National Westminster Bank plc v Amin (Executrix of the Estate of Mohammed Amin) and Another

A mortgagee cannot necessarily rely on a solicitor’s confirmation that a vulnerable surety understood a transaction. Reliance will ordinarily suffice where the solicitor acted for the surety and the mortgagee neither knew of nor was implicated in any failure of advice. It may not suffice where the solicitor acted for the mortgagee, or where known linguistic and cultural circumstances called for additional confirmation of the surety’s understanding.

A defence based on undue influence and constructive notice must proceed to trial where the solicitor’s status, the advice given and the mortgagee’s reasonable precautions depend on disputed facts.

A bank sought possession of a matrimonial home charged by a husband and wife as security for their son’s business liabilities. The wife alleged that she and her husband spoke only Urdu, had received no adequate explanation of the charge and had entered the transaction under their son’s undue influence.

A deputy district judge and Judge Hindley QC refused to strike out the defence and counterclaim. The Court of Appeal allowed the bank’s appeal, holding that it could rely on a solicitor’s written confirmation that the transaction had been explained.

The wife appealed to the House of Lords. The central questions were whether the solicitor had acted for the mortgagors or the bank, and whether the bank had taken reasonable steps to avoid constructive notice of the son’s alleged impropriety.

1. The appeal was allowed unanimously and the case remitted to the County Court for trial. Lord Scott of Foscote delivered the leading speech. Lord Nicholls of Birkenhead, Lord Hoffmann, Lord Hope of Craighead and Lord Rodger of Earlsferry agreed with his reasons.

2. Per Lord Scott, the solicitor’s status was a factual issue which could be resolved only at trial. The mortgagors had produced evidence that nothing was explained to them. There was no evidence that they had instructed or retained the solicitor, while the only established instructions came from the bank. His communication of what had supposedly occurred at the meeting was also arguably inconsistent with an ordinary solicitor-client relationship.

3. If the solicitor acted for the mortgagors, the bank might ordinarily have discharged its obligations by obtaining his confirmation that the risks had been explained. Lord Scott applied the qualified principle stated by Lord Nicholls in Royal Bank of Scotland plc v Etridge (No 2) [2001] 3 WLR 1021. An undisclosed failure by such a solicitor to advise properly would ordinarily impose no additional obligation on the bank.

4. The position would be materially different if the solicitor did not act for the mortgagors, failed to give a sufficient explanation and was acting on the bank’s instructions. The bank could not then rely on his inaccurate confirmation, and section 199 of the Law of Property Act 1925 would come into play. The analogous Wallace conjoined appeal in Etridge (No 2), where the House had rejected summary disposal in the bank’s favour, supported the need for a trial.

5. Even if the solicitor had acted for the mortgagors, the bank would not necessarily succeed. Its alleged knowledge that they spoke no English and might be especially vulnerable could require more than an ordinary confirmation. Its request referred merely to formalities, identified no need for special care and elicited no confirmation that the mortgagors appeared to understand the transaction.

6. These unresolved matters made the defence and counterclaim unsuitable for determination on a strike-out application.

1. House of Lords: The House unanimously allowed the mortgagor’s appeal in [2002] UKHL 9 and remitted the case to the County Court for trial.

2. Court of Appeal: Mummery and Clarke LJJ allowed the bank’s appeal on 9 December 1998. They held that the mortgagor had no reasonable prospect of resisting possession because the bank was entitled to rely on the solicitor’s confirmation.

3. Birmingham County Court: Judge Hindley QC upheld Deputy District Judge Sanghera’s refusal to strike out the defence and counterclaim under Order 13, rule 5 of the County Court Rules.