Castle Phillips Finance v Piddington: CA 1995

The wife charged the matrimonial home to Lloyds to secure the husband’s indebtedness. The husband subsequently agreed with Barclays for the indebtedness to be refinanced. The husband and an accomplice forged her signature on a transfer of the matrimonial home into joint names and on a remortgage. When Barclays pressed for repayment, the husband applied to the claimant, which agreed to make a loan. The claimants’ loan was applied in paying off the husband’s indebtedness to Barclays, including that part of Barclays’ indebtedness which arose from its having paid off Lloyds. The husband defaulted in repaying the claimant’s loan, and the claimant commenced proceedings against the husband and the wife claiming possession of the matrimonial home on the basis that it was entitled to be subrogated to Barclays. The judge held that Barclays was entitled by subrogation to the Lloyds charge and that the wife was bound in respect of so much of the secured indebtedness under the Barclays charge as derived from the payment by Barclays to discharge the Lloyds charge. She appealed, saying the conditions for subrogation were not satisfied. The claimant contended that it was entitled to be subrogated to the Lloyds charge in respect of the sum paid to Barclays out of the claimant’s loan. Counsel for the claimant submitted that, under the principle of subrogation, the claimant was entitled to step into the shoes of Barclays, which (to the extent of andpound;4735.39) was in turn entitled to step into the shoes of Lloyds and thus to enforce the Lloyds charge.
Held: That submission was accepted. Subrogation ’embraces more than a single concept in English law’. ‘I do not think it is open to this court to reinterpret the Butler v. Rice line of authorities in the way which [counsel for the wife] would have us do in the light of the approval of the broad principle laid down in such cases and approved in decisions binding on us. I feel it right to add that for my part, given that the court in a case like the present is having to choose between allocating a loss, either to the innocent mortgagor or to the innocent provider of the moneys, I do not regard it as unjust that in accordance with Butler v. Rice the loss should fall on the mortgagor who otherwise takes a windfall benefit. I say that despite the fact that, as [counsel for the wife] rightly stressed, the wife in the present case had no contract with [the claimant], was not the principal debtor, knew nothing of the transaction under which [the claimant] lent money to the husband and has never ratified the discharge of the mortgage on the property. [Counsel for the wife] also advanced the further argument that it would be an unwarranted extension of the Butler v. Rice principle if [the claimant] were to be held entitled to step into the shoes of Lloyds by what he called sub-subrogation. For my part, I see no conceptual difficulty in this. As the judge held, Barclays was entitled to the Lloyds security by subrogation when Barclays discharged the debt to Lloyds, thinking that it was to obtain an effective security for its own money. When [the claimant] discharged the debt to Barclays, thinking that it was obtaining an effective security for its own money, it became entitled to the same security as Barclays [had]. I would, therefore, hold that by subrogation [the claimant] became entitled to the same security as that held by Barclays, [that] is to say the Lloyds charge.’ The court rejected the argument advanced on behalf of the claimant based on imputed consent on the part of the wife.
Sir John May, McCowan LJ, McCowan LJ
[1995] 1 FLR 783
England and Wales
CitedButler v Rice 1910
The wife owned a Bristol property and a Cardiff property subject to a andpound;450 charge in favour of a bank with whom the title deeds had been deposited. The husband asked the plaintiff to lend him andpound;450 to pay off the mortgage. The . .
CitedEquity and Law Home Loans Ltd v Prestidge CA 1992
A house was bought in the name of one partner in an unmarried couple. It was subject to a mortgage, and the non-owner contributed a capital sum. The landowner later remortgaged for a larger sum, but without the partner’s consent. The landowner then . .
CitedOrakpo v Manson Investments Ltd HL 1977
Transactions were entered into under which loans were made to enable the borrower to acquire and develop certain properties were held to be unenforceable under the 1927 Act. The effect was to enrich the borrower, who had fallen into arrears of . .

Cited by:
CitedUCB Group Ltd v Hedworth CA 4-Dec-2003
The defendant challenged the claimant’s right to possession under a legal charge. She appealed a finding that she had not established the undue influence of her husband, a solicitor.
Held: A lender who received a voidable security was entitled . .

These lists may be incomplete.
Updated: 02 June 2021; Ref: scu.190506