Gallie v Lee (Saunders v Anglia Building Society)

The plea of non est factum is confined within narrow limits. A signed document is void only where the signer’s consent was truly absent because the transaction was radically, fundamentally or essentially different in substance or kind from the transaction intended.

The signer bears a heavy burden. The signer must prove the requisite difference and that reasonable precautions were taken. Carelessness prevents reliance on the plea, without any need to establish negligence in the tortious sense or an estoppel. A mere mistake about legal effect, or a departure in detail from expected contents, is insufficient.

For innocent third parties, the practical object and effect of the intended and actual transactions must be compared. The rigid distinction between a document’s character and its contents is not decisive.

An elderly leaseholder signed an assignment of her house to Lee after being told that the document concerned a gift to her nephew. She could not then read effectively without her broken spectacles. Her purpose was to help her nephew raise money on the house. Lee obtained a loan from the building society on the security of the apparently valid assignment.

The trial judge declared the assignment void against both Lee and the society. Lee did not appeal. The Court of Appeal allowed the society’s appeal and dismissed the claim against it. The executrix continued the leaseholder’s appeal after her death.

The central issue was whether the assignment was void against an innocent mortgagee under the plea of non est factum. A later hearing also concerned the society’s right to add litigation costs to its mortgage security and to recover appellate costs from the legal aid fund.

Appeal dismissed unanimously.

1. Per Lord Reid, Lord Hodson, Viscount Dilhorne, Lord Wilberforce and Lord Pearson, the plea of non est factum is exceptional and must remain within narrow limits because innocent third parties commonly rely on an apparently regular signature. The signer bears a heavy burden of clear and positive proof.

2. Per Lord Wilberforce and Lord Pearson, with the other speeches reaching the same essential conclusion, a document is void only where consent is truly lacking. The actual transaction must be essentially, fundamentally or radically different in substance or kind from the transaction intended. A rigid distinction between a document’s “character” and its “contents” is unsatisfactory. The whole circumstances and the practical object and effect of the transactions must be considered.

3. Per Lord Reid, a person must have had some grounded belief about the document’s character or effect. A person who signs without attempting to discover even its general effect cannot use the plea. A mistake merely about legal effect is insufficient. The remedy may exceptionally be available to a person of full capacity, but ordinarily assists those unable, without fault, to understand the document because of illiteracy, blindness, illness, defective education or incapacity.

4. Per all five Law Lords, reasonable care is required. Carelessness in signing bars the plea. This is not negligence requiring a duty of care in tort, and it is not technically an estoppel. The signer must prove that reasonable precautions were taken. Carlisle & Cumberland Banking Co v Bragg [1911] 1 KB 489 was wrongly decided; per Lord Wilberforce, it should no longer be cited as authority for any purpose.

5. On the facts, the assignment to Lee was not radically different from the transaction intended. The signer intended to divest herself of the lease so that money could be raised for her nephew, and she took no adequate steps to discover what she signed. The society had advanced money in good faith on the document. The plea therefore failed.

6. On costs, the House held that the society could add its proper litigation costs to the mortgage security. That right arose under the mortgage and did not impose personal liability by an order against the legally aided party. Under section 1 of the Legal Aid Act 1964, the society’s taxed House of Lords costs, so far as unrecovered from the security, were payable from the legal aid fund. Its Court of Appeal costs were not.

1. House of Lords: The appeal was dismissed unanimously. The society’s right to add proper costs to its mortgage security was preserved, and its unrecovered House of Lords costs were ordered to be paid from the legal aid fund.
2. Court of Appeal: The building society’s appeal was allowed. The claim against it was dismissed, and it was declared entitled to add its trial and appeal costs to the mortgage security.
3. High Court: The trial judge declared the assignment void against Lee and the building society, ordered delivery up of the title deeds by the society, and directed an inquiry into damages against Lee. Lee did not appeal.