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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Lloyds TSB Bank v Holdgate [2002] EWCA Civ 1543 (14 October 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1543.html Cite as: [2002] EWCA Civ 1543, [2003] HLR 335

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE SOUTHEND COUNTY
(HIS HONOUR JUDGE YELTON)

		Royal Courts of Justice Strand London, WC2 Monday, 14th October 2002

Monday, 14th October 2002

1. LORD JUSTICE PETER GIBSON : I will ask Lord Justice Mance to give the first judgment.
2. LORD JUSTICE MANCE: This is an appeal with the permission of Kennedy LJ against two orders of His Honour Judge Yelton, sitting in the Southend County Court, one dated 21st September 2000 and the second dated 27th April 2002.
3. The appellant is the wife of Mr Holdgate. They have been estranged since late 1996. Mr Holdgate was at all material times from the 1970s until 1999 involved in a commercial photography business. Until early 1997 this was as a partner with a Mr Nicholson. Thereafter it was as a sole trader. The appellant was not a partner with her husband at any stage. Nevertheless, in 1977 she signed a joint mortgage with her husband charging the matrimonial home in favour of the respondent in an unlimited amount in respect of any sums owing then or thereafter by Mr Holdgate, whose occupation was described in the deed as "photographer". That was a matrimonial home owned by both of them. When Mr Nicholson left the partnership in 1997 he was released by the respondent from any guarantee of responsibility for the business's debts. Mr Holdgate remained the sole person ultimately liable for the business's debts, but the respondent bank maintains that it also has the charge, to which I have referred, over the jointly owned matrimonial home.
4. The respondent commenced possession proceedings. The appellant pleaded and maintained that she had a properly triable defence in that she had been under her husband's undue influence and had been led to sign the mortgage by a misrepresentation made to her by him that the bank's charge was limited to £5,000.
5. The matter came on for trial before His Honour Judge Yelton on 21st September 2000. The respondent bank then sought an order for either summary determination or a preliminary issue in respect of the question whether, even on the appellant's version of the facts, she had any triable defence. The judge agreed that it was appropriate to determine such an issue, making an assumption for the purposes of so doing that there had been, as between husband and wife, the undue influence and/or misrepresentation which she alleged had induced her to sign. The issue identified was presented as being an issue of law whether the bank's position was affected.
6. In the light of the then state of the authorities, as he read them, His Honour Judge Yelton considered that any such undue influence and/or misrepresentation could not have any effect on the respondent bank's position, and he made an order for possession on 19th October 2000. But the House of Lords was due to hear an appeal in the case of Bank of Scotland P.L.C. v Etridge (No.2), so the judge ordered a stay of execution of the order for possession until the later of six months from the date for possession or 38 days after the House of Lords' decision. He also ordered any further application to be reserved to him.
7. The House of Lords decided Etridge (No.2) [2001] UKHL 44 or [2001] 3 WLR 1021 on 11th October 2001. However, no application was made to His Honour Judge Yelton or to appeal his original order within 38 days thereafter. Accordingly, the respondent bank obtained a warrant for possession in February 2002 and the appellant returned home one day to find a bailiff.
8. By application notice dated 27th February 2002 the appellant applied to the Basildon County Court for suspension of the warrant and/or leave to appeal against the original order for possession, saying that the matter should be heard by His Honour Judge Yelton.
9. In fact, it came on before District Judge Gypps who on 6th March 2002 ordered that:

"1. Warrant is stayed for 7 days and if notice of appeal or a separate application for permission to appeal from the possession order is made in that time it shall remain stayed until that appeal or application is disposed of unless otherwise ordered in the meantime.

2. Any application relating to the warrant made in the county court `shall be reserved to His Honour Judge Yelton and may be heard wherever he may be sitting'."

A notice applying for permission to appeal the original order of 21st September 2000 was apparently then issued in the Basildon County Court and the matter came a second time before His Honour Judge Yelton on 27th March 2002. He identified its procedural complexity, but, putting that on one side, he looked at the merits of the application. He considered that the House of Lords' decision in Etridge No.2 still gave the appellant no prospect of any success and made an order which, as drawn, was that the appellant's application to stay or suspend the warrant be dismissed. It would seem that his order should have been expressed as an order allowing an appeal from District Judge Gypps, but that is of no consequence.

