The bank took a second charge over property, but failed to get it registered. The chargors fell into debt and bankruptcy, and the property was sold. The proceeds were used to discharge the first charge, and then repay unsecured creditors. The bank claimed the money had been received on constructive trust.
Held: The court confirmed that the failure to register the charge only voided it as against the purchaser. When the bank’s security was destroyed, a security interest was created automatically in the asset which replaced it. The sale by the husband and wife was not authorised by the bank, and the judge had concluded correctly.
Arden LJ stated: ‘if . . the mortgagor makes a disposition of the mortgaged property in a manner which destroys the mortgagee(s estate in the mortgaged property, a security interest in the property which represents the mortgaged property automatically and as a matter of law comes into existence as from the moment that the mortgagor becomes entitled to their property.’
Woolf LCJ, Tuckey, Arden LJJ
Gazette 09-Aug-2001,  EWCA Civ 1223,  1 P and CR DG7,  BPIR 25,  31 EGCS 103,  NPC 124
Law of Property Act 1925 63
England and Wales
Cited – Banner v Berridge 1881
Cited – Charles v Jones 1887
Cited – The Benwell Tower 1895
Cited – Raffelsen Zentralbank Osterreich Ag v Five Star General Trading Llc and Others CA 1-Mar-2001
An assigned marine insurance policy was subject to a claim. The issue was the ability of an assignee to claim as a claim in contract where the proper law was that under which the contract was made, or a claim of an intangible right to claim against . .
Cited – Wight, Pilling, Mackey v Eckhardt Marine GmbH PC 14-May-2003
(Cayman Islands) An international bank went into liquidation in the Cayman Islands, with liabilities in Bangladesh. A new bank was created in Bangladesh, and the applicants sought to make the new bank liable, and through them the liquidators.
Cited – Menelaou v Bank of Cyprus Plc ChD 19-Jul-2012
On the sale of the claimant’s property, the solicitors received agreement by the defendant bank to the release of their charge over the property for a certainsum, being less than the loan outstanding. In the course of discharging the loan, a bank . .
Cited – Bank of Cyprus UK Ltd v Menelaou SC 4-Nov-2015
The bank customers, now appellants, redeemed a mortgage over their property, and the property was transferred to family members, who in turn borrowed from the same lender. A bank employee simply changed the name on the mortgage. This was ineffective . .
These lists may be incomplete.
Updated: 02 January 2021; Ref: scu.147410