Scott v Southern Pacific Mortgages Ltd and Others: SC 22 Oct 2014

The appellant challenged a sale and rent back transaction. He said that the proposed purchaser had misrepresented the transaction to them. The Court was asked s whether the home owners had interests whose priority was protected by virtue of section 29(2)(a)(ii) of, and Schedule 3, paragraph 2, to the Land Registration Act 2002.
Held: The appeal failed. The vendors acquired no more than personal rights against the purchasers when they agreed to sell their properties on the basis of the purchasers’ promises that they would be entitled to remain in occupation. Those rights would only become proprietary and capable of taking priority over a mortgage when they were fed by the purchasers’ acquisition of the legal estate on completion, and then Cann would apply, with the effect that the acquisition of the legal estate and the grant of the charge would be one indivisible transaction, and the vendors would not be able to assert against the lenders their interests arising only on completion.
Lady Hale said: ‘the purchaser of land cannot create a proprietary interest in the land, which is capable of being an overriding interest, until his contract has been completed. If all the purchaser ever acquires is an equity of redemption, he cannot create an interest which is inconsistent with the terms of his mortgage.’

Lady Hale, Lord Wilson, Lord Sumption, Lord Reed, Lord Collins
[2014] UKSC 52, [2014] HLR 48, [2015] 1 AC 385, [2014] 3 WLR 1163, [2014] WLR(D) 447, UKSC 2012/0102
Bailii, Bailii Summary, WLRD, Bailii Summary, SC, SC Summary
Financial Services and Markets Act 2000, Land Registration Act 2002 29(2)(a)(ii)
England and Wales
Appeal fromCook v The Mortgage Business Plc CA 24-Jan-2012
The land owners sought relief from possession orders made under mortgages given in equity release schemes: ‘If the purchaser raises all or part of the purchase price on mortgage, and then defaults, the issue arises whether the mortgagee’s right to . .
CitedBannister v Bannister 1948
A claim that the owner had agreed to let the occupier live in a cottage rent free for as long as she wished was treated as a claim based on constructive trust, on the basis that the purchaser fraudulently set up ‘the absolute character of the . .
MentionedChurch of England Buidling Society v Piskor CA 1954
Weekly tenancies had been granted by the purchaser of the property, title to which was unregistered, before completion. The society now sought possession of the property. The tenants argued that although their tenancies were equitable, they were . .
CitedStrand Securities Ltd v Caswell CA 2-Feb-1965
The leaving of furniture in a flat or having a key to the flat or making occasional use of it was not enough to constitute actual occupation. Where A permits B to occupy land on B’s own behalf by way of gratuitous licence, A’s capacity as licensor . .
CitedLloyds Bank plc v Rosset CA 13-May-1988
Claim by a wife that she has a beneficial interest in a house registered in the sole name of her husband and that her interest has priority over the rights of a bank under a legal charge executed without her knowledge. The case raises a point of . .
CitedShaw v Foster HL 14-Mar-1872
As regards the trusteeship which arises for a vendor of land after exchange of contracts: ‘there cannot be any doubt of the relation subsisting in the eye of a Court of Equity between the vendor and the purchaser. The vendor was a trustee of the . .
CitedLysaght v Edwards ChD 20-Mar-1876
The testator had agreed to sell a farm, but died before completion.
Held: The farm passed under a devise of ‘all the real estate which at my death might be vested in me as trustee.’ On the making of contract for the purchase of land, the . .
CitedEgmont v Smith CA 1877
The court discussed the position of a vendor of land between exchange and completion: ‘He is certainly a trustee for the purchaser, a trustee, no doubt, with peculiar duties and liabilities, for it is a fallacy to suppose that every trustee has the . .
CitedRayner v Preston CA 8-Apr-1881
The vendors agreed to sell a house which they had insured against fire risk. The house was damaged by fire after contract but before completion, and the issue was whether the purchaser was entitled to the benefit of the insurance.
Held: . .
CitedCumberland Consolidated Holdings Limited v Ireland CA 1946
A vendor of a warehouse left in the cellars of a warehouse rubbish including bags of hardened cement which would be difficult to remove, and which affected the value of the property and precluded the proper use of the cellar. The buyer complained . .
