Land - Trusts & Coownership - Cases (2)
Possession/Sale
Mortgage Corporation v Shaire
- Shaire has ‘precedent value’ and in view of the more cautious view taken of the matter by Neuberger J it is submitted that cases decided under the repealed s30 LPA 1925, whilst still useful, should be treated with ‘caution’.
- Court made 4 main points: 1. Parliament must have intended a change in the law in specifically setting out in s15 of 1996 Act the matters that the court had to have regard to when exercising its jurisdiction to order a sale
- 2. s15(1) of 1996 Act made clear that the interests of the chargee were just one of four specified factors that the court was to consider in the exercise of its powers. There was nothing to suggest that those interests were to be given any more weight than the interests of children residing in the home (another of the four specified factors)
- 3. The concept of trust for sale and the law as it had been developed by the courts suggested that, in the absence of a good reason to the contrary, the court should order a sale, whereas there was nothing in the language of the 1996 Act to suggest that it upheld the old concept of the trust for sale
- 4. It was clear that Parliament now regarded it as appropriate to have a different approach for cases that involve a bankrupt co-owner as those involve an application for possession by a chargee
Bank of Ireland Home Mortgages v Bell
- Prefer interests of secured creditors
- Stress the need to safeguard the interests of lenders
- If there is no chance of the mortgagee receiving adequate recompense, sale is the only option, else the viability of mortgage lending, itself socially desirable, is called into question
Barca v Mears (2004)
- The High Court, in this judgment, albeit obiter, has questioned the appropriateness of the current restrictive interpretation of ‘exceptional circumstances’ when applying for sale and possession of a matrimonial home under Section 355A of Insolvency Act 1986. The Judge said that ‘to adopt an almost universal rule, which prefers the property rights of the bankrupt’s creditors to the rights of the third parties, members of this family, who owe the creditors nothing… the Court may be required in compliance with its duty under Section 3 of the Human Rights Act 1988 to adopt a broader construction of ‘exceptional circumstances’.’
Alliance and Leicester plc v Slayford (2000)
- CA held that it is not an abuse of process for a mortgage lender, who cannot get a possession order because the borrower’s wife has an equitable defence, to sue on the borrower’s personal covenants and bankrupt the borrower, even though this may result in the trustee in bankruptcy selling the property in which the wife has an equitable interest
- Court is obliged to order sale when trustee applies bankruptcy within 12 months for the same property
- Court is more willing to order sale for payment default case because the sale if not ordered now, might as well be ordered when trustee files bankruptcy
Edwards v Lloyds TSB
- Needs of children may lead to postponement of sale
- Lloyds TSB Bank (L TSB) was granted second mortgage by Mr Edwards to secure a guarantee for business lending. L TSB appear to have thought that the property was solely owned by Mr Edwards but it was, in fact, owned jointly with Mrs Edwards. The mortgage was purportedly signed by both. L TSB accepted that Mrs Edwards’ signature was a forgery.- An Order in subsequent matrimonial proceedings provided for the legal and beneficial interest in the property to be transferred to Mrs Edwards subject to the first mortgage; no mention being made of the L TSB mortgage. The transfer was never formally effected.- Mrs Edwards claimed that L TSB did not have any charge over the property. L TSB contended that it had an equitable charge over Mr Edwards’ beneficial interest and claimed an Order for Sale.- The Judge held that a mortgage that is forged was not necessarily a nullity. It was binding on the person who had forged it as far as it affected any property interest which that person owned. L TSB’s failure to make enquiries of the discrepancy on the mortgage did not disqualify it from obtaining an equitable charge over Mr Edwards’ beneficial interest.- The Order in the matrimonial proceedings did not affect the L TSB’s charge; Mrs Edwards took Mr Edwards’ interest subject to the charge on it.- The Judge granted an Order for Sale but its operation postponed for 5 years. The purpose of the trust was to provide a home for the children of the family and the Order was postponed so they could complete their education.- A factor in exercising its powers under Trusts of Land and Appointment of Trustees Act was that Mrs Edwards would not be able to find another property with funds available to her. A second factor was that there was sufficient equity in Mr Edwards’ share to cover the debt for some time.
Bank of Baroda v Dhillon (1997)
- Dhillon case establishes that the wording of s14 TLATA 1996 (and its predecessor s30 LPA 1925) is sufficiently wide in a bankruptcy situation to enable a court to order a sale of a house subject to a possession order in favour of a mortgagee, even though another party has a right to occupy the house which is a s70(1)(g) overriding interest ranking before that of the mortgagee
- Limit the application of Boland case: court’s discretion overrides Dhillon’s overriding interest (over the bank) and orders sale
- Dhillon case’s decision further reduces the ability of a person to rely on a s70(1)(g) overriding interest in order to stay in occupation of a property as against a third party lender
Pritchard Englefield v Steinberg (2004)
- Follows Dhillon case: Sales order under s14 TLATA despite occupant’s overriding life interest
- The claimants were asking for an order for sale under s 14 TLATA 1996. Under s 14, the courts cannot alter the order of priority; but they can order sale even against a person with a prior interest. The priority will be transferred to the proceeds of sale.
