Barclays Finance Corporation of the Leeward and Windward Islands Ltd Claimant v (1) St. Rose Verneuil (2) Leandra Verneuil Defendants [ECSC]
| Jurisdiction | St Lucia |
| Judge | Hariprashad-Charles, J |
| Judgment Date | 03 May 2005 |
| Judgment citation (vLex) | [2005] ECSC J0503-2 |
| Court | High Court (Saint Lucia) |
| Docket Number | Cslaim No. 693 of 2002 |
| Date | 03 May 2005 |
THE EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
(CIVIL)
Cslaim No. 693 of 2002
This is a claim by Barclays Finance Corporation (the Bank) to recover an outstanding balance due in respect of a consolidated loan made to the defendants with their matrimonial home being used as security for the debts. The loan fell into arrears. The Bank demanded payment of the outstanding balance but the defendants failed to satisfy the debts. The Bank instituted proceedings against both defendants for the outstanding balance together with accrued interest.
I interpolate to observe that the Bank has already obtained judgment in full against the first defendant, Mr. Verneuil ("the husband") at a Case Management Conference on 12th June 2003. The parties to the loan are jointly and severally liable and the Bank now seeks to obtain judgment as against both parties to the loan. This is its right.
Mr. and Mrs. Verneuil first met in June 1973 when she was 15 and he was 16. They became boyfriend and girlfriend. In September 1974, after successful results in 8 subjects at the G.C.E. "O" Levels, Mrs. Verneuil taught at the Vieux Fort Secondary School for a year before leaving for England to pursue higher studies. During that time, she made a promise to Mr. Verneuil that he will be her only boyfriend. In August 1982, she returned to Saint Lucia and started cohabitating with him. They lived together as man and wife until their marriage on 1st July 1989. Three children were born out of this union.
On or about 19th June 1989, Mr. and Mrs. Verneuil applied for and obtained lending in the sum of $144,000.00 for the refinancing of a loan with the Bank of Nova Scotia in respect of the purchase of land and house. The loan application was signed and accepted by both parties. ("Exhibit 31").
On 17th October 1997, Mrs. Verneuil appeared before Solicitor and Notary Royal Jennifer A. Remy ("Ms. Remy") and executed a Power of Attorney in favour of her husband empowering him to administer all of her affairs in a manner as he thinks fit. ("Exhibit 30").
On or about 30th September 1998, Mr. Verneuil sought additional financing in the sum of $60,000.00. The financing was approved and both parties signed the application. ("Exhibit 29"). The balance in respect of the loan executed in or about June 1989 and the additional financing of $60,000.00 were amalgamated and a letter of instruction was issued to Ms. Remy for the preparation of the mortgage on behalf of the parties in the sum of $172,000.00. The matrimonial home registered in the Land Registry as Block 1251B Parcel 21 was used as security for the loan. On 27th October 1998, both parties executed the Hypothecary Obligation ("the mortgage") before Ms. Remy. It was registered in the Land Registry as Instrument No. 4731/98 ("Exhibit 27"). It was alleged that the purpose of the mortgage was to finance Mrs. Verneuil's legal studies.
In early 2000, a further mortgage was negotiated by loans officer Mildred Benjamin for an additional sum of $48,718.00 using the said matrimonial home as security. The Additional Hypothecary Obligation registered as Instrument No. 951/2000 was executed on 18th February 2000 before Ms. Remy. Mr. Verneuil signed on behalf of his wife using the Power of Attorney. It was alleged that this loan was to finance Mr. Verneuil's business. ("Exhibit 23").
On 11th October 2000, Mrs. Verneuil appeared before Ms. Remy to revoke the Power of Attorney which she executed in October 1997. ("Exhibit 14").
The two loans with a principal amount of $223,000.00 went into arrears sometime in June/ July 2000 when Mr. Verneuil failed to pay the monthly instalments.
On 30th November 2000, Mrs. Verneuil filed a Petition for Divorce. On 28th November 2001, the parties settled ancillary matters in their divorce proceedings by entering into a consent order whereby the matrimonial home along with other properties were to be put up for sale and the proceeds of sale be used firstly to satisfy any outstanding debt and any balance remaining be divided equally between the parties.
