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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Equity & Law Home Loans Ltd. v Prestidge [1991] EWCA Civ 8 (03 October 1991) URL: http://www.bailii.org/ew/cases/EWCA/Civ/1991/8.html Cite as: [1992] 1 All ER 909, [1992] 1 WLR 137, [1992] WLR 137, [1991] EWCA Civ 8 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE TRURO COUNTY COURT
(MR RECORDER BURNETT, Q.C.)
B e f o r e :
LORD JUSTICE BUTLER-SLOSS
LORD JUSTICE MANN
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EQUITY & LAW HOME LOANS LIMITED |
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-v- |
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KEITH JOHN PRESTIDGE |
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and |
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IVY ANNE BROWN |
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MR STEPHEN LENNARD, instructed by Messrs Winter-Taylors (High Wycombe, Bucks), appeared for the Respondents (Plaintiffs).
The First Defendant did not appear and was not represented.
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Crown Copyright ©
LORD JUSTICE MUSTILL: In November 1987 Mrs Ivy Brown was the owner of 50 Queen Margaret's Road, Coventry. She was a divorced woman who was living with Mr K.J. Prestidge. They decided to move to Pendeen in Cornwall and they set up house with her three children at "Fairview", 11 Jubilee Place in that town. For this purpose Mrs Brown sold the house in Coventry for a net sum of £10,340. The purchase price of "Fairview", namely £39,950, was met as follows. Mrs Brown put in a little less than £10,000 from the proceeds of sale of the Coventry house. The rest was raised by a mortgage of £30,000 taken out with Britannia Building Society (hereafter "Britannia"). The Deed of Charge named Mr Prestidge alone as the borrower, and he alone covenanted to make the repayments. So also with the conveyance of "Fairview" which was in the sole name of Mr Prestidge.
In her evidence in the county court Mrs Brown explained, and the Recorder accepted, that the choice of Mr Prestidge as the only party to the transaction, notwithstanding that Mrs Brown was putting up one quarter of the price, was deliberate and was taken on the advice of their solicitor; the reason being, apparently, that Mrs Brown had a county court judgment outstanding against her, and it was thought that this might make the building society less willing to lend if she was shown as jointly interested in the transaction. At all events, she undoubtedly knew very well that her name did not feature in the documents. In a written statement put in evidence in the county court she gave this explanation:
"I remember being worried about the arrangements and discussing the matter with my parents. As a result, I went back to see Mr. Stewart [he was the solicitor] again and said 'I want my name to be on the title deeds'. I remember Mr. Stewart saying 'You've got nothing to worry about. It's all in black and white. You've put money into this house and you've heard what Mr. Prestidge has said about that and anyway you'll be getting married. If you don't get married, we can always sort this problem out after you've purchased 'Fairview'. I do not recall Mr. Stewart saying anything about the problem being one of time as there was a contract race. Davies Partnership have explained to me that an amendment of the mortgage offer to Mr. Prestidge in order to include me may well have caused a delay and this was perhaps what Bate Edmunds were concerned about. I honestly do not recall any mention of this difficulty. As Mr. Stewart had said I had nothing to worry about, I let the matter go through. I was very concerned throughout the transaction and indeed considered withdrawing from the whole business. I spoke with Prestidge on the telephone in Cornwall on many occasions and his reaction to my saying I would withdraw was to reassure me that as far as he was concerned, 'Fairview' was mine."
"Also, I would be very grateful if you could make up some kind of papers to show I sold my house, and put all I had left to pay a quarter of this one. It might seem silly, but it is best to be careful."
The solicitor does not appear to have replied. However, on 13th April 1988 he wrote to Mr Prestidge and Mrs Brown jointly as follows:
"In the meantime, perhaps you could let me know whether it is still your intention to transfer 'Fairview' into your joint names. If so, I can then retain the Title Deeds from the Britannia for a while longer to deal with these formalities. If not, I must then return them to the Building Society straight away."
"As to the transfer of the property, I would suggest that you wait until you are actually married and then approach a local office of the Britannia Building Society for an application form to transfer the Mortgage into joint names. Once that has been approved, it will be a simple enough matter for us to transfer the property itself."
The two addressees of the letter do not seem to have replied.
A serious problem then arose concerning the sale of the Coventry house. The details do not matter for present purposes. It is sufficient to say that a claim was made by Coventry Council for repayment of a discount allowed to Mrs Brown when she purchased the house, which had originally been council property, and which had not been taken into account when Mrs Brown put up the whole of the net proceeds of sale as her contribution to the purchase of "Fairview". Evidently the difficulties which ensued caused her to lose confidence in her solicitor, for on 21st July she went with Mr Prestidge to consult new solicitors, Messrs Jewill Hill & Bennett, who then took over negotiations concerning the discount. Although both parties were concerned in giving instructions to the new solicitors, Mr Prestidge must already have been planning to cheat Mrs Brown, for only a few days later we find him in touch with mortgage brokers with a view to arranging an advance on "Fairview" in his name alone. The intended mortgagees were Equity & Law Home Loans Limited, the present plaintiffs. In their first letter to Mr Prestidge they made these enquiries:
"You do not appear on the voters roll. Please forward a written explanation along with documentary evidence of your address ie. Driving Licence, Bank Statement, etc. Please confirm whether any other person over the age of 17 years will be residing in the property. Could you please confirm what Life Assurance Policy you require in conjunction with your mortgage."