10. Kennedy LJ on 11th July 2002 granted permission to appeal out of time against both the original order dated 21st September 2000 and His Honour Judge Yelton's later order, although this was wrongly referred to as dated 27th April 2002 rather than 27th March 2002. Again, that is of no consequence.
11. The principal issue now before us is whether His Honour Judge Yelton was right to consider that the principles set out in Etridge No.2 can be of no assistance to the appellant or whether the appellant was at least entitled to a trial.
12. There is a preliminary point, which I mention briefly. It is submitted in the papers put before us that the judge was wrong on 21st September 2000 to agree to determine, as a prior and separate issue without hearing any evidence, whether the appellant had any defence even on her own account of the facts. It is pointed out that CPR 24.3 precludes summary judgment in proceedings for possession of residential premises against a mortgagor.
13. This is another case in which it seems to me that there was probably insufficient definition of what was being done. The judge seems to have left open the character of the issue he was determining. The matter had come on for trial and it was open for him to determine any separate issue arising on the parties' cases. Insofar as there was a pure issue of law arising on their cases, he could determine that as a separate issue. However, no-one defined precisely whether that was what he was doing or, if so, what the issue was or the precise factual assumptions on which it was based. This was, it seems to me, unsatisfactory. It also leaves me not entirely confident that the only issue determined was one of pure law. However, that does not matter in view of the other conclusions to which I have come.
14. Are the principles in Etridge No.2 of any assistance to the appellant?
15. First, it is clear that we must proceed on the assumption that, as between the husband and wife, the mortgage was induced by undue influence and/or misrepresentation.
16. Second, in the light of Etridge No.2 the respondent bank was "put on inquiry". The position in this respect was expressed as follows by Lord Nicholls in Etridge No.2 at paragraphs 44 to 49:

"44 In O'Brien the House considered the circumstances in which a bank, or other creditor, is `put on inquiry'. Strictly this is a misnomer. As already noted, a bank is not required to make inquiries. But it will be convenient to use the terminology which has now become accepted in this context. The House set a low level for the threshold which must be crossed before a bank is put on inquiry. For practical reasons the level is set much lower than is required to satisfy a court that, failing contrary evidence, the court may infer that the transaction was procured by undue influence. Lord Browne-Wilkinson said [1994] 1 AC 180, 196:

`Therefore in my judgement a credit is put on inquiry when a wife offers to stand surety for her husband's debts by the combination of two factors: (a) the transaction is on its face not to the financial advantage of the wife; and (b) there is a substantial risk in transactions of that kind that, in procuring the wife to act as surety, the husband has committed a legal or equitable wrong that entitles the wife to set aside the transaction.'

In my view, this passage, read in context, is to be taken to mean, quite simply, that a bank is put on inquiry whenever a wife offers to stand surety for her husband's debts.

45 The Court of Appeal, comprising Stuart-Smith, Millett and Morritt LJJ, interpreted this passage more restrictively. The threshold, the court said, is somewhat higher. Where condition (a) is satisfied, the bank is put on inquiry if, but only if, the bank is aware that the parties are cohabiting or that the particular surety places implicit trust and confidence in the principal debtor in relation to her financial affairs: see Royal Bank of Scotland plc v Etridge (No 2) [1998] 4 All ER 705, 719.

46 I respectfully disagree. I do not read (a) and (b) as factual conditions which must be proved in each case before a bank is put on inquiry. I do not understand Lord Browne-Wilkinson to have been saying that in husband and wife cases, whether the bank is put on inquiry depends on its state of knowledge of the parties' marriage, or of the degree of trust and confidence the particular wife places in her husband in relation to her financial affairs. That would leave banks in a state of considerable uncertainty in a situation where it is important they should know clearly where they stand. The test should be simple and clear and easy to apply in a wide range of circumstances. I read (a) and (b) as Lord Browne-Wilkinson's broad explanation of the reason why a creditor is put on inquiry when a wife offers to stand surety for her husband's debts. These are the two factors which, taken together, constitute the underlying rationale.

