Stanbridge v Advanced Industrial Technology Corporation Ltd

A forged signature does not create a valid legal charge over the interest of the person whose signature was forged. It may nevertheless bind the forger’s own beneficial interest where he represented that the instrument was valid and is estopped from denying its validity.

A joint account holder is not necessarily liable to make restitution of money paid into the account. Where the money was siphoned through the account without that holder’s knowledge, conferred no benefit, and was received in good faith, the court may refuse restitution.

Ratification requires clear adoption or acquiescence with full knowledge of the essential facts. A register may be rectified where an invalid legal charge has been entered against the legal estate.

The claimant sought declarations that a facility letter and second charge over jointly owned property were void because her husband had forged her signature. The lender accepted that she had not signed the documents but alleged authority, ratification and estoppel. It also sought repayment of the advance, judgment on dishonoured cheques, an equitable charge over the husband’s beneficial interest, and related relief.

The court found that the claimant had no knowledge of the transaction when the advance was made. The loan proceeds were paid into a joint account and were then transferred away by her husband without her knowledge or benefit. The issues included the effect of the forged signature, the lender’s restitutionary claim, the validity of the charge over the husband’s interest, and rectification of the register.

1. Ratification. Ratification requires clear adoption or equivalent acquiescence, accompanied by full knowledge of all essential facts. The claimant had not known of the charge, facility letter or advance when the transaction occurred. Her failure to object therefore could not amount to ratification.
2. Estoppel and restitution. The estoppel case depended on the claimant’s alleged knowledge before the advance. That factual foundation failed. The lender’s claim for restitution also failed against her. Although money had been paid into a joint account, it had been used as a conduit by her husband, she had not known of the payments, and she had received no benefit. In those circumstances it would be unjust to require her to repay the advance. The lender had assumed the risk created by failing to contact her directly.
3. Charge over the husband’s interest. The forged signature made the charge ineffective against the claimant’s interest and the legal estate. It did not prevent the instrument from operating against the husband’s own beneficial interest. Following the reasoning in Edwards v Lloyds TSB Bank [2004] EWHC 1745 (Ch), the husband could not rely on his own fraud to escape the liability which his deed purported to impose on his interest.
4. Deed and estoppel. Although the charge had not strictly been executed as a deed because the husband had not signed it in the witness’s presence, the representation that it was a valid deed had been intended to be relied upon and was relied upon. Applying Shah v Shah [2002] QB 35, the husband was estopped from denying its validity. The charge therefore severed the joint tenancy and charged his equitable interest.
5. Register. Under section 65 and Schedule 4 of the Land Registration Act 2002, the entries relating to the invalid legal charge were ordered to be removed. The court would hear counsel on the precise form of order.