Bank charge consent of spouse void unless fully and freely given
The Governor and Company of the Bank of Ireland (plaintiff/ appellant) v Michael Joseph Smyth and, by Order, Una Smyth (defendants/ respondents.)
Charge - Family home - Consent of spouse - "Informed consent" - Requirements for valid - Duty of bank - Conveyancing Act 1882 (6 Vict c 39) section 3 - Family Home Protection Act 1976 (No 27) section 3.
The Supreme Court (before the Chief Justice, Mr Justice Hamilton; Mr Justice Egan and Mr Justice Blayney); judgment delivered is November 1995.
UNLESS the form of consent to a charge signed by a spouse pursuant to section 3 of the Family Home Protection Act 1976 is an informed consent fully and freely given, the said consent is void. The Supreme Court so held in dismissing the appeal.
Michael McDowell SC and Robert Hastings, BL for the plaintiff/ appellant, Patrick Keane SC and Michael MacGrath BL for the first named defendant/ respondent, H.A. Whelehan SC and Isobel Kennedy BL for the second named defendant/ respondent
MR JUSTICE BLAYNEY in outlining the facts, said that the first named respondent, Mr Smyth, was a farmer and owner of approximately 124 acres of land, on which the family home was situate.
On 25 May 1978, the Mr Smyth executed an indenture of charge in favour of the appellant bank to secure all monies then owing or which should thereafter become owing on a general balance of account or otherwise from Mr Smyth to the bank. The second named respondent, Mrs Smyth, signed a form of consent endorsed on the said charge whereby she consented for the purpose of section 3 of the Family Home Protection Act 1976 to the said charge.
In June 1988, the sum of £180,289.38 was due and owing to the bank by Mr Smyth. The bank issued a special summons seeking an order for possession of the lands. In the High Court, the bank's claim was dismissed. The bank then appealed.
Mr Justice Blayney went on to say that the sole issue with which the court was concerned was the single issue on which the learned trial judge decided in favour of Mr and Mrs Smyth. That was that while there was a document purporting to be a consent in writing, there in fact was no consent within the meaning of the 1976 Act.
Mr Justice Blayney said that there was no dispute over the circumstances in which Mrs Smyth came to give her consent. At the request of the bank manager, Mr and Mrs Smyth called to the bank, and in the course of an interview with the manager, Mrs Smyth signed the form of consent. It was not explained to her that she would lose her home if the payments were not made, nor was it suggested that she should get independent advice. It was accepted by counsel for the bank that Mrs Smyth believed that the charge did not affect the family home.
Mr Justice Blayney explained that the net issue in the case was whether the consent signed by Mrs Smyth was sufficient consent for the purposes of the 1976 Act having regard to the circumstances in which her consent was given and in particular having regard to her understanding of what she was doing.
Mr Justice Blayney said that the onus of proving that it was a sufficient consent was on the bank.
Mr Justice Blayney said that the question of what the requirements are which a consent has to comply with in order to be valid had not as yet been considered by any court. He went on to say that they have to be deduced from the object of the Act itself and from dicta of the Supreme Court explaining it, and also from authorities setting out what requirements have been laid down for consents which are required in other contexts.
Mr Justice Blayney referred to Dianne v Hamilton  IR 466 and said that the purpose of the provision in the 1976 Act was to enable a spouse to protect the family home for her own benefit and also for that of her children.
In Somers v W  IR 94, it was implied that the responsibility for obtaining the consent was that of the other spouse after the matter had first been discussed between them.
Mr Justice Blayney said that there are two areas in which the requirements for a valid consent have been considered by the court, that is, marriage and adoption. He referred to the cases of N (otherwise K) v K  ILRM 75, which dealt with consent to marriage, and G v An Bord Uchtala  IR 32, in the area of adoption.
He went on to say that the consequences of a consent given under section 3 of the 1976 Act were not as far reaching as the consequences of a consent to marry or to place a child for adoption, but one of the elements required for the validity of the consent in each of those cases, namely the requirement that the consent must be an "informed consent", applied in the case under section 3 also.
Mr Justice Blayney said that the consent under section 3 of the 1976 Act must be a fully informed consent, and the spouse giving it must know to what it is that he or she is consenting.
Mr Justice Blayney said that he was satisfied that Mrs Smyth did not know to what she was consenting. She believed that the charge would affect the land only and would not affect the family home. He went on to say that her consent, therefore, was not fully informed consent and on that ground was invalid.
It was submitted on behalf of the bank that as the bank manager could not have known what was in Mrs Smyth's mind, they were not affected by the fact that she did not know that the charge included the family home.
This submission was rejected for two reasons, firstly, that the validity of the consent depended solely on whether Mrs Smyth had full knowledge of what she was doing. Therefore, whether the bank was not aware of her lack of knowledge was immaterial. He also held that the bank would be treated as having constructive notice of her lack of knowledge, pursuant to section 3 of the Conveyancing Act 1882.
Mr Justice Blayney said that the bank manager should have inquired as to the state of knowledge of Mrs Smyth in regard to what was covered by the charge.
He went on to reject the argument advanced on behalf of Mrs Smyth at the bank had a duty to explain the charge fully to her, and to suggest that she should get independent advice. Mr Justice Blayney said that the bank did not owe any duty to Mrs Smyth to take these steps: they should have done so to protect the bank's own interests, to ensure that they got good title to the land which was the subject of the charge.
Mr Justice Blayney was satisfied that in the circumstances that the charge given by Mr Smyth to the bank was void by reason of his wife's consent having been invalid.
Mr Justice Blayney went on to deal with the submission on behalf of the bank that even if the consent were held to be invalid an order for possession should nonetheless be made of the land excluding the family home. He pointed out that this submission had not been made in the High Court, and Mr Justice Blayney indicated that the court in this case should not depart from the well established jurisprudence that a matter which had not been raised at first instance should not be allowed to be argued on the appeal.
Mr Justice Blayney referred to the cases of Dunne v Hamilton and Bank of Ireland v Slevin (High Court, Johnson J, 16 February 1989), but held that it was unnecessary to decide whether it would have been possible to sever the charge and declare it void in respect of the family home only.
Mr Justice Blayney therefore dismissed the appeal and confirmed the decision of the High Court.
THE CHIEF JUSTICE and MR JUSTICE EGAN agreed with the judgment of Mr Justice Blayney.
Solicitors: Patrick Monahan (Dublin) for the plaintiff/ appellant; J. J. Kennedy & Co. (Birr) for the first named defendant/ respondent; Richard Kennedy & Co. (Birr) for the second named defendant/ respondent.