Equity and succession

Couple taking out mortgage as security for husband's guarantee of company's liabilities in fixed sum - bank increasing guarantee without informing wife - wife paying off share of mortgage and making claim against husband - bank not entitled to preclude wife from being subrogated to claim against husbandLloyds TSB Bank plc v Shorney and Another; CA (Lords Justice Waller, Latham and Mr Justice Astill); 20 July 2001The husband entered into a guarantee of the liabilities of a company up to 150,000 and the husband and wife executed a mortgage of the matrimonial home as security for his liability.The bank later increased the husband's guarantees but had not disclosed to the wife its intention to do so nor allowed her the opportunity to consider whether to give notice and terminate the mortgage.

The bank later obtained a charging order over the husband's interest in the property and brought proceedings for possession.

The judge found that it could not rely on a clause in the mortgage preventing the wife from bringing a claim against her husband before his liabilities to the bank had been discharged.

The bank appealed.Christopher Pymont QC and Ian Wilson (instructed by Stephens & Scown, Exeter) for the bank; Peter Knox (instructed by Freemans) for the husband and wife.Held, dismissing the appeal, that since the husband was providing a guarantee limited to 150,000 to secure the running account of a company for which he would otherwise have no liability, any material increase in his liability above 150,000 would prejudice the wife's position as co-surety if the bank relied on an all-monies clause precluding her from making a claim against her husband in competition with the bank; that the bank could only rely on such a clause if it had disclosed to her its intention to increase her husband's liabilities and allowed her the opportunity of considering whether to give notice and terminate; and that it was not possible for the bank otherwise to rely on a general clause to dispense with consent when it contemplated entry into further guarantees.