Did the case of Horsham kill the case of Boland - Essay Example

Did the case of Horsham kill the case of Boland? Introduction The purpose of this paper is to examine whether the recent decision in Horsham Properties Group Ltd v Clark and another (Secretary of State for Justice intervening)1 seeks to nullify the position taken by the House of Lords in Williams & Glyns Bank Ltd v Boland2. The case of Boland is concerned with the violation of wife’s unregistered right of possession of her matrimonial home in which her spouse had equal share but had his name alone shown as the registered proprietor of the property in the land register. The husband had mortgaged the property to Williams & Glyns’s Bank without his wife’s knowledge even though they were living together in the same house. The mortgagee bank also did not care to verify with his wife if she had any interest before lending her husband against the mortgage of the said property. The question was whether the wife had an overriding interest by virtue of section 70 (1) (g) Registration Act 1925.since the appellant had sought to distinguish the “word actual occupation” as mentioned in the said section from her real status. The House of Lords ruled that actual occupation had only its literal meaning of physical presence and as long as she was physically present in the matrimonial home with all the rights of an occupier. Hence the wife had an overriding interest even though it could be argued that hers was the equitable interest as a minor interest entitled for her interest only in the proceeds of sale. The mortgagee bank failed to verify the factual position at their peril.3 Thus an equitable mortgagee, in spite of his legal interest, does not get priority over an equitable interest of which he is deemed to have constructive notice.4 According to Halbury’s laws of England, a mortgagee should take care to have a constructive notice of non-registrable rights capable of being reasonably discovered by mere inspection of the property to be mortgaged by enquiring with the occupiers about their interest in the property or the terms under which they are holding the property. It is not sufficient if he makes enquiry with the vendor alone. He should enquire with any tenants in occupation for the tenancy agreement and also enquire with the spouse of the vendor if the spouse is in occupation though enquiry with their children may be dispensed with.5 Nicola has observed that this decision of the House of Lords altered the position that section 70 (1) (g) of the Land Registration Act 1925 is not intended to be overriding of the beneficial interests under a trust. Nicola goes on to say that the House of Lords decided wrongly of the overreaching provisions as there is no basis to assume interests in trust can override a subsequent disposition under section 70(1) (g).6 Although the banks are seriously affected, social justice favouring innocent wives outweighs any other solution available to the lenders. Lord Templeman man has said that the Boland rule is only for the hapless wife having equitable interest in a matrimonial home not in the know of things and this is not to protect the spouses who either knew of the mortgage or jointly signed the mortgage agreement. Lord Templeman’s averment is that the Bankers or mortgagees have no difficulty making simple enquiries as to whether the mortgagor is married and if so whether spouse is aware of the mortgage sought to be created and if the spouse would come and jointly sign the agreement. And even if the prospective mortgagor attempts to hide facts, the prospective mortgagee can still make background checks through attorneys or any agency apart from the direct enquiries at the home to be mortgaged and in the neighbourhood.7 Actual occupation is important at the time of mortgage to claim an overriding interest. Though actual occupation could be broadly interpreted to include excuses like the claimant of overriding interest, being away at the time of the prospective mortgagee’s making enquiry, the legal position is that the claimant can not succeed if he/she was not in actual occupation. Thus, in the case of Abbey National building Society v Cann and Another8, it was decided against Mrs Can, the mortgagor’s mother who had contributed substantially to the cost of acquisition since she was not present in the home (not in actual occupation as she was holidaying in Netherlands) at the time of execution of mortgage, This case is unique because claimant had substantially contributed to cost of acquisition with which her son managed to purchase and mortgaged the land immediately after the land transfer. There was no opportunity for the mortgagee to see Mrs Cann. The difference between Boland and this case is that Boland was already in occupation whereas in the case of Mrs Cann, transfer and mortgage were made simultaneously before any occupation could be made at all. Besides, the mortgagee was actually lending substantial cost of acquisition and the mortgage was to secure the loan. The advantage of overriding equitable interest can tempt parties to collude among themselves in order to circumvent a mortgagee’s claim however competent he may be. Besides, the mortgagee being a custodian of public money, too much protection of unregistered overriding interest would lead to banks shying away from lending at all thus leading to collapse of an economic system. As such, it has always the intention of the courts and the parliament to balance the interests of the lenders as well as the innocent wives having unregistered interest in a matrimonial home. The new Land Registration Act 2002 has not made much headway in protecting the lenders’ interests in such situations. In view of the above position, the decision in Horsham Properties 9 gains significance. It recognises the power of the mortgagees to sell a mortgaged property in action without obtaining a court order to do so. Section 101 of the Law of Property Act 1925 (LPA) provides for sale of mortgaged property by the