Mr Prestidge replied on 17th August:
"As requested in your letter dated the 15-8-88 I am not on the Voters Roll because it is not brought up to date until October each year. I enclose evidence of my address. Also, the only other person over the age of 17 residing at the property will be a Mrs Ivy Brown who is my common law wife."
Further on in time still Mr Prestidge filled in an enquiry form relating to the mortgage, in which in response to a question, "Is this mortgage either to purchase a new residence or to improve your main residence?" he had ticked the box relating to improvements, and further on in the form under the heading "Non-Owner Occupant's Details" is written the name Ivy Ann Brown. In the box marked "Reasons for Occupation or Relationship to Borrower" he had written "Common Law Wife", and under the heading "Have They Executed Deed of Consent" he had ticked the box marked "No", and had added "but will".
The plaintiffs were evidently reassured by this response, and they made a formal offer, which was accepted, and after some delay an advance was made of £42,835 net, secured by a charge on "Fairview" in the name of Mr Prestidge. It seems that part of this sum was used to redeem the mortgage with Britannia Building Society and that the rest was pocketed by Mr Prestidge.
At the hearing in the county court Mrs Brown gave evidence, which the learned Recorder accepted, that she knew nothing at the time about the redemption of the Britannia mortgage and the re-mortgage to Equity & Law, and only found out about these transactions in late November 1988. The firm of solicitors who acted for Mr Prestidge in the redemption and re-mortgage have in turn asserted in correspondence that they did not know that Mrs Brown even existed, let alone that she was residing in the property.
Not long afterwards the relationship between Mr Prestidge and Mrs Brown broke down, and he ceased to reside at "Fairview". He never made any repayment under the Equity & Law mortgage, and Mrs Brown (who by now was living on social security) could not do so. Subsequently, Mr Prestidge informally renounced all his title to the house, but no documents have been executed to recognise whatever interest therein Mrs Brown may possess.
"I am prepared to extend the Henninq case to this particular set of facts. Mrs. Brown should be put in the same position as if the mortgage was the same as that originally obtained. I again quote from the Henning case at page 609 E. 'Mrs. Henning knew of and supported the proposal to raise the purchase price of the Devon house on mortgage'. I think that if one analyses the matter this way, her consent seems to be the right basis for analysis. Mrs. Brown did authorise Mr. Prestidge to raise nearly £30,000 from a lending institution; what Mr. Prestidge did would have been quite unarguably justified if there had been substituted one lender for another in the same sum because she had agreed that £30,000 although not more should be borrowed."
In the result a possession order was made, coupled with an order in the following terms:
"... out of the proceeds of such sale the Plaintiff be entitled to enforce its security to such extent as would represent an advance of £29,918.40 on 21st October 1988 and accrued interest thereon".
In the event we have not been called upon to decide the first of these questions. In the light of the evidence, read against the background of Grant v. Edwards [1986] Ch 638, the respondent building society has not sought to argue, and could not have hoped to argue with success, that the appellant had no beneficial interest at all. Furthermore, in the absence of any cross-appeal we need not enter into the extent of that interest. Perhaps in some other case it may be necessary to consider what the position is where the party with the beneficial interest puts up the whole or a substantial portion of the capital outlay, but assumes no personal responsibility for the repayment of the sums borrowed to finance the balance. Here, we can start on the simple basis that, as between herself and Mr Prestidge, the appellant had the entire beneficial interest in "Fairview", as indeed Mr Prestidge was later to acknowledge.
"Therefore, in order to determine what, on the assumption made, is the nature of Mrs. Henning's right in the villa, it is necessary first to determine from the parties' actions what were their express or imputed intentions as to her beneficial interest.
'I would have realised that the building society were expecting to be able to rely on the full value of the house as security of loan - but I never really thought about it - if somebody had explained it to me as you have now I would have appreciated it.'
So it seems to me that one must ask this question:
"What intention must one impute to the parties as regards the position which would exist if the mortgage which had been obtained in order to enable the purchase of the house, and which the parties intended to have priority over Mrs Brown's beneficial interest, should be replaced by another mortgage on no less favourable terms?"
In my judgment, this question need only to be posed for it to be answered in favour of the new mortgagees. Any other answer would be absurd, for it would mean that if Mr Prestidge had in good faith and without the knowledge of the appellant transferred the mortgage to another society in order (say) to obtain a more favourable rate of interest, Mrs Brown would suddenly receive a windfall in the shape of the removal of the encumbrance which she had intended should be created in consequence of a transaction which could not do her any harm and of which she was entirely ignorant.
Finally, I must add two comments on an argument advanced by Mr Brown based on the failure by the respondents to follow up the clear hints in the documents that someone besides Mr Prestidge might have an interest in the house. In the form deployed by Mr Brown, this was a complaint that if the respondents had been more alert and had made more enquiries the appellant would have realised that Mr Prestidge was up to no good and that she was being left with a property encumbered by a mortgage whose instalments she could not pay. In such circumstances she would, so it is said, have prevailed on the Department of Social Security to keep up the instalments, something which they now will not do because the unpaid sums have in the interval become so greatly increased. Thus, she is being made homeless through a combination of Mr Prestidge's dishonesty and the respondent's incompetence and, she might well add, some serious mistakes by her first solicitors. I am by no means convinced that this will be the practical result of upholding the judgment, for it may happen that a result can be negotiated which will keep Mrs Brown and her family in the house, whilst recognising the full mutual rights of the parties. I certainly hope so. But in any event I am quite unable to see how the respondents could be regarded as owing towards her any duty of care which could alter the consequences of her initial imputed consent to the encumbering of the property.