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1. This is an appeal against the order and judgment of Keane J made and given herein on 21 December 1992.

2. The order made by Keane J declared that the sum of £263,992.77 was secured, first, by the equitable mortgage created by the deposit made on 2 February 1987 by the first named defendant/appellant, Ben Hogan, of the deeds to the lands specified at numbers 1 and 2 in the schedule to the order (the premises known as numbers 77 Roebuck Downs, Dublin 14, and 32 Brookevale Downs, Rathfarnham, Dublin 14) on Mr. Hogan’s interest in the said lands and premises and, secondly, by the equitable mortgage created by the deposit made on 26 May 1989 by the second named defendant, Margaret Hogan, of the title deeds to the lands described as No. 3 in the said schedule (being the lands and premises known as St. Rita’s, Kilternan, Co. Dublin) on Mrs. Hogan’s interest in those premises. The order of Keane J went on to set out the directions and provisions ordinarily contained in a primary order in mortgage proceedings.

3. The particular issue which Keane J tried on oral evidence evolved from a pleading contained in paragraph 7 of the defence filed by the defendants herein on 25 October 1991. Having averred that Mrs. Hogan did not give any security to the plaintiff/respondent the pleadings went on to allege as follows:-

4. If the second named defendant did give any such security (which is denied) which was valid (which is denied) same was obtained from her improperly or unconscionably and by reason of the inequality of bargaining power which existed between herself and the plaintiffs and by reason of their undue influence over her and ought to be declared void on that account and by reason of the fact that the plaintiffs by their servants or agents represented and agreed that as a condition of and in return for a deposit of title deeds by her they would advance the sum of £75,000 to the first named defendant or to Drefflane Associates Ltd if he so directed, which advance the plaintiffs failed or refused to make.

5. The background against which that issue fell to be considered may be summarised by reference to the judgment of the learned trial judge in the following terms. On 23 January 1987, the plaintiff (the bank) agreed to advance the sum of £150,000 to the first named defendant (Mr. Hogan). As security for that advance Mr. Hogan made an equitable deposit with the bank of the title deeds to three residential properties which he owned, i.e., Nos. 69 and 77 Roebuck Downs, Goatstown Road, Dublin 14, and 32 Brookevale Downs, Rathfarnham, Dublin 14. The sum was duly advanced and on 28 January 1988 the amount due by Mr. Hogan on foot of the advance to the bank including interest, was £189,285.79. On that date, by agreement between the bank and Mr. Hogan, the then existing facility was converted into a term loan from the bank to Mr. Hogan in the sum of £190,000 which was to be repaid with interest in five equal annual instalments, the first instalment to be paid one year from the date of the agreement.

6. The title deeds to St. Rita’s, Kilternan, were deposited with the bank on 26 May 1989 by Mrs. Hogan and controversy existed as to the purpose for which such deposit was made or perhaps, more particularly, the extent of the security which it was intended thereby to create.

7. It is common case that the advance in January 1987 was made to Mr. Hogan to enable him to purchase as an investment the two properties, namely, 77 Roebuck Downs and 32 Brookevale Downs. Mr. Hogan was also a controlling shareholder of a company called Drefflane Associates Limited (‘the company’). The company was advanced substantial sums from time to time by the bank. Ultimately the bank called in its loans to the company and, payment not being forthcoming, appointed a receiver under the powers in that behalf contained in the mortgage debenture which it held over the assets and undertaking of the company. It was part of the defence of Mr. and Mrs. Hogan that the bank was at all times in a fiduciary position in relation to them and also exercised a position of dominance over them. Mr. and Mrs. Hogan contended that the sum claimed by the bank was not a loan to Mr. Hogan but was part of, and related to, the finances made available to the company and that the bank negligently and in breach of its fiduciary duty so acted in relation to the company as to render it incapable of carrying on business.

