BROWNE v FLOWER

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Derogation from grant by way of illegal easement, and the right to peaceful enjoyment of property, make for a brief and yet divisive matter, when two leaseholders seek to enforce their own entitlements in the courts.

Having recently acquired tenancy in a shared building, the respondent took steps to reduce her portion of the property, in exchange for subletting to an additional tenant.

In order for this to work, it was proposed by the leaseholder to the landlord, that an iron external staircase would allow for access when the using the room created.

The landlord raised no objections, and so the work went ahead as planned.

Having rented the ground floor of the same building, the claimant’s privacy was impinged upon, as the staircase was erected between two of her bedroom windows.

This translated that the sub-tenant using the stairs was now afforded a clear view into those rooms.

Under the terms of the lease, the landlord was under obligation not to derogate from the arrangement, which included an agreement that no tenant would suffer, or cause to suffer, another tenant any nuisance or reduction of the view to the outside gardens while in occupancy.

As was clear from the location and purpose of the staircase, the claimant was now placed into a position where she either installed blinds or curtains to restrict the view, or argued that the imposition and loss of light resulting from them had constituted a breach of agreement on the part of the landlord.

Upon litigation, the court heard about, and fully appreciated, the invasive nature of the staircase, but when relying upon similar case precedent, there was insufficient evidence to suggest that the invasion of privacy amounted to total loss of the views provided for by the outside gardens, or any enjoyment of natural light.

It was held instead, that the change in circumstances proved mere inconvenience at particular times of the day and little more.

It was also held that while the terms of the lease prevented any use of the property beyond that of private tenants, the staircase had been built upon adjoining land, and not that used and paid for by the tenants, therefore it fell beyond the scope of claim.

In closing, the judge awarded in favour of the respondents, before noting that the landlord had only consented with the erection of the staircase on the respondent’s assurances that the claimant had raised no objections; therefore, there had been misrepresentation as to any disagreement prior to their installation, and so no order for her costs were made, while the court reminded the parties that:

“[I]f the grant or demise be made for a particular purpose, the grantor or lessor comes under an obligation not to use the land retained by him in such a way as to render the land granted or demised unfit or materially less fit for the particular purpose for which the grant or demise was made.”

ROYAL BANK OF SCOTLAND v ETRIDGE NO.2

Used as an opportunity to tackle the principles surrounding surety for a partners borrowing against a risk of property repossession, this House of Lords appeal took the opportunity to address Royal Bank of Scotland plc v Etridge (No.2), Barclays Bank plc v Harris, Midland Bank plc v Wallace, National Westminster Bank plc v Gill, UCB Home Loans Corporation Ltd v Moore, Barclays Bank plc v Coleman, Bank of Scotland v Bennett and Kenyon-Brown v Desmond Banks & Co; all of which, were at various stages of litigation.

In these instances, the wives of husbands both acting as individuals and owners of their businesses, offered themselves as surety for loans that notwithstanding payment, placed the wives’ interest in the matrimonial home in the hands of the lenders upon default.

As had become a feature of the courts, it had become common for those co-signatories to deny knowledge of that risk, and claim they were unduly influenced into signing, either through withholding of information, or misrepresentation by the husbands; whereupon recovery of funds through property repossession became almost impossible for the lenders in the absence of overwhelming evidence to the contrary.

Legal precedent for the requisite principles needed to secure repossession, are found in Barclays Bank plc v O’Brien; in which, it was stated that the bank or lender, is held accountable for disclosure to the co-signing party when (i) the wife is signing despite no financial gain on her part and (ii) the manner in which the husband has induced the wife’s assistance represents an inequitably wilful act that enables the wife to withdraw her acquiescence if needed.

Having taken this process a stage further, the House of Lords expressed that in such circumstances, the banks or lenders were to insist upon privately held meetings with just the wife; and that a full and comprehensive disclosure of her liabilities were to be explained by a representative of the bank before strongly advising her to seek independent legal advice prior to signing; whereas previous cases (including those below) allowed the lenders to rely upon mere solicitor referral, whose written confirmation of an explanation was sufficient enough to support a possession order.

Royal Bank of Scotland v Etridge (No.2)

Unlike the following cases, the wife’s claim of undue influence in similar circumstances, fell foul of insubstantial evidence and was dismissed both in the first hearing and in the Court of Appeal.

Having approached the claim under both ‘actual’ and ‘presumedundue influence, it was ultimately judged in favour of the bank, but not before caution was raised when attempting to exploit legal principles with questionable evidence.

Despite this outcome, the matter was presented to the House of Lords in the hope of preventable repossession, whereupon the appeal was unanimously dismissed. 