mortgagee on default. As per the decision, it is not in contravention of Protection of Human Rights protocol. A clause in the mortgage agreement also provided for the sale on default. The claimants sought to declare section 101 of the LPA as violative of Convention rights of mortgagors especially residential. The reasoning of the decision is that section 101 rather served to facilitate a private bargain between mortgagor and mortgagee than to override the rights of the mortgagee. Article 1 of the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms guarantees peaceful enjoyment and possessions of legal and natural persons except in public interest. and that this guarantee shall not impair right of a State to use property to secure payment of taxes or penalties or contributions.10 The ruling in the case therefore says that the article 1 of the First Protocol (A1FP) does not in anyway stand in the way of the claimants Horsham Properties by exercising their right in deprivation of the possession of the defendant as reinforced by the section 101 of the Law of Property Act 1925. The common ground for the cases of Boland and Horsham is scope of action under section 36 of Administration of Justice Act 1970 by which a court may adjourn the proceedings, stay or suspend execution of judgement or order, postpone the date for delivery of possession when the mortgagee seeks court’s permission to evict occupiers from the mortgaged property on default.11 It is argued that this decision provides a loophole for a lender to take undue advantage of the Administrative Justice Act’s provision to dislodge an occupier without going to the court.12 The obiter of the Horsham’s judgment is stated as follows Any deprivation of possession constituted by the exercise by a mortgagee of its powers under s.101 of the Act after a relevant default was justified in the public interest and required no case-by-case exercise of a proportionality exercise by the court. It clearly reflected the bargain habitually and historically drawn between mortgagors and mortgagees, in which the ability of a mortgagee to sell the property offered as a security without having to go to court was identified as an essential aspect of the security necessary if substantial property based security lending was to be available at affordable rates of interest.13 Discussion and Conclusion Though these cases are concerned with the deprivation of possession, each of them stems from different perspectives. While Boland’s case is that of overriding of an unregistered equitable interest of a wife in a matrimonial home, Horsham is concerned directly with legal owners whose eviction is sought without a court order by invoking section 101 of the Law of Property Act 1925 due to default in repayment. The fear that this decision will be applied in Boland like cases is unfounded for the Horsham’s decision does not refer to Boland’s case at all. It is not the intention of the Horsham case to dislodge a genuine overriding interest of matrimonial character which Boland’s decision is concerned. with. Countering the possible misuse through collusion between the spouses was the only issue that arose out of Boland’s decision. Land Registration Act 2002 and Matrimonial Home Act also have undergone amendments since the decision of Boland. Even if the ratio of Horsham’s decision is sought to be applied in Boland like cases, the very same A1 FP will come into play in favour of the persons having overriding interests evicted without court orders. As observed in Horsham’s decision, the procedure of eviction without a court order is only as a matter of convenience and not to deny anyone’s genuine right. Besides any measure of denial of matrimonial home interests can be considered a public interest which prevents an action against an unregistered equitable interest of spouse. The Boland’s case should be only construed as a protection of possible violation of such equitable interest in a matrimonial home. In the case of Abbey National building Society v Cann and Another14, mother’s interest in her son’s property by virtue of her sizeable contribution towards cost of acquisition was not protected by the respective decision. Further, Horsham’s decision itself has not seen its finality since there is scope for appealing to House of Lords and in the event of being decided against, European Court of Justice can still discuss and give a final judgement with human rights perspective. Horsham’s reasoning to justify action without a court order and without the human right’s perspective is in fact weak requiring reconsideration by the higher court. Until finality is reached, it is premature to say that Horsham’s case has killed the case of Boland. Even if finality is reached reaffirming the High Court’s decision in Horsham, Boland like cases can survive against such actions without court orders. References Abbey National building Society v Cann and Another [1991] AC 56 House of Lords English Rosalind, 2008, Human Rights & public law update, 1 Crown Office Row, FLW Case note, Housing Law-All, Mortgage Possession and Possession, available at < http://nearlylegal.co.uk/blog/?s=Horsham > accessed on 9 November 2009 Halsburys Laws of England/MORTGAGE (VOLUME 32 (2005 REISSUE))/4. PRIORITY OF MORTGAGES/ (4) FAILURE TO GAIN, OR LOSS OF, PRIORITY/ (i) Priority Barred by Notice of Prior Rights/480. Constructive notice of the rights of persons in occupation of land. Law commission Report on Williams and Glyn’s Bank v Boland, Hansard, HL Deb 15 December 1982 vol 437 cc639-64 Head note Lexis Nexis Horsham Properties Group Ltd v Clark and another (Secretary of State for Justice intervening) [2008] EWHC 2327 (Ch); [2008] WLR (D) 307 McCarthy and Stone Ltd v Julian S Hodge & Co Ltd [1971] 2 All ER 973, [1971] 1 WLR 1547. Nicola Jackson, 2006, Overreaching in Registered Land Law, Modern Law Review, 69(2) pp 214-241 Section 36 Administration of Justice Act 1970 Williams & Glyns Bank Ltd v Boland [1981] AC 487, [1980] 2 All ER 408, HL. Read More