Bank loan secured on divorcee’s equitable interest in former matrimonial home – House occupied by young adult children of marriage – Whether such occupation should weigh against bank’s application for order for sale.
In 1979 the second defendant (the wife) and the third defendant (L), who were then married to each other, purchased in their joint names a house in St Lawrence, Isle of Wight, as a home for themselves and their three young children. Pursuant to a divorce court order, made on the breakdown of the marriage, L assigned his beneficial share to the wife on August 13 1984. L remained a joint owner of the legal estate. Five years later the wife married the first defendant (S) and on January 23 1990 purported to convey the house, as sole owner, to herself and S to hold the same on a trust for sale, her solicitors having misunderstood the state of the legal title. The beneficial shares taken by the wife and S were respectively 88.57% and 11.43%.
On February 26 1993 the wife and S purported to charge the legal estate in favour of the plaintiff bank. In 1996 their marriage was dissolved and the divorce court, by order, purported to transfer the entire legal and beneficial estate back to the wife. Having received no payments since October 1996 the bank sought to recover the total mortgage debt, which stood at £83,923. It was common ground that, by reason of the error made in 1990, the 1996 transfer could only operate on the wife’s equitable interest, subject to the rights of the bank as equitable chargee. In that capacity the bank applied for an order for possession and sale under sections 14 and 15 of the Trusts of Land and Appointment of Trustees Act 1996, which require the court to have regard, inter alia, to the purposes for which the property was held on trust and to the interests of any secured creditor of any beneficiary. The wife and L opposed the application on grounds largely related to the children, two of whom lived in the house while the youngest, aged 18, was in full time vocational training.
Held There would be an order for sale and possession.
1. Three principles, which governed the exercise of the courts’ discretion under the now replaced section 30 of the Law of Property Act 1925, were also applicable to an application under section 14 of the 1996 Act. These were that: (i) regard had to be had to all the circumstances of the case; (ii) save in exceptional circumstances the interest of the chargee should prevail over the that of an innocent spouse; and (iii) where there was a collateral purpose of the trust still subsisting the court should not defeat that purpose by ordering a sale.
2. Having acted together with L in receiving the loan and creating the charge, the wife could not claim to be an innocent spouse: cf Abbey National Plc v Moss (1994) 1 FLR 319; Barclays Bank Plc v Hendricks (1996) 1 FLR 258.
3. Although the intention of the 1984 court order was doubtless to provide a home for the wife and children, there was no authority to support the proposition that, in the absence of express words, the intention went beyond the child coming of age. In that regard it was noteworthy that section 15 of the 1996 Act specifically confined consideration of the welfare of any children to minors. There was, accordingly, no subsisting collateral purpose which might otherwise have weighed against the making of the order applied for.
David Pope (instructed by Adams & Partners, of Lewis) appeared for the plaintiff; James Behrens (instructed by AJ Careless & Co, of Ventnor) represented the second defendant; the first and third defendants did not appear and were not represented.
This case was heard in Newport (IOW) County Court.
