Lord Justice Jonathan Parker
This appeal is concerned with the position of a bank vis-à-vis the holders of a joint account, where each of the account-holders has authorised the bank to honour cheques drawn on the account by any one of them. In particular, an issue arises on the facts of the instant case as to whether the respondent The Royal Bank of Scotland plc ("the Bank") breached a duty of care owed to the appellant, Mrs Sandra Fielding, one of the account-holders.
Mrs Fielding is the defendant in the action. She appeals against an order made by Hart J on 2 May 2003 whereby he ordered her to pay to the Bank, as claimant, the sum of £3,559,652.31 inclusive of interest to the date of the order. The judge granted permission to appeal.
At the commencement of the appeal Mr Richard Perkoff, appearing for Mrs Fielding (he did not appear below), applied for an extension of time for appealing. This application was not opposed by Mr Charles Purle QC, appearing with Mr David Eaton Turner for the Bank (they both appeared below). We accordingly granted the application.
The judgment sum represents the overdrawn balance as at the date of the order on a joint account (no. 00157220) opened in 1979 in the joint names of Mrs Fielding and her husband Mr Michael Fielding at the Bank’s Piccadilly branch. Mrs Fielding contends that the overdrawn balance represents borrowings which she neither knew about nor authorised, and for which she is not liable. She also counterclaims that she is owed money by the Bank, arising out of the manner in which the Bank applied the net proceeds of sale of a property, 6 Hanover Terrace NW1, over which the Bank had a charge.
The trial of the action lasted some 10 court days between 10 and 28 March 2003.
Before the judge, Mrs Fielding did not accept that she had signed a mandate relating to the joint account. However, on the footing that (as the Bank contended, and as the judge in due course found) she had signed a mandate in the Bank’s then standard form, she contended that on its true construction the mandate did not authorise the Bank to allow any of the borrowings which gave rise to the overdrawn balance on the joint account the subject of the Bank’s claim. In the alternative, she contended that following the grant by the Bank in 1988 of a specific facility of £200,000 on the joint account ("the 1988 facility") the Bank was not authorised to allow borrowings above that £200,000 limit by Mr Fielding alone without first obtaining her consent; and that since (as was common ground) her consent to further borrowings by Mr Fielding alone was not sought – the Bank continuing to rely on the mandate – she was not liable for such borrowings. In the further alternative, she contended that the Bank was in breach of a duty of care owed to her in allowing such further borrowings to be made without her consent. She also contended that the Bank’s charge over 6 Hanover Terrace (which had been purchased in 1986 in her name), the 1988 facility and a further facility granted in 1994 were voidable as between herself and Mr Fielding on grounds of abuse of confidence and that they should be set aside as against the Bank for the reasons elaborated by the House of Lords in Royal Bank of Scotland v Etridge (No 2)  AC 773.
In a detailed and lucid judgment which he handed down on 2 May 2003, the judge, having found that on the opening of the joint account Mr and Mrs Fielding signed a mandate in the Bank’s then standard form, rejected her contention as to the true construction of the mandate, concluding that it authorised the Bank to allow borrowings on the joint account by Mr Fielding alone. He further concluded that the granting of the 1988 facility did not affect that state of affairs, and that the mandate continued to have effect after the grant of the 1988 facility as it had done previously.
As to breach of duty, the judge, whilst leaving open the possibility that in some circumstances a duty of the kind alleged might arise, concluded that on the facts of the instant case – and in particular the fact that from the opening of the account until the end of 1993 the Bank regularly sent bank statements relating to the joint account to Mr and Mrs Fielding at their home address – the Bank had no reason to suppose that she was ignorant of the extent of the overdraft, or that the mandate was being abused in any way. He accordingly rejected her case based on an alleged breach of duty.
The judge also rejected her case based on abuse of confidence. She does not appeal against that part of the judge’s judgment.
As to Mrs Fielding’s counterclaim, the judge found that she had given actual authority to Mr Fielding to agree to the whole of the outstanding balance on the loan account being discharged out of the net proceeds of sale of 6 Hanover Terrace.
On this appeal Mrs Fielding does not challenge any of the judge’s findings of primary fact. She does, however, renew her contentions as to the true construction of the mandate; as to the effect of the 1988 facility; and as to breach of duty. She also appeals against the dismissal of her counterclaim.
By a Respondent’s Notice, the Bank invites this court to uphold the judge’s judgment on three additional grounds. The first is that, even if Mrs Fielding’s contentions as to the true construction of the mandate are correct, by her conduct she impliedly authorised the Bank to allow the borrowings which she seeks to challenge. The second additional ground is that by reason of her conduct Mrs Fielding is estopped by convention from asserting that the Bank lacked the necessary authority. The third additional ground relates to Mrs Fielding’s counterclaim. The Bank contends that the judge ought to have held that in any event Mrs Fielding, through her solicitors Lawrence Graham, agreed to the Bank applying the net proceeds of sale of 6 Hanover Terrace as it did.
The judge dealt with the facts at length and in great detail. For the purposes of this appeal the following summary will, I hope, suffice.
Mr and Mrs Fielding were married in 1968, when he was 22 and she 21. They have two sons; one born in 1972, one in 1975.
Mr Fielding qualified as a solicitor in 1971 and thereafter practised as such, first with Grangewood Allen, who were the in-house solicitors to the Stern Group. In 1974, following the collapse of the Stern Group, he and some other colleagues founded their own firm, Grangewoods. In 1989 Grangewoods was dissolved, and Mr Fielding joined Brecher & Co as a partner. In 1995 he became a partner in Lawrence Graham.
Mrs Fielding gave up work after the birth of her second child: she had previously worked as a medical secretary. The judge found her to be "a not unintelligent but financially unsophisticated lady of leisure".
