Business Law Assignment: Equitable Interest and Mortgage Priority

This business law assignment presents a case study revolving around equitable interest, focusing on Jane's rights to an apartment against a bank seeking eviction. It analyzes the concept of overriding interest, referencing key cases like Williams & Glyn’s Bank v Boland, Gissing v Gissing, and Eves v Eves, to determine if Jane's contributions and occupation grant her beneficial interest. The analysis also considers proprietary estoppel, citing Jennings v Rice and Tanner v Tanner, to argue against Jane's eviction. The solution proposes dividing the proceeds of the house sale between Jane and the bank to balance fairness. The second part explores how Jane's prior consent to the mortgage would alter the ruling, referencing Paddington Building Society v Mendelsohn and Bristol and West Building Society v Henning to conclude that her knowledge of the mortgage risks would negate her equitable rights. The assignment concludes that Jane's awareness of the mortgage changes the outcome, favoring the bank's claim in the second scenario.

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Business Law Assignment
Individual Assignment
03-Dec-17
(Student Details: )

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Introduction
Equitable interest is a concept which covers an interest held by a person due to the virtue
of equitable title, or something which is claimed on equitable grounds, and an example of this is
the interest of beneficiary interest (Atkins, 2015). This equitable title shows the beneficial
interest which is held in the property, as a result of which the holder has the right of acquisition
of the formal legal title. The right in equity is formed through the equitable interest protected
through the equitable remedies (Moffat, Bean & Probert, 2009). The given case study revolves
around this concept and the ones associated with it.
Part 1
Issue
The defendant in the case study was Jane and the plaintiff would be the bank. The main
issue stems from the legal rights which are available with Jane for the apartment given in the
case study. The legal rights here are available as a result of the possibility of a case of eviction
being brought by bank against Jane.
Rule
Overriding interest refers to the general rules related to conveyancing under the land law.
This requires the rights and interests regarding a piece of land to be written on register, which in
turn enables the entry on the land (Dixon, 2016). Williams & Glyn’s Bank v Boland [1981] AC
487 was a case in which the house was solely registered in the name of husband and the wife had
made significant contributions towards the payment of mortgage and purchase price as a result of

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which she was entitled to the beneficial interest of the house. The husband took the loan on
house and defaulted in making payments. Upon the bank claiming the possession of house, the
wife claimed overriding interest due to the beneficial interest. The court held that as a result of
the actual occupation of wife, she did hold the beneficial interest which was overriding. As a
result of this, the claim of the bank became unsuccessful (E-Law Resources, 2017a).
In Gissing v Gissing [1971] AC 881, there was a lack of declaration regarding the trust
which implied the presence of constructive trust. The court held that where as a result of the
inducement of trustee, another individual acted in their own detriment, a beneficiary interest in
land would again be attained (E-Law Resources, 2017b).
Eves v Eves [1975] 1 WLR 1338 saw the claimant and defendant being in a relationship,
where the claimant was impregnated and the promise was made by the defendant to marry the
claimant upon divorcing his first wife. The two bought a home but the same was in the
defendant’s name only. There was no contribution of the claimant in a direct manner towards the
house’s purchase price; though she had carried on the majority work at this home. After the
divorce was completed and the duo had another child, the defendant refused to marry the
claimant. As a result of another woman, he left the claimant. This led to the Court of Appeal
holding that the claimant had the right to get one quarter of the beneficial inertest as a result of
operation of constructive trust in this case (E-Law Resources, 2017c).
Through the concept of proprietary interest, a proprietary interest in land is created
particularly when the standard formalities are not present. The operation of this is on the
unconscionable behaviour for awarding the interest in land as a remedy, in such cases where the
denial of entitlement of the claimant would be unconscionable in the eyes of law (Wilken &

