Joint legal owners creating equitable charge over house to secure borrowings from bank – Other family occupants claiming equitable interest having priority to charge – Whether equitable interest arose on the facts – Whether claimant bank prejudiced by defective assignment of debts initially owed to parent bank
Shortly after emigrating from India in 1973, a married couple (H and W), acquired a house in Harrow as joint registered proprietors, holding on trust for themselves as tenants in common. At all material times thereafter the house was occupied by the second and third defendants, the sons of H and W, who shared the house with both parents until H returned to India in 1979. H and a company owned by him banked with Central Bank of India. In 1981 H’s account was £25,000 overdrawn and the company account had been debited with an amount of US $339,500. By letters dated July 7 and September 18 1981 H’s solicitors, acting on the telexed instructions of H and W, wrote to Central Bank confirming that they held the land certificate to the house, to the order of the bank, for the purpose of securing the indebtedness of H and the company. On August 6 1983 W died. On February 21 1984 H’s solicitors forwarded the land certificate to Central Bank, who caused a notice of deposit to be registered on the title. No legal charge was ever executed. On September 24 1986 H entered into a professionally drawn agreement with the sons, whereby they assigned to H all their interest in the house under W’s intestacy in return for certain undertakings by H, notably to allow the sons and their families to reside in the house until certain moneys were paid, whereafter their right to occupy would be terminable on 60 days’ notice. By deed made on August 30 1988 the Central Bank assigned to the plaintiff bank the debts owed by H and the company and its equitable mortgage over the house. On November 8 1989 the plaintiff bank purported to give written notice of these assignments to H and his company. On October 16 1996 the bank obtained judgment against H and the company for sums which, by May 15 1997, totalled £538,243. In subsequent proceedings by the bank for possession and an order for sale, the sons claimed an equitable interest in the house having priority over the bank’s equitable mortgage, and further contended that the notice of November 8 1989 was defective in that it had incorrectly referred to an assignment dated August 31 1988.
Held Judgment was given for the plaintiff bank.
1. Since the mortgage had been created beforehand the sons could not found their claim on the 1986 agreement. There was no evidence of major expenditure made by the sons in the expectation, generated by H and W, that they should each enjoy a life interest in the house. Sums actually expended by them did not exceed the day to day outlay on the house, reasonably to be expected from licensees who did not pay rent: see Dillwyn v Llewellyn (1862) 4 De GF&J 517, Inwards v Baker [1965] 2 QB 29 distinguished.
2. The notice of November 8 was not required to perfect the transfer of the charge: see section 114 of the Law of Property Act 1925. While an accurate notice was required in order to effect a legal assignment of the debts under section 136 of 1925 Act (see WF Harrison & Co Ltd v Burke [1956] 1 WLR 419 and Van Lynn Developments Ltd v Pelias Construction Co Ltd [1969] 1 QB 607), that point could only have been taken by H and the company in the bank’s earlier action against them.
Richard Wallington (instructed by Alan Taylor & Co) appeared for the plaintiff; Nicholas Isaacs (instructed by Charles Russell) appreared for the second and third defendants; the first defendant did not appear and was not represented.