On 16th July 2002, the Bank commenced these proceedings seeking recovery of the outstanding balance. Some six weeks later, Mrs. Verneuil filed her defence. In it, she pleaded that the transactions were procured by the undue influence of her husband and further she has no knowledge of the additional loan executed on 18th February 2000. She also alleged that the Bank had constructive notice of the undue influence and in the circumstances, should have been "put on inquiry" during negotiations and before executing the loans.
In her statement of facts and issues filed on 31st October 2003, Mrs. Roheman appearing as Counsel for the Bank helpfully distilled the issues which have arisen for consideration in this case. They are as follows:
(i) Whether and to what extent it is equitable to expect the Bank to have applied the principles and guidelines in the case ofRoyal Bank of Scotland plc v Etridge (No. 2)WLR [2001] 4 All ER 4761 at the time of the grant of the two transactions?
Law pre-Etridge
(i) Whether the presumption of undue influence based on the confidential relationship of husband/wife can be rebutted?
(ii) Whether the loans allegedly undertaken by Mrs. Verneuil were manifestly disadvantageous to her?
Law post-Etridge
(i) Whether Mrs. Verneuil was unduly influenced to enter the two transactions. In other words, whether Mr. Verneuil exercised domination or control over the mind of his wife such that her independence of decision was undermined?
(ii) Whether the Bank was put on inquiry as to an equitable wrong?
(iii) Whether the Bank took reasonable steps and as a result, was fixed with notice of the undue influence?
2. Whether Mrs. Verneuil affirmed the two transactions/ lending by entering into an order by consent for the sale of the property held as security?
3. Whether Mrs. Verneuil is estopped from setting aside the two transactions based on lapse of time/acquiescence?
4. Whether the defence can be considered an abuse of process based on the oonsent order in the ancillary proceedings?
For the purpose of considering whether there is an arguable defence, it is necessary to look at what a party in the position of Mrs. Verneuil has to show to establish undue influence. Undue influence is a defence available whenever influence is acquired and abused, where confidence is reposed and betrayed. It negatives contractual consent but
does not make any contract induced by it void, only voidable, at the instance of the party affected.There are two kinds of undue influence which the courts have considered and refined over the last 20 years. First, there are cases of actual undue influence where it has been used as an instrument of fraud. This case was opened to me albeit vaguely, as one in which presumed, not actual undue influence was alleged. However, in her closing submissions, Mrs. St. Rose appearing as Counsel for Mrs. Verneuil suggested that actual undue influence had been made out from the evidence. She submitted that Mr. Verneuil's use of insults, inducements, abuse and threats including threats against the children and his ability to make good those threats were situations amounting to actual undue influence.
Mrs. Roheman argued that actual undue influence was not pleaded. I have to agree with her and say that, although the defence does not in terms differentiate between actual and presumed undue influence, in the light of Mrs. St. Rose's closing submissions, I am obliged to consider it.
The law is that a person alleging actual undue influence has the burden of showing that the other party to the transaction (or someone who induced the transaction for his own benefit) had the capacity to influence the complainant, that the influence was exercised, that its exercise was undue and that its exercise brought about the transaction.2
The principle was affirmed inEtridge's case. At paragraph 103 of the judgment, Lord Hobhouse of Woodborough said:
"(Actual undue influence) is an equitable wrong committed by the dominant party against the other which makes it unconscionable for the dominant party to enforce his legal rights against the other. It is typically some express conduct overbearing the other party's will…He who alleges actual undue influence must prove it."
InCIBC Mortgage plc v Pitt [1994] 1 A.C. 2003, Lord Browne-Wilkinson distinguished the two classes of case as "actual" and "presumed" undue influence respectively. At page 209, he said:
"Actual undue influence is a species of fraud. Like any other victim of fraud, a person who has been induced by undue influence to carry out a transaction which he did not freely and knowingly enter into is entitled to have that transaction set aside as of right."
The issue of actual undue influence is a question of fact the onus of proof of which rests on Mrs. Verneuil. An example of a situation which will be regarded as constituting actual undue influence includes a husband forcing his wife to sign a joint mortgage over their matrimonial home to secure a loan. As I gleaned through the evidence in the instant case, it does not, in my view establish actual undue influence.
The kind of undue influence which arises here is presumed undue influence arising from a special relationship; in this case, the relationship of husband and wife: Class 2B. The complainant must establish the facts. The burden of proof is on Mrs. Verneuil (in this case) seeking to avoid the transaction to establish that...
To continue reading
Request your trial