In 1979 Mr and Mrs Fielding opened the joint account. Previously they had had a joint account at the National Westminster Bank, Stamford Hill. At the same time, Mrs Fielding transferred her deposit account (which stood at some £25,000) from the National Westminster Bank to the Bank.
As noted earlier, the judge found that on the opening of the joint account Mr and Mrs Fielding each signed a form of mandate in the Bank’s then standard form for a joint account. The mandate was in the following terms:
We hereby request and authorise you to pay to the debit of any Current Account kept by us with you in our joint names all Cheques and other Orders which may by drawn by either or the survivor of us and that whether any such Account shall be in credit or overdrawn or may become overdrawn by reason of the payment of the said Cheques and Orders: And we agree and declare that we will be liable to you jointly and severally for all sums due and to become due on any such Account with interest and charges thereon.
We do also hereby authorise either or the survivor of us to receive on our behalf all Statements, Cheques and Vouchers relating to any such Account.
We further authorise and request you to pay to the order of the survivor of us, or to the executors or representatives of such survivor any balance at [sic] the credit of any such Account.
During the 1980s Mr Fielding began to devote himself increasingly to his financial and commercial interests. In 1982 he set up an off-shore (Jersey) settlement as a receptacle for the fruits of his various ventures. By that time he had come to be seen as not only a solicitor at the head of a prosperous practice but also a shrewd and successful businessman on his own account, operating in the world of commercial property. Certainly that was how the Bank regarded him.
From 1977 to 1984 Mr and Mrs Fielding lived at 16 Albert Court, Prince Consort Road, SW7. In July 1984 they traded up their matrimonial home by purchasing 12 Kent Terrace, Regents Park for £333,500. The purchase was financed entirely by a bridging loan from the Bank. On completion, the property was transferred into Mrs Fielding’s sole name. The bridging loan was duly repaid out of the proceeds of sale of 16 Albert Court, which was sold in December 1984.
By this time, if not earlier, the Fieldings were enjoying an increasingly affluent lifestyle, employing domestic staff and a driver: a situation which continued until they left the United Kingdom in June 2001. By 1986 the Jersey settlement was said to be worth some £6M.
By June 1984 Mr Fielding had established a pattern of running the joint account on overdraft. The sums involved tended to be in the region of £10,000 to £30,000. The pattern usually consisted of a degree of ‘unauthorised’ borrowing, which was ‘regularised’ after the event by agreement with the Bank. By June 1984 the overdrawn balance on the joint account stood at £26,291, as against an agreed limit of £20,000. The Bank was at this time adopting a consistently conciliatory attitude towards Mr Fielding. The judge observed that it was clear that the local branch held him in considerable esteem.
For her part, Mrs Fielding made relatively little use of the joint account. She was at all material times content to leave the whole conduct of the banking relationship entirely to Mr Fielding, and (save on a limited number of occasions, relating to properties taken or to be taken in her name) she did not concern herself as to the way in which Mr Fielding arranged their joint finances. A striking example of this is the fact that (as noted in paragraph 8 above), notwithstanding that statements relating to the joint account were sent regularly to Mr and Mrs Fielding at their home address until the end of 1993, Mrs Fielding did not bother to open them, let alone look at them. Further, the judge accepted Mrs Fielding’s evidence that Mr Fielding never told her, and that she never knew, the true position on the joint account; and that at all material times she believed that her only indebtedness to the Bank was in respect of the £550,000 loan secured on 6 Hanover Terrace and in respect of the 1988 facility. The judge concluded that (quite unknown to the Bank) she was the victim of manipulation and deception at the hands of Mr Fielding.
By March 1986 the overdraft on the joint account had reduced to £35,000 (as against an agreed limit of £45,000). At this point Mr and Mrs Fielding decided once again to trade up their matrimonial home. An opportunity arose to purchase 6 Hanover Terrace, a substantial property in a prestigious terrace bordering Regents Park designed by John Nash. The purchase price was £1M.
The purchase of 6 Hanover Terrace was completed on 29 October 1986. It became the family home for some fourteen years. The purchase was financed as to £550,000 by a loan (described as a bridging loan) by the Bank, which the Bank debited to a separate loan account in the names of Mr and Mrs Fielding, and as to the balance by funds provided by Mr Fielding. As had happened with the previous properties, it was transferred into Mrs Fielding’s sole name.
The loan was granted on the terms of a facility letter dated 2 June 1986 which was signed by both Mr and Mrs Fielding. The facility letter provided for interest on the loan to be debited to the joint account on a quarterly basis (as was duly done).
Although 6 Hanover Terrace was in due course registered in Mrs Fielding’s name as sole proprietor, the Bank’s charge, which was on the Bank’s printed form, named both Mr and Mrs Fielding as "the Mortgagor". The charge was expressed be a continuing security for the discharge of "the Mortgagor’s Obligations", which were in turn defined as:
All the Mortgagor’s liabilities to the Bank of any kind (whether present or future actual or contingent and whether incurred alone or jointly with another) including banking charges and commission.
Hence the charge extended to Mr Fielding’s sole liabilities to the Bank. However, at no stage did the Bank seek to enforce the charge other than in respect of the loan account and the joint account.
The sale of the property at Kent Terrace was not completed until 12 November 1986 (that is to say about a fortnight after completion of the purchase of 6 Hanover Terrace), and in consequence the amount of the loan had to be increased on a temporary basis to £950,000.
In December 1986 Mr Fielding requested, and the Bank agreed, that the overdraft facility on the joint account be increased to £75,000. By April 1987 the limit was once again being exceeded. By late 1987 the overdrawn balance on the joint account stood at £140,000. In December 1987 Mr Fielding reduced it to some £35,000 by payment into the account of the proceeds of a property venture, but by March 1988 the overdrawn balance had risen to some £100,000.
