Mortgage – Possession – Actual occupation – First defendant charging property to claimant by way of legal mortgage – Claimant applying for possession of property when outstanding balance unpaid – Second defendant claiming beneficial interest in property – Whether second defendant in actual occupation at relevant date – Whether occupation obvious on reasonably careful inspection of property – Whether mortgage taking priority over claimed beneficial interest – Claim allowed
The first defendant was the sole legal owner of a property at 3, Endcliffe Grove Avenue, Sheffield. She charged the property by way of legal mortgage to the claimant to secure a loan to her on 3 September 2022 (the relevant date). In November 2023, the claimant commenced proceedings against the first defendant in the county court, seeking possession of the property because the term of the loan had expired and the outstanding balance had fallen due.
The second defendant (who had been in a domestic relationship with the first defendant for a period) was joined as a party to counterclaim for a declaration that he had an overriding interest in the property. The proceedings were transferred to the Chancery Division so it could be case managed with the second defendant’s claim for a declaration that he was the sole beneficial owner of the property notwithstanding that the first defendant was the sole legal proprietor.
Preliminary issues arose concerning: (i) the nature of the second defendant’s occupation of the property, if any, on the relevant date; (ii) whether any such occupation would have been obvious on a reasonably careful inspection of the property; (iii) on the assumed basis that the second defendant had registered the property in the name of the first defendant to disguise his claimed beneficial interest from (amongst others) HMRC, whether the mortgage took priority over the alleged interest, notwithstanding any occupation on the relevant date by the second defendant.
Held: The claim was allowed.
(1) By section 29(1) of the Land Registration Act 2002: “If a registrable disposition of a registered estate is made for valuable consideration, completion of the disposition by registration has the effect of postponing to the interest under the disposition any interest affecting the estate immediately before the disposition whose priority was not protected at the time of registration”.
The priority of an interest was protected if, amongst other things, it was an interest belonging at the time of the disposition to a person in actual occupation, so far as relating to land of which he was in actual occupation, except for an interest which belonged to a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition, and of which the person to whom the disposition was made did not have actual knowledge at that time (paragraph 2 of schedule 3).
(2) Actual occupation required some degree of permanence and continuity which would rule out mere fleeting presence. The question whether a person was in actual occupation on particular date was an evaluative decision for the court, based on findings of primary fact. There was no single test for determining whether a person was in actual occupation. The degree of permanence and continuity of presence of the person, the intentions and wishes of the person, the length of absence and the reason for it and the nature of the property and personal circumstances of the person were among the relevant factors to be evaluated and weighed. The burden of proof was on the person asserting the occupation.
The words “actual occupation” were ordinary words of plain English and should be interpreted as such. The word “actual” emphasised that physical presence was required. It did not necessarily involve the personal presence of the person claiming to occupy. A caretaker or the representative of a company could occupy on behalf of his employer. However actual occupation by a licensee (who was not a representative occupier) did not count as actual occupation by the licensor. The mere presence of some of the claimant’s furniture would not usually count as actual occupation. If the person said to be in actual occupation at any particular time was not physically present on the land at that time, it would usually be necessary to show that his occupation was manifested and accompanied by a continuing intention to occupy: Strand Securities Ltd v Carswell [1965] Ch 958, Williams & Glyn’s Bank v Boland [1981] AC 487, Abbey National BS v Cann [1991] 1 AC 56, Thompson v Foy [2009] EWHC 1076; [2009] PLSCS 166 and Link Lending Ltd v Bustard [2010] 2 EGLR 55 considered.
In the present case, the second defendant had produced no convincing documentary evidence to establish his actual occupation of the property. The second defendant’s prolonged absences from the UK told against any permanence and continuity of presence at the property. He was not present at the property on the relevant date and had not demonstrated that his occupation was manifested and accompanied by a continuing intention to occupy or that he occupied on that date by way of his caretakers or agents. Accordingly, the second defendant was not in actual occupation on the relevant date.
(3) There was no doubt that the property had been emptied of the possessions, furniture and other physical manifestations of occupation by the second defendant or anyone else in July 2022. The second defendant did not replace any items of his own. To the extent that occupation was evident on the relevant date, it could only have been occupation by his brother and his wife and family which could not be enough to evidence the second defendant’s occupation. On a careful inspection there would have been no sign of actual occupation by the second defendant. The claimant was entitled to possession of the property against the second defendant: Thomas v Clydesdale Bank plc (t/a Yorkshire Bank) [2010] EWHC 2755; [2010] PLSCS 298 considered.
(4) If that conclusion was wrong and the second defendant was in actual occupation which would have been obvious on a reasonably careful inspection, the second defendant as equitable owner had the property registered in the name of the first defendant and did not bring any limit on her authority to the attention of the claimant. Thus, it was fair as between the owner and lender that the owner bore the risk of the first defendant’s fraud: Wishart v Credit and Mercantile Plc [2015] EGLR 57 applied. Brocklesby v Temperance Permanent Building Society [1895] AC 173 and Ali v Dinc [2020] EWHC 3055 considered.
Alex Cunliffe (instructed by Brightstone Law) appeared for the claimant; Andrew Dymond (instructed by Dumonts) appeared for the second defendant; The first defendant did not appear and was not represented.
Eileen O’Grady, barrister
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