr Slack but as to that no evidence was put before me.

So far as the destination of the loan monies is concerned Mr Englehart wrote to Mr Stanbridge on 2 June 2009 asking for:

“Confirmation as to where you want the money sent. If this is to be anywhere other than an account in the joint names of yourself and your wife I will need the express authority of whichever is not going to be on the account.” In addition he asked that:

“The Solicitor should also please certify that he has identified both you and your wife prior to signing and that he is undertaking to send to me a certificate of such identity together with photocopies of your passport and other identification pictures.”

Those steps were not taken.

On 2 June 2009 Mr Stanbridge signed the Facility Letter and the Charge in his own name. He also forged the name of Mrs Stanbridge on both documents. In both instances the signatures purport to have been witnessed by Ms de

The Facility Letter describes the borrower as “John Stanbridge and Laura Stanbridge” and contains an agreement for them to borrow the sum of £135,000 for a term of 2 months at 5% interest per month secured against the Property. The purpose of the loan is said, somewhat oddly, to be “…to secure monies loaned or to be loaned to the Borrower to raise funds by way of second charge secured on the Property”.

The Charge is an unlimited “all monies” charge and purports to have been executed as a deed by both Mr and Mrs Stanbridge in the presence of Ms de Plaza.

Mrs Stanbridge alleges that she did not become aware of either the Facility

By an email timed at 16:52 on 4 June 2009 and headed “090604 question” Ms de Plaza wrote to Mrs Stanbridge as follows:

“Hi Laura,

I forgot mention you before that yesterday I certified your signature in a document that John gave me. I asked him if you knew about this and he told me yes. Is this correct?

Only to be sure that everything is OK

Thank you!”

By an email of a few minutes later on the same day Mrs Stanbridge responded

“Hi,

No, I am not aware that he needed my signature for anything. Do you know what it is about?

Laura ”

Ms de Plaza made three witness statements concerning these events. The first was made at the request of Mrs Stanbridge’s solicitors, prior to commencement of proceedings, and was very supportive of Mrs Stanbridge’s case, and two were made in the course of the following year (after she had been made a defendant to AITC’s Part 20 Claim) in which she was critical of Mrs Stanbridge, which were plainly calculated to undermine Mrs Stanbridge’s

All three of Ms de Plaza’s witness statements were verified by statements of truth. In the first Ms de Plaza expressly stated that she had seen Mr

The emails were, however, referred to in the second statement, which also contained the following assertion immediately after the reference to the exchange of emails:

“29.

I subsequently spoke to Mrs Stanbridge on the telephone on the following day and informed her than the documents related to a loan agreement; that her signature appeared on the documents and that I had been asked by Mr Stanbridge to witness her signature, although I was not sure she had in fact signed them.

30.

During our telephone conversation, she now told me that she had already talked to John, and all was clarified now, so I had not to worry about it.”

She said that she believed that at the time of the conversation Mrs Stanbridge was in the USA, which I find was not correct. She also said she had felt pressurised into making the first statement because she was worried about being sacked from her job by Mrs Stanbridge, which is in fact what happened shortly after Ms de Plaza disclosed the emails to the parties in this litigation

At least one of the statements made by Ms de Plaza in terms which contradict the other must be untrue. I have carefully weighed the evidence, both written and oral, of Mrs Stanbridge and Ms de Plaza and considered each in the context of the surrounding documentation and the oral evidence of other witnesses. Although Mrs Stanbridge was in some limited respects an unreliable witness, as I have indicated above, I have come to the conclusion that on the central issues in this case her evidence is to be preferred to that of

In paragraph 14 of her second witness statement Mrs Stanbridge responds to

Mrs Stanbridge goes on to say that she confronted her husband later that evening and he misled her into believing that he was in fact dealing with a mortgage application over the property in the USA. Mrs Stanbridge says that had he told her that he had forged her signature on a mortgage application or a legal charge over the Property she would have “hit the roof”. She later adds that had he asked for her consent to the Facility Letter or the Charge she would have “flatly refused” and for that reason lied about the documents which Ms de Plaza had purported to witness. I accept that. I am sure that Mr Stanbridge was also aware of the likely reaction if he had told the truth to his wife. Similarly, she asserts, and I find, that had AITC or anyone on its behalf contacted her in relation to the transaction she would have “refused point blank” to co-operate.