8. In 1989 Mr. Hogan wished to sell two of the properties the title deeds to which had been lodged by him with the bank by way of security, namely, Nos. 69 and 77 Roebuck Downs. The bank contended that it had agreed to release the two properties from the equitable mortgage provided that the title deeds of St. Rita’s were lodged with it in substitution for the deeds of the properties being sold. In the event only number 69 was sold and the title deeds of St. Rita’s were undoubtedly deposited with the bank. Mr. and Mrs. Hogan put forward a different explanation of the arrangement. They said that the bank had agreed to advance the sum of £75,000 on the security of the deeds of St. Rita’s and further that this loan would be repaid out of the profits of the company. The borrowers maintained that they had been assured that this was a temporary arrangement and that the deeds would be returned to Mrs. Hogan within a few months. More particularly the defendants contend that Mrs. Hogan made the deposit when she was acting under the influence of the bank and without independent legal advice.

9. It was not disputed that Mrs. Hogan purchased St. Rita’s for a sum in the order of £79,000 of which approximately £71,000 was made available to her by the company. The amount so paid by the company to Mrs. Hogan – with the knowledge of the bank – represented the repayment of monies advanced by her to the company to pay staff wages from time to time. Messrs Orpen Franks & Co., solicitors, acted for Mr. and Mrs. Hogan in relation to the purchase of the various properties with which these proceedings are concerned. In addition they acted for the bank from time to time.

10. Arrangements were made for Mrs. Hogan to deposit with the bank the title deeds to St. Rita’s. The deposit was to be made on 26 May 1989. A few days before that Mr. Jackson of Orpen Franks & Co. told Mrs. Hogan that the title deeds were required by the bank to secure the advances made to Mr. Hogan. Some discussion took place between Mr. Jackson and Mrs. Hogan in the course of that conversation in relation to the transaction.

11. On the occasion of the deposit on 26 May 1989 there was present, Mr. John Farrell a manager of the bank, Mr. Brian Perry, the area manager of the bank for the land, Mr. Hogan, Mrs. Hogan and Mr. Edward Hickey then a solicitor in the firm of Orpen Franks & Co.

12. There is a significant dispute between the parties as to what took place on that occasion. Mrs. Hogan gave positive evidence as to her understanding as to the bargain between the parties and the extent of the security which she had agreed to provide. It was her evidence that the security was limited to the sum of £75,000 which was to be advanced by the bank to Mr. Hogan or the company. It was the evidence of the officers of the bank and of Mr. Hickey that the security was to extend without limitation to any indebtedness on the part of either Mr. Hogan or Mrs. Hogan. On that fundamental issue of primary fact the trial judge found in favour of the bank and rejected the version put forward on behalf of the defendants/appellants.

13. In addition Mr. Hickey gave evidence of the fact that he had explained to Mrs. Hogan at the meeting in the bank that she was under no obligation to make the deposit which she did in fact make on that date but that if she did so the bank would be entitled to sell the property in the event of a default by her husband. Mr. Hickey’s evidence in that respect was confirmed by Mr. Farrell and it was supported by a detailed memorandum prepared and signed by Mr. Hickey some five days afterwards, which memorandum was admitted in evidence. Again the learned trial judge accepted the evidence of Mr. Hickey to the effect that he had given advice in the terms set out in the memorandum.

14. Whilst the greater part of the argument before this Court (and much of the judgment of the learned trial judge) related to the sufficiency of the advice given by Mr. Hickey, or indeed Mr. Jackson, to Mrs. Hogan it must be recognised that once Mrs. Hogan’s version of the events was rejected there was no evidential basis to ground an argument that she had been misled or overborne or would or might have acted differently in the event of her obtaining more comprehensive legal advice.

15. The independence of the advice was challenged on the basis that Messrs Orpen Franks & Co. had undoubtedly and admittedly acted for the bank in relation to other matters. Apart from any potential conflict of interest it was contended on behalf of the appellants that the circumstances in which the advices – if that is what they were – were given were so unsatisfactory as to render the advice worthless. The complaint was made that the consultation between Mr. Hickey and Mrs. Hogan took place in the bank and in the presence of its officials and more particularly it took place at a time when Mrs. Hogan was effectively committed to the transaction. It was argued that independent legal advice should be given privately and in good time so that a client could, without undue embarrassment, withdraw from a transaction if that was to be the outcome of the advice given to her or to him.

