English Banking Law: Did the of Horsham Killed the of Boland - Case Study Example

English Banking Law Legal rights to a land occurs when the interest in the land is transferred either by a deed of sale which carries registered , then the mortgagor or lesor or the buyer is said to have acquired the legal rights to the land. The name of the mortgagor or lesor or the buyer must appear in the deed hence showing that the owner has legal title over the land. Equitable interest in land lies in a case when the distressed party has no legal interest over the land. He/she may not be the registered proprietor who possesses absolute title to the land. This kind of ownership is recognised by equity and not under the common law. For instance the beneficiary under a trust will have an equitable interest. Law says that some equitable rights have to be in writing or else they may be lost when the land is sold. In the same way equitable interests in other possessions will be lost when the legal title to the land is traded to a bona fide buyer for a price and this buyer will not have any notice of the equitable interest. Under such a situation the possessor of the equitable interest can maintain compensation from the seller who sells the legal title1. (http://www.encyclopedia .com /doc/1O18-equitableinterest.html retrieved November 7, 2009). Under the English land law a general rule is that when a registered conveyancing takes place it means that all interests and privileges over the land should be in writing. It has to be entered in the register entry for that land. If not when someone purchases that piece of land, the interests are not transferred to the buyer and his/her rights are lost. An 1 For example in Halifax v Popeck ChD 2008 The court considered the priority of equitable interests under LRA 2002 and the effect of ss.28 and 29 of that Act. Where a transfer of land had not been made ‘for valuable consideration’ since it was carried out as part of a fraud, the general rule under s.28 of the LRA 2002 applied. Thus an equitable interest (via proprietary estoppels) created prior to the transfer of the land had priority over an equitable charge created after that transfer. An exception to this rule is ‘overriding interests’. Overriding interests need not be registered to bind a new owner. Overriding interest was created for short term leases as well because it would become a burden for the bureaucracy of registration. Overriding interests were brought in under section 70 of the Land Registration Act of 19252. The law of overriding interests can be explained better with the case of Williams and Glyn’s Bank v Boland (1981). This was a case whereby a question was raised with regard to overriding interests of the wife (http://www.swarb.co.uk/lisc/RegiL19801984.php, accessed 8 November 2009). The bank claimed possession of a matrimonial home under a mortgage deed. The purchase of this house had some contributions from the wife as well but the home was registered in the name of her husband. Since the wife had also made contributions towards the purchase price of the house it gave her the rights of an equitable tenant in common to the level of her contribution. Later on the husband mortgaged the house to a bank and failed to pay the amount. The bank proceeded and filed a case in the High Court with a view to sell the house without making an enquiry as to whether the wife also had a right over the house (http://www.swarb.co.uk/lisc/RegiL19801984.php, accessed 8 November 2009). This case brings to the forefront two questions: i. Whether the legal and registered mortgage is effective against the matrimonial home; ii. Whether the wife’s beneficial interest will get a priority. According to Section 70 (1) (g) of Land Registration Act 1925: “The rights of every person in actual occupation of the land or in receipt of the rents and profits thereof, save where enquiry is made of such person and the rights are not disclosed.” 2. This Act has been entirely substituted by the Land Registration Act 2002, where the rules on overriding interests are found in Schedules 1 and 3. The Law of Property Act 1925 also has to be considered and which states that setting aside the impact of the doctrine of notice, it acts as probable source of danger to buyers. But on the other hand the provisions in the Land Registration Act 1925 with referrence to notice states that a buyer can accept the land detached from equitable interests even if he has been notified or not. Notice can be recognised only if it has been entered on the register. This being the law the Act also recognises “overriding interests” through this case. For this two more questions has to be proved and that is ‘whether the wife is a person in actual occupation and so she as a tenant in common interest can be protected by this provision’. And the second question is that ‘whether the wife’s equitable interest can have an overriding interest over the land occupied’. If there exists actual occupation on the part of the wife and she has rights then the buyer accepts the sale subject to such rights. This was an exception drawn on the facts of this