On the morning of Friday 5 June 2009 Mrs Stanbridge left Spain for a short trip to the UK, where she visited Bath, and from there to the USA. My attention was drawn to an entry on the Clydesdale bank statement for 8 June 2009 which appeared to show 2 uses of a bank card on the joint account on that day, the first at Barclays Bank in Bath and the second at Austin Reed in Bath. Mrs Stanbridge denies that the card was used by her. However, there is no evidence to suggest that Mr Stanbridge was in Bath at the time and the only possible inference is that the card was used by Mrs Stanbridge. That does not, however, persuade me that on the central issues in the case Mrs Stanbridge was not telling me the truth.

AITC alleges that had Mrs Stanbridge informed them that her signature on the documents had been forged they would not have advanced the loan monies on the following day. I am asked to draw the inference that Mrs Stanbridge authorised her husband to enter into the loan arrangement and execute the relevant documentation on her behalf, alternatively that in the course of the evening on which the emails had been sent Mr & Mrs Stanbridge would have discussed the contents of Ms de Plaza’s email and Mrs Stanbridge learned about the Charge, the Facility Letter and the advance made by AITC. I reject those assertions. I find that not only would she have “hit the roof” if she had known about the transaction at the time but far from ratifying it she would have taken steps to prevent it from being carried into effect.

On 5 June 2009 Engleharts transferred the sum of £134,553 to the joint account of Mr & Mrs Stanbridge at the Clydesdale Bank Plc. The credit is recorded in a bank statement for the joint account dated 5 June 2009 which appears to have been posted to Mr & Mrs Stanbridge in Spain. Neither AITC nor Mr Englehart nor Mr Stanbridge draw the payment to Mrs Stanbridge’s attention. I find that she did not know, and did not for some considerable time become aware, that the payment had been made.

On 9 June 2009 the sum of £134,000 was transferred from the joint account to a Mr Michael Read at Clariden Leu Bank in Zurich, allegedly for the benefit of Mr Samir Bouyakhrichan, on the written instructions of Mr Stanbridge alone. In the authorisation form the address given for Mr Read is the same as that of Mr Stanbridge. This transfer is also recorded in the joint account statements sent to Spain. I find that Mrs Stanbridge had no knowledge of or involvement in the transfer of these monies and did not see the bank statements relating to the receipt of the advance or the transfer to Mr Read. I accept her evidence that when these matters came to light copies of the bank statements had to be requested from Clydesdale. Further, there is no evidence that she received any benefit from the sum transferred into the joint account and I find that she did not.

At completion of the remortgage Mr Stanbridge drew 3 cheques on the joint account in favour of AITC. They bear his signature alone. The first cheque for £6,750 was met on presentation on the day that the advance was made: in other words the payment came out of the advance. Thereafter Mr Stanbridge defaulted on the loan.

Very shortly afterwards the term date of the loan arrived, and the cheques for the principal (£135,000) and the accrued interest (£6,750) which Mr Stanbridge had drawn on the joint account were presented for payment but

On 14 August 2009 AITC purported to exercise its powers under the Charge to appoint Mr Denney as a Law of Property Act receiver. On the same day

On 17 August 2009 Douglas & Gordon notified Mr Stanbridge by email that they had been requested by Engleharts to pay the rental income from the Property over to Mr Denney. Mr Stanbridge replied that he was “aware of the situation” and was expecting to be able to repay the money due to AITC. There followed a chain of emails which were copied to Ms Greenwood on the

On 21 September 2009 Mrs Stanbridge resigned as a director of CCG. I accept her evidence to the effect that she did so because she was no longer so involved with the business. She was cross-examined as to the co-incidence of her resignation with the borrowing by her husband of a £15,000 loan from Clydesdale for the benefit of CCG but she told me, and I accept, that she knew nothing of this.