Barclays Bank plc v Harris

In this matter, the wife again stood as surety for her husband’s company, however, the solicitor involved was not appointed by her, but did enjoy a close relationship with her husband.

Unaware as to the liabilities of her signing, the wife argued that she had been unduly influenced by her partner to sign the agreement; while the bank itself had never obtained written confirmation from the solicitors that they had fully explained the legal ramifications of her actions, yet were aware that the solicitors felt they had not provided clear enough instruction as to her responsibilities.

Having been heard as an interlocutory appeal, the bank had been supported, despite stark evidence to the contrary, and was now before the House of Lords for final judgment, where the appeal was unanimously upheld and the case referred for full trial.

Midland Bank plc v Wallace

In this interlocutory appeal, the lender was put on inquiry after the wife of the borrower stood as surety for her husbands debts, whereupon a solicitor was required to provide independent legal advice as to her liabilities, prior to her signing the document.

Under agreed legal principles, a solicitor must be appointed by the wife, or her husband, and act accordingly in order to remain party to the outcome of the agreement should the need arise.

Here, it transpired that the solicitor had acted alone, therefore the bank had a right to damages for breach of implied warranty of authority against the solicitor, but not the wife.

However, the Court of Appeal awarded in favour of the bank, thus being again challenged by the wife on grounds of undue influence, where the House upheld the appeal and referred the case for full trial.

National Westminster Bank plc v Gill

What began as a possible argument for misrepresentation, ended up failing under a claim of ‘actualundue influence, when the wife standing surety to a £36,000 loan was actually party to an advance of around £100,000, but one that demonstrated her approval and acquiescence.

This became fatal to her allegation, and thus was brought before the House of Lords, who again unanimously dismissed the appeal.

UCB Home Loans Corporation Ltd v Moore

Varying slightly, this interlocutory matter concerned the actions of both an insurance company and husband, that culminated in the bank agreeing to the loan, despite failing to check and receive confirmation that the signing wife had been made aware of her legal encumbrance.

Having induced his wife to sign the agreement through fraudulent means, the husband’s acting insurance broker never once communicated with the wife, while the lenders and the solicitors, equally failed to instruct or advise her accordingly.

At the point of this appeal, the House ruled that to establish full accountability, the case was required to go to trial.

Barclays Bank plc v Coleman

When a husband and wife who were both members of the Hassidic Jewish community, signed an agreement for monies secured to purchase property, the wife again acted as surety for the loan, despite a lack of knowledge as to the fullness of her legal obligation.

When heard at trial, she claimed that an elderly solicitor had been acting for her, but had failed to fully explain her liabilities as legally required.

However, when suing for breach of duty, it was established that the gentleman had since died, and so no proceedings on her part could be brought; but other issues remained in contention at the point of this appeal, which despite a degree of reservation, was wholly dismissed.

Bank of Scotland v Bennett

For loans secured against the survival of his company, a husband had again, coerced his wife into signing as surety for a substantial amount before the unavoidable collapse of the firm.

Having challenged the validity of the order for repossession, the wife argued that she had been victim to undue influence on the part of her husband, and that the bank had due notice of such impropriety.

The trial judge found in her favour before the Court of Appeal again upheld her claim, hence the final appeal by the bank in the House of Lords, who uniformly upheld the argument taken by the bank.

Kenyon-Brown v Desmond Banks & Co

On this occasion, the wife claimed undue influence in that she had reluctantly agreed to sign as surety for her husband’s debts at his suggestion, yet unaware that their jointly-owned home was at risk.

The wife also argued that she had received no prior legal advice from their acting solicitor, whereupon the solicitor provided legal certification to the bank claiming such advice had been given.

Unable to provide sufficient evidence at the Court of Appeal, the solicitor’s contention was then presented to the House of Lords, who upheld their appeal in full, while reminding the parties that:

“Banks and other lenders who take charges from surety wives are certainly purchasers of property rights. But they acquire their rights by grant from the surety wives themselves.”

L’ESTRANGE v GRAUCOB

‘Reading the small print’ is a phrase familiar to discerning consumers, and in so this instance the value of careful reading served to remind that contracts of all shapes and sizes require careful attention, especially when the text is not readily visible.

In 1933, two travelling salesmen paid a visit to a small community café in Wales in order to sell them an automatic cigarette vending machine; and so, having spent a number of hours discussing the user benefits and attached payment terms, the respondent duly agreed to sign the partially completed ‘sales agreement’ in expectation of a new and fully working product.