case3 (http://www.swarb.co.uk/lisc/RegiL19801984.php, accessed 8 November 2009). Thus the courts could not overlook the succession of the wife’s beneficial interest which is recognised by the English law and states that a married woman ought to be given beneficial rights in the matrimonial house. But if they lose this interest will be weak and maybe also destructed, by an unprincipled husband (http://www.swarb.co.uk/lisc/RegiL 19801984.php, accessed 8 November 2009). In City of London Building Society v Flegg the case was with reference to Bleak House. This house was bought for Mrs and Mrs Maxwell-Brown and Mr and Mrs Flegg to live in (the Fleggs were the parents of the Mrs Maxwell-Brown). In this case the title deed 3. Williams & Glyn’s Bank v. Boland case was affirmed by the House of Lords: [1980]2All E.R.408 and applied by the Chancery Division in Spectrum Investment Co. V. Holmes [1981] 1 All E.R.6 and Blacklocks v. J.B.Developments (Godalming)Ltd. [1981] 1 All E.R.392. was made in the name of the Maxwell-Browns alone, but the Fleggs had furnished at the least half the cost price. All four occupied the house but a mortgage was obtained by the Maxwell-Browns without informing the Fleggs about this. The bank received a receipt from both the Maxwell-Browns. The bank on its part failed to enquire the Fleggs interest in the house. The Fleggs asserted their beneficial interest in the house and claimed that it was binding on the bank by virtue of s.70 (1) (g) of the Land Registration Act 1925 (http://pntodd.users.netlink.co.uk/cases/cases_f/flegg.htm accessed 8 November 2009). The House of Lords alleged (annulling the CA), that the Fleggs interest in the house cannot be considered as soon as the payment was made to the Maxwell-Browns. The court stated thus as the since the Fleggs interest had been overreached. Thus the case cannot be brought within the purview of s.70 of the Land Registration Act 1925. Conveyancing should be made easier and this was the intention of the 1925 legislation. This made the decision of the CA, according priority to the Land Registration Act overriding interest provisions above the Law of Property Act overreaching provisions, was not in agreement with this approach. (http://pntodd.users.netlink.co.uk/cases/cases_f/flegg.htm accessed 8 November 2009). Cases of Undue influence Undue influence has to be proved by the party who files a petition for the same. The laws states that if there is no misrepresentation from the male partner, and then it is the burden of the women to show that she acted under undue influence4 while signing a document which affected their home. 4. The requirements of undue influence were set out in Bank of Credit and Commerce International v Aboody [1990] 1 QB 923, CA, where it was held that there are two aspects to undue influence: (i) Undue influence, either in fact or presumed; and (ii) Manifest disadvantage of the transaction to the surety. Undue influence can be: 1. Actual undue influence, in which case a plea of undue influence can not be supposed and is liable to be preserved unless positively proved; and 2. Presumed undue influence where by undue influence can be assumed by the relationship of faith and assurance between the parties. Some relationships give rise to such an assumption in law (like solicitor and client). The relationship of husband and wife does not come under this category (National Westminster Bank plc v Morgan [1985] AC 686, HL). On the other hand, if the wife is able to prove a relationship in which she had trust and confidence in the husband, this will give rise to a presumption of undue influence. In the case of CICB Mortgages v Pitt [1994] 1 AC 200, HL, the House of Lords declared that obvious disadvantage is only a requisite in cases of supposed undue influence (http://sls.sagepub.com/cgi/content/ abstract/11/2/257 accessed 8 November 2009). It is cases of mortgage where undue influences play a major role when it comes to women. This is due to men’s bad behaviour and inflicted not only by the perpetrators but also solicitors and bank officials. This goes unchecked by courts because men’s bad behaviour is taken for granted by our society. (http://sls.sagepub.com/cgi/content/ abstract/11/2/257 accessed 8 November 2009). Horsham properties group ltd v Paul James Clark and Carol Ann Beech The High Court held in the case of Horsham Properties Group Ltd v Clark and Beech [1] that a mortgagee has the right to exercise its power of sale even before obtaining a court order. This action is not mismatched with the mortgagors human rights. This decision led to the interference by the Secretary of State for Justice and its transfer from the County Court to the High Court. The decision is welcomed by loaners as affirming the conventional understanding of their rights of sale. On the other hand the Government has stated that it is without delay taking into consideration the significances of the decision. This decision has revealed "a potential gap in the legal protection given to homeowners" when the Government is dedicated to make repossession a last resort (http://www.walkermorris.co.uk/content.aspx?id=694 