Charge of property — Property held by husband and wife as joint tenants — Husband signed charge on property on understanding his wife would sign — Wife refused to sign — Whether charge effective — Whether charge binding the legal estate — Whether caution entered to prevent dealings should be discharged
The plaintiffs are husband and wife and joint owners in law and in equity of a house. Some time ago the husband guaranteed an overdraft of a company called Brassgem Ltd in which he had an interest. The overdraft increased and the defendant bank required some security to back the guarantee. In June 1987 the husband signed a charge expressed to be between himself as “principal debtor” of the first part, his wife and himself the “mortgagor” of the second part, and the bank of the third part. The purpose of the arrangement was to effect a charge on the house owned by the plaintiffs. Only Mr Woollam signed the charge; Mrs Woollam refused to do so.
The company ran into financial difficulties and a winding-up order was made in November 1987. The bank then called in the guarantee. The Land Registry entered a caution against the registered title to the house to prevent dealings in the legal estate. The plaintiffs sought a motion to remove the caution on the ground that the charge was ineffective as Mr Woollam signed the charge on the basis that Mrs Woollam would also sign. At the most Mr Woollam had only charged his own beneficial interest in the property and the bank would have to proceed under section 30 of the Law of Property Act 1925 to seek a sale of the property, in which event the bank’s security would probably be worth less than half the value of the house.
Held An assumption that the charge was binding necessitated implying a form of “double escrow” until Mrs Woollam signed the deed. That was too complicated and there was no express provision for this. Mr Woollam had not entered into the transaction he thought he was entering into. Where one party enters into a deed with another on the basis known and understood to both of them that a third party is also to sign, and the third party does not do so, the deed does not bind the parties: see Greer v Kettle [1938] AC 156 and Lady Naas v Westminster Bank Ltd [1940] AC 366. The charge therefore did not bind Mr Woollam.
The caution against dealings in the legal estate should therefore be vacated as there was no arguable case as to the validity of the charge on the property to go for trial: see Alpenstow Ltd v Regalian Properties plc [1985] 1 WLR 721.
Williams and Glyn’s Bank Ltd v Boland [1981] AC 487; Thames Guaranty Ltd v Campbell [1985] QB 210; and James Graham & Co (Timber) Ltd v Southgate-Sands [1986] QB 80 considered.
Charles Purle (instructed by Wright Webb Syrett) appeared for the plaintiffs; and Richard de Lacy (instructed by Harris Rosenblatt & Kramer) appeared for the defendant.
