Kenyon-Brown v Desmond Banks & Co, Court of Appeal - Civil Division, November 16, 1999,  Lloyd's Rep PN 338, PNLR 266, Lloyd's Rep Bank 80, EWCA Civ 3033
Error! Main Document Only.Case No: QBENF/1998/0830/A2 BAILII Citation Number:  EWCA Civ 3033 IN THE SUPREME COURT OF JUDICATURECOURT OF APPEAL (CIVIL DIVISION)ON APPEAL FROM THE HIGH COURTQUEEN'S BENCH DIVISIONMr. Peter Leaver Q.C.Royal Courts of JusticeStrand, London, WC2A 2LL Date: Tuesday, 16 November 1999 B e f o r e : LORD JUSTICE PETER GIBSONLORD JUSTICE MANCEand MR. JUSTICE WILSON- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -(Transcript of the Handed Down Judgement ofSmith Bernal Reporting Limited, 180 Fleet StreetLondon EC4A 2HDTel No: 0171 421 4040 Fax No 0171 831 8838Official Shorthand Writers to the Court)- - - - - - - - - - - - - - - - - - - - -Miss Julia Smith (instructed by Messrs. Neilson & Co. of Marylebone for the Appellant)Mr. Ben Hubble (instructed by Messrs. Henmans of Oxford for the Respondent)- - - - - - - - - - - - - - - - - - - - -JudgmentTuesday, 16 November 1999 JUDGMENTLORD JUSTICE MANCE: This is an appeal against the judgment of Mr Peter Leaver Q.C. sitting as a deputy High Court judge, whereby he dismissed a claim made by Mrs Jessica Kenyon-Brown against her former solicitor, Desmond Banks & Co. On 12th January 1993, Mrs Kenyon-Brown executed a second mortgage in favour of National Westminster Bank plc over a holiday house, Rock Cottage, Melplash, Bridport, which she owned jointly with her then husband. Her claim against Desmond Banks & Co., whose sole principal was Mr Banks, was for negligence and/or breach of contract consisting of alleged failure to give her any or adequate advice on that occasion. Mrs Kenyon-Brown met her future husband in 1969, when she went to work for his company, K.B. Insurance Brokers (London) Ltd. (``K.B.''). She married him in 1972, when she was about 24, and she commenced divorce proceedings in July 1996. He is 14 years older than she is. After their marriage, she continued to work within K.B., becoming a director in K.B. and in its subsidiary or associated company, P.M. Insurance Services Ltd. (``P.M.''). At some point she also became a shareholder in K.B, holding an equal number (525) of ``B'' shares to her husband. On 7th April 1986 the two of them purchased Rock Cottage in joint names for about £50,000 with the assistance of a £30,000 mortgage from Nationwide Building Society. In December 1987, a controlling interest in K.B. and P.M. was sold to a South African company, Crusader Life Assurance Corporation Ltd. (``Crusader''). This sale was with Mrs Kenyon-Brown's full agreement, since, although she envisaged continuing to work for K.B. and P.M., she hoped that in three or so years she and her husband would be able to retire. In early May 1988 they sold their then home in London and acquired 53 Dene Road, Northwood with the help of a £30,000 mortgage from National Westminster Bank plc. The defendant acted for both of them on that purchase. He acted over the years on many occasions for K.B. and P.M. on Mr Kenyon-Brown's instructions. Much less frequently he also acted for Mrs Kenyon-Brown. K.B. and P.M. did not prove profitable acquisitions for Crusader, and in the latter part of 1989 Mr Kenyon-Brown negotiated to repurchase the shares which had been sold. Mrs Kenyon-Brown was very much against doing this, but was, in the judge's words, ``overborne by her husband and very reluctantly agreed to the repurchase''. To fund the repurchase, Mr Kenyon-Brown borrowed monies from the National Westminster Bank plc Bude branch, where he (but not Mrs Kenyon-Brown) had an account. These monies were secured by a second mortgage effected by Mr and Mrs Kenyon-Brown over their matrimonial home, 53 Dene Road. Before the execution of this mortgage, the bank required to be assured that Mrs Kenyon-Brown had received legal advice. Advice was given her by Mr Banks, who arranged for a limit of £150,000 to be included in the mortgage and drew attention to the fact that the second mortgage would cover any sums lent to Mr Kenyon-Brown, but would not cover or enable any lending to Mrs Kenyon-Brown. At a meeting with Mrs Kenyon-Brown alone on 15th November 1989, Mr Banks asked her why it was that, if she and her husband were buying K.B. back, the money should be lent to Mr Kenyon-Brown alone. Mrs Kenyon-Brown did not know, so Mr Kenyon-Brown joined the meeting. Mr Banks' attendance note records then that ``We discussed the pros and cons of the matter at some length. Eventually Mrs Kenyon-Brown decided that, as she trusted her husband and had no account at the Bude branch, she would proceed. I drafted a letter for Mr Kenyon-Brown to sign in which he said that the money would be used in buying back K-B jointly between them. I explained that this was only an agreement to agree, as it did not lay down the proportions in which they would be buying the company. No decision had been made on that. It depended on accountants' advice. Mr Kenyon-Brown would not have to pay Capital Gains Tax if he sold his