CitedAbbey National Building Society v Cann HL 29-Mar-1990
Registered land was bought with an advance from the plaintiff. The transfer and charge were registered one month later, but in the meantime, the buyer’s parents moved in. When the buyer defaulted, his mother resisted possession proceedings, saying . .
CitedLloyds Bank plc v Rosset HL 29-Mar-1990
The house had been bought during the marriage but in the husband’s sole name. The plaintiff’s charge secured the husband’s overdraft. The bank issued possession proceedings. Mr Rosset had left, but Mrs Rosset claimed, as against the bank an interest . .
CitedMortgage Corporation Ltd v Nationwide Credit Corporation Ltd, Nationwide Building Society CA 20-May-1993
A notice of a charge, short of registration, does not give priority over an earlier un-registered charge. The effect of the notice was limited to that stated in the Act. . .
CitedNational and Provincial Building Society v Ahmed CA 1995
A mortgagor’s equity of redemption is extinguished when the mortgagee, in the exercise of his power of sale, enters into a contract of sale of the mortgaged property.
Millett LJ said: ‘The purpose of making an order under section 36 of the . .
CitedNationwide Anglia Building Society v Ahmed CA 1995
The First Defendant agreed to purchase a business from the Second Defendant for andpound;160,000. andpound;80,000 was raised by way of a secured loan from the plaintiff and was paid to the Second Defendant. The balance of andpound;80,000 was left . .
CitedYaxley v Gotts and Another CA 24-Jun-1999
Oral Agreement Creating Proprietory Estoppel
The defendant offered to give to the Plaintiff, a builder, the ground floor of a property in return for converting the house, and then managing it. They were friends, and the oral offer was accepted. The property was then actually bought in the name . .
CitedBirmingham Midshires Mortgage Services Ltd v Sabherwal CA 17-Dec-1999
An equity arising from a proprietary estoppel is not an ‘equitable interest’ capable of being overreached pursuant to section 2 of the Law of Property Act 1925. . .
CitedEnglewood Properties Limited v Patel and Another ChD 16-Feb-2005
The claimant was a property developer, which sought to sell a row of shops at auction. One lot was a Woolworths store, where the company owned both freehold and leasehold interests, with Woolworths occupying an underlease, which the claimant had . .
CitedTasker v Small 3-Jun-1836
The words in a Settlement to raise Money by ‘Mortgage, Annuity or otherwise,’ authorises a Sale of a reversionary Estate.
Lord Cottenham LC said that the rule by which a purchaser becomes in equity the owner of the property sold ‘applies only . .
CitedInland Revenue Commissioners v G Angus and Co CA 1889
Lord Esher MR rejected an argument that a specifically enforceable contract or agreement for the sale of land is in truth a conveyance: ‘And it is said that, when an agreement is such that equity will grant specific performance of it, it is to be . .
CitedUniversal Permanent Building Society v Cooke CA 1951
The mortgagor agreed to buy a shop with living accommodation above. She let the flat to her sister before completion, and by the date of the mortgage, the sister was in possession. After default, the lender sought possession under the mortgage, but . .
ApprovedCoventry Permanent Economic Building Society v Jones ChD 1951
The contracting purchaser of a property agreed, prior to completion, to let the ground floor of the property to two tenants. She subsequently borrowed a sum of money from the plaintiffs to enable her to complete the purchase. On completion, she . .
CitedOughtred v Inland Revenue Commissioners HL 4-Nov-1959
The taxpayer and her son owned through a trust the entire beneficial interest in the shares of a company. She agreed to transfer other shares to him in return for his interest in the shares subject to the trust, releasing the trust. The Revenue . .
CitedChang v Registrar of Titles 11-Feb-1976
(High Court of Australia) The court discussed the trusteeship arising on a contract for the sale of land.
Mason J said: ‘It has long been established that a vendor of real estate under a valid contract of sale is a trustee of the property sold . .
CitedBerkley v Poulett and others CA 29-Oct-1976
Lord Poulett sold the Hinton St George Estate to X, and X sub-sold the house and grounds to Y. Both transactions were subsequently completed. Y brought action against the executors of Lord Poulett, and the main question which subsequently arose was . .
