City of London Building Society v Flegg
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DILLON,SIR GEORGE WALLER,LORD JUSTICE KERR |
| Judgment Date | 04 December 1985 |
| Judgment citation (vLex) | [1985] EWCA Civ J1204-1 |
| Docket Number | 85/0805 |
| Court | Court of Appeal (Civil Division) |
| Date | 04 December 1985 |
[1985] EWCA Civ J1204-1
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(HIS HONOUR JUDGE THOMAS)
Royal Courts of Justice
Lord Justice Kerr
Lord Justice Dillon
Sir George Waller
85/0805
MR. R. H. J. McCRACKEN (instructed by Messrs. John Morley & Co.) appeared for the Appellants.
MR. ROBERT WAKEFIELD (instructed by Messrs. Tucker Turner & Co.) appeared for the Respondents.
This is an expedited appeal by the first and second defendants, Mr. and Mrs. Flegg, against an order made on 31st July 1985 by His Honour Judge Thomas sitting as a judge of the High Court in the Chancery Division. By that order the judge made declarations that a legal charge dated 12th January 1982 in favour of the plaintiffs in the action, the City of London Building Society, on a property known as Bleak House, 256 Grange Road, Gillingham, Kent, which is registered land registered at H.M. Land Registry under Title No. K467866, was valid against the legal estate in that property and binding on Mr. and Mrs. Flegg and could be enforced by the plaintiffs against Mr. and Mrs. Flegg, and he made an order for possession of the property against, among others, Mr. and Mrs. Flegg.
The appeal raises a question of some importance. In Williams & Glyn's Bank Ltd. v. Boland (1981) A.C. 487 it was held by the House of Lords, affirming the decision of the Court of Appeal, that, where a house, being registered land, stands in the name of a single registered proprietor, but is occupied by someone else—in fact the proprietor's wife—who contributed part of the purchase money and so has a beneficial interest, the interest of the person in occupation is an overriding interest for the purposes of the Land Registration Act 1925 and so binds a mortgagee who took a mortgage of the house from the registered proprietor without making any enquiries of the person in occupation. The main question in the present case is whether the reasoning in Boland applies with the same result where there are two registered proprietors who both grant the mortgage, but there are further persons in occupation of the house who contributed to the purchase money and of whom no enquiries were made by the mortgagee.
There is a subsidiary question on the facts of this case raised by a respondent's notice, in that it is submitted for the plaintiffs that Mr. and Mrs. Flegg impliedly authorised the raising of any amount of money on the security of a first mortgage of the property in favour of anyone, even though, as the judge found, Mr. and Mrs. Flegg were unaware that the plaintiff's mortgage had been entered into and would not have agreed to it if they had known about it.
Mr. and Mrs. Flegg are the parents of Mrs. Maxwell-Brown, the fifth defendant. In 1977, when the property in question, Bleak House, was bought, the Fleggs had been living for some 28 years in a bungalow which they owned at Rainham in Kent. In the summer of 1977, however, Mr. and Mrs. Maxwell-Brown, the fourth and fifth defendants, suggested that it would be a good idea if the Fleggs sold their bungalow and a larger house was bought which the Fleggs and the Maxwell-Brawns could share. The Fleggs agreed to this and the property, Bleak House, was bought. The purchase was completed by a conveyance dated 18th October 1977 whereby the property was conveyed to Mr. and Mrs. Maxwell-Brown and they were duly registered as the proprietors of it at H.M. Land Registry. The conveyance contained an express trust for sale of the property and a declaration that the trustees were to have all the powers of mortgaging the property of an absolute owner; it treated the Maxwell-Browns as beneficial joint tenants of the property and made no mention of the Fleggs. The Fleggs went into occupation of the property on or about 27th October 1977 and have lived there ever since. The Maxwell-Browns also lived there for some years after the purchase but do not live there now.
