Feminist Judgment of Rosemary Auchmuty - Essay Example

?ETRIDGE CASE CRITIQUE: ROSEMARY AUCHMUTY’S FEMINIST JUDGMENT, A BETTER ALTERNATIVE? Contracts1 are constituted upon the meeting of the minds betweenindividuals or entities where one party offers to give or render service and the other accepts are bound by their promises. The right of the parties, either natural or juridical persons, to enter into an agreement cannot be curtailed except when it is against the law, public policy, good custom or morals. This entails voluntary and conscious action between the parties who are at liberty to negotiate and stipulate the terms of the agreement. This equally connotes that the parties have acquiesced with the provisions of the agreement knowingly when they affixed their signatures thereto. It can be reasonably concluded that they have read and understood the terms of the agreement and bound themselves to perform their obligations. Hence, the agreement becomes the law between the parties and operates to define their obligations and liabilities. It is therefore essential for the parties to establish that they have the legal capacity and competence to enter into a contract and to ensure that their consent was given freely without any undue influence, violence, duress or threat against their persons and sans any allegations of fraud or misrepresentation. It cannot be denied however that in contract negotiations, one party may have an advantage over the other—would this constitute as a ground to nullify the agreement? A concrete example of negotiating at a dominant position would be banks when it offers loan packages to jump start a business, increase capitalization, purchase cars, family homes and other personal amenities—the banks are at liberty to impose the terms of the loans, to accept the security offered and to further require spousal surety or “surety wife”.2 For loan transactions procured by husbands, together with their wives secured by family homes, what then is the impact of vice of consent upon the wives—does the allegation of impropriety nullify the transaction? Would it be proper and equitable then to confer more rights upon the weaker or vulnerable party—“surety wife”—as opposed to the more dominant party—banks? These are the issues raised in the Etridge consolidated cases presented for critical analysis, it was alleged that the wives—the weak and vulnerable parties submit to the will of their husbands as undue influence is exerted upon them—were not fully cognizant of the nature of the transactions entered into by their spouses, given inadequate advice and if only the gravity of the situation were explained to them, they could not have acted as sureties much more offer their family homes as security to guaranty the loans procured by their spouses to finance their business undertakings. In the consolidated Eldridge decision, the House of Lords (HL) sustained the position of some of the wives exposed to undue influence however contrary dispositions were rendered against the Etridge couple and two other couples—Gill and Coleman. This gave rise to debates and spurred legal and feminists scholars, particularly the esteemed Rosemary Auchmuty, to pursue alternative judgments and it is the task of this paper to examine whether the feminist ruling advanced is fair, just and equitable. Indeed, women are portrayed as weak, vulnerable and incapable of independent thinking such that they would succumb to pressure from their husbands and would even sell or convey by way of surety their interest in the family home to please the husband if not maintain a blissful relationship. This infirmity has been raised by wives to stop banks from foreclosing the family home in case of default in the amortization. However, as society is overzealous in protecting the rights of women, particularly the wives, it is posited that it may have deleterious effect to the public weal and interest. It is argued that public interest pitted against individual rights far outweighs the rights of wives. To afford wives greater protection would be discriminatory and promotes unequal protection of the laws. The extraordinary protection accorded to wives would put a cloud of doubt on the worthiness or capacity of wives to enter into an agreement—it creates an impression that they would later hide behind the cloak of undue influence to renege on their obligation. It would similarly restrict opportunity for women or wives to obtain credit as banks or financial institutions would reject any loan application on account of gender bias and prejudice. This contention has merit but nonetheless it must fail—vitiated consent does not give rise to an enforceable contract hence it is within the jurisdiction of the courts to nullify an agreement found tainted with undue influence, fraud or misrepresentation. This writer is inclined to agree with Ms. Auchmuty and banks cannot escape liability by merely substantially complying with the guidelines—then under the O’Brien case or pursuant to the landmark case of Etridge.3 Stability in the lending industry is the sole responsibility of the banks and it must conduct due diligence in ensuring that the debtors and their sureties