Abbey National Bank Plc v Stringer & Ors

A beneficial interest in jointly registered property depends on the parties’ true intention and the financial and surrounding circumstances, not merely on the form of registration or a lender’s requirement that another person join in borrowing. The court may infer that a nominal joint proprietor has no beneficial interest and declare the trusts affecting the property despite an inconsistent joint-tenancy declaration.

Undue influence may be actual or presumed. A relationship of trust and confidence, coupled with a wrongful and manifestly or utterly disadvantageous transaction calling for explanation, may establish the presumption. Where a principal debtor procures an illiterate and dependent surety’s signature, he has a positive duty to ensure that she understands the transaction.

Abbey National Bank plc appealed against an order of His Honour Judge Medawar Q.C. in the Central London County Court dated 7 July 2005. The judge dismissed the bank’s claim to enforce a second legal charge over 25 Cecil Road, Acton, executed by Rosa Stringer to secure a business loan made to her son and his associates.

The judge held that Rosa Stringer was the sole beneficial owner of the property and that her signature had been procured by actual or presumed undue influence. The bank challenged both findings and alternatively claimed an equitable mortgage over Anthony Stringer’s alleged beneficial interest. The central issues were whether Anthony had any beneficial interest and whether the charge was enforceable against Rosa.

1. Appeal dismissed. The judge was entitled to find that Anthony Stringer had no beneficial interest in 25 Cecil Road. Although the property was registered in joint names and the mortgage liability was joint, the evidence showed that Rosa Stringer supplied the purchase funds, paid the mortgage instalments and outgoings, and intended her son’s participation to be nominal, solely to satisfy the lender’s requirements.
2. The reasoning in Lloyds Bank v Rosset [1991] 1 AC 107 did not prevent the court from drawing that conclusion merely because there was no evidence of an express conversation about beneficial ownership. The parties’ agreement or understanding could be inferred from the surrounding circumstances and their conduct. The absence of a restriction under section 58(3) of the Land Registration Act 1925 did not determine the true beneficial ownership. Re Gorman [1990] 1 WLR 616 was materially different on its facts. The court could declare the trusts affecting the property, as illustrated by Wilson v Wilson [1969] 1 WLR 1470, without requiring rectification of the unavailable transfer.
3. The finding of actual or presumed undue influence was also justified. Rosa was illiterate, had limited understanding of English, depended on Anthony for correspondence and financial matters, and placed trust and confidence in him. The charge put her home and principal asset at risk for a business loan from which she obtained no direct benefit. The transaction was therefore utterly disadvantageous and called for explanation.
4. The court applied the approach in Royal Bank of Scotland v Etridge (No. 2) [2001] UKHL 44; [2002] 2 AC 773, including the relevance of vulnerability and exploitation and the need for the transaction to be wrongful or inexplicable by ordinary motives. It also relied on the formulation in National Westminster Bank v Morgan [1985] AC 686. The different relationship between mother and son meant that observations concerning reasonable conduct between husband and wife did not govern this case.
5. In a transaction where a principal debtor procures his illiterate and vulnerable mother’s assistance as surety, he has a positive duty to ensure that she understands the transaction. The general proposition in Barclays Bank v Schwartz The Times 2 August 1995 that inability to understand English is not by itself a defence did not resolve this case. Taking Rosa to solicitors, presenting the document without explanation and telling her to sign it was insufficient. The appeal was dismissed as to both beneficial ownership and enforceability of the charge.

• Court of Appeal (Civil Division): Dismissed the appeal against the order of the Central London County Court.
• Central London County Court: On 7 July 2005, His Honour Judge Medawar Q.C. dismissed the claim to enforce the mortgage, held that Rosa Stringer was the sole beneficial owner, and found actual or presumed undue influence.