Mortgage Corporation Ltd v Nationwide Credit Corporation Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE DILLON,LORD JUSTICE KENNEDY,SIR ROGER PARKER |
| Judgment Date | 14 May 1993 |
| Judgment citation (vLex) | [1993] EWCA Civ J0514-2 |
| Docket Number | No. CHANI 92/1069/B |
| Court | Court of Appeal (Civil Division) |
| Date | 14 May 1993 |
[1993] EWCA Civ J0514-2
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT OF JUSTICE
(CHANCERY DIVISION)
(Mr. D. Neuyberger QC)
Before: Lord Justice Dillon Lord Justice Kennedy and Sir Roger Parker
No. CHANI 92/1069/B
MR. T. DUMONT (instructed by Messrs. Brand Montague) appeared on behalf of the Appellants.
MR. D. HODGE (instructed by Messrs. Reynolds Porter Chamberlain) appeared on behalf of the Respondents.
( )
This appeal, from a decision of
Mr. David Neuberger QC, sitting as a Deputy Judge of the High Court in the Chancery Division, raises a question of priority as between two charges on registered land. The Judge held that a charge on the land in favour of the plaintiffs, The Mortgage Corporation Ltd., made on the 10th July 1989, had priority to a charge on the same land in favour of the defendants, Nationwide Credit Corporation Ltd., made on the 31st July 1989, notwithstanding that the defendants' charge was, and the plaintiffs' was not, protected by a notice in the Charges Register of the Title to the land under section 49 of the Land Registration Act 1925.
The property in question is 1 Park Gate, Blackheath, as comprised in Title No. SGL 97325, and the registered proprietors at all material times were a Mr. and Mrs. Laslett.
At the beginning of July 1989 the property was subject to three registered charges which had been created by Mr. and Mrs. Laslett, namely, in the order of their priorities, a first charge in favour of Mortgage Trust Ltd., a second charge in favour of National Westminster Bank Ltd., and a third charge in favour of Aitken Hume Ltd. The first and third charges imposed restrictions, which were duly entered in the proprietorship register of the Title, that except under an order of the Registrar no disposition by the proprietors of the land was to be registered without the consent of the proprietor for the time being of the charge.
On the 10th July 1989 Mr. and Mrs. Laslett executed a Legal Charge in favour of the plaintiffs to secure an advance of the £367,500 with interest; this is the plaintiffs' charge. Out of the money so advanced, all moneys due to National Westminster Bank Ltd., and Aitken Hume Ltd., under the second and third registered charges were paid off and Forms 53 were duly obtained by the plaintiffs from those chargees, and all but £5,000 of the money due to the first chargee Mortgage Trust Ltd., was also paid off; but £5,000 remained due to Mortgage Trust Ltd.
On the 31st July 1989, Mr. and Mrs. Laslett executed a Legal Charge in favour of the defendants to secure an advance of £60,000 with interest; this is the defendant's charge. On the 14th August 1989, a notice under section 49 in respect of the defendants' charge was duly entered in the Charges Register of the Title. It appears that the defendants had applied to register their charge as a registered charge, but that was not possible because (apart from any other reasons there may have been) of the restriction in the first charge to the Mortgage Trust Ltd., whose consent the defendants had not been able to obtain.
By the 14th August 1989 no application had been made to the Land Registry to register the plaintiffs' charge as a registered charge or to register any notice or other protection in respect of it. In fact, no application was made to the Land Registry in respect of the plaintiffs' charge until many months later —well after the end of the period of priority conferred by their priority search against the Title to the property at H.M. Land Registry.
The defendants had also made a priority search against the Title, but that does not avail them because their charge has never been registered as a registered charge; it is merely protected by the notice for what that is worth. Under the priority rule —now Rule 6 of the Land Registration (Official Searches) Rules 1990, but then an earlier rule in the same terms —priority is only granted if the instrument which effected the disposition for which priority is claimed is actually registered.
In the event, the plaintiffs, having obtained an order for possession against Mr. and Mrs. Laslett, exchanged contracts for the sale of the property on the 26th April 1991 at a price of £300,000, and that sale was completed on the 28th May 1991. At that date, there was, according to the plaintiffs, a sum of the order of £511,437.45 due to the plaintiffs on the security of their charge, and there was, according to the defendants, a sum of the order of £97,012.29 due to the defendants on the security of their charge. Since the proceeds of sale were obviously not enough to repay both in full, it was, as I understand it, agreed that the defendants would withdraw their notice in order to enable the sale to be completed, and the question of priority would be put to the Court for decision after completion. The Originating Summons was accordingly issued by the plaintiffs on the 3rd June 1991.
There is no difficulty as to the priorities of registered charges, since section 29 of the Act provides in clear terms that, subject to any entry to the contrary on the register, registered charges on the same land shall as between themselves rank according to the order in which they are entered on the register, an not according to the order in which they are created.
As regards charges, however, which for the time being are not registered charges, the first provision to be considered is section 106 of the Act, as substituted by the Administration of Justice Act 1977. Subsections (1) to (3) of Section 106 are as follows:-
"106 —(1) The proprietor of any registered land may, subject to any entry to the contrary on the register, mortgage, by deed or otherwise, the land or any part of it in any manner which would have been permissible if the land had not been registered and, subject to this section, with the like effect.
"(2) Unless and until the mortgage becomes a registered charge -
(a) it shall take effect only in equity, and
(b) it shall be capable of being overridden as a minor interest unless it is protected as provided by subsection (3) below.
(3) A mortgage which is not a registered charge may be protected on the register by -
(a) a notice under section 49 of this Act,
(b) any such other notice as may be prescribed, or
(c) a caution under section 54 of this Act".
The effect of that, as I understand it, is that though a charge which is protected by a notice under section 49 will no longer be capable of being overridden as a minor interest, it will still only take effect in equity unless and until it becomes a registered charge.
Subject to the effect of the registration of a notice under section 49 in respect of an equitable charge, the general rule as to the priority of equitable charges is...
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