47 The position is likewise if the husband stands surety for his wife's debts. Similarly, in the case of unmarried couples, whether heterosexual or homosexual, where the bank is aware of the relationship: see Lord Browne-Wilkinson in O'Brien's case, at p 198. Cohabitation is not essential. The Court of Appeal rightly so decided in Massey v Midland Bank plc [1995] 1 All ER 929: see Steyn LJ, at p 933.

48 As to the type of transactions where a bank is put on inquiry, the case where a wife becomes surety for her husband's debts is, in this context, a straightforward case. The bank is put on inquiry. On the other side of the line is the case where money is being advanced, or has been advanced, to husband and wife jointly. In such a case the bank is not put on inquiry, unless the bank is aware the loan is being made for the husband's purposes, as distinct from their joint purposes. That was decided in CIBC Mortgages plc v Pitt [1994] 1 AC 200.

49 Less clear cut is the case where the wife becomes surety for the debts of a company whose shares are held by her and her husband. Her shareholding may be nominal, or she may have a minority shareholding or an equal shareholding with her husband. In my view the bank is put on inquiry in such cases, even when the wife is a director or secretary of the company. Such cases cannot be equated with joint loans. The shareholding interests, and the identity of the directors, are not a reliable guide to the identity of the persons who actually have the conduct of the company's business."

The present case is within the "straightforward" category identified by Lord Nicholls at the beginning of paragraph 48, where he says:

"As to the type of transactions where a bank is put on inquiry, the case where a wife becomes surety for her husband's debts is, in this context, a straightforward case. The bank is put on inquiry."

He then contrasts the other side of the line:

"On the other side of the line is the case where money is being advanced, or has been advanced, by the husband and wife jointly. In such a case the bank is not put on inquiry, unless the bank is aware the loan is being made for the husband's purposes, as distinct from their joint purposes."

17. Here, as I have made clear, the money was being advanced for the husband's purposes in respect of his business's debts, and that was known by the respondent bank. The wife was simply charging her interest in the matrimonial home (on an unlimited basis, as it happened, whatever she thought) in order to secure present and future business indebtedness of her husband.
18. Third, the question therefore arises whether the respondent bank did sufficient, or received sufficient assurance, to satisfy itself that it could put aside the possibility of undue influence and misrepresentation, or whether the facts otherwise justified it in being so satisfied. When the charge was executed by her husband and the appellant, solicitors were involved, who witnessed the signature. The bank therefore knew of the involvement of solicitors to that extent. But, that was all the bank knew, so far as the material presently before us shows. The solicitors were in fact the same solicitors who had acted for the appellant and her husband in the purchase of the matrimonial home a year or so before in 1976. The appellant says in the statement put before us that she cannot remember them giving her any advice. Nor can the relevant lawyer in the solicitors, Mr Simpson, remember anything about the matter, and their documentation, which Mr Simpson speculates may have been added to the house purchase file, is now not available, the house purchase file having long since been destroyed. The husband says, however, positively in his statement that no advice was given to the appellant.
19. The House of Lords said this in Etridge No.2:

"79 I now return to the steps a bank should take when it has been put on inquiry and for its protection is looking to the fact that the wife has been advised independently by a solicitor.

(1) One of the unsatisfactory features in some of the cases is the late stage at which the wife first became involved in the transaction. In practice she had no opportunity to express a view on the identity of the solicitor who advised her. She did not even know that the purpose for which the solicitor was giving her advice was to enable him to send, on her behalf, the protective confirmation sought by the bank. Usually the solicitor acted for both husband and wife.

Since the bank is looking for its protection to legal advice given to the wife by a solicitor who, in this respect, is acting solely for her, I consider the bank should take steps to check directly with the wife the name of the solicitor she wishes to act for her. To this end, in future the bank should communicate directly with the wife, informing her that for its own protection it will require written confirmation from a solicitor, acting for her, to the effect that the solicitor has fully explained to her the nature of the documents and the practical implications they will have for her. She should be told that the purpose of this requirement is that thereafter she should not be able to dispute she is legally bound by the documents once she has signed them. She should be asked to nominate a solicitor whom she is willing to instruct to advise her, separately from her husband, and act for her in giving the necessary confirmation to the bank. She should be told that, if she wishes, the solicitor may be the same solicitor as is acting for her husband in the transaction. If a solicitor is already acting for the husband and the wife, she should be asked whether she would prefer that a different solicitor should act for her regarding the bank's requirement for confirmation from a solicitor.