The price of the property was £34,000. There was a deposit of £3,400 which was provided by the Fleggs from savings. The balance of the price was provided on completion by a bridging loan from Lloyd's Bank. But £14,600 of the balance was recouped to the Bank very shortly afterwards and, as previously arranged, on completion of the sale of the Fleggs' bungalow. It is thus not in doubt that the Fleggs provided £18,000 of the purchase price of the property. They may also have provided a further £4,000; the judge did not find it necessary to make any finding one way or the other. Insofar as it was not provided by the Fleggs the price of the property was provided by the Maxwell-Browns by a mortgage on the property for £20,000 which they raised a few weeks after completion from the Hastings & Thanet Building Society and which cleared the balance of the bridging loan from Lloyd's Bank. This mortgage to the Hastings & Thanet was riased with the approval of Mr. and Mrs. Flegg, and it is conceded that the interest of the Hastings & Thanet would have had priority to any interest in the property of Mr. and Mrs. Flegg. But the mortgage to the Hastings & Thanet (which had by then become the Anglia Building Society) was repaid and finally discharged when the plaintiffs took their mortgage in January 1982. The plaintiffs accept, in view of the decision in Orakpo v. Manson Investments Ltd. (1978) A.C. 95, that they cannot claim to be subrogated to the Hastings & Thanet.
In September 1979 the Maxwell-Browns mortgaged the property by way of second charge to the Midland Bank and in 1981 they mortgaged it by way of third charge to their solicitor. There is no reason to doubt Mrs. Flegg's evidence that the Fleggs had no knowledge at all of these charges and would not have agreed to them. Getting further into financial difficulties, the Maxwell-Browns defaulted under the first mortgage to the Hastings & Thanet, and the Hastings & Thanet obtained an order for possession against them; the Fleggs were not parties to these proceedings and were not aware of them.
Then, by the legal charge of 12th January 1982, on which the plaintiffs rely in this action, the Maxwell-Browns charged the property by way of legal mortgage to the plaintiffs to secure an advance of £37,500 which was used to repay all the prior mortgages to the Hastings & Thanet, the Midland Bank and the Maxwell-Browns' solicitor. Before entering into this legal charge and making their advance, the plaintiffs made no enquiry of the Fleggs, although the Fleggs were in occupation of the property. The finding of the learned judge, clearly warranted by the evidence of Mrs. Flegg, was, as I have already mentioned, that the Fleggs were unaware that the plaintiffs' mortgage had been entered into and would not have agreed to it if they had known about it. The Maxwell-Browns speedily defaulted under the plaintiffs' mortgage; they were made bankrupt in 1982 and have not sought to defend this action.
As to the point raised by the respondents' notice that Mr. and Mrs. Flegg impliedly authorised the raising of any amount of money on the security of a first mortgage of the property in favour of anyone, and so impliedly authorised the mortgage to the plaintiffs, in my judgment the facts do not bear this out. Counsel for the plaintiffs points to a letter from the Fleggs' solicitor to Mr. Flegg in which the solicitor advised that the property ought to be in the names of all four, both Fleggs and Maxwell-Browns, and counsel refers also to the evidence of Mrs. Flegg that the Fleggs did not follow the advice of the solicitor because the Maxwell-Browns said it would be less trouble to the Fleggs if the property were in the names of the Maxwell-Browns alone. That evidence shows that the Fleggs did not want to be personally liable under the mortgage to the Hastings & Thanet which the Maxwell-Browns were going to raise as their contribution to the price. It does not show that the Fleggs were authorising the Maxwell-Browns to charge the property to whatever extent the Maxwell-Browns thought fit; if I lend the key of my house to a man whom I trust, I do not authorise him to steal the contents. Beyond that, however, Mrs. Flegg's evidence was clear that she knew that there was to be a mortgage from a building society but only for the balance of the price which she thought was £15,000, and it was to be from the Hastings & Thanet and no other building society was discussed. It is impossible to imply any wider or general authority from that evidence.
I turn, therefore, to consider the main issue on this appeal. It is common ground that, because of their contribution to the purchase price, the Fleggs have had, since the purchase in 1977, an interest in the property; the nature of that interest, as explained by Denning L.J. in Bull v. Bull (1955) 1 Q.B. 234, is that they were entitled in equity to an undivided share in the property, as equitable tenants in common with the Maxwell-Browns, and they were entitled, concurrently with the Maxwell-Browns, to the possession and use and enjoyment of the property. As a matter of fact, they were at all material times in actual occupation of the property, according to the natural meaning of those words, in their own right.
Accordingly, it is conceded by the plaintiffs, in the light of Boland's case, that, had there been only a single registered proprietor of the property at the date of the plaintiffs' mortgage, the Fleggs' interest in the property would have been binding on the plaintiffs as an overriding interest within the meaning of the Land...
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