Upon payment of the deposit, the appellants returned a signed ‘order confirmation’ and accompanying eighteen-month guarantee; at which point, the contract was well underway and instalments were regularly paid.

However, after a period of less than a few days, the machine began malfunctioning and several engineer visits were arranged, before at the point of exhaustion, the respondent requested the item be returned in forfeit of her deposit.

In spite of this, the appellants refused to terminate the transaction, whereupon the respondent commenced litigation for return of the monies paid on grounds that the product had been unfit for purpose and so contrary to the contract and guarantee.

Likewise, the appellants counter-claimed their remaining costs owed for the purchase of the machine, before the respondent amended her claim to include repayment for failure to provide full consideration, breach of implied condition that the vending machine was functioning at point of sale, and/or damages for breach of implied warranty that the product was fit for purpose.

The argument cited by the appellants relied upon an absence of failed consideration and non-existence of implied conditions as per section 11(c) of the Sale of Goods Act 1893,  which read that:

“Where a contract of sale is not severable, and the buyer has accepted the goods, or part thereof, or where the contract is for specific goods, the property in which as passed to the buyer, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there be a term of the contract, express or implied, to that effect.”

Sale of Goods Act 1893

Thus, no implied warranty existed on grounds that the signed sales agreement excluded both condition and warranty within the small print shown at the bottom, which read that:

“[T]his agreement contains all the terms and conditions under which I agree to purchase the machine specified above, and any express or implied condition, statement, or warranty, statutory or otherwise not stated herein is hereby excluded…”

Whereupon, the respondent contended that she had been induced to sign the agreement through misrepresentation on grounds of never having her attention drawn to the exclusion notice beforehand.

In the first instance, the Carnarvonshire County Court awarded a sum of 70l for the respondent in light of a perceived breach of warranty, despite her signature and no evidence of misrepresentation, and further allowed the appellants the sum of 71l for the monies unpaid.

Having appealed in the Court of the Kings Bench, the appellants argued again that no misrepresentation had occurred, and that at any point the respondent was free to note and enquire as to the limitations of the contract, but had waived that right when signing to the terms expressed.

Here, the Court relied upon the principles used in Parker v South Eastern Railway Co; in which, the Court of Appeal had held that:

“In an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he has not read the agreement and does not know its contents.”

Parker v South Eastern Railway Co

Which translated that despite recognition of the respondent’s misfortune, the law could not enforce a claim for misrepresentation based upon the oversight of a party willing to contract.

Hence, the court set aside the respondent’s award and upheld that of the appellants, while reminding the parties that:

“When a document containing contractual terms is signed, then, in the absence of fraud, or, I will add, misrepresentation, the party signing it is bound, and it is wholly immaterial whether he has read the document or not.”

U.S. v. CAROLENE PRODUCTS CO.

Amendment rights and the need to protect against fraud, are central to a case involving a distributor of food products and the intervention by Congress in the interests of public safety when in 1938, a corporate entity was indicted under §§ 61 and 62 of the Filled Milk Act 1923.

After having shipped a number of containers of ‘Milnut’, a product that fell within the scope of the Act, and which resulted in a sentence of either imprisonment or a $1000 fine as per § 63, the now appellee was charged with illegal distribution and misrepresentation, within which § 62 clearly expressed how:

“It is declared that filled milk, as herein defined, is an adulterated article of food, injurious to the public health, and its sale constitutes a fraud upon the public. It shall be unlawful for any person to ship or deliver for shipment in interstate or foreign commerce, any filled milk.”

Whereupon the matter was taken to appeal before the U.S. Supreme Court under the Criminal Appeals Act 1907. Here, the appellee demurred that application of the 1923 Act was subject to the limitations prescribed by the Tenth Amendment to the U.S. Constitution, which states that:

“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

And that seizure of the prohibited goods was a breach of the Fifth Amendment to the Constitution, which expresses how:

“No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury…nor be deprived of life, liberty, or property, without due process of law…”

Therefore, the decision by Congress to create and apply prohibitive legislation which conflicts with the aims of the Constitution, was both ultra vires and an affront to the privacy rights and freedoms of the individual citizens of the United States of America.

Contrastingly, the Court drew reference to Hebe Co. v. Shaw, in which the Supreme Court ruled that any state law forbidding the manufacture and sale of filled milk under § 6(c) of the 1923 Act, which clarified how:

“The term ‘filled milk’ means any milk, cream, or skimmed milk, whether or not condensed, evaporated, concentrated, Powdered, dried, or desiccated, to which has been added, or which has been blended or compounded with, any fat or oil other than milk fat, so that the resulting product is in imitation or semblance of milk, cream, or skimmed milk, whether or not condensed, evaporated, concentrated, powdered, dried, or desiccated.”