On 28 April 2010 AITC, acting through Engleharts, exchanged contracts for the sale of the Property to a company called Platte Fougere Holdings Limited, which had been incorporated in Guernsey as recently as 4 November 2009.

On 13 May 2010 Mrs Stanbridge’s solicitors wrote to AITC’s solicitors asserting, among other things, that the Charge was void. Shortly thereafter the contract was rescinded by mutual agreement between Mr Denney and the Guernsey company and, I infer, that the deposit was returned. The purchaser was dissolved in July 2011. Mrs Stanbridge, relying on the valuation of the Property at between £725,000 and £750,000 alleges that had the sale proceeded it would have been at a considerable undervalue and in breach of

I am satisfied that from about January 2010 Ms Greenwood knew that there were problems with AITC and that Mr Stanbridge was attempting to remortgage the Property but Mrs Stanbridge was not made aware of this either by Ms Greenwood or Mr Stanbridge until Ms Greenwood telephoned and spoke to her (for the first time) in Spain on about 6 May. In paragraph 6 of her witness statement dated 1 December 2011, which I accept, Ms Greenwood said:

“…I, therefore, spoke to Laura on the telephone at [the letting agent’s] suggestion, I think, probably on the evening of 6 May 2010. I had never met or spoken to her previously. I told her about the appointment of a Law of Property Act receiver over the Property and the letter from Engleharts dated 14 August 2009 [notifying Douglas and Gordon about the appointment of the receiver] and about a buyer having been found. I did not provide her with a copy of the letter in question until 11 May 2010, having clarified with Douglas and Gordon that all rental payments had been made to AITCO since Sept 2009 on John’s instructions…I have a clear recollection of her being so shocked and horrified by what I told her.”

That independent evidence supports my conclusion that until 6 May 2010 Mrs Stanbridge did not know of the existence of the transaction between AITC and her husband. It was by an email dated 11 May 2010 Ms Greenwood sent to Mrs Stanbridge a pdf file containing a copy of Mr Denney’s appointment as receiver. In their earlier conversation Mrs Stanbridge had asked Ms Greenwood to send her whatever she had on her file which might clarify the

On 12 May 2010 Mrs Stanbridge called Englehart Solicitors and spoken to

AITC submit that I should infer from this conversation that Mrs Stanbridge had copies of the Charge and Facility Letter in her possession from the time that they were signed by Mr Stanbridge but in my judgement such a finding would be wholly inconsistent with the other evidence and my findings in respect of it. The attendance note is brief and necessarily only records what Ms Follows considered to be the essence of the conversation which took place with Mrs Stanbridge. I find that Mrs Stanbridge only saw the Charge and Facility Letter for the first time when copies were obtained for her by Penningtons.

By a letter dated 13 May 2010 Mrs Stanbridge’s solicitors wrote to Engleharts informing them that their client had just seen copies of the Facility Letter and Charge, that the Facility Letter bore an electronic version of her signature, that her signature on the Charge had been forged and it was therefore invalid and of no effect.

These proceedings were commenced on 24 May 2010 and were followed by

AITC submits that even if it is the case that Mrs Stanbridge’s signature on the Facility Letter and the Charge was put there by her husband without her prior authority she nevertheless ratified those acts and is therefore bound by the two documents. Mr Kremen cited the principles of ratification as identified in

Mr Kremen submits that the evidence shows that Mrs Stanbridge knew that Mr Stanbridge was borrowing money secured against the Property on 4 June 2009 and that those monies were to be paid into the joint account. Given that she took no steps to disown the Charge the court should find that she ratified her husband’s execution of it on her behalf.

Mr Fowler submits that being a nullity, because of the forgery of her signature, the Charge, as against Mrs Stanbridge, could not be ratified and he relies on Bowsted & Reynolds on Agency (19^th Ed) at 2-057 to 2-059. The passage which I cite below from the decision of Park J in Edwards v Lloyds TSB supports that contention.

