Family law

Wives offering security for husband's debtsRoyal Bank of Scotland v Etridge and ors (2001) The Times, 17 OctoberIn this the House of Lords again considered the question of lender's requiring security from a wife on the security of her matrimonial home.In Barclays Bank v O'Brien [1994] 1 AC 180, [1994] 1 FLR 1, the Lords considered when a lender becomes fixed with notice of the presumed undue influence of a husband where a wife agrees to stand as surety for her husband's debts.O'Brien held that such notice depended on whether the lender knowingly allowed the husband to act as its agent to obtain execution of the charge deed.

The result, if proved by the wife, would be that the charge would be unenforcable as between the bank and her.Etridge looked at the question: how can a lender be certain that the wife has sufficient advice about the proposed security to avoid her later allegation that she signed the charge in consequence of the husband's undue influence?The answer is to ensure that the wife has independent legal advice.

One of the purposes of Etridge, then, is to suggest procedures to be followed to enable a lender to feel reasonably sure that its loan will be enforceable.

From another point of view, it enables the lender to shift its loss (an unenforcable security) to the solicitor (in negligence) if things go wrong.As soon as the wife offers herself as surety for the husband's debts, says Lord Nicholls of Birkenhead, a lender must be on inquiry.Where the couple contract the debt jointly the bank is only on inquiry if it knows that the loan is solely for the husband's purposes.

Once on inquiry, the lender should take steps to ensure that the wife is aware of the risks she is proposing to take.

Banks are able to provide the necessary advice in-house, but they are unwilling to do so.

Therefore, they should refer the wife to a solicitor for independent legal advice.The bank's obligation is therefore to ensure that the wife is referred for legal advice.

It should write to her direct about this, and the letter must make clear to her that one of the bank's objectives in referring her for advice is that, once she has been advised, she cannot later sustain a case against the bank based on an allegation of the husband's undue influence.Having taken advice, she will be bound under the loan deed in full knowledge of its significance.

The bank should not proceed until the wife is properly advised.

It should provide information to the wife's solicitor (having first obtained any necessary consent - for example, from the husband - to release confidential information) where it is reasonably requested.And if the bank has any information that the wife is being misled by the husband, then it has a duty to inform her solicitor.The solicitor's responsibilities stem from the scope of the retainer.

In these cases, said Lord Nicholls, the retainer arises from the bank's concern to ensure that the wife has advice about the risks of contracting the loan; but once the wife has seen her solicitor, the solicitor's retainer derives directly from her instructions to the independent solicitor.The solicitor should, under the retainer:l Explain the documents and the consequences of any default by the husband under the charge;l Explain the seriousness of the risks inherent in signing the charge; that it might be extended; that terms might be changed and new facilities granted to the husband - all without further reference to the wife;l Consider the wife's (and perhaps the husband's) means in case of the husband's default;l State clearly to the wife that she has a choice, but that choice is hers alone, and;l Ask the wife if she is content for the solicitor to write to the bank that she has had the documents and their consequences explained to her.The interview must take place face to face.

If the solicitor needs further information from the lender it must be provided.

Without further information a solicitor cannot provide confirmation of advice to the bank.

A solicitor can advise that a transaction is not in the client's best interests.

A solicitor can try to renegotiate the arrangement with the lender.

However, in the final analysis the decision is that of the client.

The decision to proceed is for the wife, not the solicitor.Another route to reliefV v V (Child Maintenance) [2001] 2 FLR 799With changes in the child support system not far away, it is useful to report a means to secure some child support for two girls used by Mr Justice Wilson in V v V (Child Maintenance) [2001] 2 FLR 799.In that case, the parents had left it to the judge in ancillary relief proceedings - or so it seemed - to arbitrate between them as to what child periodical payments should be paid for the girls.

The judge preferred 10,000 per child, proposed by the mother, and rejected the father's offer of 5,000 each.

Confronted with this proposition, the father said he had not consented after all.

Thus, Mr Justice Wilson said he could do nothing but fix the maintenance at 5,000 each.

He then invited the mother to proceed with a claim for a lump sum for the children.Section 8(3) of the Child Support Act 1991 prevents the court awarding periodical payments for children other than by consent.

It is rare for a court to award a lump sum for children.The judge was well aware of this.

He was unable to accede to an immediate application to vary the order - asking what change in circumstances had there been (paragraph [24])? And even 'where a party has played a trick upon the [court], the court cannot play a trick on him.'However, Mr Justice Wilson said that where he had already held that the welfare of the children demanded that their mother be paid 20,000 per annum for them then it would be illogical if he could not ensure that, in some way, that sum should be paid.

The father was able to afford to pay a capital sum.

Therefore, the judge ordered the father to pay a total of 50,000 to make up the shortfall during the girls' remaining dependency, which he held in their circumstances to be until they reached the age of 21.Postscript on child maintenanceAs a postscript on child periodical payments, it may be worth recalling two other means of obtaining support for children outside the child support scheme:l In A v A (Financial Provision) [1998] 2 FLR 180, Mr Justice Singer felt able to fix a figure for child periodical payments where both parties asked the judge 'to indicate the annual maintenance figure [regarded by the judge] as reasonable for the husband to make available to the wife to meet [the child of the family's] needs' (at 181H).

This figure could then be incorporated into a consent order.

Both parties submitted to the judge's arbitration; in V v V the husband did not ultimately consent.l In Askew-Page v Page [2001] Fam Law 794, Judge Meston QC acceded to a mother's request that she be paid an interim lump sum under section 23(3)(b) of the Matrimonial Causes Act 1973 for expenses and liabilities for children 'reasonably incurred' by her on their behalf.

By David Burrows, David Burrows, Bristol