Mortgages Flashcards
Royal Bank of Scotland plc v Etridge (No 2)
Where the mortgagee has been “put on enquiry” i.e. where he knows that (1) the provision of security is for another’s debts and (2) the relationship between the mortgagor/surety and the debtor is non-commercial
How to put bank on notice?
(1) the provision of security is for another’s debts e.g. Wife is providing security for husbands debts
and
(2) the relationship between the mortgagor/surety and the debtor is non-commercial.
CIBC Mortgages Plc v Pitt.
Lender not on enquiry/notice because H stated mortgage was for purchase of holiday home.
W agree to a second mortgage to enable H to borrow money to purchase shares. The actual mortgage documents, which W did not read, stated that the purpose of the loan was for H and W to purchase a second property, a holiday home. On the fact of the documentation, the loan was for the benefit of both the husband and wife, nothing to suggest to lender that it was otherwise. Therefore, lender was not put on enquiry.
Etridge (HL)
went on to set out in more detail what they considered the relevant parties should do:
1) Mortgagee should communicate directly with the wife. Explain why she needs to see a solicitor and what the solicitor will do.
2) Mortgagee should then send to the wife’s solicitor information about the husbands financial affairs, because without the information, solicitor cannot advise the wife properly. Mortgagee cannot send that information without the husbands consent. If the husband refuses consent, mortgagee can then refuse to lend the money.
3) Solicitor should see wife face to fact in the absence of the husband, explain why he has become influence (i.e. so mortgagee can counter later arguemnet of undue infleucne). To explain
a. the nature of the transaction, practical consequences,
b. seriousness of any risk and
c. point out that the wife has a choice as to whether or not to go ahead.
d. whether wife wishes to go ahead.
4) If she chooses to go ahead, the solicitor will write to the bank to confirm that the meeting had been had and what was discussed. The aim is to ensure that the wife knows what she is doing, and freely agrees to it.
The most unformate point made by HL in Etridge is tht the solicotr who adivces the wife can be the husbands solicotr, primarily because of the cost. But the solicitor should still be advising the wife fully and conscientiously.
TSB Bank plc v Camfield
Mortgage can be set aside. It will not be partially set aside
Dunbar Bank Plc v Nadeem
The mortgagor may be required to make restitution of any benefit received
TSB Bank plc v Camfield.
Where mortgage is granted by wife alone, the mortgage will be completely ineffective, not partially ineffective :
TSB Bank plc v Camfield
H and W were joint legal owners. They took out a mortgage loan for the purposes of H’s business. There was an innocent misrepresentation by H to W that the maximum liability was £15,000. W did not receive independent advice, therefore because of misrep not bound. TSB argued that W should be bound to the extent of £15,000 because she agreed to this amount, just not agreed to a larger amount. CA held that the mortgage was totally ineffective, it was an invalid mortgage.
Dunbar Bank Plc v Nadeem.
Mortgagor may have received some benefit from the loan, there is dicta to the effect that before the mortgage can be set aside, the mortgagor should return (restitution) any benefit received
Dunbar Bank Plc v Nadeem
Mortgage loan taken out partly to pay off H’s debts and partly to buy a longer lease of H and W’s home in replacement of the existing lease under which H and W were to be joint tenants. On the facts there was found to be no undue influence. Therefore, mortgage was binding in its entirely, but comments on if there had been undue infleucne so mortgage could have been set aside. CA expressed view (obiter) that wife had benefitted by acquiring half of a new lease, benefit was half of the new lease which was required. If was sugguested that if she wanted to set aside the mortgage loan, she would have had to make restitution of that half the value of the lease.
First National Bank plc v Achampong
relied on s63(1) LPA. The legal mortgage in this case was ineffective against wife for undue influence, but it was nevertheless held that it created an equitable charge of the husbands equitable interest under s63(1) LPA and at the same time severed the beneficial joint tenancy. Consequence was that the mortgagee without equitable charge over the beneficial interest, could apply to the court under s14 TOLATA for the sale of the property and succeed.
Samuel v Jarrah Timber
option to purchase fee simple. Mortgage deed granted the mortgagee an option to purchase the fee simple. Held: void because if the mortgagee exercised it, the mortgagor would not get his property back on repayment of the loan.
Fairclough v Swan Brewery
right to redeem rendered illusory. Term which rendered right to redeem illusory was void.
Fairclough v Swan Brewery
The mortgagor held a hotel under a lease of which 17 1/2 years were unexpired. He mortgaged this lease. The mortgage purported to postpone redemption until 6 weeks before the expiration of the lease. This was held to be not possible because there was effectively no right to redeem.