The bank should not proceed with the transaction until it has received an appropriate response directly from the wife.

(2) Representatives of the bank are likely to have a much better picture of the husband's financial affairs than the solicitor. If the bank is not willing to undertake the task of explanation itself, the bank must provide the solicitor with the financial information he needs for this purpose. Accordingly it should become routine practice for banks, if relying on confirmation from a solicitor for their protection, to send to the solicitor the necessary financial information. What is required must depend on the facts of the case. Ordinarily this will include information on the purpose for which the proposed new facility has been requested, the current amount of the husband's indebtedness, the amount of his current overdraft facility, and the amount and terms of any new facility. If the bank's request for security arose from a written application by the husband for a facility, a copy of the application should be sent to the solicitor. The bank will, of course, need first to obtain the consent of its customer to this circulation of confidential information. If this consent is not forthcoming the transaction will not be able to proceed.

(3) Exceptionally there may be a case where the bank believes or suspects that the wife has been misled by her husband or is not entering into the transaction of her own free will. If such a case occurs the bank must inform the wife's solicitors of the facts giving rise to its belief or suspicion.

(4) The bank should in every case obtain from the wife's solicitor a written confirmation to the effect mentioned above.

80 These steps will be applicable to future transactions. In respect of past transactions, the bank will ordinarily be regarded as having discharged its obligations if a solicitor who was acting for the wife in the transaction gave the bank confirmation to the effect that he had brought home to the wife the risks she was running by standing as surety." [per Lord Nicholls]

...

"167 In a number of cases a firm of solicitors has been acting for the husband in the transaction with the bank and has acted also for the wife in connection with the grant of the security to the bank. In many cases, the same solicitor acting for the husband and the wife has been asked by the bank to act for it in connection with the completion of the security. A number of questions arise - for instance:

(1) Does the fact that, to the knowledge of the bank, a solicitor is acting for the wife in the security transaction entitle the bank reasonably to believe that the solicitor will have given her an adequate explanation of the nature and effect of the security document she is to sign?

(2)If so, are there, in the ordinary case, i.e. where there is no special reason for the bank to suspect undue influence or other impropriety, any other steps that the bank ought reasonably to take?

(3) If the answer to question (1) is `Yes' and to question (2) is `No', does the fact that the solicitor is also the husband's solicitor and is acting for the bank in arranging for completion of the security bar the bank from relying on the solicitor's role in acting for the wife?

(4) In many cases the solicitor in whose offices the wife has signed the security document has confirmed, sometimes on the document itself and sometimes in a covering letter to the bank, that the nature and effect of the document has first been explained to the wife and that she has appeared to understand it and to be entering freely into the transaction, or to that effect.

If in these cases the solicitor has in fact given no, or no adequate, explanation of the document to the wife, in what circumstances can the solicitor's knowledge of his failure be attributed to the bank?

168 As to question (1), the duty of a solicitor towards his client is, in every case, dependent on the instructions, express or implied, that he has received from his client. A solicitor acting for a client in connection with a proposed transaction under which the client is to become surety or give security for the debts of another will not necessarily have instructions to advise the client about the nature and effect of the transaction. In most cases such instructions, if not express, would, I think, be implied; but it is at least possible that the circumstances of the solicitor's retainer would not require him to give such advice. So, in my opinion, knowledge by a bank that a solicitor is acting for a surety wife does not, without more, justify the bank in assuming that the solicitor's instructions extend to advising her about the nature and effect of the transaction.

169 Normally, however, a solicitor, instructed to act for a surety wife in connection with a suretyship transaction would owe a duty to the wife to explain to her the nature and effect of the document or documents she was to sign. Exactly what the explanation should consist of would obviously depend in each case on the facts of that case and on any particular concerns that the wife might have communicated to the solicitor. In general, however, the solicitor should, in my opinion: (i) explain to the wife, on a worst case footing, the steps the bank might take to enforce its security; (ii) make sure the wife understands the extent of the liabilities that may come to be secured under the security; (iii) explain the likely duration of the security; (iv) ascertain whether the wife is aware of any existing indebtedness that will, if she grants the security, be secured under it; (v) explain to the wife that he may need to give the bank a written confirmation that he has advised her about the nature and effect of the proposed transaction and obtain her consent to his doing so.

