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Mortgage could not be enforced against wife whose husband hid affair

30 March 2010

A mortgage company could not enforce a charge against a wife because her husband was concealing an affair, the Court of Appeal has unanimously ruled.

Giving the leading judgment in Hewett v First Plus Financial Group [2010] EWCA Civ 312, Lord Justice Briggs said that the affair “cried out for disclosure”.

He said that First Plus had constructive notice of Mr Hewett’s undue influence or misrepresentation.

Briggs LJ said the couple bought a bungalow in Gorleston, Norfolk, as a home for their family, including two young children and Mrs Hewett’s mother, in 1999. It was remortgaged to First Plus in 2004.

“The circumstances in which the mortgage to First Plus came to be executed were as follows,” Briggs LJ said.

“Mr Hewett’s credit card debts had increased to a level which made it impossible for him, even with his wife’s and mother in law’s assistance, to pay the high level of interest due on those debts, while also discharging the mortgage instalments due on the property and the other family outgoings.”

Briggs LJ said the proposed mortgage of the property to First Plus also required Mr Hewett to obtain his mother-in-law’s written consent to the mortgage since she was an occupier of the property.

“Rather than risk his mother-in-law causing difficulties, Mr Hewett chose to forge her signature on the consent form, a crime for which he was later convicted.”

Mrs Hewett found out about her husband’s affair in May 2004. He left the property the following year and the Hewetts were divorced in 2006.

In the meantime, Briggs said Mr Hewett lost his job and was declared bankrupt, owing credit card debts of £40,000. Mrs Hewett acquired her former husband’s beneficial interest in the property from his trustee in bankruptcy for £1, but found it impossible to pay the mortgage instalments and possession proceedings began in October 2008.

Briggs LJ said Mr Hewett was responsible for three fraudulent misrepresentations.

“The first was that the remortgage to First Plus was ‘the only way’ to preserve the property as the family’s home.

“The second was a promise, known by him to be false, that Mr Hewett would pay the instalments due to First Plus thereafter.

“The third was his deliberate concealment of his affair, a highly material fact which his wife needed to know, if she were to make an informed decision whether or not to accede to his request.”

Lord Justice Briggs said that Mr Hewett’s concealment of his affair from his wife amounted to the exercise of undue influence against her, sufficient to vitiate the remortgage.

“It is evident that Mrs Hewett’s decision to accede to her husband’s request was based upon an assumption on her part that he was as committed as she was to the marriage, to the family and to the preservation of their home life in the future.”

Briggs LJ said Mr Hewett’s execution of the mortgage to First Plus operated as an equitable charge of his beneficial interest in the property and Mrs Hewett acquired the interest subject to that charge.

He allowed her appeal and set aside the mortgage upon which First Plus made its claim, but remitted the question of the equitable charge to the judge at first instance. Lord Justices Leveson and Jacob agreed.

John Cushing, litigation executive at Hatch Brenner in Norwich, acted for Jayne Hewett. He said that Mrs Hewett was discussing the situation with First Plus in the light of the judgment.

He said First Plus would need to make a separate application should it wish to enforce the equitable charge.

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