retrieved on 8 November 2009). Facts of the case were that the defendants owned a property which they had mortgaged as security for a loan. The defendants failed to pay. The mortgagee appointed receivers to the property under section 101 of the Law of Property Act 1925. The property was finally sold with the help of the powers in the mortgage deed. The applicant consequently became the registered owner and laid claim for possession against the defendants. The defendants indicated that section 101 impinged their rights under the European Convention on Human Rights. They argued that a mortgagee in this case was allowed to overreach a mortgagors rights in respect of property (http://www. walkermorris.co.uk/content.aspx?id=694 retrieved on 8 November 2009). The defence of the defendants was that the mortgagee had to first obtain a court order before actually selling the property. They stated that it was against the Human Rights Act 1998 which then called for the mortgagee to first get a court order, which would give powers to the court either to adjourn or suspend the creating of the possession order. Section 101 gives a statutory power of sale which is exercisable when the mortgage money becomes due. This will be subject to any opposing intent in the mortgage deed. (http://www.walkermorris.co.uk/content.aspx?id=694 retrieved on 8 November 2009). The claim of violation was based on rights in article 1 of the First Protocol of the Convention which presents: "Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law.” Actually the equity of recovery was a control, and state interference could be by legislation, the court discovered that there was no applicable deprivation under the Convention. The court adjudged that section 101 enforced and did not override the private deal between mortgagor and mortgagee. It stated that a commodious power of sale to mortgagees implementing the normal anticipations of the parties while cutting cost and delay (http://www.1cor.com/1315/?form_1155.replyids=1178 retrieved 8 November 2009). Further, section 101 was articulated to be subject to opposing intention and did not come under the concept of state intervention into private rights. The decision was not strict, arbitrary or prejudiced and its consequence was not only obvious on its face and was imported in the terms of the mortgage itself (http://www.1cor.com /1315/? form_1155.replyids=1178 retrieved 8 November 2009). In a permissibility decision, Wood v. United Kingdom (1997) 24 EHRR 69, the Commission resolved that to the point repossession impoverishes a mortgagor of his/her ownerships, such dispossession are in the public interest. It is in the public interest assuring the payment of contract debts, and is also in conformity with the decrees provided for by law (http://www.1cor.com/1315/?form_1155.replyids=1178 retrieved 8 November 2009). The base of undue influence The basis of undue influence provides an assurance to the guarantor that he/she is not unduly influenced by the bank or even by the principal debtor when the guarantee is signed. In case the undue influence is proved the guarantee may be reserved by the court5 (http://www.eagletraders.com /neg_financial _instruments/guarantees_o.htm retrieved 8 November 2009). Evidence of control alone is not enough and it has to be proved that the guarantor has endured a real loss due to the execution of the guarantee National Westminster Bank plc v Morgan [1985]. The principle of undue influence is established in equity and its footing was submitted in Allcard v Skinner [1887] (http://www.eagletraders.com /neg_financial _instruments/guarantees_o.htm retrieved 8 November 2009). Issues will arise mostly in cases where a wife guarantees her husbands loans or an elderly parent that of their child.  Even though no undue influence is supposed to subsist then it has to be proved on the facts. For instance if a wife has neither an interest in, nor gains a benefit from, the transaction like in  National Westminster Bank plc v Morgan [1985] (http://www.eagletraders.com/neg_financial_instruments/guarantees _o.htm retrieved 8 November 2009).  Reference 1. Official text of the Land Registration Act 1925 as amended and in force today within the United Kingdom, from the UK Statute Law Database 2. UK Land Registry 3. http://www.encyclopedia .com /doc/1O18-equitableinterest.html retrieved November 7, 2009. 4. http://www.swarb.co.uk/lisc/RegiL19801984.php, accessed 8 November 2009 5. http://pntodd.users.netlink.co.uk/cases/cases_f/flegg.htm accessed 8 November 2009 6. http://sls.sagepub.com/cgi/content/ abstract/11/2/257 accessed 8 November 2009 7. http://www.walkermorris.co.uk/content.aspx?id=694 retrieved on 8 November 2009 8. http://www.1cor.com/1315/?form_1155.replyids=1178 retrieved 8 November 2009. 9. http://www.eagletraders.com/neg_financial_instruments/guarantees _o.htm retrieved 8 November 2009 5. See cases: Davies v London and Provincial Marine Insurance Co. [1878]; Lloyds Bank Ltd v Bundy [1975]; Bank of Credit and Commerce International SA v Aboody [1989]; Woodstead Finance Ltd v Petrou [1985]; Goldsworthy v Brickell [1987]. Read More