However, as a matter of fact AITC’s argument is unsustainable. There is no evidence which could persuade me that Mrs Stanbridge “adopt[ed] or

AITC submit that Mrs Stanbridge was under a duty to bring to its attention the existence of the alleged fraud and because of her failure to do so she is estopped from denying her liability under it. In support of that proposition it relies on the decisions of the House of Lords in Greenwood v Martins Bank

The cornerstone of AITC’s submission that Mrs Stanbridge is estopped from relying on the invalidity of the Charge is that she had discovered the existence of the forgery by the evening of 4 June 2009. Had she done so she would, in my judgment, arguably have been under a duty to disclose the forgery to AITC before the loan was transferred to the joint account and before the monies were paid out from that account. However, in the light of my findings that she

AITC contends that whatever the status of the Charge Mr & Mrs Stanbridge are liable to repay the monies received in the joint account as monies had and received.

In Re Bishop, Deceased. National Provincial Bank v Bishop [1965] 1 Ch 450 Mr Justice Stamp held, in respect of an account which had been opened jointly by a husband (the deceased) and a wife, that:

“…in the absence of some circumstances or some evidence of intention that the joint account was to have a limited operation or was set up and kept for some special purpose, each spouse has power to draw on the joint account not only for the benefit of the spouses but for his or her own benefit. In the absence of some circumstances from which one infers an agreement to the contrary, one must treat the joint account as truly a joint account, a joint account on which each party had power to draw to take the money out of the ambit of the joint account and to employ it as he or she thinks fit either for his own purposes or not, and if he does draw money out and invests it in his own name I see no room for any inference that he holds that investment on trust for himself and his wife either in equal shares or in any other shares”.

AITC cites the above in support of the proposition that because the advance was paid into the joint account, to which Mr & Mrs Stanbridge had equal and unlimited access, they are each liable to restore the advance to AITC as monies had and received. Mr Kremen says that prima facie the monies were received by both Mr & Mrs Stanbridge and were used for the purposes of their business, in other words for the benefit of CCG.

On the other hand Mrs Stanbridge relies on the principle considered by Peter Smith J in OEM Plc v Schneider & others [2005] EWHC 1072 (Ch) in which the claimant sought to recover monies paid into a joint account in the name of the second defendant and her late husband on the grounds that the second defendant had been unjustly enriched thereby. In the course of argument in respect of a number of interim applications the claimant acknowledged that:

“…if the Second Defendant establishes that the operation of the account was done by the deceased and the account was used as a conduit for him to siphon off the stolen monies so that she achieved no benefit, that may be a basis for suggesting that she has not been unjustly enriched as regards the entirety of the funds that passed through the joint account.” [para 29 of the judgment].

At paragraph 43 of his judgment Peter Smith J accepted the principle which is set out in the Bishop case above and appeared to accept that the potential defence of siphoning was viable as a matter of law:

“As I have said, Mr Boyle [for the claimant] conceded that if it can be shown that money was merely siphoned through the account of which Mrs Schneider was unaware that might be a basis for suggesting that it would be unjust to require her to make restitution in respect of such payments. One example I posed to him was £20,000 paid in one day and removed almost immediately to a third party source or purchase in respect of which Mrs Schneider had no direct or indirect benefit. Mr Boyle was careful not to concede that as being anything other than a possibility.”

Mr Kremen reminds me and relies on the fact that in the above case the

Further, Mr Kremen drew to my attention that the learned editors of Goff & Jones , The Law of Restitution (7^th Ed), noted the OEM case and the siphoning defence and commented, in a footnote at 2-025, “then that might be a basis for suggesting that it would be unjust to require her to make restitution”.

As a matter of evidence Mr Kremen submits that Mrs Stanbridge could not, in any event, satisfy any of the factual requirements of paragraph 43 of the judgment by Peter Smith J. With that last proposition my findings of fact show that I disagree. It seems to me that for all practical purposes the present case is indistinguishable from the hypothesis posed by Peter Smith J to Mr Boyle QC as set out in paragraph 43 of that judgment.

