Lloyds Bank Plc v Rosset and Others

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Bridge of Harwich, Lord Griffiths, Lord Ackner, Lord Oliver of Aylmerton, Lord JAuncey of Tullichettle
Judgment Date08 May 1990

[1990] UKHL J0508-1

House of Lords

Lord Bridge of Harwich

Lord Griffiths

Lord Ackner

Lord Oliver of Aylmerton

Lord Jauncey of Tullichettle

Lloyds Bank Plc
(Appellants)
and
Rosset and Another
(Respondents)
Lord Bridge of Harwich

My Lords,

1

The subject matter of this dispute is Vincent Farmhouse, Manston Road, Thanet ("the property"). The property is registered land which the first respondent, Mr. Rosset, contracted to purchase on 23 November 1982 and which was conveyed to him on 17 December 1982. On the same date Mr. Rosset executed a legal charge on the property in favour of the appellant, Lloyds Bank Plc. ("the bank") to secure an overdraft on his current account with the bank. The bank's charge was registered on 7 February 1983. The bank initially agreed to allow Mr. Rosset to borrow up to £15,000, but later raised this limit to £18,000. The limit was in due course exceeded, the bank's demand for repayment was not met and the bank instituted proceedings in the Thanet County Court for possession of the property in July 1984 against both respondents. Mr. and Mrs. Rosset, who had initially occupied the property as their matrimonial home, had by this time parted. Mr. Rosset, who was no longer residing in the property, did not resist the bank's claim. Mrs. Rosset, however, alleged by way of defence to the bank's claim and by way of counterclaim against her husband that she had been entitled, since the date when her husband contracted to purchase the property, to a beneficial interest in the property under a constructive trust which qualified as an overriding interest under section 70(1)( g) of the Land Registration Act 1925 because she was in actual occupation of the property both on 17 December 1982 and 7 February 1983, whichever was the relevant date to be considered in determining the existence of the overriding interest to which she alleged the bank's charge was subject.

2

At the trial Judge Scarlett found that Mrs. Rosset was entitled as against her husband to a beneficial interest in the property in an amount to be determined at a future hearing. He held that, on the true construction of the Land Registration Act, the proprietor of a legal charge takes subject to overriding interests which are subsisting on the date of creation, as opposed to the date of registration, of the charge. He accordingly asked himself whether Mrs. Rosset was in actual occupation of the property on 17 December 1982 and, finding that she was not, concluded that her equitable interest was not protected as an overriding interest by section 70(1)( g) so as to prevail against the bank's legal charge. He gave judgment for possession in favour of the bank. Mrs. Rosset appealed, but Mr. Rosset has taken no further part in the proceedings.

3

The Court of Appeal unanimously affirmed the judge's decision that the relevant date on which Mrs. Rosset had to show that she was in actual occupation in order to establish an overriding interest which would prevail against the bank was 17 December 1982, the date of creation of the bank's charge. But they differed on the facts as to whether she was in actual occupation on that date. Purchas and Nicholls L.JJ. held that she was; Mustill L.J. held that she was not. The bank now appeals by leave of your Lordships' House against the majority decision of the Court of Appeal in Mrs. Rosset's favour.

4

The important question arising under the Land Registration Act as to the relevant date on which to ascertain whether an interest in registered land is protected by actual occupation so as to prevail under section 70(1)( g) against the holder of a legal estate has now been resolved by your Lordships' decision in Abbey National Building Society v. Cann in favour of the view that it is the date when the estate is transferred or created, not the date when it is registered.

5

The primary ground of the bank's appeal challenges the judge's finding, which was also unanimously affirmed by the Court of Appeal, that Mrs. Rosset had by the date of completion acquired a beneficial interest in the property.

6

The Rossets were married in 1972. There are two children of the marriage, a daughter born in 1972 and a son born in 1981. From 1976 until the events giving rise to the present dispute, the parties were living in premises which had been built as an extension to a bungalow in Broadstairs which was the home of Mrs. Rosset's parents, Mr. and Mrs. Gardner. Mr. Rosset had borne the cost of building the extension, but it was occupied on the terms of an agreement between the Rossets and the Gardners which provided that, on the Rossets vacating the extension, each should be paid a fixed sum by Mr. and Mrs. Gardner. Mrs. Rosset's father had insisted on his daughter being joined in the agreement in this way.