are adequately informed of the magnitude of their responsibility by procuring the loan and acting as securities. A more stringent policy should be employed when the charge involves a family home where the peril of losing the family home should they fail to pay is quite high. This would ensure that the surety is aware of the consequences being part of the decision process but it is a way for the bank to protect itself against undue influence defence later should the charge be called to answer for the indebtedness. It is beyond dispute that the procedural requirements imposed upon banks in its credit investigation would work to the advantage of the debtor and surety as well since the information to make an intelligent decision is easily accessible. Certainly, this does not address the fact that the surety wife is subjected to the undue influence in giving her consent but the thrust of the HL decision should not be viewed as capitalist protective. Rather it is a measure to ensure credit availability to anyone who needs capital and promote economic stability. To protect the general public from unscrupulous banking practices and procedures and in strict compliance with the guidelines enunciated in O’Brien and supplemented by the Etridge case, banks must be required to institute fair banking system especially when charges are made upon family homes by individuals procuring loans or acting as sureties regardless of gender. In this manner the debtors and sureties are afforded adequate protection. Banks and other financial institutions’ concern should not focus on its bottom line. The responsibility of banks and other financial institutions must not be limited to dispensing cash and perfunctorily examine the mortgage documents without exercising due diligence. It must ascertain that they are disposing of their rights over the family abode after a well-informed discussion on the outcome should they default. The argument that it would unduly burden the banks to go beyond the written report or undertaking of the solicitor should not be countenanced. Solicitors must provide informed and independent advice but the burden of ensuring that the sureties entered into the surety agreement knowingly is the primary duty of the banks. This is anchored not only on the fact that banks collect from debtors service charges for the procurement of the loan but more importantly, it is well within its expertise to establish the credit viability and worthiness of the individuals and their sureties. Banks would assert that this would unnecessarily burden their resources and it would require upon them more than what is mandated in the guidelines.4 This is not a departure of the guidelines but rather a duty imposed upon banks and financial institutions to comply with the guidelines with vigour and fidelity. To ensure that the loans are paid specially those charged against family homes, the banks must provide financial education upon the debtors and sureties regardless of gender to ascertain that they aware of the situation before the loans are released. The loans agreement must be accompanied by computations to apprise the debtors and their sureties of their indebtedness to guarantee their understanding on the terms and conditions—this calls for transparency in the transaction and erases any suspicion that any of the parties withheld information or subjected to undue influence. This is a sound banking and lending practice so as to avoid predatory credit. Information campaigns are imperative towards educating the concerned individuals of the ramifications of the transaction they are embarking on—empowering the vulnerable regardless of gender should be the policy. It is presumptuous to assert that the vulnerable or weak would decide to favour the husband’s position even when confronted with a serious financial debacle should the undertaking fail. Even on the assumption that the weak or vulnerable would still sign the agreement notwithstanding the financial trouble it would bring to their household, it was reached knowing all the repercussions of the agreement. And, even after a decision to procure the loans secured by the family home is reached, the banks’ responsibility should not end there. It must establish a customer service where all questions of the debtors and their sureties are given adequate attention. The employees of the banks may favour their employers but a personalized account staff would encourage debtors and sureties to verbalize their concerns. This would not replace professional advice given by a solicitor but it would initiate a more intelligent discussion between the solicitors and the debtors or sureties as the case may be. The sufficiency of the charge must not be a factor in the approval of the loan but it must examine the viability of the business where the loan proceeds would be invested. Banks must not only provide ready credit but it must provide facility to study the feasibility of the undertaking—the banks should be able to assess whether the business would flourish and the income generated from the undertaking would be sufficient to pay the loan and not call on the charge. Again, it is not only the banks’ responsibility