Chancery law ; ;By Dov Ohrenstein, barrister, 3 New Square, London ;Abuse of process to pursue inconsistent cases ;First National Bank Plc v Walker, (23 November 2000 CA, unreported) ;This case is of interest not just to banking and matrimonial lawyers but to litigators in general.

;The claimant bank made a joint loan to a husband and wife which was secured by a charge over the matrimonial home.

Subsequently, the bank issued possession proceedings to enforce the charge.

;The wife divorced her husband and in separate matrimonial proceedings made an application for ancillary relief.

She swore an affidavit in support of her application for ancillary relief which included details of the banks charge over the property.

A property adjustment order was made that the husband transfer his interest in the matrimonial home to the wife and a deed was entered into conveying the property to her.

;There was no suggestion by the wife in the ancillary relief proceedings that the bank did not have a valid charge over her share of the equity in the matrimonial home.

In fact, the conveyance expressly referred to the banks charge and provided that nothing affected or prejudiced the continuing nature of those charges.

;However, in the possession proceedings the wife served a defence based on the principles set out in Barclays Bank v OBrien [1994] AC 180 claiming that when she executed the charge over the matrimonial home she was acting under her husbands undue influence.

;Josephine Hayes on behalf of the bank contended that the wifes conduct in the ancillary relief proceedings and the fact of her being party to the conveyance amounted to an affirmation of the banks charge.

;It was argued on behalf of the wife that it does not follow that merely because the wife had agreed not to set aside the charge as against her husband, that the bank is not affected by notice of wrongdoing.

Thus, it was said that if the wife could establish such notice she would be entitled to have the charge set aside as against the bank.

It was also argued on behalf of the wife that the bank could not rely on the terms of the deed of conveyance as the bank was not a party to that transaction.

;The wife succeeded at first instance.

However, the Court of Appeal unanimously found in favour of the bank, and for the first time since the decision in OBrien considered the nature of a right to set aside a charge obtained by undue influence.

;The Court of Appeal held that the wifes rights against her husband were inextricably linked to her rights against the bank.

As Rix LJ stated, her rights against the bank were parasitic on her claim against her husband.

The wife had not suggested to her husband that he would have to repay the whole of the loan without a right to a contribution or indemnity from her for half of any amounts paid by him.

Once the wife ceased to have rights against her husband to challenge the validity of the charge, she also ceased to have such rights against the bank.

;If the wife wanted to pursue an undue influence defence against the bank, then she should have raised the issue in the matrimonial proceedings and made her stance known to her husband at the earliest opportunity.

Her failure to do so meant that any later attempt to rely on such a defence amounted to an abuse of process and would not be allowed.

;The case raises the issue of to what extent a former spouse, who wishes to allege undue influence against a bank after obtaining an order on a different basis in matrimonial proceedings, ought to go back to the family court and tell them that the previous order was made on an incorrect basis.

In appropriate cases the matrimonial proceedings should be adjourned until after the determination of the undue influence allegation.

;The moral of this case is that persons who may be party to various proceedings must be carefully advised so that they do not inadvertently prejudice their position in one set of proceedings by adopting an inconsistent stance in another.

;Consumer Credit Act and lenders human rights ;Wilson v First County Trust, (23 November 2000 CA, unreported) ;This case is a powerful example of how the Human Rights Act 1998 can now be relied on by commercial and property lawyers to challenge the effect of legislation.

;In this case a pawnbroker had agreed to lend 5,000 secured on a car.

The pawnbroker charged a fee of 250 for providing the loan.

The borrower was unable to pay the fee so it was added to the amount of the loan.

The agreement, which was regulated by the Consumer Credit Act 1974, recorded the total amount of the loan as 5,250.

;The borrower brought proceedings to have the loan agreement declared unenforcable.

After she failed on this issue at first instance she repaid the loan and interest and recovered her car.

However she argued on appeal that since the agreement was unenforcable she was also entitled to the return of the money she had paid to redeem her car.

;The Court of Appeal accepted the borrowers argument that the effect of inflating the loan by 250, so as to include the fee, meant that contrary to sched 3 of the Consumer Credit (Agreements) Regulations 1983 and s.61 of the 1974 Act, the agreement did not contain a term correctly stating the amount of credit.

Accordingly, by reason of s.127(3) of the 1974 Act the agreement was unenforcable.

Moreover by reason of s.113 of the Act the security over the borrowers car was also unenforcable.

On an ordinary construction of the statute, this meant that the borrower could take advantage of the error on the agreement and obtain a windfall.

;The Court of Appeal stated that since the amount of the loan was deliberately recorded as 5,250 it was not possible to rectify the agreement on the grounds of mistake.

A restitutionary claim by the pawnbroker on the grounds of unjust enrichment was also problematic in the light of the House of Lords decision in Dimond v Lovell [2000] 2 WLR 1121 that a consequence of the Consumer Credit Act prescribed by Parliament could not be said to be unjust.

;However, the Court of Appeal unanimously held (and despite the fact that neither party had raised the issue) that it was arguable that s.127(3) of the 1974 Act infringed art.6(1) (Right to a fair trial) and/or art.1 of the First Protocol (Right to protection of Property) of the European Convention on Human Rights.

;Art.6(1) was potentially infringed because the absolute bar on enforcement in the case of an agreement that did not contain the terms prescribed by s.61 of the 1974 Act appeared to be a disproportionate restriction on the right of the lender existing in all other cases to have the enforceability of his loan determined by the court.

Art.1 of the First Protocol was potentially infringed because the legislation deprived the lender of its property, i.e.

the money which had been lent.

;In the light of the potential infringements of the Human Rights Act the Court of Appeal decided that it might be appropriate to make a declaration of incompatibility and adjourned for representations to be made by the Attorney General.

It also remains open to the Court to try to impose a strained interpretation on the 1974 Act so as to possibly avoid a finding of incompatibility.

;Although this case relates to consumer credit, similar challenges to legislation could be applied in other contexts, such as landlord and tenant cases, where a relatively minor failure to comply with a statutory requirement (eg, to correctly complete a notice) results in a draconian loss of rights for one party despite a lack of prejudice to the other party.