Banking law
Pre-Etridge (No2) transactions
National Westminster Bank Plc v Amin [2002] UKHL 9
Mr and Mrs Amin came to England from a African country.
They were both Urdu speakers and have never at any time been able to speak English.
Mr and Mrs Amin purchased a property in joint names for use as their matrimonial home.
Their son, who was brought up in England, was the sole proprietor of a business.
He was, of course, a fluent English speaker.
He required a loan for his business.
The bank was prepared to provide him with this facility provided that he could supply the bank with security.
The security offered by the son was a charge over his parents' matrimonial home.
Prior to execution of the charge, the bank wrote to a firm of solicitors requesting that they ensure that Mr and Mrs Amin were fully aware of the terms and conditions of the charge.
An assistant solicitor attended to the matter.
A meeting was held at which the assistant solicitor, Mr and Mrs Amin and their son were present.
Mr and Mrs Amin signed the charge at this meeting.
The assistant solicitor did not speak Urdu.
Mrs Amin says that she never received any advice at the meeting about the charge and its effect from either the assistant solicitor or her son.
For the purpose of the strike-out application, this assertion was relied upon as true.
Following the meeting, the assistant solicitor wrote a letter to the bank confirming that he had explained the terms and conditions to Mr and Mrs Amin.
Mr and Mrs Amin subsequently executed the charge.
The son's business suffered difficulties and the bank issued possession proceedings.
The proceedings were defended on the grounds that the son exerted undue influence over his parents and the bank was fixed with constructive notice of his wrongdoing.
The bank applied to strike out the defence on the basis of the confirmation that it received from the assistant solicitor.
The only issue on the strike-out application was whether the bank had taken reasonable steps to bring home to Mr and Mrs Amin the risk they were running in executing the charge.
In Etridge (No.
2) [2001] 3 WLR 1021, 1046 paragraph 80, Lord Nicholls stated that 'in respect of past transactions, the bank will ordinarily be regarded as having discharged its obligations if a solicitor who was acting for the wife in the transaction gave the bank confirmation to the effect that he had brought home to the wife the risks she was running by standing as surety'.
In these circumstances, provided the bank did not know about the inadequacy of any advice given, the failure of the solicitor properly to advise the wife would not result in the bank being fixed with constructive notice of wrongdoing.
Mrs Amin argued that the solicitor was acting for the bank.
If this were correct the bank would be fixed with constructive notice of the defective nature of the advice given to Mrs Amin.
Even if Mrs Amin's assertion was not made out, their Lordships did not think that the bank would necessarily succeed at trial.
Lord Scott pointed out that the passage of Lord Nicholls, cited earlier, would be the conclusion reached in the ordinary case.
Lord Scott stated that the 'present case has features which, in my opinion, raise the question whether something more might not be required of the bank before it could claim to be free of constructive notice' of the son's impropriety.
One of the factors that Lord Scott had in mind when expressing this opinion was that the bank was alleged to have known that Mr and Mrs Amin could not speak English and knew of their cultural, ethnic minority background and that they therefore might be especially vulnerable to exploitation.
While of course their Lordships did not decide the issue, it seems to be unlikely that a bank will be able to rely in pre-Etridge transactions, merely on an independent solicitor's confirmation that the effects of the transaction were explained to a surety when the surety was from an ethnic minority background and did not speak English.
In these circumstances, it was suggested that the bank should seek not merely confirmation of the explanation of the charge but confirmation that the surety understood its effects.
Therefore, the judgment provides non-English speaking members of ethnic minority background with an additional level of protection over and above the level of protection applied in the ordinary case.
Such an approach is consistent with equity's role in protecting individuals against unconscionable conduct.
Security for costs
Nasser v United Bank of Kuwait [2002] EWCA Civ 556, [2002] 1 ALL ER 401
Banking is an increasingly international business.
This case will be of interest to defendant banks seeking orders for security for costs against overseas claimants.
A court may order security for costs against a claimant or an appellant if having regard to all the circumstances it is just to make an order and one or more of the gateway conditions in rule 25.13(2) of the Civil Procedure Rules applies.
One such gateway condition, rule 25.13(2)(a), applies where a claimant or appellant is an individual who is ordinarily resident outside of the jurisdiction and who is not a person against whom a claim could be enforced under the Brussels or Lugano conventions.
In this case, the bank applied for security for costs against an appellant resident in the US.
The US is not a signatory to either the Brussels or Lugano conventions.
At first instance, the bank successfully applied under rule 25.13(2)(a) for an order for security for costs.
The appellant applied to discharge or vary the order.
The Court of Appeal held that the order would be varied.
However, in doing so the court determined that the mere fact that an individual was resident outside of the jurisdiction in a non-convention country was not by itself sufficient to justify the court in exercising its discretion whether to make an order for security for costs.
Such an approach would be discriminatory and contrary to article 14 of the European Convention for the Protection of Human Rights.
The court would move now to a more flexible approach.
Where 'the discretion to order security is to be exercised, it should therefore be on objectively justified grounds relating to obstacles to or the burden of enforcement in the context of the particular country concerned'.
Therefore, applicants for security under rule 25.13(2)(a) will need to consider whether evidence is required about the burden of enforcement in a non-convention country.
By Simon Sugar, barrister, 36 Bedford Row, London
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