to provide credit but it must assist the debtors and sureties in their business endeavours. It is accepted that banks are not insurers of success and ultimately, the decision whether to proceed with the undertaking lies with the debtor, it must present an alternative venture which is more sustainable. Banks must be conscious of its responsibility to promote the welfare of its clientele in general.5 Dispensing loans must not be its primordial concern but it must similarly provide adequate advice on how the resources of the debtors are preserved and constant communication with its clientele to monitor their financial standing after the loans are released and immediately recommend measures to avoid calling on the charges. With the mandatory implementation of the foregoing procedural requirements prior to the release of loan agreements, the allegation of undue influence, duress or misrepresentation would be minimized if not totally eliminated. Education and proper guidance would ensure that the weak or vulnerable would be able to withstand undue pressure if they are armed with adequate information to support and defend their position. Women or wives are not necessarily the hindrance towards economic progress but rather are the voice of reason when the reckless and negligent act of the men or husbands would threaten the sanctity of the family home. Thus, courts must come to the succour of women or wives to set aside the agreement when the husband’s undue influence or misrepresentation induced them to part with their prized possession—family abode. The HL dismissed these sentiments of wives against allegations of impropriety against the husbands as mere emotions is no longer controlling. The emerging trend recognizes that family homes do not simply comprise rooms where members of the family may stay. Rather homes offer physical amenities that sustain and support the residents, and they are often essential to the very survival of their occupants6. Homes are important for the development of central psychological meanings and necessary to develop individual identities, it is a place where families grow and bond themselves to the larger society through their homes, thus homes are repository of essential psychological and cultural processes.7 “Family home”8 is referred to as a dwelling in which a married couple ordinarily reside thus where it appears that the other spouse is engaging in such conduct as may lead to the loss of any interest in the family home or may render it unsuitable for habitation as a family home with the intention of depriving the applicant spouse or a dependent child of the family of his residence in the family home, the court may make such order as it considers proper, directed to the other spouse or to any other person, for the protection of the family home in the interest of the applicant spouse or such child9 and order the offending spouse or party to compensate the aggrieved spouse and their children to make up for the loss as may appear to the court to be just and equitable.10 Family homes are important to the wives and their children to develop their identities and nurture their well-being thus repossession of the family home should not proceed when undue influence, fraud and misrepresentation is alleged to protect the wife and minor children. It cannot be denied that wives may consider the accommodating the demands of the husbands but they would think twice if it would jeopardize the welfare of their children. It is in this context that husbands are reluctant to disclose the extent or nature of the transaction to secure the consent of their wives. It is therefore important to emphasize that all parties to the contract must act with good faith and should the husband act in bad faith and procure consent by exerting undue influence or by misrepresenting the amount of the loan11 and withholding information which endanger the welfare of his wife and children then he too must be held liable, including the banks or financial institutions which enabled the husbands to perpetuate an injustice. The weak and vulnerable would avoid being victims of undue influence or misrepresentation if they are vigilant and knowledgeable of their rights under the circumstances. They must be informed that before they affixed their signatures to any instrument, they must assess the agreement and demand copies thereof including all documents which form part of the agreement for their perusal. The banks must provide adequate information on how they will be able to protect their interests. It is incumbent upon the banks to inform them that they can procure the services of an independent solicitor to go over the contract and explain the terms of the loan agreement. It is imperative for the bank to stress that the choice of solicitor may be different from that of the husband to avoid any conflict of interest. If the wife had consulted with the solicitor but was merely told to sign the instrument,12 such act cannot be construed as competent advice and should it result in manifest disadvantage to the wife then the instrument may be set aside due to lack of competent counsel. The requirement of competent counsel is not merely