170 I think the solicitor should, probably, begin by trying to discover from the wife her understanding of the proposed transaction. He, the solicitor, may then be in a position to remedy any misapprehensions and cure any misrepresentations.

171 A bank, proposing to take a security from a surety wife for whom a solicitor is acting, requires, first, confirmation that the solicitor's instructions do extend to advising her about the nature and effect of the transaction. Subject to that confirmation, however, the bank is, in my opinion, entitled reasonably to believe that the solicitor will have advised her on the matters to which I have referred and, accordingly, that she has had an adequate explanation and has an adequate understanding of the transaction" [per Lord Scott]

20. Attention was principally directed, in the submissions by Mr Wolfson for the respondent bank, upon whom we called first, to paragraphs 79 to 80. It is true that these focus first and foremost on the future, but they also deal with the past, as paragraph 80 in its second sentence makes clear. The word "ordinarily" in that second sentence may, of course, contemplate that further steps may sometimes be necessary, but equally, as Mr Wolfson submits, it may contemplate that in some circumstances other methods of satisfying the bank, apart from confirmation, may suffice. However, I am quite unable to agree with Mr Wolfson's submission that in the present case it was open to the judge safely to conclude that the bank was protected and no longer on inquiry because, to quote his skeleton, "it was entitled to rely on the fact that the wife executed the mortgage having seen her own family solicitor". If that were the case, there would probably not be many cases where the bank did not satisfy its duty and the threshold would be set, in my judgment, too low.
21. Further, as Mr Wolfson indeed accepted, paragraph 80 could, and would, then simply have read in its second sentence:

"In respect of past transactions, the bank will ordinarily be regarded as having discharged its obligations if a solicitor ... was acting for the wife in the transaction."

The only additional idea which his formulation introduces was that it was here a family solicitor. Even if that was known to the present bank, which is not clear, it seems to me that it could not make all the difference.

22. Furthermore, when one examines the actual decisions in the cases which were in the House of Lords under the umbrella of Etridge (No.2), the decision in Moore is, in my judgment, instructive. This is considered by Lord Hobhouse at paragraph 127, which it is appropriate to read in conjunction with the general background observations made in paragraph 115, and in the speech of Lord Scott in paragraphs 294 to 309, particularly, however, paragraphs 306 and 307.
23. What Lord Hobhouse and Lord Scott were both clearly emphasising in those paragraphs was that the mere involvement of a solicitor was not necessarily to be equated with any advisory role. A solicitor may have an "execution only" role, in which case he will not have concerned himself with the interests of the wife, such as the present appellant, or with the question whether she is accepting the obligations, which she accepts, freely and with knowledge of the true risks and facts.
24. It is true, as Mr Wolfson has urged on us, that in the case of Moore there was the additional factor that the solicitors there were only questionably the wife's solicitors, however much they appeared from the mortgage application form that the bank received to be acting for her as well as her husband. She had, in reality, signed that form in blank and her case was that she had never instructed those solicitors. Lord Hobhouse observed that, in those circumstances, she might be estopped from denying that they were her solicitors. Lord Scott pointed out that the bank was not to know that she had never instructed the solicitors. Mr Wolfson submitted that the only decision in Moore was that, in circumstances where a wife has not in fact instructed solicitors, a bank cannot claim the protection of such advice as the solicitors might be thought to have given. That is not how I read the reasoning in Moore. Indeed, the contrary seems to me entirely clear from the reasoning of Lord Scott, with whom Lord Bingham agreed. Lord Scott said expressly this:

" ... the information that Mr and Mrs Moore had solicitors acting for them reduced the risk. It is not to the point that Mrs Moore had never instructed Quiney & Harris. UCB were not to know that that was so. They had been misled by the contents of the mortgage application form that Mrs Moore had signed in blank. It would be possible to argue that Mrs Moore, by signing in blank, had given an implied authority to her husband, or to his agent Mr Zerfahs, to complete the form on her behalf. It is enough, however, to conclude that UCB were entitled to take the mortgage application at its face value."