Bristol and West Building Society v Henning
Mans sole name, partner knew that he was raising part of purchase price by means of a loan, and she knew this, property could not be brought without mortgage loan.
Abbey National Building Society v Cann
Issue of imputed consent has been approved and extended. CA spoke of the imputed notice and HL agreed but it is the CA whose decision we are interested about with regards to imputed notice.
Abbey National Building Society v Cann
The case concerned a claim by a mother to an equitable interest in her son’s house having priority over the interest of a mortgagee. There was some doubt as to whether the mother actually knew that the son was raising money on mortgage, but there was no doubt that she knew there was a shortfall in available funds and that her son did not have available the full purchase price. This knowledge of a shortfall was held to be sufficient to give rise to imputed consent. View of CA was that because she knew of the shortfall, it could be inferred that she knew her son would have to take out a mortgage loan. He would have to borrow the money, almost certainly a secured loan and he had no other property upon which he could secure the loan. The shortfall which the mother knew was £4,000, the son actually borrowed £25,000, the lender took priority for the ful £25,000. But if we are speaking of imputed consent, we can say that mother consented to mortgagee taking priority of the £4,000 shortfall but cannot say that she would have said that lender can take priority for the full £25,000 – this is very controversial.
This follows previous decisions
House of Lords in Abbey National Building Society v Cann: HL took a different approach in determining priority making the notion of imputed consent of no relevance anymore. Mothers argument depended on her being able to show that her equitable interest in the property was created before the mortgage was granted. Therefore, had priority because it was the first in time as long as she could show that it was protected under schedule 3 para 2 under LRA because of actual occupation. Therefore, the argument was that by contributing to the purchase, the mother would acquire an equitable interest carved out of her sons interest, then when the son purchases the property, he acquired the full legal and equitable ownership of that property and a moment later, he granted the mortgage. The argument was that the moments gap allows the mothers interest to attach to the sons ownership. Therefore, the mothers interest arises momentarily before the mortgagees. Therefore, since it has priority due to time, as long as she was in actual occupation the moment the mortgage was granted, she would have priority. HL rejected this argument.
HL SAID: where the purchase is dependent on the mortgage loan the purchase and the mortgage are indissolubly bound together such the purchaser never acquires anything but the equity of redemption and any contributor can only acquire an interest in that.So where son could not have brought the property without the loan, he does not acquire full ownership where there is a mortgage, all he acquires is the property subject to a mortgage, an equity of redemption. Therefore, since mothers interest is caved out of sons interest, all she can acquire is an interest in equity of redemption of property with a mortgage. Therefore, the mortgagee takes priority. It was crucial that mortgage loan was necessary in the purchase of the property. Rare when loan taken out where it was not necessary, but can imagine a situation where purchaser has other property but chooses not to sell property, therefore, can distinguish Cann on this ground, but unlikely this will happen anyway because then HL would need to sort out the issue of priority again.
When purchaser acquisition mortgage, the mortgagee almost certainly takes priority every time. This means that mortgagee can be lazy because it would not require much to say that mortgagee should make a few injuries to see if someone is contributing to purchase price/if someone is in actual occupation. But they do not have too.
Wishart v Credit & Mercantile
Where an equitable owner has given authority to another to deal with the property on his behalf and has failed to bring any limitation on that authority to the attention of a mortgagee, he may be unable at assert his right against the mortgagee:
Wishart v Credit & Mercantile Plc
the beneficial owner of property (contributor) had no knowledge of the loan taken out by the legal owner but was still unable to enforce his interest against the mortgagee and this was because equitable owner had given authority to legal owner to deal with property on his behalf. He had actually given the legal owner the means of holding himself out to the lender as being able to grant the mortgage over the property. Equitable owner had failed to bring any limitation of this to mortgagee.
Wishart v Credit & Mercantile Plc
W and S (a fraudster) were friends. S was authorised to buy property on behalf of W – the legal title was in the name of a company controlled by S but the full beneficial interest was in W. One month later S caused the property to be mortgaged. W was in actual occupation at the time but held that he could not assert his interest as against the mortgagee. The CA followed the CA in Abbey National v Cann and said W had given authority to S’s company to deal with the property.
Equity and Law Home Loans Ltd v Prestidge
A remortgage takes the priority of the original mortgage to the extent of the original mortgage provided it is on no less favourable terms
Equity and Law Home Loans Ltd v Prestidge
The case involved the purchase of property in the sole name of the man with the aid of a £30,000 mortgage to which the woman had consented therefore mortgagee had priority on basis of consent. This was replaced with a later mortgage for £43,000. Court was prepared to impute the woman’s consent to the remortgage because she had consented to the first mortgage. Knowledge of remortgage is irrelevant as long as contributors position is not worsened.