TLATA 1996- The act had been drafted with the aim of relaxing the old law so as to enable the court to have a greater discretion that could be exercised in favour of families and against banks and other chargees
Mortgage Corporation v Shaire
- Shaire has ‘precedent value’ and in view of the more cautious view taken of the matter by Neuberger J it is submitted that cases decided under the repealed s30 LPA 1925, whilst still useful, should be treated with ‘caution’.
- Court made 4 main points: 1. Parliament must have intended a change in the law in specifically setting out in s15 of 1996 Act the matters that the court had to have regard to when exercising its jurisdiction to order a sale
- 2. s15(1) of 1996 Act made clear that the interests of the chargee were just one of four specified factors that the court was to consider in the exercise of its powers. There was nothing to suggest that those interests were to be given any more weight than the interests of children residing in the home (another of the four specified factors)
- 3. The concept of trust for sale and the law as it had been developed by the courts suggested that, in the absence of a good reason to the contrary, the court should order a sale, whereas there was nothing in the language of the 1996 Act to suggest that it upheld the old concept of the trust for sale
- 4. It was clear that Parliament now regarded it as appropriate to have a different approach for cases that involve a bankrupt co-owner as those involve an application for possession by a chargee
Bank of Ireland Home Mortgages v Bell
- Prefer interests of secured creditors
- Stress the need to safeguard the interests of lenders
- If there is no chance of the mortgagee receiving adequate recompense, sale is the only option, else the viability of mortgage lending, itself socially desirable, is called into question
Barca v Mears (2004)
- The High Court, in this judgment, albeit obiter, has questioned the appropriateness of the current restrictive interpretation of ‘exceptional circumstances’ when applying for sale and possession of a matrimonial home under Section 355A of Insolvency Act 1986. The Judge said that ‘to adopt an almost universal rule, which prefers the property rights of the bankrupt’s creditors to the rights of the third parties, members of this family, who owe the creditors nothing… the Court may be required in compliance with its duty under Section 3 of the Human Rights Act 1988 to adopt a broader construction of ‘exceptional circumstances’.’
Alliance and Leicester plc v Slayford (2000)
- CA held that it is not an abuse of process for a mortgage lender, who cannot get a possession order because the borrower’s wife has an equitable defence, to sue on the borrower’s personal covenants and bankrupt the borrower, even though this may result in the trustee in bankruptcy selling the property in which the wife has an equitable interest
- Court is obliged to order sale when trustee applies bankruptcy within 12 months for the same property
- Court is more willing to order sale for payment default case because the sale if not ordered now, might as well be ordered when trustee files bankruptcy
Edwards v Lloyds TSB
- Needs of children may lead to postponement of sale
- Lloyds TSB Bank (L TSB) was granted second mortgage by Mr Edwards to secure a guarantee for business lending. L TSB appear to have thought that the property was solely owned by Mr Edwards but it was, in fact, owned jointly with Mrs Edwards. The mortgage was purportedly signed by both. L TSB accepted that Mrs Edwards’ signature was a forgery.- An Order in subsequent matrimonial proceedings provided for the legal and beneficial interest in the property to be transferred to Mrs Edwards subject to the first mortgage; no mention being made of the L TSB mortgage. The transfer was never formally effected.- Mrs Edwards claimed that L TSB did not have any charge over the property. L TSB contended that it had an equitable charge over Mr Edwards’ beneficial interest and claimed an Order for Sale.- The Judge held that a mortgage that is forged was not necessarily a nullity. It was binding on the person who had forged it as far as it affected any property interest which that person owned. L TSB’s failure to make enquiries of the discrepancy on the mortgage did not disqualify it from obtaining an equitable charge over Mr Edwards’ beneficial interest.- The Order in the matrimonial proceedings did not affect the L TSB’s charge; Mrs Edwards took Mr Edwards’ interest subject to the charge on it.- The Judge granted an Order for Sale but its operation postponed for 5 years. The purpose of the trust was to provide a home for the children of the family and the Order was postponed so they could complete their education.- A factor in exercising its powers under Trusts of Land and Appointment of Trustees Act was that Mrs Edwards would not be able to find another property with funds available to her. A second factor was that there was sufficient equity in Mr Edwards’ share to cover the debt for some time.
Bank of Baroda v Dhillon (1997)
- Dhillon case establishes that the wording of s14 TLATA 1996 (and its predecessor s30 LPA 1925) is sufficiently wide in a bankruptcy situation to enable a court to order a sale of a house subject to a possession order in favour of a mortgagee, even though another party has a right to occupy the house which is a s70(1)(g) overriding interest ranking before that of the mortgagee
- Limit the application of Boland case: court’s discretion overrides Dhillon’s overriding interest (over the bank) and orders sale
- Dhillon case’s decision further reduces the ability of a person to rely on a s70(1)(g) overriding interest in order to stay in occupation of a property as against a third party lender
Pritchard Englefield v Steinberg (2004)
- Follows Dhillon case: Sales order under s14 TLATA despite occupant’s overriding life interest
- The claimants were asking for an order for sale under s 14 TLATA 1996. Under s 14, the courts cannot alter the order of priority; but they can order sale even against a person with a prior interest. The priority will be transferred to the proceeds of sale.
TLATA 1996- The act had been drafted with the aim of relaxing the old law so as to enable the court to have a greater discretion that could be exercised in favour of families and against banks and other chargees
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