Undue Influence and Parallel Proceedings

Extract

The relationship between ancillary relief and undue influence was considered by the Court of Appeal in First National Bank plc v. Walker [2001] 1 F.L.R. 505. The case is a warning to practitioners that unless carefully advised, divorcing clients may be precluded as a result of ancillary relief proceedings from alleging an O’Brien defence of undue influence in subsequent possession proceedings. The facts of Walker were that husband and wife were joint tenants of the matrimonial home. Three mortgages of the house had been executed: first and third mortgages in favour of Barclays Bank and Lloyds Bank, and the disputed second charge in favour of First National Bank (FNB). This disputed mortgage, created in 1991, was to secure a loan made for the sole business purposes of Mr. Walker and his then partner. The marriage foundered, as did the husband’s business. A decree absolute of divorce was granted in 1993, and in 1994 Mrs. Walker’s petition for ancillary relief was heard. The court ordered that Mr. Walker transfer to his former wife his interest in the matrimonial home and in an endowment policy; an order for nominal periodical payments (of five pence per year) was also made. The transfer was completed in 1995. Mrs. Walker subsequently sought to defend possession proceedings brought by FNB on the ground, inter alia, that her execution of the charge had been procured by her husband’s undue influence and that the bank had actual or constructive notice of the relevant facts.