By May 1988 the balance on the loan account stood at £375,000, but the overdraft on the joint account had been almost eliminated by a payment into the account of a sum of around £120,000 representing "monies being lent to Mr Fielding from a Family Settlement". However, in September 1988 the Bank allowed Mr Fielding to draw £100,000 on the joint account to enable him to open a US$ account in his own name at another of its branches, on the understanding that this was for the possible purchase of a property in Spain. The effect of that drawing was to increase the overdraft on the joint account to around £140,000 (the limit remaining at £75,000).
At this point Mr Fielding asked the Bank to increase the overdraft limit to £200,000, on the basis that he would arrange to have his drawings on an annual basis covered by the trustees of a family trust. The Piccadilly branch of the Bank recommended to the Bank’s regional office that the request be granted, saying that it held Mr Fielding in the highest regard, and that although the "bridging loan" had been outstanding for an unduly long time, it was confident that it would be repaid shortly.
In the event, the Bank agreed to Mr Fielding’s request. The terms of the £200,000 facility (the 1988 facility) were set out in a letter dated 18 October 1988 from a Mr Irving of the Bank to Mr and Mrs Fielding, which they each signed. The 1988 facility letter reads as follows (so far as material):
Dear Mr and Mrs Fielding,
I write further to recent discussions with Mr Fielding and have pleasure in confirming formally the Bank’s agreement to the following facility:-
This facility falls due for renewal annually in August and is subject to the Bank’s normal terms and conditions including the right of repayment on demand.
Interest on this account will be calculated at 2.5% per annum above the Bank’s base rate (presently 12%) subject to a minimum of 6.5% per annum and will fall due on the normal quarterly application dates being the end of March, June, September and December.
The Bank will continue to rely on the existing security to cover this facility.
The reference in the 1988 facility letter to "the existing security" can only be a reference to the Bank’s charge over 6 Hanover Terrace. Mrs Fielding accepted in evidence that, having signed the 1988 facility letter, she must have realised that the pre-existing overdraft limit on the joint account was £75,000, and that that limit must have been agreed between Mr Fielding and the Bank.
In February 1989 Mr Fielding wrote to the Bank warning it that the overdraft on the joint account might shortly rise to some £300,000 for a short period. This in fact happened, but in April 1989 Mr Fielding procured a payment into the joint account of a cheque for £150,000 drawn by the trustees of a family settlement in favour of Mrs Fielding. That reduced the overdraft to some £148,000.
In May 1989 the Bank agreed to lend £100,000 to Mr Fielding personally to finance a currency speculation. It appears from the bank statements that the £100,000 was initially debited to the joint account but that shortly thereafter the entry was reversed. The speculation appears to have been a successful one, and in July 1989 the Bank agreed to make Mr Fielding a further loan for the same purpose.
During the period from May to August 1989 the overdraft on the joint account rose from about £150,000 to about £500,000. The judge inferred that this must have occurred with the prior agreement of the Bank, which continued to hold Mr Fielding in high regard. The reason for the increase in the overdraft was that funds were required for the purchase of a flat in Cannes for £1M. The purchase was made in Mrs Fielding’s name.
By December 1989, despite promises by Mr Fielding, the position on the joint account had deteriorated to the point where the overdraft stood at around £628,900. Mr Fielding requested to the Bank to increase the overdraft limit to £700,000, on the basis that receipts were shortly expected from a family trust. The Bank, being by this stage locked in, had little alternative but to agree.
By March 1990 the overdraft on the joint account had risen to £900,000. In May 1990 the Bank agreed to increase the overdraft limit to £900,000, but no formal facility letter was issued. By this time, Mr Fielding was in breach of an agreement which he had earlier reached with the Bank for the repayment of the balance on the loan account by periodic payments of £80,000.
By October 1990 Mr Fielding had succeeded in reducing the outstanding balance on the loan account by £42,000, but only at the expense of increasing the overdraft on the joint account to £924,033. By the end of 1990 the overdraft on the joint account exceeded £900,000, but the outstanding balance on the loan account had been reduced to £295,000.
During the first six months of 1991 Mr Fielding procured payments to be made into the joint account totalling more than £700,000, but at the end of that period the overdraft stood at £1.2M.
In about September 1991, the Bank began dishonouring Mr Fielding’s cheques. Thereafter, the overdraft was kept more or less within its £900,000 limit.
By the end of 1992 the outstanding balance on the loan account had been reduced to £215,000 (the lowest figure it reached) but no progress had been made in reducing the overdraft on the joint account, which stood at £1.14M as against a limit agreed earlier in the year of £1.16M.
By the end of 1993 the Bank was indicating that cheques would not be met on the joint account until the overdraft had been reduced below the £960,000 limit which was by then being marked, and that the limit would reduce by £700,000 (to £260,000) by 31 January 1994 (Mr Fielding having promised that £700,000 would shortly be received from trust funds held in Geneva).
From the end of 1993 onwards the joint account remained more or less dormant, apart from the debiting of interest (both on the joint account and on the loan account).
In the event, the £700,000 which Mr Fielding had promised never materialised, and by the end of 1994 the overdraft on the joint account had risen to £1.3M. The judge found (in paragraph 60 of his judgment) that, whilst Mr Fielding had huge liabilities, both to the Bank and to other parties, in 1994 he genuinely believed that in a comparatively short time his various commercial ventures would generate sufficient funds to discharge his debts.
