Hewett v First Plus Financial Group Plc

Undue influence may vitiate consent even where the claimant made a conscious choice. In a relationship of trust and confidence, a person proposing a risky financial transaction must provide candour and fairness so that the other party can make an informed decision. Deliberate suppression of a material fact may constitute an abuse of influence. Materiality is assessed objectively, rather than by asking whether disclosure would necessarily have changed the decision.

Mrs Hewett appealed from an order of His Honour Judge Darroch in the Norwich County Court requiring her and her former husband to give possession of their home to First Plus Financial Group plc and ordering payment of £47,372.79 under a mortgage granted in 2004.

The mortgage secured Mr Hewett’s separate credit-card debts. First Plus accepted that it had constructive notice of any undue influence or misrepresentation because it had not complied with the guidance in Royal Bank of Scotland v Etridge. The judge nevertheless rejected Mrs Hewett’s defences, holding that she had made her own choice and that her husband’s statement that the re-mortgage was the only way to preserve the home was not a misrepresentation.

The central issue on appeal was whether Mr Hewett’s non-disclosure of a clandestine affair, while persuading his wife to charge her interest in the family home as security for his debts, amounted to undue influence sufficient to vitiate the transaction.

1. Appeal allowed. The mortgage was set aside. Because First Plus had constructive notice of any undue influence proved between the spouses, it could be in no better position.
2. Undue influence does not require the claimant’s will to have been completely overborne. A conscious exercise of will may still be vitiated, since the relevant question is how the intention was produced.
3. An obligation of fairness and candour arose because Mrs Hewett trusted her husband with responsibility for the family finances and relied on his promise to pay the increased mortgage instalments. That obligation was not confined to cases in which a wife unquestioningly followed her husband’s directions.
4. Mr Hewett’s affair was objectively material. A solicitor advising Mrs Hewett would have regarded it as relevant to the reliability of his promise and his commitment to the family and home. Its non-disclosure breached the duty of fairness and candour. The court considered the concealment deliberate, although deliberateness was unnecessary to the result.
5. It was unnecessary to prove that disclosure would have caused Mrs Hewett to refuse the transaction. The equitable wrong lay in the abuse of confidence forming part of the process by which her consent was obtained.
6. Mr Hewett’s execution of the mortgage created an equitable charge over his beneficial interest. The question whether, and when, that charge could be enforced by an order for sale under the Trusts of Land and Appointment of Trustees Act 1996, section 14, was remitted if the parties could not agree.

• Court of Appeal (Civil Division): allowed the appeal and set aside the mortgage, remitting the issue of enforcement of the equitable charge to the County Court if necessary.
• Norwich County Court: on 17 August 2009, His Honour Judge Darroch ordered possession of the property and entered a money judgment for £47,372.79, rejecting the defences of undue influence and misrepresentation.