So, in the view of those two members of the House of Lords, quite clearly the Moore case was not decided on the basis that Mrs Moore never instructed the solicitors, or that the bank never had reason to believe that she had instructed solicitors. The basis of their decision appears in paragraph 307 of Lord Scott's speech, which I read:

"But the problem is that UCB did not know what Quiney & Harris's instructions were and had no reason to assume that their instructions extended to giving Mrs Moore advice about the nature and effect of the legal charge. The instructions may have been no more than to agree the form of security documents and make arrangements for them to be executed. Quiney & Harris gave UCB no indication that they had given Mrs Moore any such advice and in fact they had not done so. In my opinion, therefore, on the evidence as it now stands UCB failed to take reasonable steps to satisfy itself that Mrs Moore understood the nature and effect of the legal charge."

25. Lord Hobhouse put the matter as follows in paragraph 127, referring to the mortgage application form and its completion by the husband with the name of the solicitors after the wife had signed it in blank. He said:

"As a result, on the face of the form sent to the lender there was a single solicitor who was to act on behalf of both applicants. The wife says that the husband had not obtained her authority to fill in the form in this way; it is agreed that the husband undoubtedly filled in other parts of the form fraudulently. Having received instructions from Mr Zerfahs, the solicitors, without obtaining confirmation from the wife, referred to her and her husband in correspondence as `our clients'. The lender did not obtain any assurance that the wife had received independent advice before signing. It is the wife's case that she received no advice at all. This is a disturbing case. It may turn out (if there is a trial) that the wife is an unreliable witness and that her case cannot be accepted. But, for present purposes, the lender's case has to depend wholly upon an estoppel arising from her having signed the application form in blank and, it is argued, an inference that she had been separately advised as an independent client by the solicitor. I do not believe that this is a sound basis for disposing of this case without a trial. The true facts need to be known. She was the victim of misrepresentation; the solicitors purported to act on her behalf without any authority to do so; the only document which the lender saw did not suggest anything other than a joint retainer; the lender never checked the position with the wife or sought any confirmation that she was being separately advised. Discovery of documents and a morning in the county court would have sorted the matter out more expeditiously and cheaply."

Lord Hobhouse's speech on this point was expressly agreed to by Lord Nicholls, and Lord Clyde generally agreed with Hobhouse LJ's reasoning and the result. The result was that the wife's appeal in Moore succeeded.

26. It seems to me clear that Lord Hobhouse is treating it as of potential relevance that the solicitors were, on the face of it, were acting under nothing more than a joint retainer in a transaction which, on the face of it, was in the husband's financial interest but involved the wife's proprietary interest, that the bank never checked the position with the wife and that the bank never sought or obtained any confirmation that she was being separately advised. It is quite clear, to my mind, that the reasoning in the House of Lords is to contrary effect to that which His Honour Judge Yelton thought on 27th March 2002 and that which Mr Wolfson has urged on us today. Far from establishing that the appellant has no proper case to go for trial, it must, upon any view, go to trial.
27. For further confirmation of that, if it were necessary, it seems to me one only has to look at the attitude taken in this court in the still more recent authority of UCB Corporate Services Ltd v Christine Ann Williams [2002] EWCA civ. 555, where (at paragraph 67) Jonathan Parker LJ notes that counsel conceded that the judge's finding in that case that UCB was entitled to assume that Mr Howells would have given "full and proper advice to Mrs Williams as to the nature of the transaction" cannot, after Etridge in the House of Lords, in itself support an argument that UCB was not put on inquiry or that UCB took "reasonable steps" to avoid being fixed with constructive notice of Mr Williams' wrongdoing, which would include obtaining confirmation that Mr Howells had in fact advised Mrs Williams as to the nature and effect of the transaction.
28. Then at paragraph 95 Parker LJ went even further by saying:

"I should, perhaps, begin this section of the judgment by saying that in my judgment Mr Barker's concession (to the effect that UCB cannot avoid being fixed with constructive notice of Mrs Williams' equity by relying merely on an honest belief that Mrs Williams was represented in the transaction by a solicitor) was rightly made.