CitedKern Corporation Ltd v Walter Reid Trading Pty Ltd 1987
(High Court of Australia) The court discussed the status of the owner of land between exchange and completion on a sale: ‘it is both inaccurate and misleading to speak of the unpaid vendor under an uncompleted contract as a trustee for the purchaser . .
CitedBirmingham Midshires Mortgage Services Ltd v Sabherwal CA 17-Dec-1999
An equity arising from a proprietary estoppel is not an ‘equitable interest’ capable of being overreached pursuant to section 2 of the Law of Property Act 1925. . .
CitedTanwar Enterprises Pty Ltd v Cauchi 7-Oct-2003
High Court of Australia – Vendor and purchaser – Contracts for sale of land – Default by purchaser – Notice of termination – Supplemental deed requiring completion by stipulated date – Time of essence – Default by purchaser – Notice of termination – . .
CitedJerome v Kelly (Her Majesty’s Inspector of Taxes) HL 13-May-2004
In 1987, trustees holding land for various beneficiaries in undivided shares entered into a contract to sell it to a purchaser. In 1989 Mr and Mrs Jerome, who were absolutely entitled to interests in the land, assigned part of their beneficial . .
CitedCuthbertson v Irving 24-Jun-1859
Martin B said: ‘There are some points in the law relating to estoppels which seem clear. First, when a lessor without any legal estate or title demises to another, the parties themselves are estopped from disputing the validity of the lease on that . .
CitedRe Birmingham, deceased; Savage v Stannard 1957
An unpaid vendor’s lien arises the moment the contract is entered into. It is discharged on completion to the extent that the purchase money is paid. . .
CitedSargaison v Roberts ChD 1969
The court was asked as to a taxpayer’s entitlement to tax allowances under section 314 of the 1952 Act, and whether, for the purposes of the legislation, a transfer by the taxpayer into trust of a farm and the simultaneous grant by the trustees to . .
CitedLondon and Cheshire Insurance Co Ltd v Laplagrene Property Co Ltd ChD 1971
. .
CitedWatson v Goldsbrough 1986
Licensees of land owned by the wife’s parents agreed that an angling club could have fishing rights if they improved the ponds.
Held: The estoppel was fed when the licensees acquired the legal estate. . .
CitedUCB Bank plc v Beasley 1995
. .
CitedBarclays Bank Plc v Estates and Commercial Limited CA 20-Feb-1996
Millett LJ discussed the assertion of a vendor’s lien where a third party would be adversely affected: ‘A party with an equitable charge can be taken to agree to the postponement of his property against any party who was allowed to his knowledge to . .
CitedBell and others v General Accident Fire and Life Assurance Corporation Ltd CA 11-Dec-1997
The court was asked: ‘whether a company which has granted a lease of business premises in circumstances which would ordinarily mean that the provisions of the Landlord and Tenant Act 1954 (‘the Act’) applied can invoke s. 24 A of that Act even . .
CitedCuthbertson v Irving 7-Jul-1860
Held: Decision affirmed. Neither the lessee nor the lessor can dispute one another’s title and if the lessor without a legal estate later acquires one, the estoppel is ‘fed’ . .
Wrongly DecidedWoolwich Equitable Building Society v Marshall ChD 1952
. .
CitedWilliams and Glyn’s Bank Ltd v Boland HL 19-Jun-1980
Wife in Occupation had Overriding Interest
The wife had made a substantial financial contribution to the purchase price of the house which was registered only in her husband’s name, and charged to the bank. The bank sought possession. The wife resisted saying that she had an overriding . .
CitedPaddington Building Society v Mendelsohn 1985
(Bristol County Court) The relevant date for identifying occupation for section 70 was the date of execution of the building society’s charge. On appeal the case was decided on a different point. . .
CitedBristol and West Building Society v Henning CA 2-Apr-1985
. .
CitedWaya, Regina v SC 14-Nov-2012
The defendant appealed against confiscation orders made under the 2002 Act. He had bought a flat with a substantial deposit from his own resources, and the balance from a lender. That lender was repaid after he took a replacement loan. He was later . .

Lists of cited by and citing cases may be incomplete.

Registered Land, Financial Services

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Updated: 01 November 2021; Ref: scu.537832