In his closing written submissions received some time after the conclusion of the trial, in accordance with an agreed timetable, Mr Fowler referred me to the edition of Goff & Jones which had since been published. The new (8^th) edition, now entitled “The Law of Unjust Enrichment”, considers the OEM case in further detail in a number of places. At paragraph 20-069 the learned editors write that:

“Claims in unjust enrichment are usually brought against a single defendant who alone receives a benefit from the claimant. But it can happen that a single benefit is received by more than one defendant – for example, where a payment is made into a joint bank account, or where a debt owed by several debtors is discharged. In such cases, the law generally holds that all the defendants are jointly and severally enriched, with the result that a claim for the whole amount of the enrichment lies against any or all of them, but the principle against double recovery prevents the claimant from recovering from every defendant in full.”

In paragraph 4-54 of the new edition the learned editors recite for the first time the above passage in similar terms and then comment on the OEM case:

“Claims in unjust enrichment are usually brought against a single defendant who alone has received a benefit from the claimant. However, it can happen that a benefit is received by more than one defendant…In such cases the law generally holds that all the defendants are jointly and severally enriched, with the result that a claim for the whole amount of the enrichment may lie against any or all of them. Note, though, that where a payment is made into a joint account, and money is then withdrawn by one of the accountholders without the other’s knowledge, she may have a change of position defence.”

It is in support of the proposition contained in the last sentence of that passage that the OEM case is cited together with a number of other English and Australian authorities.

The first of those cases is Euroactividade v Moeller (1995) (Unreported, Court of Appeal, 1 February 1995). In that case Simon Brown LJ, ruling on an unsuccessful application for permission to appeal against summary judgment against a wife for money had and received in respect of money paid into a joint account with her husband, held:

“As the Judge pointed out, however, the second defendant’s difficulty is that no evidence was adduced from her as to her having changed her position or as to good faith. So far as changing her position goes, Miss Benbow submits, inventively, and not unappealingly, that here the second defendant’s husband changed her position by making payment to the plaintiffs of substantial sums that had initially been paid into [the joint account]. Let me for present purposes assume that to be a sufficient change of position in law to satisfy that aspect of the matter. The second defendant’s difficulty remains, however, that there is to this day no evidence from her as to good faith. There is not even, in all the voluminous material before the court, a contention from her that she knew nothing whatever of these payments, either into, or out of, her joint account with the first defendant.”

Mr Fowler submits, and I accept, that Simon Brown LJ was considering a variant of the siphoning defence and found it not “unappealing”. The difference between the facts of the Euroactividade case and the present is that I have found that Mrs Stanbridge knew nothing of the payments into and out of the joint account and for the purposes of this issue I would hold her to have acted in good faith.

In Primlake Ltd (in liquidation) v Matthews Associates [2006] EWHC 1227 Lawrence Collins J considered whether a wife was obliged to make restitution of monies which her husband had wrongfully caused to be paid into their joint account. The learned judge dealt with the questions of principle in the following paragraphs of his judgment:

“335.

The prevailing view is that there is no separate cause of action for unjust enrichment as such, and that it is necessary for the case to be brought within one of the recognised restitutionary heads, such as money had and received…In my judgment the authorities would justify the conclusion that Mr Matthews is liable for money had and received…on the basis of an absence of consideration in the sense of no legal basis for the payments…

336.

So far as concerns Mrs Matthews, she would be liable, as a volunteer, to make restitution of the money still in her control. But, subject to what is said in paragraph 341 below [as to tracing], she would not be liable for money which went through the joint accounts, but is no longer held by her, except on the basis of dishonest assistance or knowing receipt. But there is no evidential basis for such claims…”

It may be thought that this statement of principle goes beyond what was in consideration in the OEM and Euroactividade cases but it supports the proposition that where the joint account was used as a means of siphoning the money from the claimant and the wife was unaware of its use she would have a defence to a claim for money had and received.