By that time the outstanding balance on the loan account had also increased to £510,000, partly as a result of a facility of £100,000 agreed by the Bank in June 1994 in response to a written request signed by both Mr and Mrs Fielding. The purpose of the facility was to finance some renovations to 6 Hanover Terrace. The remainder of the increase was accounted for by transfers of indebtedness from a company called Arrowhawk Ltd, with which Mr Fielding was associated. The judge found that the Bank had no mandate from Mrs Fielding to make those further advances on the loan account.
Notwithstanding that by the end of 1994 the Bank’s patience was finally exhausted, and it was threatening bankruptcy proceedings, Mr Fielding managed to keep the Bank at bay for a further two and a half years with promises that the indebtedness would be cleared by expected receipts from his commercial ventures.
By July 1997 the overdraft on the joint account stood at £3.14M (the increase being accounted for mainly by the debiting of interest on it and on the loan account). On 17 July 1997 a formal demand for a total sum of £4.2M was made on Mr Fielding alone. On 12 October 1998 a statutory demand was served on Mr Fielding in the sum of £9.3M.
By mid-1999, 6 Hanover Terrace had been placed on the market.
In March 2000 contracts were exchanged for the sale of 6 Hanover Terrace for £3M. Completion of the sale took place on 5 July 2000. In the meantime, Mr Fielding had reached an agreement with the Bank whereby £490,000 out of the net proceeds of sale would be retained by himself and Mrs Fielding, to be put towards their purchase of a substitute matrimonial home at 29 Cumberland Terrace NW1. It was further agreed between Mr Fielding and the Bank that the balance of the net proceeds of sale would be applied in discharge of the outstanding balance on the loan account (which stood at £510,000, a figure which included the additional facility granted by the Bank in 1994) and, subject to that, in reduction of the overdraft on the joint account.
The judge found (in paragraph 97 of his judgment) that Mrs Fielding "undoubtedly" gave actual authority to Mr Fielding to agree to the whole of the £510,000 balance on the loan account being extinguished out of the net proceeds of sale of 6 Hanover Terrace.
Lawrence Graham (of which Mr Fielding was by then a partner) acted in the sale of 6 Hanover Terrace for Mrs Fielding as the sole registered proprietor of the property. On completion, Lawrence Graham retained £490,000 out of the net proceeds of sale, as had been agreed between the Bank and Mr Fielding, and remitted the balance (amounting to almost £2.51M) to the Bank. The Bank applied that sum in extinguishing the entirety of the indebtedness on the loan account and (as to the balance) in reducing of the overdraft on the joint account to £3,028,555.
On 2 June 2001, Mr Fielding cleared his desk at Lawrence Graham and absconded. He left a letter addressed to the senior partner in which he confessed to stealing clients’ funds and stated his intention of being abroad "for some time". On the same day, he and Mrs Fielding left the United Kingdom. Mr Fielding was subsequently adjudicated bankrupt on the Bank’s petition.
Following their hasty departure from the United Kingdom, Mr and Mrs Fielding moved into a condominium flat on Williams Island, Miami, Florida which had been purchased in 2000 in the name of a British Virgin Islands company, the purchase being funded by the Jersey trust. At the time of the trial they were still living there together, and we have not been informed of any change in that situation.
THE JUDGE’S CONCLUSIONS
The effect of the mandate
The judge addressed this issue in paragraphs 78 to 87 of his judgment, as follows:
Abuse of confidence
In paragraphs 88 to 97 of his judgment the judge addressed, and rejected, Mrs Fielding’s contentions based on abuse of confidence. Since there is no appeal from this part of his judgment, I can pass straight away to the issue of breach of duty.
Breach of duty
The judge addressed this issue in paragraphs 98 to 106 of his judgment, as follows:
The judge went on to say (in paragraph 108) that in reaching his conclusion on the breach of duty issue he had not felt it necessary explicitly to consider (although he made it clear that he had not ignored) expert banking evidence which had been given on Mrs Fielding’s behalf by Mr Anthony Greenman ACIB, who had wide experience between 1980 and 1994 with Barclays Bank. The judge continued:
.... He made a number of trenchant and pertinent criticisms of the bank both in its conduct of the Joint Account and the Loan Account, in particular of its failure to comply with its own internal guidelines as to the issue of facility letters or to take other steps to ensure that Mrs Fielding was both aware of, and properly advised, in relation to the borrowing which took place. Justified though many of those criticisms undoubtedly may have been, they did not seem to me to assist in deciding on the correct legal analysis to apply to the solution of this case.
As noted earlier, the judge found (in paragraph 38 of his judgment) that the debits to the loan account in respect of the indebtedness of Arrowhawk Ltd were not authorised by Mrs Fielding. However, as I also noted earlier, the judge also found (in paragraph 97 of his judgment, under the heading ‘Abuse of confidence’) that Mrs Fielding conferred actual authority on Mr Fielding to agree with the Bank how the net proceeds of sale of 6 Hanover Terrace were to be applied. The judge continued:
I cannot, therefore, see how she can .... quarrel with the amounts debited to the loan account.
This echoes an earlier comment made by the judge (in paragraph 67 of his judgment) that since Mrs Fielding’s beneficial interest in 6 Hanover Terrace was itself the result of largesse in her favour from Mr Fielding, and since the balance on the loan account was less at the date of the sale of the property than it had been at the date of purchase, she was hardly in a position to quarrel with the manner in which the Bank, as chargee, applied the net proceeds of sale.
THE ARGUMENTS ON THIS APPEAL
Mr Richard Perkoff, appearing before us for Mrs Fielding, places considerable emphasis on the enormous scale of the borrowings effected on the joint account by Mr Fielding without Mrs Fielding’s knowledge or consent. The instant case, he submits, is an extreme case, and a far cry from the typical joint account opened by a married couple, of the kind to which the mandate is apt to apply. He submits that this is a factor to be borne in mind when construing the mandate.
