Scotlife Home Loans v Hedworth: CA 1996

The lender claimed possession as chargee under a legal charge granted by the respondents who filed Defences contending that the claimant had agreed to replace the secured loan and to waive its remedies for default under the charge. The claimant said the defence was misconceived. The District Judge declined to make a possession order, and gave directions. The claimant appealed to the circuit judge. By the time the appeal was heard Mrs Hedworth had amended her Defence to plead that the claimant’s charge was unenforceable against her since it had been procured by Mr Hedworth’s undue influence, of which the claimant had constructive notice. The judge allowed the claimant’s appeal and made a possession order. On appeal Mrs Hedworth sought to adduce additional affidavit evidence to the effect that if the appeal were allowed she would re-amend her Defence to allege that the claimant’s advance was applied in discharging existing charges which had themselves been procured by the undue influence of Mr Hedworth, of which the claimant had constructive notice. The claimant conceded that if Mrs Hedworth’s Defence were amended to include such allegations it would no longer be appropriate to strike it out.
Held: Dismissing her appeal: ‘I appreciate that counsel for Mrs Hedworth would argue that the fact that a loan by way of mortgage is to be applied for the redemption of prior mortgages does not necessarily establish that the remortgage is to the wife’s advantage because …. the mortgages redeemed may themselves have been procured by undue influence. I am not persuaded, however, by this argument. Indeed, it seems to me that it is contrary to the reasoning in Pitt. The court has to find an equilibrium between the proper protection of the rights of a wife who may be the victim of actual or presumed undue influence on the one hand and on the other hand the furtherance of ordinary business transactions involving mortgages of a matrimonial home in the joint ownership of a husband and wife. The decision in Pitt …. demonstrates that a transaction which involves a remortgage with the application of any surplus funds to a purpose which is to the apparent benefit of the husband and wife would not normally arouse suspicion. In the present case I think the correct approach is to consider what would have been the position had Scotlife been alerted to the fact that these monies were to be applied (save for a very small fraction) to the redemption of earlier mortgages. On this basis, I consider that Scotlife would have been entitled to treat the transaction as an ordinary business transaction. …. As I see it, Scotlife had no reason to question the validity of these earlier mortgages.’


Neill LJ


(1996) 28 HLR 771


England and Wales

Cited by:

CitedUCB Group Ltd v Hedworth CA 4-Dec-2003
The defendant challenged the claimant’s right to possession under a legal charge. She appealed a finding that she had not established the undue influence of her husband, a solicitor.
Held: A lender who received a voidable security was entitled . .
Lists of cited by and citing cases may be incomplete.

Housing, Undue Influence

Updated: 13 May 2022; Ref: scu.190507