Cook v Mortgage Business Plc; Taylor v Southern Pacific Mortgages Ltd; Scott v Southern Pacific Mortgages Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Etherton,Lord Justice Rix,Master of the Rolls
Judgment Date24 Jan 2012
Neutral Citation[2012] EWCA Civ 17
Docket NumberCase No: A3/2010/3037, 2011, 0197,

[2012] EWCA Civ 17

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

HIS HONOUR JUDGE BEHRENS

9PA45383/9PA32528/9PA26882/9PA18115

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Master of the Rolls

Lord Justice Rix

and

Lord Justice Etherton

Case No: A3/2010/3037, 2011, 0197,

0198, 0199, 0200, 0201, 0202, 0203

Between:
Denise Cook
Appellant
and
The Mortgage Business Plc
Respondent
and
Mortgage Express
Interested Party
Leslie Tweddell
Appellants
Anne Tweddell
and
Southern Pacific Mortgages Limited
Respondent
and
Mortgage Express
Interested Party
Lee Taylor
Appellants
Alison Taylor
and
Southern Pacific Mortgages Limited
Respondent
and
Mortgage Express
Interested Party
Rosemary Scott
Appellant
and
Southern Pacific Mortgages Limited
Respondent
and
Mortgage Express
Interested Party

Mr Jonathan Small QC, Mr James Stark and Mr Daniel Robinson (instructed by Clark Willis Solicitors) for the Appellant

Mr Jonathan Seitler QC and Mr Daniel Gatty (instructed by Eversheds LLP) for the Respondents

Miss Nicole Sandells (instructed by Cobbetts LLP) for the Interested Party

Mr Jonathan Small QC, Mr James Stark and Mr Daniel Robinson (instructed by David Gray Solicitors) for the Appellants

Mr Jonathan Seitler QC and Mr Daniel Gatty (instructed by TLT LLP) for the Respondents

Miss Nicole Sandells (instructed by Cobbetts LLP) for the Interested Party

Mr Jonathan Small QC, Mr James Stark and Mr Daniel Robinson (instructed by David Gray Solicitors) for the Appellants

Mr Jonathan Seitler QC and Mr Daniel Gatty (instructed by TLT LLP) for the Respondent

Miss Nicole Sandells (instructed by Cobbetts LLP) for the Interested Party

Mr Jonathan Small QC, Mr James Stark and Mr Daniel Robinson (instructed by David Gray Solicitors) for the Appellant

Mr Jonathan Seitler QC and Mr Daniel Gatty (instructed by TLT LLP) for the Respondent

Miss Nicole Sandells (instructed by Cobbetts LLP) for the Interested Party

Hearing date : 19 th and 20 th December 2011

Lord Justice Etherton

Introduction

1

These appeals concern arrangements, described by the appellants as equity release schemes, by which the registered owners of registered land sell their homes to purchasers, who promise the vendors the right to remain in their homes after the sale. The financial terms of the transactions reflect such a promise, typically by the purchase price being less than the market value or the payment back to the purchaser of part of the purchase price. The attraction for the vendor is that the sale raises sufficient money to pay mortgage or other debt but the vendor can continue to occupy his or her home. If the purchaser raises all or part of the purchase price on mortgage, and then defaults, the issue arises whether the mortgagee's right to possession has priority over, or is subject to, any entitlement of the vendor to continue in occupation where the right asserted by the vendor is prohibited by the mortgage.

2

These appeals are brought by such vendors from orders for possession made on 19 November 2010 by His Honour Judge Behrens, sitting as a High Court Judge, in actions for possession instituted by mortgagees where such purchasers have defaulted in their mortgage payments. The Judge made the orders for possession following his determination of three preliminary issues in nine test cases. In short, he considered that the effect of the Land Registration Act 2002 ("the LRA") and case law, including in particular Abbey National Building Society v Cann [1991] 1 AC 56, meant that the mortgagees' right to enforce their security has priority over the rights of the vendors to remain in occupation of their homes and there was no legal defence to the mortgagees' claims for possession.

3

The provisions of the LRA and the Law of Property Act 1925 ("the LPA 1925") mentioned in this judgment are set out in the appendix.

4

It is right that I should say at the outset, as did the Judge, that it is impossible not to feel the greatest sympathy for the situation in which the appellant vendors find themselves. Having entered into a transaction, in complete good faith, which they reasonably thought would secure both their financial situation and the continuing occupation of their home, they potentially find themselves with no security in respect of either, and, indeed, in a worse situation than if they had never entered into the transaction. Mr Jonathan Small QC, in his able submissions on their behalf, unsurprisingly, but skilfully, concentrated part of his oral submissions on the policy issues raised by that unfortunate situation.

The facts

5

The appeals have been brought by only some of the unsuccessful defendants in the nine test cases determined by the Judge. The appeals in the other cases have been settled or stayed. The claimant mortgage lenders, who are the respondents in these appeals, are Mortgage Business plc and Southern Pacific Mortgage Ltd ("the respondent lenders"). In their respective proceedings they claim possession from the purchaser, as first defendant, and the occupying vendor, as the second defendant, of the relevant property.

6

Mortgage Express was the claimant in one of the test cases decided by the Judge. The occupying vendors in that case appealed, but subsequently withdrew their appeal. Mortgage Express has, nevertheless, participated in the remaining appeals as an interested party, by direction of the Master of the Rolls.

7

The Judge set out in appendix 1 to his judgment the various parties, their representation and the relevant property in each case. He set out in appendix 2 to his judgment a summary of relevant facts relating to each case. For the purpose of these appeals, it is sufficient to give the following broad and general summary which I have gratefully taken largely from the Judge's judgment.