Was not an infringement of the Fourteenth Amendment of the Constitution, which again stipulates that:

“No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

This translated that while the rights afforded under the Constitution were exempt from the wishes of Congress, the importance of public interest and compelling evidence submitted by the House Committee on Agriculture and the Senate Committee on Agriculture and Forestry in relation to ‘doctored’ milk, justified the prevention of misrepresentation through sensitive regulation, as opposed to wanton deprivation of liberty or distortion of justice.

Hence, it was for this fundamental reason that the Court dismissed the demurrer and reversed the judgment accordingly.

R v LAMBIE

Fraudulent misrepresentation and the need for proof of inducement, may at first seem like prudent adjudication; however, when the facts are properly assembled, there is little doubt as to whether the act itself was one of corroboration through personal gain, or a simple exploitation of the contractual arrangements between credit and debtor.

In the winter of 1980, the now respondent was convicted for obtaining pecuniary advantage by deception under section 16(1) of the Theft Act 1968 after an indictment on two counts, one of which was quashed, while the second occurred during a period after the lending bank had recalled the credit card used.

Having been granted use of the card in spring 1977, the bank had, after a period of time, requested its return after the respondent had incurred a debt far in excess of the prescribed limit of £200.

On 6th December 1977, the respondent agreed to return the card; after which, she entered into a transaction in a Mothercare store on 15th December 1977, before returning the card on 19th December; at which point, the debt had increased to a princely £1005.

At the trial, the jury returned a verdict against the respondent; after which, she appealed on grounds that the store clerk had, by her application of store policy regards their relationship with the bank, allowed the transaction to proceed, not because she had been falsely induced, but rather because the credit card was within the expiration date, not on the store’s ‘stop list’ and the respondent’s signature matched that on the card.

It was also argued that the mere presentation of the card did not indicate anything more than that of a right to use it, as opposed to any representation on behalf of the bank, therefore liability for deception could not stand.

With doubts as to the exactness of related precedent, the Court of Appeal reluctantly overturned the conviction; during which, Cumming-Bruce LJ remarked:

“By their contract with the bank, Mothercare had bought from the bank the right to sell goods to Barclaycard holders without regard to the question whether the customer was complying with the terms of the contract between the customer and the bank.”

At which point, the County Chief Constable appealed under section 33(2) of the Criminal Appeal Act 1968, and the matter was again presented before the House of Lords.

Here, the facts of R v Charles were given deliberate consideration, in particular the commentary by Diplock LJ who had explained:

“By exhibiting to the payee a cheque card containing the undertaking by the bank to honour cheques drawn in compliance with the conditions endorsed on the back, and drawing the cheque accordingly, the drawer represents to the payee that he has actual authority from the bank to make a contract with the payee on the bank’s behalf that it will honour the cheque on presentment for payment.

What creates ostensible authority in a person who purports to enter into a contract as agent for a principal is a representation made to the other party that he has the actual authority of the principal for whom he claims to be acting to enter into the contract on that person’s behalf.

[T]hen, is he bound by the contract purportedly made on his behalf. The whole foundation of liability under the doctrine of ostensible authority is a representation, believed by the person to whom it is made, that the person claiming to contract as agent for a principal has the actual authority of the principal to enter into the contract on his behalf.”

R v Charles

Which meant that despite the protestations of exemption from the transaction, the respondent was inevitably liable for deception when using the card in the knowledge that it was the property of the issuing bank; and that the period for its used had since expired.

It was also noted by the House that when introducing the concept of inducement into any act of fraud, the words of Humphrey J in R v Sullivan reminded the judiciary that:

“[I]t is patent that there was only one reason which anybody could suggest for the person alleged to have been defrauded parting with his money, and that is the false pretence, if it was a false pretence.”

R v Sullivan

At which point, the House unanimously reversed the decision of the Court of Appeal and awarded due judgment for the Crown, while holding that:

“[W]here the direct evidence of the witness is not and cannot reasonably be expected to be available, reliance upon a dishonest representation cannot be sufficiently established by proof of facts from where an irresistible inference of such reliance can be drawn.”

HASHAM v ZENAB

Specific performance and cessation of contract on grounds of mistake, are both viable arguments for either continuation of contractual obligations, or the cessation of a transaction for reasons non-detrimental to both contractees; however, both approaches rely upon the honesty and accountability of at least one party, should the courts take a view to upholding either of them.

