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Santander UK Plc v Fletcher  EWHC 2778 (Ch), 23 October 2018
Fraud- mistake – undue influence – declaration of trust – equitable charge
Ashley Fletcher was convicted of fraud. His victim was his mother, the appellant, Mrs Paula Fletcher. As a result of the fraud, Mrs Fletcher mortgaged her home to the respondent bank, Santander, for about £120,000 instead of £32,000. Prior to signing the mortgage, she executed a transfer of the house into the joint names of herself and her son on form TR1. The loan had not been repaid and the bank brought possession proceedings. Mrs Fletcher argued that the mortgage should be set aside for undue influence.
At trial, the judge accepted that the mortgage should be set aside for undue influence, of which the bank had sufficient notice to be on inquiry. The judge, however, found that the bank had the benefit of an equitable charge over the son’s beneficial interest in the property. The TR1 contained an express declaration of trust that Mrs Fletcher and her son owned the property as 50/50 tenants in common. Although Mrs Fletcher denied that she had intended her son to have any beneficial interest the judge held that the declaration of trust was conclusive. The bank was therefore entitled to enforce the equitable charge against the son’s 50% beneficial interest, even though the mortgage was set aside.
Mrs Fletcher had new counsel for the appeal. She was granted permission to amend the grounds of appeal on the morning of the appeal, but on the footing that if the facts and evidence from trial were not sufficient to support her new argument, then it would fail. The case was not one to be remitted. Mrs Fletcher’s new argument was that as TR1 was procured by fraud the judge was not required to treat the written document as conclusive as to her intentions in this case. Further, the bank could not rely on the declaration of trust in the TR1 as evidence of Mrs Fletcher’s intentions as this would be unconscionable in circumstances when it was “on inquiry” of the undue influence.
Expressing great sympathy for Mrs Fletcher’s position, Mr Justice Birss dismissed the appeal. He held that there had been no claim before the judge to set aside, rescind or rectify the declaration of trust in the TR1. The only question at trial had been whether the son had a beneficial interest in the property over which the bank had an equitable charge. The bank had clearly relied on the TR1 in lending the money. Therefore, the bank acquired an equitable charge over the son’s interest, even if the legal charge was set aside. Further, the fact that the bank was on inquiry in relation to undue influence affecting the mortgage deed did not mean that it was on notice of any taint affecting the conveyance. There was no such finding by the judge as it had not been explored at trial. The fact that the mortgage deed was executed less than six months after the TR1 was not enough in itself to fix the bank with constructive notice of any right held by Mrs Fletcher to rescind the declaration of trust. In any event Mrs Fletcher’s unilateral mistake, if established, could only render the declaration of trust voidable, not void. If a claim for rescission had been part of Mrs Fletcher’s case at trial and if the bank had pleaded a bar to rescission, there might have been a burden on the bank to establish a right to bar rescission. However, the bank could not be criticised for not doing so, given the way in which the case was pleaded and argued at trial. The appeal was therefore dismissed.
Daniel Gatty acted for the successful respondent.