He accepts that, as was conceded by counsel appearing for Mrs Fielding before the judge (Mr Kaye QC, leading Mr Alexander Pelling), the mandate authorised the Bank to honour cheques drawn by Mr Fielding alone which had the effect of taking the joint account from credit into overdraft (a process which the judge described in paragraph 81 of his judgment, quoted earlier, as "tacit sole borrowing"). However, he submits that on its true construction the mandate authorised no further borrowing save to the extent that an overdraft limit had been agreed by the Bank with both Mr and Mrs Fielding. I understood Mr Perkoff also to accept, albeit with some reluctance, that where such a limit had been agreed (for example, the limit of £200,000 set by the 1988 facility), the mandate authorised tacit sole borrowing in the form of the drawing of a cheque which, if honoured, had the effect of taking the overdrawn balance over that agreed limit. Subject to that, however, he submits that as a matter of construction the mandate did not authorise borrowings beyond any overdraft limit agreed with each of Mr and Mrs Fielding.
He submits that the judge’s analysis in paragraph 85 of his judgment (quoted earlier) is flawed, and that the final sentence of the paragraph begs the question as to the extent of the authority conferred by the mandate.
In the alternative, should his submissions as to the extent of the authority conferred by the mandate on its true construction not find favour with the court, he submits that Mrs Fielding’s agreement to the 1988 facility had the effect that thereafter (subject only to " sole facility borrowing") any further borrowing above that limit required Mrs Fielding’s consent. In effect, he submits, the 1988 facility operated as a ‘cap’ on the potential borrowings. Once that ‘cap’ had been reached, he submits, any further borrowings by one account-holder without the express authority of the other should be regarded as for the account of that account-holder only.
Mr Perkoff submits that, although the judge made no specific finding in this respect, in agreeing to the terms of the 1988 facility Mrs Fielding’s expectation must inevitably have been that the limit of £200,000 would not be exceeded without her knowledge and consent. On this basis, he submits that the Bank, in offering the 1988 facility, represented that it would not allow borrowing in excess of the limit without obtaining Mrs Fielding’s consent, and that it is accordingly estopped from claiming that Mrs Fielding is liable for Mr Fielding’s further borrowings. He points out that although no case of estoppel was pleaded, in their written closing submissions to the judge counsel for Mrs Fielding referred to an estoppel.
In the further alternative, he submits that there must in any event come a point at which borrowings by one account-holder reach such a level that they exceed what was reasonably in the contemplation of the account-holders when they signed the mandate. He submits that that is what occurred here.
Mr Perkoff makes it clear that Mrs Fielding does not seek to disclaim liability for borrowings by Mr Fielding alone which conferred some direct benefit on her (for example, the borrowing for the purposes of the acquisition of her flat in Cannes). In this connection, he referred us to the well-known case of Liggett v Barclays Bank  1 KB 48, in which the court applied the equitable rule that where an agent has, without authority, paid debts of his principal, the agent can nevertheless recover from the principal (see per Wright J at p.60).
As to breach of duty by the Bank, Mr Perkoff, whilst accepting the judge’s findings and conclusions in relation to an alleged abuse of confidence (as he must, since there is no appeal against that part of the judgment), submits that the fact that such enormous borrowings were being made on the joint account by Mr Fielding alone, coupled with the fact that (as the Bank knew) the greater part of the borrowings from about 1989 onwards were made for the purposes of Mr Fielding’s commercial ventures, sufficed to put the Bank on inquiry that the mandate was being abused by Mr Fielding, and to place it under a positive duty to confirm with Mrs Fielding that she consented to such borrowings. Had the Bank done that, Mrs Fielding would have had an opportunity to decide whether or not to consent to a particular borrowing; an opportunity which in the event was denied her.
Mr Perkoff also seeks to rely in this connection on the expert report of Mr Greenman, which the judge found to be of no assistance (see paragraph 108 of his judgment, quoted earlier). He rejects the suggestion that Mr Greenman’s report offers expert opinion as to matters of law, and is accordingly of no assistance to the court. He submits that it constitutes cogent evidence of banking practice, and as such is of considerable assistance in determining the extent of the Bank’s duties towards Mrs Fielding.
Citing Barclays Bank v Quincecare  4 All ER 363, Mr Perkoff submits that, as a matter of law, circumstances may arise in which a bank is not entitled to act blindly on its mandate; and that the extraordinary circumstances of the instant case fall into that category.
Mr Perkoff identifies the particular circumstances on which he relies as follows:
Frequent and large transactions on the joint account when it was overdrawn beyond the limit agreed with Mrs Fielding, and which were referable only to Mr Fielding.
The fact that after the grant of the 1988 facility the Bank agreed a number of increases in the overdraft limit on the joint account with Mr Fielding alone.
The fact that by the time the 1988 facility was granted the joint account had ceased to be operated as a normal domestic joint account.
The fact that every increase in the overdrawn balance on the joint account had the effect (if the Bank is right) of increasing Mrs Fielding’s liability, in circumstances where (as the Bank must have known) Mr and Mrs Fielding were not business partners.
At one stage in the course of his submissions, Mr Perkoff submitted that the ‘trigger’ for the duty of care, that is to say the point at which the Bank was ‘put on inquiry’, was the first borrowing by Mr Fielding above the £200,000 limit which was not apparently for Mrs Fielding’s benefit (it will be recalled that the first major borrowing taking the overdraft on the joint account above the £200,000 limit was in respect of the acquisition of Mrs Fielding’s flat in Cannes). He attempted, by reference to the bank statements, to identify the particular borrowing which put the Bank on inquiry.