shares on retirement at the age of 60, so might take a larger proportion. I witnessed the signatures of both of them to the deed and gave each of them a copy. I told Mrs Kenyon-Brown that she should telephone me if she should change her mind about wanting to go ahead, although I was satisfied that she was content and had understood what I had said.'' Mr Banks does not therefore appear to have been aware or elicited that Mrs Kenyon-Brown had been overborne when agreeing to the proposed repurchase from Crusader. But he was aware that she was ready to act and commit her own assets on the basis of trust in her husband. The shares were re-transferred on 1st July 1990, with Mr Kenyon-Brown in fact receiving the lion's share (1825) and Mrs Kenyon-Brown receiving the balance (125). It does not appear that K.B. prospered any more thereafter than it had under Crusader's control. On 29th September 1992 the bank's Bude branch wrote to Mr Kenyon-Brown regarding a company development loan of over £7000 and a private loan account of over £180,000, in addition to which the letter suggests that use was also being made of a company overdraft facility of £10,000 and a private overdraft facility of £10,000. The letter went on: ``The Bank requires within this further short period the following:- 1. An execution of a Second Mortgage over the Bridport property (I have previously asked for information from you on this point in order to complete our Mortgage form) and now await your further advices. 2. Tangible progress towards a re-mortgage over your private residence (i.e. a letter of intent or offer received). The Bank is becoming increasingly concerned at the unsatisfactory position developing here and is not prepared to allow continued interest roll-up in the absence of tangible progress towards repayment/reduction and in the absence of any progress being made on the both points forementioned it would seem that a sale of your private property may well be the only realistic way forward. By the end of this further term the Bank would also welcome a breakdown of your income and expenditure along with an update and details of your net asset position and in any event your written proposals/Action Plan to deal with the private loan are required as foreshadowed.'' This led in due course to the second mortgage of Rock Cottage. On 15th December 1992 the bank wrote to Mr Banks saying that ``We have been instructed by Mr Kenyon-Brown to forward the Bank's Legal Mortgage document to yourselves in order that Independent Legal Advice can be given to Mrs Kenyon-Brown before signing the document. Kindly ensure that both parties sign to acknowledge receipt of a completed copy of the form and that they also sign where the limitation clause has been deleted. We shall be grateful if you will confirm that Legal Advice was given to Mrs Kenyon-Brown when the charge form is returned. Thanking you in anticipation.'' On 12th January 1993 Mr Banks saw both Mr and Mrs Kenyon-Brown in his offices. He saw them both together on a matter relating, it seems, to legal costs and K.B.'s lease of its Queensway offices. The attendance note for that matter commences ``Mr and Mrs K-B here''. A further 15 minutes were occupied on the second mortgage of Rock Cottage. Mr Banks' attendance note records this matter as follows: ``Both clients here Advised on mortgage -Jessica is happy to go along with it - doesn't want me to go into it in detail - even if money is borrowed by N alone to buy shares in KB in his name. Dene Road already mortgage. Copy mortgage to JKB Mrs KB appeared to understand it fully and despite the terms of my warning to be totally unconcerned that the mortgage of property jointly owned by her would benefit her husband alone and be without limit.'' Mr Banks then witnessed the signatures of both Mr and Mrs Kenyon-Brown, and, when sending the bank the executed document, wrote: ``We confirm that we gave legal advice to Mrs Kenyon-Brown before she executed it.'' On 22nd June 1993 he rendered a fee note to Mr Kenyon-Brown for £30 plus VAT ``. in connection with our advising Mrs Kenyon-Brown at these offices advising her concerning the proposed mortgage in favour of National Westminster Bank Plc and witnessing both of your signatures; writing to the bank and perusing their reply.'' The first complaint about Mr Banks' conduct was made by Mrs Kenyon-Brown in May 1996 through the solicitors who have acted for her in this action. The action was begun in August 1997, and was tried in May 1998. Judgment was given on 5th June 1998. At an early stage during opening speeches, the judge confined the trial to liability. The background was a submission by Miss Smith that, for the purposes of the tort claim, the execution of the second mortgage of Rock Cottage would constitute the suffering of loss, but that the evaluation of the precise loss (for the purposes of both the contract and the tort claims) could only take place after a sale of Rock Cottage, which had unexpectedly fallen through. At the...
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