Paddington BS v Mendelsohn (1985) 50 P & CR 244

Key point

  • Consent of a beneficiary to a mortgage over land he is entitled to can be implied where there is actual knowledge of the mortgage and the mortgage is necessary to fund the purchase

Facts

  • A mother (D) contributed to her son’s purchase of a lease, which she knew required a mortgage for the remainder
  • The son obtained a mortgage from Paddington building society (C), who had no notice of D’s interest in the flat
  • The son defaulted and C sought possession
  • D argued that she had an overriding interest by actual occupation

Held (Court of Appeal)

  • Order for possession granted; D did not have an overriding interest as she had impliedly consented to the mortgage

Browne-Wilkinson LJ

  • Since D knew and intended not only that the mortgage was to be granted to the society but that without the mortgage they could not acquire the flat, the only possible intention to impute to the parties was an intention that the society’s rights took priority over her rights
  • Even assuming (the flat being registered), that D was in actual occupation and that her interest was an overriding interest within section 70(1)(g) of the Land Registration Act 1925, the quality of her rights would not have given rise to priority over the society’s rights
  • Once it was established that the imputed intention must be that the D’s rights were subject to the mortgage, s70 cannot enlarge those rights into any greater rights