Land registration — Proprietary interest — Caution — Undertaking — Claimant alleging deeds to property held as security for loans owing by second defendant — Property sold to first defendant — Whether caution against property should be cancelled — Claim dismissed
The claimant solicitor contended that he held the deeds of the second defendant’s farm as security for sums allegedly owed to him pursuant to an agreement and undertaking signed by the second defendant and her late husband. He had registered a caution against the title, but she had subsequently sold the farm to the first defendant. The Land Registry directed the claimant to issue proceedings to determine whether the caution should be cancelled.
The claimant applied to the court for declarations that: (i) the second defendant held the farm for him as beneficiary of an equitable mortgage over the property to secure the repayment of the monies owed to him; and (ii) the first defendant should not be registered as the proprietor of the farm. The first defendant counterclaimed for a declaration that the claimant was not entitled to maintain the caution and that it should be cancelled.
Held: The claim was dismissed.
The claimant was not entitled to a proprietary interest in the farm, and the caution over the property should be vacated. The mere deposit of deeds did not give rise to an equitable charge. It was always necessary to show that the deeds had been deposited as part of a transaction to secure an obligation, and, on the balance of probabilities, the claimant had failed to establish this: United Bank of Kuwait plc v Sahib [1997] Ch 107 considered.
The transaction could be impugned by the second defendant on grounds of undue influence. The claimant’s complete failure to consider the second defendant’s interests separately from those of her husband, and his own clear position of conflict, would justify an order that the transaction be set aside on that ground: Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44; [2002] 2 AC 773 considered.
Furthermore, the undertaking had been legally ineffective to create an equitable charge over the farm and did not comply with the strict requirements of section 2(3) of the Law of Property (assent to all the terms and not simply a signature somewhere on the document. As a matter Miscellaneous Provisions) Act 1989. The purpose of section 2 was to require a clear of principle, a party could sign a document by writing only its initials on it, provided it was clear that the signatory intended to authenticate the full terms. However, for the purposes of section 2, the initialling of a correction in the margin did not constitute the signing of a document. In any event, there had been no consideration for the undertaking and accordingly, it had no legal effect.
John de Waal (instructed by Needham & James, of Stratford) appeared for the claimant; Stuart Cakebread (instructed by Blandy & Blandy, of Reading) appeared for the first defendant; the second defendant appeared in person.
Eileen O’Grady, barrister
