The court will look to the realities of the relationship between the mortgagors and will not be governed by the terms of the mortgage instrument if they do not accord with the actual facts.
Held: the court accepted that an equity of exoneration could apply after transactions between a father and his son.
Foster J said: ”As between the bankrupt’s father and the bankrupt, and bearing in mind that the father is admittedly only a surety, it should be implied that their intention was that the bankrupt’s beneficial interest should bear the burden. If that is so, it seems to me that the bankrupt’s interest vested in his trustee in bankruptcy, subject to an inchoate right of indemnity, if the surety were called on to pay, or the debt fell to be discharged, as it would have to be, out of the proceeds of sale of the property. Alternatively, I think that the father could be regarded as having an actual charge on the bankrupt’s interest within the principle discussed by Warrington J’
Judges:
Foster J and Fox J
Citations:
[1976] 1 WLR 952, [1976] 2 All ER 1010
Jurisdiction:
England and Wales
Cited by:
Cited – In Re Pittortou (a bankrupt) ChD 1985
H and W charged the property to secure the H’s overdrawn bank account. The account was used both for his business and for payment of expenses relating to the matrimonial home. H was adjudicated bankrupt. W sought her equity to be exonerated from H’s . .
Cited – Day v Shaw and Another ChD 17-Jan-2014
Mr and Mrs Shaw had granted a second charge over their jointly-owned matrimonial home to secure the personal guarantee given by their daughter and by Mr Shaw in respect of a bank loan to a company (Avon). Their daughter and Mr Shaw were the . .
Cited – Armstrong v Onyearu and Another CA 11-Apr-2017
Exoneration of partner’s equity on insolvency
The court considered the equity of exoneration, where property jointly owned by A and B is charged to secure the debts of B only, A is or may be entitled to a charge over B’s share of the property to the extent that B’s debts are paid out of A’s . .
Lists of cited by and citing cases may be incomplete.
Equity
Updated: 04 May 2022; Ref: scu.567250