As Lord Scott, in particular, makes clear in Etridge, an honest belief to that effect is not enough, since it cannot be assumed that the solicitor's retainer extends to explaining to his client the nature and effect of the transaction."

Jonathan Parker LJ then cited paragraph 168 of the judgment in Etridge, which was to that effect, in particular the last sentence, which reads as follows:

"So, in my opinion, knowledge by a bank that a solicitor is acting for a surety wife does not, without more, justify the bank in assuming that the solicitor's instructions extend to advising her about the nature and effect of the transaction."

He also cited paragraph 115 in the speech of Lord Hobhouse which, as I have said, draws a clear distinction between a solicitor's potential role, sometimes of a relatively low order involving no more than the execution of an agreed transaction, sometimes of a higher order involving a lesser or greater degree of advice.

29. With that judgment, Kay LJ agreed, as did also Peter Gibson LJ.
30. It is, in my judgment, unnecessary in these circumstances to go into any of the other matters that were canvassed in skeletons, and we did not hear counsel on them. Many of them would seem to me only marginally, if at all, relevant to any preliminary issue that the judge may be taken to have been trying and indeed in some cases not even to have been pleaded.
31. The appeal should, in my judgment, be allowed, the order for possession dated 21st September 2000 should be set aside and the possession proceedings should go for trial. The warrant for possession issued under the order dated 21st September 2000 must fall with the order for possession; but, if necessary, it seems to me the stay of its execution should be restored indefinitely.
32. LORD JUSTICE PETER GIBSON : The main point raised by this appeal and, in the event, the determinative point is whether the surety wife, Mrs Holdgate, has an arguable defence, worthy of trial, to the mortgagee bank's possession claim in the light of the decision of the House of Lords in Royal Bank of Scotland v Etridge (No.2) [2001] 3 WLR 1021 ("Etridge") or whether such defence is precluded by the law as stated in this court in the same case [1998] 4 All ER 705 at 721 in paragraph 44(1). This court had held that where the wife deals with the bank through a solicitor the bank is not ordinarily put on inquiry. Further, relying on the Bank of Baroda v Rayarel [1995] 2 FLR 376, this court in Etridge said that the bank is not ordinarily required to take any steps at all. The present case is one in respect of a transaction completed prior to the decision of the House of Lords in Barclays Bank plc v O'Brien [1994] AC 180 ("O'Brien"). If Mrs Holdgate has an arguable defence, then the judge was wrong to give summary judgment and the appeal must be allowed.
33. One of the difficulties in this area is that the House of Lords in O'Brien not only stated the law then applicable but gave guidance for the future. Similarly, in Etridge there are further statements as to what should be done by banks in the future. But there can be no doubt but that a principle and a test were laid down in O'Brien which applied to past transactions as well as to the future and that all the cases heard together in Etridge were past transaction cases. It is therefore necessary to keep in mind what were the applicable principle and test and to identify the relevant reasoning in the House of Lords in Etridge which led to the decisions in respect of of past transaction cases.
34. Lord Browne-Wilkinson in O'Brien at page 196 stated the applicable principle. He said what was the combination of factors which puts a creditor on inquiry when a wife offers to stand surety for her husband's debts. That combination of factors was present in this case. Lord Browne-Wilkinson stated that, unless the lender put on inquiry takes reasonable steps to satisfy himself that the wife's agreement to stand surety has been properly obtained, the creditor will have constructive notice of the wife's rights to have the transaction set aside by reason of any legal or equitable wrong committed by the husband against her.
35. Lord Browne-Wilkinson then posed the question: what are the reasonable steps which the creditor should take to ensure that it does not have constructive notice? Normally, he said, the steps would consist of making inquiry of the wife to see whether such rights are asserted. But he accepted that it would be impossible to require banks to inquire whether one spouse has been unduly influenced or misled by the other.
36. Lord Browne-Wilkinson continued at page 196:

"But in my judgment the creditor, in order to avoid being fixed with constructive notice, can reasonably be expected to take steps to bring home to the wife the risk she is running by standing as surety and to advise her to take independent advice. As to past transactions, it will depend on the facts of each case whether the steps taken by the creditor satisfy this test."