In this instance, a Gujarati widower entered into an agreement to convey a determinate plot of land for an agreed sum, yet immediately after signing the disposition she tore up the document and refused to continue with the transaction, on grounds that she had been misled as to the size of the plot, and the identity of the individual to whom the purchaser was planning to sell it to.

During initial litigation in the Supreme Court of Kenya, her argument for the fraudulent misrepresentation was based upon her limited grasp of the English language; and so, she had elected a representative to be present with her at the time of signing.

However, it was also argued that no mention had been given as to the size of the plot; which in the first instance, was alleged to be half an acre and not the two acres contained within the conveyance; a fact discovered only after the signing.

When cross-examined, the respondent was proven to have falsified the statement; and so, her witness was accused of perjury, whereas the appellant contested that during preliminary talks, the proposed plot was described as two acres and not the half-acre suggested.

The contract itself was signed in the presence of a third party; however, the respondent also relied upon the contention that at no point during an earlier meeting did anybody translate the contents of the contract, despite the appellant claiming that not only did he explain it, but that the respondent’s cousin had also clarified its contents to her.

It was likewise argued by the appellant that the respondent tore up the contract, not because of the plot variation, but upon the knowledge that the land was to be resold to an individual she disliked; however, this was also proven to be untrue after lengthy cross-examination and questioning of oral evidence.

Upon summation, the trial judge awarded in favour of the appellant, despite reservations around the integrity of both parties; and so, when presented to the Court of Appeal of East Africa, the Court took issue with the reliability of the appellant’s statements and proceeded to reexamine the facts, before reaching the same conclusion as the lower court.

Taken finally to the House of Lords, it was noted that vol. 2 of ‘Williams on Vendor and Purchaser’ clearly illustrated that:

“[A]s a rule, either party to a contract to sell land is entitled to sue in equity for specific performance of the agreement. This right is, in general, founded on a breach of the contract, but not in the same manner as the right to sue at law. The court has no jurisdiction to award damages at law except in case of a breach of the contract; while the equitable jurisdiction to order an agreement to be specifically performed is not limited to the cases in which at law damages could be recoverable.”

Which translated that when contracting parties hold a good account of themselves throughout their dealings, equity would provide sufficient weight as to instigate specific performance.

Yet, on this occasion neither party had been anywhere near as truthful as a court would rightfully expect; and so, on this principle it was impossible to uphold the appeal, nor enforce the equitable rights of the appellant, or those forwarded by the respondent.

Hence, the appeal was dismissed, while the House reminded the parties that:

“In equity all that is required is to show circumstances which will justify the intervention by a court of equity.”

SCRIVEN BROS & CO. v HINDLEY & CO.

Negligence and mistake, are two elements of contract law which conflict as between vendor and purchaser, particularly when the former is unreasonably applied to the buyer.

In this very brief but notable case, the issue in hand turns upon the overpayment for a product at auction.

Typical of the period, many agricultural products were imported for domestic use as the temperate weather of foreign countries provided for larger tonnage and lower prices; and so, on this occasion the subject matter was Russian industrial grade hemp, which while grown widely across the UK, remained their largest export at the time, and was a much sought after commodity.

Contrastingly, tow is a by-product of hemp, and thus sold at a much lower price, often for use as upholstery stuffing and other secondary purposes.

However, when a dockside auctioneer put out large bales of both hemp and tow, the samples shown to potential bidders were easily confusable.

To make matters worse, the two consignments were given similar lot names, therefore the possibility of bidding in error was high.

On this occasion, the purchaser had recruited a manager to bid on his behalf; at which point, he had placed similar bids on both items on the assumption that he was buying hemp.

To his further detriment, the auction programmes failed to distinguish the lots; and so, only those who had the foresight to inspect them beforehand were spared the embarrassment of overpaying for items of lower market value.

When the purchaser discovered his managers error, he sued the auctioneers for misrepresentation upon the principle of ‘ad idem’ (which is parties not in agreement to the nature of a contract); who themselves counter-sued for negligence on the part of the manager.

In the original trial, it was found that there could be no evidence of a contract as per the principle of disagreement, and that no grounds of negligence existed in the absence of any duty of care by the manager to examine the lots prior to bidding.

When brought before the Court of the Kings Bench, it became apparent despite a number of opposing facts, that the auctioneers had been recent victims of fraud, thus were simply looking to pass on the loss to another unsuspecting buyer.

And so, irrespective of any argument that the onus of inspection fell to the buyer’s representative, it was found that a contract could not be found to exist where no agreement had been settled between the vendor and the purchaser

Hence, the court awarded for the defendants, while reminding the parties that:

“A buyer when he examines a sample does so for his own benefit and not in the discharge of any duty to the seller.”

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