a procedural right but it is a substantive right so that the wife—the weak or the vulnerable—would be able to understand the provisions of the agreement—if there is no attempt to explain the contents of the agreement then the overt act of signing the instrument will not divest the wife the right to assail the instrument at the opportune time. Estoppel will not lie since the consent is vitiated from the beginning. Another scenario which comes within the purview of equity which annuls the agreement is when the person who dispensed legal advice is not the solicitor but a mere staff13 then no competent counsel was procured which presumes vitiated consent. Again, estoppel will not lie since the consent was procured under false pretences. The failure to explain the consequences of signing an “all moneys”14 charge which is manifestly disadvantageous to the wife alone is sufficient justification to avoid the transaction as the couple were exposed to unnecessary risk when the charge to the existing properties is enough to guaranty the current loan.15 Equity cannot be invoked to set aside an agreement when the counsel dispensed by the solicitor is prejudicial to the wife. Bad counsel will not absolve the wife of her loan obligation thus the charge may be called in but she is not without any remedy. She may run after the solicitor for negligent or improper counsel.16 Conclusion The right balance between the capitalist interest and that of the weak and vulnerable may acquire a proper equilibrium when the procedural and substantive rights of the latter are observed. The banks should not condone procedural short cuts so that the integrity of the lending institution may be protected as it promotes the rights of the weak and vulnerable as well. The fear instilled by lending institutions of credit crash when the guidelines should be strictly implemented is obviously an empty threat as the lending industry thrives even when stringent requirements are imposed. Women or wives require no special treatment or accommodation but they must be treated with respect and given the opportunity to decide for themselves freely—whether the transaction is advantageous or not. Women or wives demand equal treatment on matters involving finances where the affairs of the family are at stake. This is a small price to pay in contrast with the costly litigation to nullify a transaction tainted with under influence, fraud or misrepresentation. In fine, the feminist disquisition of Ms. Auchmuty is fair, just and equitable which must be the standard in deciding cases involving vitiated consent. Women are capable of independent decisions provided that they are adequately informed of the nature and effect of the transaction. They do not impede progress but seek to put a stop to transactions which threaten the family and their homes. BIBLIOGRAPHY 1. Grundmann, Stefan and Mazeaud, Dens (eds), General Clauses and Standards in European Contract Law: Comparative Law, EC Law and Contract Law Codificaton. (Kluwer Law International 2006) 2. Cherednychenko, Olha O., Fundamental rights, contract law and the protection of the weaker party: a comparative analysis of the constitutionalisation of contract law, with emphasis on risky financial transactions. (Sellier. European Law Publishing 2007) 3. Laurin, Alain and Majnoni, Giovanni. Bank loan classification and provisioning practices in selected developed and emerging countries. (World Bank Publications 2003) 4. Gibbons, Damon. Held to account: a review of Corporate Social Responsibility in retail banking from the consumer perspective. (CFRC 2011) accessed 05 January 2012 5. Allcard v Skinner (1887) 36 Ch. D. 145 6. Annulment Funding Company Ltd v Cowey [2010] EWCA Civ 711 7. Attorney-General v R [2003] E.M.L.R. 24 8. Barclays Bank v O’Brien [1994] A.C. 180 9. Lloyds Bank Ltd v Bundy [1975] QB 326 10. National Westminster Bank v Morgan [1985] A.C. 686 11. National Commercial Bank of Jamaica v Hew [2003] UKPC 51 12. TSB v Camfield (1994) 13. Adam Opel Gmbh and Renault SA v Mitras Automotive (UK) Ltd [2008] Bus LR D55, [2007] EWHC 3205 (QB) accessed 05 January 2012 14. United Kingdom. Married Women’s Property Act 1870. c.93 (33 & 34 Vict.) 15. United Kingdom. Married Women’s Property Act 1882. 1882 c. 75 (Regnal. 45_and_46_Vict). accessed 05 January 2012. 16. Family Home Protection Act, 1976. Number 27 of 1976. accessed 05 January 2012. 17. Royal Bank of Scotland v. Etridge (AP) [2001] UKHL 44 (11th October, 2001) accessed 06 January 2012. 18. National Westminster Bank plc v. Gill 19. Barclays Bank plc v. Coleman 20. Mishkin, Frederic S., The economics of money, banking, and financial markets. (Pearson/Addison Wesley, 2007) 21. Altman, Irwin & Werner, Carol M. (eds.), Home Environments. (Springer 1985) 22. Frank J. Fabozzi, Bank loans: secondary market and portfolio management. (John Wiley and Sons 1998) 23. Goode, R. M., Consumer Credit. (Brill 1978) 24. Christian von Bar, et. al., The interaction of contract law and tort and property law in Europe: a comparative study. (Sellier. European Law Publ., 2004) 25. Moskin, M. Commercial contracts: strategies for drafting and negotiating. (Aspen Publishers Online, 2002) Read More