He then went on to state what the bank should do for the future if it wished to avoid being fixed with constructive notice.

37. The purpose of requiring the creditor to take such steps is, as Lord Scott explained in Etridge (see page 1078 paragraph 165), to satisfy the creditor that the wife understood the nature and effect of the transaction she was entering into.
38. In Etridge all the cases were past transactions; in all a solicitor had been involved, at least on the face of things, for the wife. Lord Nicholls at page 1042 paragraph 64 and Lord Scott at page 1079 paragraph 168 recognised that the duty of a solicitor to his client depends on the scope of the retainer. Lord Scott was clear that knowledge by a bank that a solicitor was acting for a surety wife does not, without more, justify the bank in assuming that the solicitor's instructions extended to advising about the nature and effect of the transaction.
39. It is plain from Lord Scott's treatment of one of the appeals in Etridge before the House of Lords, UCB Home Loans Corporation Ltd v Moore, that the reason he gave why the wife's appeal had to be allowed was that the bank, whilst knowing that Mr and Mrs Moore had solicitors purportedly acting for them in the mortgage transaction, did not know what the solicitors' instructions were and had no reason to assume that their instructions included giving the wife advice about the nature and effect of the legal charge. Accordingly, he held that the bank failed to take reasonable steps to satisfy itself that the wife understood the nature and effect of the legal charge. The wife had claimed that the solicitors had not in fact been instructed by her. Lord Scott pointed to the fact that the mortgage application had been signed by Mrs Moore in blank, and he held that it was enough to assume that the bank was entitled to take the application at its face value.
40. In my judgment, the uncertainty as to whether or not Mrs Moore did have solicitors acting for her was not part of the reasoning which led Lord Scott to the conclusion which he did reach; and Lord Bingham agreed with Lord Scott's reasoning as to the disposal of that appeal (see page 1028 paragraph 4). However, it is right to recognise, as Mr Wolfson stressed, that the other law lords gave a different basis for reaching their conclusion that the appeal in that case should be allowed. Lord Hobhouse said that an estoppel based on the wife having signed the application form and on an inference that she had been separately advised by the solicitor was not a satisfactory basis for disposing of the case without a trial. He too went on to say that the lender never checked the position with the wife or sought any confirmation that she was being separately advised.
41. The facts in the present case have not yet been found. It is clear that the bank was aware that Mr and Mrs Holdgate had solicitors, because in paragraph 19 of Mr Holdgate's untested witness statement there is the statement that the bank had asked what solicitors were instructed by Mr and Mrs Holdgate in connection with signing the charge. It is not apparent that the bank had any further knowledge than the answer to that. It is at least arguable, and it could be put more strongly, that the mere fact that the bank had ascertained that solicitors were acting for Mr and Mrs Holdgate was not enough to show that the bank had satisfied Lord Browne-Wilkinson's test of taking steps to bring home to the wife the risks that she was running by standing as surety. It is not in dispute before us that the judge was wrong to suggest that on the basis of Etridge Mrs Holdgate's defence was bound to fail.
42. Mr Wolfson has urged on us the practical difficulties facing lenders if they are not entitled to rely on the mere fact that the wife had gone to a solicitor in connection with a transaction of suretyship. He points out that, as in this case, the passage of time may mean that banks are no longer able to produce documents relating to the transaction in question and do not have witnesses to give evidence of what occurred. I see the force of that. Nevertheless, it seems to me quite impossible for this court to qualify the clear statements made in the House of Lords in Etridge or to give no or less effect to the guidance there given on the basis that it applies only after some supposed cut-off date, not being the date of the decision by the House of Lords in O'Brien. In my judgment it is quite plain that this is a case which has to go to trial.
43. For these, as well as the reasons given by Mance LJ, I too would allow the appeal and I concur in the order which he proposes.

Order: Appeal allowed with costs. In respect of the costs of the hearing in 2000, they will be the defendant's costs in cause -- that is to say Mrs Holdgate's costs in cause not the banks. Application for permission to appeal refused.

(Order does not form part of approved judgment)