As to the Bank’s Respondent’s Notice, in so far as it relates to the Bank’s claim, Mr Perkoff submits that if, on its true construction, the mandate did not authorise the borrowings in issue, then there is no basis for concluding that Mrs Fielding held Mr Fielding out as having ostensible authority to consent to such borrowings on her behalf. He further submits that there are no grounds for concluding that Mrs Fielding and the Bank were acting on the basis of a common assumption, such as could give rise to an estoppel by convention.
Turning to Mrs Fielding’s counterclaim, Mr Perkoff advances arguments both on the basis that (as he contends) Mrs Fielding was not liable for the entirety of the indebtedness on the joint account and on the alternative basis that she was so liable. On both bases, he seeks to contend that the actual authority which the judge found Mrs Fielding had conferred on Mr Fielding to reach an agreement with the Bank as to the application of the net proceeds of sale of 6 Hanover Terrace in discharge of the loan account was conferred under a mistake of fact on the part of Mrs Fielding, and that that mistake vitiated the agreement purportedly reached by Mr Fielding on her behalf. Notwithstanding that the issue of a mistake of fact on the part of Mrs Fielding was not explored before the judge (and hence he made no finding on it), Mr Perkoff submits that the issue was sufficiently raised in Mrs Fielding’s pleadings.
Mr Perkoff further submits that the Bank was put on inquiry as to whether Lawrence Graham had Mrs Fielding’s actual authority to pay to the Bank the balance of the net proceeds of sale of 6 Hanover Terrace, after retaining the agreed sum of £490,000; although he accepts that no issue was raised below as to Lawrence Graham’s authority. Relying on Etridge (No 2), he submits that the Bank ought to have realised that there was at least a substantial possibility that Mrs Fielding had not received appropriate advice from Lawrence Graham.
He also submits that there can be no question of any subsequent ratification by Mrs Fielding.
For the Bank, Mr Purle submits that the mandate means what it says. It is, he submits, authority from each account-holder to the Bank, and from each account-holder to the other, for the Bank to honour cheques drawn on the joint account by either one of them. He points out that the mandate expressly contemplates that the account may thereby become overdrawn. He relies on the account-holders’ express agreement to be liable for all sums due or to become due on the account.
He further submits that the judge was right to hold (in paragraph 85 of his judgment, quoted earlier) that there can be no material distinction between the twin concepts of "tacit sole borrowing" and "sole facility borrowing" (that is to say, borrowing by one account-holder in excess of an overdraft limit agreed by both account-holders, without reference to the other: see paragraph 81 of the judgment).
Mr Purle submits that where the joint account-holders are a husband and wife (as distinct from representatives of a company or a commercial partnership) use of the joint account is not impliedly limited to specific purposes. He submits that the ordinary basis of operation of such an account is inevitably one of trust and confidence between the account-holders.
The whole purpose of the vast majority of domestic joint accounts entered into by a husband and wife, he submits, is convenience, in that it allows either account-holder to pay debts arising in the course of their married life. He submits that it is to be expected that the contributions to the account will be unequal, just as some payments out of the account may be for the benefit of both account-holders whilst others may only benefit the account-holder who draws the cheque.
In support of his submissions on this aspect of the case, Mr Purle referred us to the judgment of Diplock J in Gage v King  1 QB 188.
Mr Purle submits, relying on Re Bishop  Ch 450, that unless there are facts which indicate that a joint account has been opened for a specific purpose or purposes (e.g. a trust account), each account-holder is entitled to draw generally on the account for his or her own purposes.
Mr Purle submits that there are good practical reasons why a bank should not be expected to inquire into the spending arrangements between parties to a subsisting marriage, and that there is no reason to strain the words of the mandate (which in any event, he submits, are clear) so as to require the Bank to do so. This is consistent, he submits, with the observations of the House of Lords in Etridge (No 2). He submits that the fact that one joint account-holder may not approve of particular transactions effected by the other account-holder is immaterial if the mandate authorises the Bank to honour the cheque in question.
He readily accepts that in the instant case the borrowings were on a very large scale indeed, but he submits that that fact cannot affect the meaning of the mandate.
He further submits that, in any event, Mrs Fielding cannot be in a position where she can retain the benefits which accrued to her from Mr Fielding’s borrowings and simply strip out of the account those borrowings of which, with hindsight, she does not approve. Yet that is what she seeks to do.
Mr Purle submits that, if Mrs Fielding’s contentions as to the construction of the mandate are upheld, the result would be that, subject only to "tacit sole borrowing", once the joint account was overdrawn the Bank would in practice have to open a separate account for cheques drawn by each account-holder. He points out that even if that were done, a question would still arise as to how subsequent credits to the account were to be dealt with.
In the alternative, should his contentions as to the true construction of the mandate not find favour with the court, Mr Purle resorts to the Bank’s Respondent’s Notice, contending that in any event by her conduct (in effect, as I understand it, by her silence despite receipt of periodic bank statements) Mrs Fielding held Mr Fielding out has having her authority to borrow on the joint account for his own purposes; alternatively that Mr and Mrs Fielding and the Bank acted throughout on the basis of a common assumption that Mr Fielding had her authority to do so, and that Mrs Fielding is estopped by convention from asserting the contrary.
As to Mrs Fielding’s contentions based upon the 1988 facility letter, Mr Purle points out that, whilst the 1988 facility committed the Bank to allowing borrowing up to £200,000 on the joint account, it did not prevent it from allowing or agreeing to further borrowing. Further, he points out that the 1988 facility was renewable annually, and that it was at a more favourable rate of interest than would otherwise have been attracted by borrowings within the stipulated limit.
