National Westminster Bank Plc v. Amin and Another

The House of Lords allowed the appellant's appeal and held that the matter must go to trial because there were genuine and material disputes of fact about whether the solicitor who gave the bank a written confirmation had in fact acted for the mortgagors or for the bank, and whether the mortgagors understood the transaction. The decision applies the principles about a bank's constructive notice of undue influence explained in the conjoined appeals in Royal Bank of Scotland plc v Etridge (No 2) [2001] 3 WLR 1021, in particular the circumstances in which a bank may ordinarily rely on a solicitor's confirmation (see para 80 of Lord Nicholls' speech), but emphasises that where the solicitor's status is unclear and where the bank knew the mortgagors were especially vulnerable (for example because they did not speak English), the question whether the bank took reasonable steps to satisfy itself is a factual one for trial. Section 199 of the Law of Property Act 1925 may be engaged if the solicitor was acting for the bank rather than for the mortgagors.

The respondent bank sought possession of a property secured by a legal charge signed by Mr and Mrs Amin as security for a loan to their son. The bank had requested solicitors (Messrs Christopher Miles) to 'attend to the formalities' and received a letter from an assistant solicitor, Mr Eyre, confirming that he had "explained the terms and conditions" to Mr and Mrs Amin. The mortgagor, Mrs Amin, pleaded that the charge should be set aside for undue influence by her son and for failure by the bank to discharge its obligations under the equitable doctrine of notice. The bank applied to have those defences struck out under County Court Rules Order 13, rule 5.

The factual record included pleadings, witness statements from Mrs Amin and Mr Eyre, and correspondence. The Court of Appeal had allowed the bank's appeal from earlier county court rulings and held the bank could rely on Mr Eyre's confirmation. Mrs Amin obtained leave to appeal to the House of Lords.

The House considered (i) whether the assistant solicitor, Mr Eyre, had been acting for Mr and Mrs Amin or for the bank; (ii) whether the bank had taken reasonable steps to satisfy itself that the mortgagors understood the transaction; and (iii) whether the bank was thereby free of constructive notice of undue influence. The House applied the principles set out in Royal Bank of Scotland plc v Etridge (No 2) [2001] 3 WLR 1021, including that ordinarily a solicitor's confirmation will discharge the bank's obligations, but held that where the solicitor's status is unclear, the mortgagors were known to be unable to speak English and vulnerable, and the bank's instruction to the solicitors was to "attend to the formalities", there remained live factual issues. The House concluded that those issues could not be resolved on a strike-out application and remitted the matter to the County Court for trial.

Nature of claim: bank claim for possession and application to strike out the mortgagor's defence and counterclaim seeking to set aside the mortgage.

Issues framed: whether the bank had taken reasonable steps to ensure the mortgagors understood the transaction; whether the solicitor acted for the mortgagors or the bank; whether the bank had constructive notice of undue influence; whether striking out was appropriate.

Court's reasoning: factual disputes about the solicitor's retainer and the mortgagors' understanding, together with the bank's knowledge of the mortgagors' vulnerability (language and cultural factors), meant the bank might need to have taken greater steps than it did; these matters require trial and cannot be decided on strike-out.

Appeal allowed. The House concluded the case raised genuine disputes of fact — notably the status of the solicitor who gave the bank a written confirmation and the mortgagors' understanding of the transaction — and that where the bank knew the mortgagors were vulnerable and the solicitor's status was uncertain, it could not be said as a matter of law on a strike-out application that the bank had discharged its obligations under the equitable doctrine of notice. The case was therefore remitted to the County Court for trial.

County Court (Deputy District Judge Sanghera): application to strike out defendant's defence dismissed. On internal appeal in the County Court (Judge Hindley QC): dismissal of strike-out application upheld. Court of Appeal (Mummery and Clarke LJJ) allowed the bank's appeal on 9 December 1998. Leave to appeal to the House of Lords was given on 14 March 2000. House of Lords [2002] UKHL 9 allowed the appeal and remitted the case to the County Court for trial.