8

In each case the purchaser and mortgagor was, or is assumed to have been, a nominee for an entity called North East Property Buyers ("NEPB"). It is unclear what NEPB is or comprises. In each case the purchaser and mortgagor, although joined as the first defendant, has taken no part in the proceedings. It is said that they have disappeared.

9

In most cases the price paid under the sale contract was, or was assessed as, the market value but the appellant vendors paid back to NEPB a significant part of the completion money. In every case the appellant vendors allege that promises were made to them by NEPB or their agents as to their right to occupy the properties after completion. The precise nature of the promises varies from case to case. In all cases the vendor appellants contend that they were offered a tenancy of their property, but the rent payable and the length of tenancy differs from case to case. In many cases the vendors were assured that they could stay in their property for as long as they liked provided they complied with the terms of their tenancy.

10

In each case the purchaser applied for a loan from one or other of the respondent lenders. The application form disclosed that the property was being purchased on a "buy to let" basis and that the tenancies granted would be assured shorthold tenancies ("ASTs") of six months' duration. The applications were successful and secured loans were made to the purchasers.

11

In each case exchange of contracts between the relevant appellant vendor and the purchaser, and the completion of the contract by the execution of the transfer, and the execution of the mortgage, all took place on the same day.

12

Subsequent to completion NEPB did purport to grant ASTs to the appellant vendors. The period for which the AST was granted varies from case to case from 2 years to 10 years.

13

Neither the rights of occupation promised by the purchasers to the appellant vendors nor the ASTs granted by the purchasers were permitted by the respondent lenders' mortgages.

14

The purchasers failed to pay the sums due under the mortgages. The arrears are substantial.

15

The appellant vendors assert that those acting for NEPB were fraudulent, but this remains uncertain.

16

As I have said, the present appeals are only some of the nine test cases decided by the Judge. There are apparently approximately another 90 cases where mortgagees have commenced possession proceedings against occupiers who have sold their homes to NEPB under a sale and leaseback scheme. In addition, there are a substantial number of other cases where mortgagees are awaiting the outcome of these proceedings.

The preliminary issues

17

The Judge ordered the determination of the following preliminary issues, which had been agreed by counsel at a case management conference:

"1. With reference to section 29 of the Land Registration Act 2002 are any of the interests alleged by the Defendants capable of being interests affecting the estates immediately before and/or at the time of the disposition, namely the transfer and/or charge of the property in question, sufficient to be an overriding interest under paragraph 1 and/or 2 of Schedule 3 of the 2002 Act? For the avoidance of doubt this encompasses (but is not limited to) arguments arising out of Abbey National v Cann 1991] AC 56, City of London Building Society v Flegg [1988] AC 54, the Law of Property (Miscellaneous Provisions) Act 1989 and section 63 of the Law of Property Act 1925.

2. Can any of the tenancy agreements alleged by the Defendants have obtained priority over the Claimants' charges under section 29(4) of the 2002 Act if (a) the Claimants did not have the benefit of a priority search at the relevant time or (b) if the Claimants did have the benefit of such a search?

3. Is it possible for the Claimants' priority to be adversely...

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4 cases
  • Southern Pacific Mortgages Ltd v Scott (Mortgage Business Plc intervening)
    • United Kingdom
    • Supreme Court
    • 22 October 2014
    ...[2014] UKSC 52 THE SUPREME COURT Michaelmas Term On appeal from [2012] EWCA Civ 17 Lady Hale Lord Wilson Lord Sumption Lord Reed Lord Collins Rosemary Scott (Appellant/Second Defendant) and Southern Pacific Mortgages Limited (Claimant/First Respondent) and Mortgage Express (Second Responde......
  • Skelwith (Leisure) Ltd and Others v Alan Armstrong and Others
    • United Kingdom
    • Chancery Division
    • 8 October 2015
    ...even if the registered title remains vested in the Second and Third Defendants." 52 In Mortgage Business plc v O'Shaughnessy [2012] EWCA Civ 17, [2012] 1 WLR 1521, however, the Court of Appeal considered it a "matter of basic land law" that "an equitable owner of land c......
  • Stoffel & Company v Ms Maria Grondona
    • United Kingdom
    • Supreme Court
    • 30 October 2020
    ...as proprietor of the registered legal title. (See section 24(b), Land Registration Act 2002; Mortgage Business plc v O'Shaughnessy [2012] 1 WLR 1521 per Etherton LJ at para 58.) The fact that the law recognises this equitable property right vested in the respondent gives rise to an importa......
  • Stoffel & Company v Ms Maria Grondona
    • United Kingdom
    • Court of Appeal (Civil Division)
    • 13 September 2018
    ...proprietor of the registered legal title: see Section 24(b) of the Land Registration Act 2002 and Mortgage Business plc v O'Shaughnessy [2012] 1 WLR 1521 per Etherton LJ (with whom Lord Neuberger of Abbotsbury MR and Rix LJ agreed) at [58]. Although this decision was the subject of an appea......
1 firm's commentaries
  • Essential Guide to Mortgages and Charges Over Land
    • United Kingdom
    • JD Supra United Kingdom
    • 29 May 2015
    ...of interests between lenders and occupiers under a sale and lease back scheme in Cook and others v The Mortgage Business plc and others [2012] EWCA Civ 17. It held that the occupiers had no equitable rights capable of being overriding interests under the LRA 2002 and the lenders’ rights und......

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