16. Objections were also made to the content of the advices or information provided for Mrs. Hogan. It is clear that what Mr. Hickey did was to explain to Mrs. Hogan the legal consequences of making the deposit of title deeds. It was not suggested by him that he offered any advice as to the prudence of engaging in such a transaction and, indeed, he very fairly conceded that he knew nothing whatever of the financial affairs of Mr. or Mrs. Hogan or how the relationship between Mr. Hogan and the company might impinge upon the transaction.

17. The learned trial judge concluded that the bank had ensured that advice available to Mrs. Hogan was adequate in all the circumstances. The learned judge also pointed out that the transaction could be viewed, quoad Mrs. Hogan as a normal banking transaction as that expression was explained by Lord Scarman speaking in the House of Lords in National Westminster Bank plc v. Morgan [1985] 1 All ER 821 and in that event no special relationship or position of dominance on the part of the bank would arise which would require the giving of independent legal advice.

18. In this Court the onus on the bank to prove the validity of the equitable mortgage or, alternatively, the obligation on it to provide advice was explored by reference to two cases, one Irish and the other English which were decided and reported subsequent to the judgment of the learned trial judge, namely, Bank of Ireland v. Smyth [1995] 2 IR 459; 1 ILRM 241 and Barclays Bank v. O’Brien in which the decision of the Court of Appeal was reported at [1993] QB 109 and that of the House of Lords at [1994] 1 AC 180.

19. Whilst there is a similarity between the facts in Bank of Ireland v. Smyth and certain of the facts in the present case there is also a fundamental difference which renders the Irish case of little assistance in resolving the problems which arise here.

20. The decision in Barclays Bank v. O’Brien is, however, both relevant and helpful. In that case the first and second named defendants therein, a husband and wife, agreed to execute a second mortgage of their matrimonial home as security for overdraft facilities extended by the plaintiff bank to a company in which the husband, but not the wife, had an interest. The wife signed the deed of mortgage without reading it in reliance on her husband’s false representation that it was limited to £60,000 and would last only three weeks. When the company’s overdraft exceeded £154,000 the bank sought to enforce the mortgage and obtained an order for possession thereof. The judge of the High Court dismissed the wife’s appeal holding that since there was no evidence that in deceiving his wife the husband was acting on behalf of the bank it, the bank, could not be held responsible for his misrepresentation and therefore the charge was enforceable against her. That decision was reversed on appeal to the Court of Appeal and their decision was upheld by the House of Lords. The lengthy judgments delivered in the Court of Appeal, and in particular that of Scott LJ, reviewing the numerous, and sometimes conflicting, authorities in relation to the presumption or possible presumption of undue influence by a husband over his wife demonstrate the difficult problems which exist in this area of the law.

21. In the single speech delivered in the House of Lords by Lord Browne-Wilkinson an effort was made to resolve conflicting principles which had been identified in the Court of Appeal. No difficulty arises in relation to the well established propositions identified by him, namely that, (i) as between the innocent party and the alleged wrongdoer the burden of proving the exercise of undue influence falls on the innocent party; (ii) there are, however, recognized categories of relationships within which there is a presumption that the alleged wrongdoer has abused his position so that the onus is on him to prove that such was not the case; (iii) the decision in Bank of Montreal v. Stewart [1911] AC 120 determined that the relationship between husband and wife did not as matter of law raise a presumption of undue influence by a husband over his wife. Notwithstanding the fact that the relationship of husband and wife has been held not to raise a presumption of undue influence some special status does appear to have been accorded to wives in a variety of decided cases. Scott LJ referred to married women being treated by the law ‘more tenderly’ than others and in the Australian case of Yerkey v. Jones (1939)63 CLR 649 Dixon J referred to ‘the invalidating tendency’ applied by the courts in relation to transactions between a husband and wife. The consequence appears to be that whilst the matrimonial relationship as such does not give rise to a presumption of undue influence it may be possible to identify circumstances in a particular case which would more readily raise that presumption in favour of a wife than any outside party. I confess that I do not find the conclusions of the House of Lords in this regard satisfying as a matter of legal logic or fully acceptable as an analysis of the rights or capabilities of women generally and married women in particular.

