Purchaser agreeing with vendor to convert house into three flats and to grant one to vendor at no cost – Purchaser taking mortgage loan to finance transaction – Vendor remaining in occupation – Whether buyer from mortgagee seeking possession bound by overriding interest claimed by vendor – Vendor’s appeal dismissed
The defendant was a sitting tenant of a large dilapidated house owned by a housing trust in London N6. In 1987 he contracted to buy the freehold at the heavily discounted price of £65,000 thereby implementing an agreement concluded with D, a developer, for an immediate resale to D for £109,250. The agreement further provided (the joint venture provisions) that D would convert the house into three flats and convey one to the defendant at no premium. There was a proviso that if D was unable, through no fault of his own, to effect the conversion, he would pay £100,000 to the defendant and retain the entire house. On January 12 1988 the housing trust, acting at the defendant’s direction, conveyed the house to D who immediately charged it in favour of Nationwide Anglia Building Society to secure a loan of £104,000 towards the purchase price. Two days later the defendant’s solicitors forwarded to Nationwide’s solicitors a consent form recording the defendant’s undertaking that any rights he might have in the house would be postponed to the Nationwide charge. Over the following 18 months a dispute arose between the defendant and D who, although receiving a further advance from Nationwide, subsequently became insolvent. In September 1991, Nationwide issued proceedings for possession against the defendant who raised a number of defences. In July 1993, while those proceedings were still unresolved, Nationwide sold the house to the plaintiff for £50,000, a price which reflected the problems posed by the defendant’s continuing occupation. The judge rejected the defendant’s claim that his equitable rights took effect, by virtue of his occupation, as overriding interests under section 70(1)(g) of the Land Transfer Act 1925 and the plaintiff obtained an order for possession. The defendant appealed.
Held The appeal was dismissed.
1. Whatever his contractual claims against others, the defendant had no proprietary interest in the house. The design for the conversion had never been finalised. A beneficial interest did not arise from the joint venture provisions since D’s promise to execute building work was too vague to be specifically enforceable: see Wolverhampton Corporation v Emmons [1901] 1 KB 515.
2. The defendant could not claim a vendor’s lien to secure the performance of D’s outstanding obligations. Since the parties had always envisaged mortgage funding, the implication of an equitable lien in the defendant’s favour would be quite inconsistent with the transaction. It was accordingly unnecessary to decide whether, contrary to the view of Whitford J in Uziell-Hamilton v Keen (1971) 22 P&CR 655, the security afforded by such a lien was limited to payment of an agreed price.
3. Even if the defendant could have claimed an equitable interest , his consent to postponement would have precluded its assertion against Nationwide and the plaintiff. Since all concerned, including the defendant’s solicitor, had acted throughout on the basis of such consent, it was immaterial that the form, which merely “completed the book-keeping”, was forwarded after the charge had been executed.
James Bonney QC and David Schmitz (instructed by Thomas Watts & Co) appeared for the appellant; Edward Denehan (instructed by Jay Benning & Peltz) appeared for the respondents.
