Read the full judgment text of CACV 000242/1996 on BabelCite. This Court of Appeal judgment was delivered on 12 March 1997 before Litton VP, Godfrey JA, Ching JA.
Equity – undue influence – mortgage – third party surety – whether mortgage can be set aside against bank where surety received no benefit – relationship of trust and confidence – class 2(A) and class 2(B) cases under Barclays Bank v. O'Brien – whether solicitors' act for all three parties constituted undue influence – costs – solicitor-and-own-client basis – contractual basis for costs – Supreme Court Ordinance s.52A – Order 62 Rules of the Supreme Court – Gomba Holdings v. Minories Finance followed. Contractual obligation – relief in equity as a result of undue influence – woman mortgaged her property to secure a third party's indebtedness to a bank – third party defaulted – whether woman who received no benefit from the transaction could have the mortgage set aside. The plaintiff bank sued to enforce a legal charge given by Madam Fong over her property to secure Mr Ma's indebtedness of $380,000; Madam Fong received no benefit and the transaction was grossly disadvantageous to her on its face. On the pleaded case the bank was the alleged wrongdoer acting through its agents. The trial judge found no undue influence and that no presumption arose; she dismissed the counterclaim and awarded the bank costs on a solicitor-and-own-client basis. Held (Court of Appeal): appeal dismissed. On the issue of undue influence: whether the solicitors were wise or unwise to render legal services to all three parties was not the issue; unless (i) the relationship and other circumstances gave rise to a presumption of undue influence, or (ii) there was evidence of some vitiating factor operating on the woman's will, the case was not made out. No class 2(A) or class 2(B) relationship existed between Madam Fong and the bank, and no coercion, domination or pressure by the bank's agents was established. The case as reframed on appeal against Mr Ma as wrongdoer was not pleaded and unsupported by the evidence. On costs: as the legal charge contained provisions for costs on a solicitor-and-own-client basis, the court in the exercise of its discretion under s.52A Supreme Court Ordinance and Order 62 RSC did not err in awarding costs on that basis; the principle in Gomba Holdings v. Minories Finance [1993] Ch 171 followed. Result: appeal dismissed; solicitor-and-own-client costs order affirmed.
Legal issues: Setting aside mortgage for undue influence by a third party surety · Award of costs on a solicitor-and-own-client basis under s.52A Supreme Court Ordinance
Outcome: Appeal dismissed; the bank was entitled to enforce the legal charge against Madam Fong, and her counterclaim to set aside the transaction was rejected.
Cited by 1 case