Mr Purle submits that there is nothing in the terms of the 1988 facility which could have the effect of limiting the authority conferred by the mandate in relation to future borrowings. He further points out that it was not suggested to any of the Bank’s witnesses that any representation had been made to Mrs Fielding that the overdraft on the joint account would not be allowed to exceed £200,000 without further reference to her. In any event, he submits, it was not Mrs Fielding’s case below that she relied on any such representation: her case was that she left everything to Mr Fielding.
As to Mr Perkoff’s attempt to identify the ‘trigger’ transaction which put the Bank on inquiry, Mr Purle points out that Mrs Fielding’s pleaded case related to all borrowings on the joint account after the £200,000 limit granted by the 1988 facility had been exceeded. However, at trial she did not attempt to list the particular transactions to which she objected, and she in any event accepted that the acquisition of the flat in Cannes was for her benefit. As the judge observed in paragraph 106 of his judgment (quoted earlier), in her evidence Mrs Fielding was unable to commit herself as to what her attitude would have been to various identified borrowings.
Mr Purle points out that at no stage was it suggested by Mrs Fielding that borrowings by Mr Fielding above the limit of the 1988 facility were a fraud on her. Indeed, as the judge also observed in paragraph 106 of his judgment, her very comfortable lifestyle was in fact being financed by borrowings on the joint account.
As to the Bank’s duties towards Mrs Fielding, Mr Purle fully accepts that a bank owes a duty of care to its customer in carrying out the customer’s instructions, and, if asked to advise, in giving advice. Further, he accepts that circumstances may arise in which a bank may be put on inquiry as to whether authority conferred on it by its mandate has been, or may have been, revoked. But he does not accept that any wider duty of care exists, such as would have required the Bank in the instant case to communicate with Mrs Fielding to obtain her consent to further borrowings by Mr Fielding once the £200,000 limit had been exceeded. Were such a duty to exist, he submits, it would not be safe for a bank to act on authority expressly conferred by its mandate.
In any event, he submits, the judge was plainly right to find, on the facts of the instant case, that the Bank had no reason to think that Mrs Fielding was not fully aware of the use which Mr Fielding was making of the joint account; and that it was never ‘put on inquiry’ in any relevant sense.
Turning to Mrs Fielding’s counterclaim, Mr Purle submits that the judge’s finding that Mrs Fielding had conferred actual authority on Mr Fielding to agree with the Bank how the net proceeds of sale were to be applied is conclusive of the issue in the Bank’s favour. He submits that Mr Perkoff’s attempt to rely on mistake of fact is misconceived, in that there can be no room for the application of the doctrine of common mistake in the instant case, bearing in mind that Mrs Fielding knew that something was owing on the loan account although she did not know how much.
In any event, he submits (turning once again to the Bank’s Respondent’s Notice), Lawrence Graham plainly had ostensible authority to deal with the net proceeds of sale in the way that it did.
By the express terms of the mandate, Mr and Mrs Fielding requested and authorised the Bank to debit to any current account in their joint names cheques drawn by either of them, ‘and that whether any such Account shall be in credit or overdrawn or may become overdrawn’. The extent of the Bank’s authority could hardly be clearer. The mandate goes on to record the agreement of Mr and Mrs Fielding to be liable to the Bank, jointly and severally, ‘for all sums due and to become due on any such Account with interest and charges thereon’. Again, the extent of Mr and Mrs Fielding’s joint and several liability could hardly be clearer.
Accordingly, on the express terms of the mandate, the Bank is authorised to grant credit (i.e. to lend money) by honouring cheques drawn on the joint account by either Mr Fielding or Mrs Fielding notwithstanding that the account either is already or will thereby become overdrawn; and Mr and Mrs Fielding are jointly and severally liable to the Bank for the resulting overdrawn balance.
The question then arises whether some restriction or qualification is to be implied into the mandate (for there is no such express provision) which has the effect of limiting the Bank’s freedom to grant credit by honouring a cheque drawn by one account-holder without reference to the other.
The nature and effect of a joint account as between husband and wife was considered by Diplock J in Gage v King. The issue in that case was as to the recoverability, in personal injury proceedings, of the wife’s medical expenses which had been paid for by the husband out of the joint account. After referring to the findings which a court may be driven to make in relation to a joint account as between husband and wife where the marriage has ended by death or divorce, Diplock J continued:
But what is to happen to the balance in the joint account when the marriage breaks up is a very different question from that of the mutual rights of the parties in relation to the account while the marriage is still subsisting. As I have said, I do not think that such an arrangement between husband and wife is meant to be attended with legal consequences as between the two spouses while the marriage is still subsisting. Mrs Gage’s right to draw upon the joint account was subject to no legal limitation ....
Where the account-holder is a commercial enterprise, there is scope for contending that in so far as the mandate relating to that account authorises the bank to lend money on overdraft, there is an implied qualification that any such lending must be for the legitimate purposes of that enterprise. Similarly, a bank will be at risk in acting on the authority of its mandate where it has notice that a fraud is being committed. However, these considerations do not arise in the instant case and accordingly it is not necessary to consider them further. In the case of a joint account as between husband and wife there is no necessary limit on the purposes for which the joint account may be used: it is for the account-holders themselves to decide what, if any, limitation to impose. Absent some such self-imposed limitation, of which the bank is on notice, it is in my judgment no concern of the bank how a husband and wife choose to operate the joint account, provided that such operation is in accordance with the express terms of the mandate. Nor is it Mrs Fielding’s case that the borrowings which she seeks to challenge amounted to a fraud on her.
In any event, it seems to me wholly unrealistic to suggest that where a husband and wife open a joint account there is, without more, some implication that their use of the account is to be restricted in some way: for example, that it will be used for ‘domestic’ purposes only, or that it will be used more or less to the same extent by each of them, or that it will only be used for purposes which benefit both of them. Indeed, if there were scope for some such implication banks would in practice be placed in an extremely difficult, if not impossible, position, and joint accounts as between husband and wife would rapidly become a thing of the past.