The Australian authorities cited in Goff & Jones are relied on by Mr Fowler as persuasive support for the proposition that an innocent joint account holder in the position of Mrs Stanbridge is not liable on a claim for monies had and received to restore the funds paid via her account without her knowledge or consent.

The positions taken by the court and the reasoning of the judges in the Euroactividade case, the OEM case and the Primlake case persuade me that as a matter of principle the court may refuse to order restitution by a joint account holder of monies siphoned through her account where she has not benefitted from them as a matter of fact and had no knowledge that her account was being used as a conduit by the other joint account holder.

In my judgment the fact that the earlier “change of position” defence asserted by Mrs Stanbridge in respect of AITC’s counterclaim was struck out does not mean that AITC is entitled to succeed on its restitution claim. The basis of the change of position which was struck out was entirely different to the principles involved in considering the siphoning issue and in my judgment does not prevent Mrs Stanbridge from asserting that AITC is not entitled to succeed on this part of its case.

I find that in this case the advance was of no benefit to Mrs Stanbridge and she was not “enriched” by it. Further, I repeat my earlier finding that she was innocent of the use being made of the joint account and in the sense intended by Simon Brown LJ in the Euroactividade case acted in good faith. In my judgment it would be unjust to require Mrs Stanbridge to make restitution by repaying to AITC a sum equivalent to the advance monies. AITC could have protected itself by making direct contact with Mrs Stanbridge at any stage prior to the drawdown of the advance and ensuring that she was aware of the transaction and checking whether she was a willing participant in it. The email sent by Mr Englehart to Mr Stanbridge about the intended destination of the loan monies (see paragraph 36 above) shows that the decision to pay the

AITC contend that even if the Charge is not a good legal charge over the legal estate in the Property it is nevertheless a valid charge over Mr Stanbridge’s beneficial interest in it, a contention which, as I mention in paragraph 6 above,

It is, as I understand it, common ground that if the Charge were in respect of Mr Stanbridge’s interest in the Property the effect would be to sever their former joint tenancy such that they thereafter held the Property on trust for themselves as tenants in common in equal shares.

The principal submission of AITC is that the forgery of Mrs Stanbridge’s signature does not render the Charge a nullity and reliance is placed on the decision of Mr Justice Park in Edwards v Lloyds TSB Bank [2004] EWHC 1745 (Ch) where he was asked to find that the effect of a charge over jointly owned property on which the husband had forged the wife’s signature was that the lender thereafter had the benefit of a charge over a 50% undivided share in

However, Mr Fowler, puts Mrs Stanbridge’s case on a different basis, distinguishing Edwards, and submits that despite Mr Stanbridge’s admission the purported charge over her husband’s beneficial interest in the Property is nevertheless void for three reasons:

As to the first of those grounds AITC says first that a finding as to whether it has the benefit of an equitable charge over Mr Stanbridge’s interest is not a matter of discretion and secondly the refusal of a remedy for Mr Stanbridge’s undoubted fraud would be akin to recognising that contributory negligence is a defence to fraud contrary to the decision of Mummery J in Alliance & Leicester Building Society v Edgestop Ltd [1993] 1 WLR 1462. I agree.

The alleged conditions are, by clause 7, “precedent to the making of the

Without prejudice to their earlier contention AITCsubmits that the conditions were inserted entirely for their benefit and that it was open to it to waive them and sue on the Charge was if the conditions had been met. They assert that the waiver took place by the making of the advance. In support of those contentions AITC rely on an extract from Chitty on Contracts (30^th Ed) at paragraph 2-157 which states the relevant principle as follows:

“Where a condition is inserted entirely for the benefit of one party, that party may waive the condition. If he does so, he can then sue and be sued on the contract as if the condition had occurred. Obviously this rule does not apply to cases falling within the first of the categories above, in which there is no contract at all before the condition occurs”.