22. However the issue in the present case does not immediately concern the rights as between husband and wife but as between a creditor or other third party and the wife. These rights were analysed by Lord Browne-Wilkinson at p. 195 of the report in the following terms:-

23. A wife who has been induced to stand as a surety for her husband’s debts by his undue influence, misrepresentation or some other legal wrong has an equity against him to set aside that transaction. Under the ordinary principles of equity, her right to set aside that transaction will be enforceable against third parties (e.g. against a creditor) if either the husband was acting as the third party’s agent or the third party had actual or constructive notice of the facts giving rise to her equity.

24. The doctrine of notice lies at the heart of equity. Given that there are two innocent parties, each enjoying rights, the earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice). In particular, if the party asserting that he takes free of the earlier rights of another knows of certain facts which put him on enquiry as to the possible existence of the rights of that other and he fails to make such enquiry or take such other steps as are reasonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it.

25. I would adopt and apply that reasoning to the facts of the present case.

26. The House of Lords went on to apply the ‘invalidating tendency’ and ‘tender treatment’ principles to the facts of the Barclays Bank case and concluded that having regard to the nature of the transaction guaranteed by the wife and the absence of any financial advantage to her that there was a presumption of undue influence so that the creditor was put on enquiry to satisfy himself that the wife’s agreement to stand surety had been properly obtained. By failing to make those enquiries Barclays Bank had constructive notice of the rights of the wife. The conclusion was expressed by Lord Browne-Wilkinson in the following terms (p. 196):-

27. Therefore where a wife has agreed to stand surety for her husband’s debts as a result of undue influence or misrepresentation the creditor will take subject to the wife’s equity to set aside the transaction if the circumstances are such as to put the creditor on enquiry as to the circumstances in which she agreed to stand surety.

28. Assuming, without deciding, that married women in this jurisdiction may in certain circumstances enjoy as against their husbands a presumption that undue influence was exercised and allowing that those circumstances existed in the present case the fatal flaw in Mrs. Hogan’s case is that no undue influence was exercised by her husband and that she has no equity against him to have the transaction set aside and, that being so, she has no prior equity on which she can rely in order to defeat the bank’s claim. The availability of appropriate independent legal advice to Mrs. Hogan would afford the bank a defence on a claim by her in respect of an equity to set aside the transaction if such equity had existed. But Mrs. Hogan had no equity. She did not allege that her husband misrepresented the situation or exercised undue influence over her. This is confirmed by the fact that she and her husband instructed the same solicitors and counsel to represent them.

29. With regard to the allegation that the bank itself exercised undue influence over Mrs. Hogan this was completely unsupported by any evidence. There was no evidence that any officer of the bank advised Mrs. Hogan that the borrowing would be limited to £75,000 or the security would be released after a limited period. Moreover Mrs. Hogan’s evidence to the effect that this was her belief was rejected by the learned trial judge. The relationship between the bank and Mrs. Hogan did not of itself give rise to a presumption of undue influence and no evidence was given as to the dealings between them which would raise an inference of any such wrongdoing. So far from it, it appears that Mrs. Hogan was contacted in relation to the deposit through her solicitor, Mr. Jackson, and she was attended in the bank on the occasion when the deposit was made by Mr. Jackson’s deputy, Mr. Hickey. There does not appear to have been any opportunity for the exercise of undue influence less still any evidence that it was so exercised.

30. In these circumstances it seems to me that the appeal must be dismissed.