So I have no doubt that, under the terms of the mandate (and looking no further for the moment), the Bank’s authority extended beyond "tacit sole borrowing" and "sole facility borrowing", to include all borrowings on the joint account by either Mr or Mrs Fielding, without limit. As Mr Purle succinctly put it, the mandate means what it says.
The 1988 facility
The next question is whether the grant of the 1988 facility had the effect of restricting the Bank’s authority under its mandate so that it no longer had the authority which (as I have held) it would otherwise have had to allow borrowings in excess of the £200,000 limit.
Like the judge, I find it quite impossible to conclude that the 1988 facility had that effect. As Mr Purle rightly points out, whilst the 1988 facility obliged the Bank to allow borrowings on the joint account up to the agreed limit of £200,000, it did not expressly oblige it to decline to allow any further borrowings by one account-holder without reference to the other. Nor, in my judgment, is there any basis for implying any such obligation into the 1988 facility. The 1988 facility was an agreement between the Bank and Mr and Mrs Fielding, subject to annual renewal, that the Bank would grant credit on the joint account up to the specified limit of £200,000 and on the specified terms, which included a term that interest would be charged on such borrowings at a lower rate than would otherwise have been charged. I can see no warrant for giving it any wider effect than that.
Breach of duty
The breach of duty claim is put forward in the alternative; that is to say, on the footing (which I have held to be correct) that borrowings by Mr Fielding in excess of the 1988 facility were authorised by the mandate. Hence the claim is that notwithstanding that the Bank acted in accordance with the mandate, nevertheless it is liable to Mrs Fielding for having failed to do something which, under the mandate, it was not required to do, viz. decline to allow Mr Fielding to make borrowings on the joint account in excess of the 1988 facility without referring to Mrs Fielding.
I can readily see that a bank might in certain circumstances be put on inquiry as to whether its mandate had been impliedly revoked, with the consequence that it could no longer safely act on the mandate without satisfying itself that the mandate still subsisted. However, I confess that I find it very much more difficult to envisage a situation in which, simply by operating an account in accordance with its (subsisting) mandate, a bank might be in breach of a common law duty of care owed to a party who signed the mandate. Nevertheless, like the judge (see paragraph 104 of his judgment), I am content in this case to proceed on the footing (but without deciding) that such a situation could possibly arise.
However, on the footing that the Bank was acting in accordance with the mandate in allowing borrowings by Mr Fielding alone in excess of the 1988 facility, the breach of duty claim can only succeed if it can be shown that some situation arose, or some event or events occurred, which required the Bank to cease to act in accordance with the mandate, or to continue so to act only with the express concurrence of Mrs Fielding. In other words, there must have come a time when Bank had some reason to suppose that the mandate was being abused by Mr Fielding.
The judge held (in paragraph 106 of his judgment) that in the circumstances of this case the Bank had no reason to suppose that the mandate was being abused. I agree with him. In my judgment, the following facts are sufficient to demonstrate the correctness of this conclusion:
From the opening of the joint account in 1979 until the end of 1993 (by which time the joint account was essentially dormant) bank statements relating to the joint account were sent regularly by the Bank to Mr and Mrs Fielding at their home address. (As noted earlier, the judge found that Mrs Fielding did not open them, let alone look at them.)
Mrs Fielding herself drew cheques on the joint account from time to time.
Properties purchased with the aid of borrowings from the joint account were placed in Mrs Fielding’s name.
Mrs Fielding was content to sign the 1988 facility, which referred to an existing overdraft limit on the joint account of £75,000.
Mrs Fielding never raised any queries with the Bank as to transactions on the joint account.
So far as the Bank was concerned, there was nothing to indicate that Mrs Fielding did not know about the borrowings made by Mr Fielding alone, in excess of the 1988 facility.
In my judgment, therefore, the breach of duty claim fails on the facts, and the judge was right so to conclude. I also agree with the judge that Mr Greenman’s expert evidence is of no assistance on the breach of duty issue, since it was directed expressly to the very question which the court has to decide, viz. the extent of the Bank’s duty at common law towards Mrs Fielding. Indeed, I would for my part regard Mr Greenman’s evidence as inadmissible for that reason.
In the circumstances, it is not necessary for me to address the further submissions made by Mr Purle in support of the Respondent’s Notice, based on Mrs Fielding’s conduct.
I accept Mr Purle’s submission that Mr Perkoff’s contentions based on common mistake, even assuming that it is open to Mrs Fielding on the pleadings to advance such a case, are misconceived. There is in my judgment no scope for the application of the doctrine of common mistake in relation to the agreement between Mr Fielding (acting, as the judge held, with Mrs Fielding’s actual authority) and the Bank as to the application of the net proceeds of sale of 6 Hanover Terrace. The fact that Mrs Fielding was ignorant of the current outstanding balance on the loan account – she believed it to be a lower sum – cannot possibly vitiate that agreement, in my judgment.
In any event, I accept Mr Purle’s further submission, in support of the Respondent’s Notice, that Lawrence Graham, as Mrs Fielding’s solicitors, had ostensible authority on her behalf to pay the balance of the net proceeds of sale to the Bank after retaining the agreed sum of £490,000, and that their action in doing so precludes any claim by Mrs Fielding to, in effect, reopen the transaction in respect of either the loan account or the joint account.
I would dismiss this appeal.
Mr Justice Charles
Lord Justice Potter
I also agree.
Mr Richard Perkoff (instructed by Messrs Magrath & Co) for the Appellant.
Mr Charles Purle QC and Mr David Eaton Turner (instructed by Messrs Cripps Harries Hall) for the Respondent.
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