I agree with Mr Kremen’s submission that the conditions precedent, if that is what they be, were obligations imposed on the borrower for the benefit of

As to the relevant formalities, section 1(3)(a)(i) of the Law of Property

At the place in the Charge where the signature of Mr Stanbridge appears there are the words “Executed as a Deed by John Stanbridge in the presence of:-“ followed by Ms de Plaza’s name and description as “Lawyer”. The evidence suggests that Ms de Plaza did not sign the document until after it had been completed by Mr Stanbridge. Mr Stanbridge, when he sent the Charge to Mr Englehart, knew that the attestation was false in that he had not signed it in Ms de Plaza’s presence but he tendered it intending that the document be relied on as a deed and that AITC should be induced to release the loan monies to him, which they duly did. On a strict construction of section 1(3)(a)(i) of the 1989 Act the Charge, not having been signed by Mr Stanbridge in the presence of Ms de Plaza, was not a deed.

As to that Mr Kremen relies on the Court of Appeal decision in Shah v Shah [2002] QB 35. In that case the signature of a witness attesting the defendants’ signatures was added shortly after they had signed but, in breach of section

1(3)(a)(i), not in their presence. At first instance the judge held that nevertheless the defendants were estopped from denying the deed’s validity. The Court of Appeal upheld that conclusion. In paragraph 33 of his judgment, with which the other two Lords Justices agreed, Pill LJ held as follows:

“Having considered the wording of section 1 [of the 1989 Act] in the context of its purpose and the policy consideration which apply to deeds, I am unable to detect a statutory intention totally to exclude the operation of an estoppel in relation to the application of the section or to exclude it in present circumstances. The section does not exclude an approach such as that followed by Sir Nicolas Browne-Wilkinson V-C in TCB Ltd v Gray [1986] Ch 621. For the reasons I have given the delivery of the document, in my judgment, involved a clear representation that it had been signed by the third and fourth defendants in the presence of the witness and had, accordingly, been validly executed by them as a deed. The defendant signatories well knew that it had not been signed by them in the presence of the witness, but they must be taken also to have known that the claimant would assume that it had been so signed and that the statutory requirements had accordingly been complied with so as to render it a valid deed. They intended it to be relied on as such and it was relied on…In my judgment the judge was correct in permitting the estoppel to be raised in this case and in his conclusion that the claimant could bring an action upon the document as a deed.”

Mr Fowler submits that the Shah case should be distinguished on the basis that in that case both defendants signed the charge in the absence of the witness before procuring attestation of it and that the defences of both were unmeritorious. In my judgment that does not provide a basis for drawing a distinction between Shah and the instant case. I am presently only concerned with Mr Stanbridge’s execution of the Charge, the premise of this discussion being that the document does not bear Mrs Stanbridge’s signature, and with Mr Stanbridge’s interest in the Property. On that basis it seems to me that the

The Charge was put forward by Mr Stanbridge as a valid deed, containing a clear representation that he had executed it in the presence of Ms de Plaza. He intended it to be relied on and it was. In my judgment Mr Stanbridge is accordingly estopped from denying the validity of the Charge. It amounted to a dealing with his interest in the Property and accordingly severed the joint tenancy and charged his equitable interest to AITC. It was always open to Mr Stanbridge to deal with or alienate his beneficial interest without the consent of his wife and in my judgment it is not open to her to challenge the effect of the estoppel in respect of his interest.

I need not therefore consider whether the Charge, if not a deed, nevertheless constituted a contract for the creation of an equitable charge because of the absence of a signature on the part of AITC.

I am satisfied that by virtue of Section 65 and Schedule 4 of the Land Registration Act 2002 I am entitled to correct the register of title to the Property by removing the entries relating to the Charge. AITC was never entitled to register the Charge as a charge against the legal estate of the Property because of the forgery of Mrs Stanbridge’s signature. It would be wrong in principle to allow the legal charge to remain on the title merely to protect the charge over Mr Stanbridge’s equitable interest in the Property. That would be to the unfair prejudice of Mrs Stanbridge. I am satisfied in all the circumstances that it would be unjust not to rectify the register by removing the entries relating to the Charge.