First National Bank Plc v Walker

An O'Brien defence to enforcement of a mortgage is parasitic on the wife's underlying equity against the husband and also depends on the creditor's notice. A spouse must conduct matrimonial and possession proceedings consistently. A party who obtains matrimonial relief on the footing that a charge is valid may be precluded from later asserting against the lender that it is voidable. A pleading seeking rescission is not necessarily a final election, because equitable claims may be amended or withdrawn. However, subsequent conduct, including a conveyance expressly acknowledging the continuing charge, may constitute affirmation, estoppel, approbation and reprobation, or abuse of process. A reservation of rights against the lender may not preserve the defence where the underlying claim against the husband has been abandoned.

First National Bank Plc sought possession of the Walkers' matrimonial home under a charge securing a business loan. Mrs Walker alleged that her husband had procured her signature by undue influence and that the Bank had constructive notice, relying on Barclays Bank Plc v O'Brien.

In matrimonial proceedings, she obtained an order requiring her husband to convey his interest in the property to her. She later executed a conveyance acknowledging the continuing mortgages, while maintaining her defence in the Bank's possession proceedings. His Honour Judge Brandt held that her conduct had not affirmed the transaction. The Bank appealed on the issue whether she was precluded from pursuing the O'Brien defence.

1. Appeal allowed. The wife had precluded herself from asserting against the Bank that the charge was voidable for her husband's undue influence.
2. Per the Vice-Chancellor, an O'Brien claim against the Bank is secondary and parasitic. It depends on an underlying equity to set aside the transaction against the husband, together with actual or constructive notice by the Bank. The wife's rights against the husband and the Bank were therefore inter-dependent.
3. The first defence and counterclaim did not, by itself, constitute an irrevocable election. A pleading is inherently liable to amendment, and all relevant circumstances must be considered when an equitable claim comes before the court. Yukong Line v Rendsburg Investment concerned a different contractual question. Johnson v Agnew confirmed the approach.
4. The matrimonial proceedings and the possession proceedings involved inconsistent positions. In the former, the wife pursued relief on the footing that the charge was valid and affected the parties' liabilities and equity. In the latter, she sought to avoid it. Authorities including Hoystead v Commissioner of Taxation and Nurcombe v Nurcombe supported the requirement for consistency and prevented the pursuit of mutually inconsistent courses.
5. The conveyance was relevant to the Bank because the Bank's rights under O'Brien were secondary to the transaction between husband and wife. Clause 4 acknowledged the second charge as a continuing security for their liabilities. At the latest on execution of the conveyance, the wife accepted the charge as enforceable between herself and her husband and abandoned the necessary underlying claim of undue influence. Her related defence against the Bank consequently failed. The order sought in the notice of appeal was made.

• Court of Appeal (Civil Division): allowed the Bank's appeal from the order of His Honour Judge Brandt.
• Colchester County Court: on 22 February 2000, determined the preliminary issue in favour of Mrs Walker and held that she had not affirmed, ratified or elected to confirm the transaction.