7

Mr. Rosset is a Swiss national. He was working in 1982 as a courier conducting coach parties of tourists on the continent of Europe and was away from home a great deal. Some time before 1982 he became entitled to a substantial sum of money under a trust fund established by his grandmother in Switzerland. In 1982 the Rossets were looking for a new home to be bought with Mr. Rosset's inheritance. It was Mrs. Rosset who first found the property. It had been unoccupied for seven or eight years and required substantial work to render it suitable for occupation. Mrs. Rosset took her husband to see it. He liked it and made an offer to purchase it for the asking price of £57,500. This was accepted on 3 August 1982 subject to contract.

8

On 25 October 1982 Mr. Rosset opened an account at the Broadstairs branch of the bank. He saw the manager and told him that he was intending to buy the property with money he had inherited in Switzerland. On 2 November Mr. Rosset received a payment of £70,200 from Switzerland of which £59,200 was paid into his account with the bank. On 23 November contracts for the purchase of the property were exchanged. On 14 December Mr. Rosset saw the bank manager and asked to be allowed to overdraw on his current account up to £15,000 to meet the cost of the works of renovation which were needed to be undertaken to the property. The manager asked whether the property was to be acquired in joint names. Mr. Rosset replied that the property was to be acquired in his sole name because his wife and children were living with her parents. The manager agreed the overdraft and Mr. Rosset signed the bank's form of charge which was then sent to Mr. Rosset's solicitor to be dated on completion and registered on behalf of the bank. Completion took place on 17 December with funds drawn from the account which required an initial overdraft of £2,267. Mrs. Rosset knew nothing of the charge to the bank or the overdraft.

9

Meanwhile Mr. and Mrs. Rosset had been let into possession of the property by the vendors even before the exchange of contracts. The builder employed by them, a Mr. Griffin, commenced work on 7 November 1982. It was originally hoped that the house would be ready for the Rossets to move in before Christmas, but this proved in the event to be impossible. Eventually the Rossets moved in about the middle of February 1983 when the work was substantially complete. By this time Mr. Rosset's overdraft had risen to. over £18,000 and the bank refused to extend further credit. Most of the additional funds drawn from the account had been expended in paying for the renovation works. Both the purchase price of the property and the cost of the works of renovation were paid by Mr. Rosset alone and Mrs. Rosset made no financial contribution to the acquisition of the property.

10

The case pleaded and carefully particularised by Mrs. Rosset in support of her claim to an equitable interest in the property was that it had been expressly agreed between her and her husband in conversations before November 1982 that the property was to be jointly owned and that in reliance on this agreement she had made a significant contribution in kind to the acquisition of the property by the work she had personally undertaken in the course of the renovation of the property which was sufficient to give rise to a constructive trust in her favour.

11

There was a conflict of evidence between Mr. and Mrs. Rosset on the vital issue raised by this pleading. The question the judge had to determine was whether he could find that before the contract to acquire the property was concluded they had entered into an agreement, made an arrangement, reached an understanding, or formed a common intention that the beneficial interest in the property would be jointly owned. I do not think it is of importance which of these alternative expressions one uses. Spouses living in amity will not normally think it necessary to formulate or define their respective interests in property in any precise way. The expectation of parties to every happy marriage is that they will share the practical benefits of occupying the matrimonial home whoever owns it. But this is something quite distinct from sharing the beneficial interest in the property asset which the matrimonial home represents. These considerations give rise to special difficulties for judges who are called on to resolve a dispute between spouses who have parted and are at arm's length as to what their common intention or understanding with respect to interests in property was at a time when they were still living as a united family and acquiring a matrimonial home in the expectation of living in it together indefinitely.

12

Since Mr. Rosset was providing the whole purchase price of the property and the whole cost of its renovation, Mrs. Rosset would, I think, in any event have encountered formidable difficulty in establishing her claim to joint benficial ownership. The claim as pleaded and as presented in evidence was, by necessary implication, to an equal share in the equity. But to sustain this it was necessary to show that it was Mr....

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