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Ghaly, 2012). In Jennings v Rice [2002] EWCA Civ 159, the defendant had employed the
plaintiff as handyman. The plaintiff, with time, starting looking after the defendant till his death
and the plaintiff was never paid anything. The plaintiff was instead promised to be given the
house and furniture once the defendant died. This led to the amount of £200,000 being awarded
to the plaintiff for the promissory estoppel (Ball, 2015a).
Tanner v Tanner (No 2) [1975] 1 WLR 1346 saw the defendant giving birth to the twins
in a rented accommodation and the father being the claimant. This accommodation was given up
for a better home and she shifted with the claimant. The claimant was offered £4000 for
removing the plaintiff and it was held by the court that the defendant could not be forced to leave
(Ball, 2015b).
Application
For a claim of equitable interest to be held by the court, it has to be shown that Jane
contributed to the same. Jane had done most of the household work and undertook the minor
repairs. Her contribution in the purchase of home was not direct, but indirect. John’s statement
covered common interest in terms of the house being of Jane as much it was of John. This led to
Jane relying on the promise made and the eviction being unfair in such case.
Applying Williams & Glyn’s Bank v Boland, the virtue of actual occupation of Jane
would make her beneficial interest overriding and this would make the bank unsuccessful in their
claims for possession of home. Applying Eves v Eves, a beneficial interest can be claimed by
Jane for the house. Tanner v Tanner also provides that Jane cannot be evicted by John from the
home. And based on Jennings v Rice, evicting Jane would be wrong due to the detriment and the
proportional judgement of the plaintiff. As a result of this, the home can be sold by the court and

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the proceeds be divided between Jane and Bank. The reason for division of proceeds is due to the
fact that the bank cannot be left to bear a loss for the undertaken actions of John and this begs the
need of equitable distribution.
Conclusion
Thus, Jane cannot be evicted by the bank and for fairness purposes, the proceeds of the
house have to be divided between Jane and the Bank.
Part 2
Issue
The key issue of this case relates to the possibility of the ruling being different where
Jane had given consent for the mortgage to the bank.
Rule
When an individual has the information or the knowledge in context of the risks
associated with the mortgage, the decision in matter of equitable interest can be changed, along
with the associated rights in such accommodation (Hudson, 2013). Paddington Building Society
v Mendelsohn (1985) 50 P & CR 244 was a case in which the registered title had been purchased
in his own name by S and the money for this purchase was supplied by his mother, who was
defendant in this case, and the plaintiff was the mortgage provider, i.e., Paddington Building
Society (Swarb, 2017). It was claimed by the defendant that the beneficial trust was held by her
in the implied trust and with this, she held the interest which was overriding to that of
Paddington Building Society, as a result of the actual occupation in the property. It was held by
the Court of Appeal that the mother had the requisite knowledge, in addition to having the intent

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at the date of purchase. This was also in context of the interest being held by Paddington
Building Society and the implication by her that would concede Paddington Building Society’s
priority. As a result of this, the defendant could not claim the beneficial interest and was
estopped from doing the same (Lexicon, 2008).
Bristol and West Building Society v Henning [1985] 1 WLR 778 was a case where a
similar ruling had been given by the court. This case saw the defendant living in the home along
with his mistress and they had children despite not being married. The lawful owner of the house
was solely the defendant and the requisite deposit amount was paid by him, partly in cash and the
remaining through the mortgage loan. He moved out of this place after some time and stopped
the mortgage payments. The key issue of this case before the court was to decide on the matter of
possession to be taken by the bank from the mistress. The court considered all the facts and ruled
in bank’s favour. They further held that there was a lack of beneficial interest in this case for the
house by the mistress as she had provided consent for the mortgage (Ball, 2015c).
Application
The given case shows that Jane did hold the requisite knowledge regarding the mortgage
and this was evidence enough that Jane held the knowledge of risk related to this mortgagee. As
a result of this, she would be deemed to be aware of the fact that in case the payments are not
made for the mortgage, she could be evicted. Applying the case of Paddington Building Society v
Mendelsohn, the beneficial interest would not be held by Jane as she knew about the mortgage.
Where the case of Bristol and West Building Society v Henning is applied, the bank would get
the right of attaining possession, along with the beneficial interest in the home.

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Conclusion
Thus, it can be summarized in this case that Jane did have the requisite knowledge of
mortgage which would mean that she would not have the rights which she held in the previous
task.

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References
Atkins, S. (2015). Equity and Trusts (2nd ed.). Oxon: Routledge.
Ball, J. (2015a). Jennings v Rice [2002]. Retrieved from:
https://webstroke.co.uk/law/cases/jennings-v-rice-2002
Ball, J. (2015b). Tanner v Tanner [1975]. Retrieved from:
https://webstroke.co.uk/law/cases/tanner-v-tanner-1975
Ball, J. (2015c). Bristol & West Building Society v Henning [1985]. Retrieved from:
https://webstroke.co.uk/law/cases/bristol-west-building-society-v-henning-1985
Dixon, M. (2016). Modern Land Law (10th ed.). Oxon: Routledge.
E-Law Resources. (2017a). Williams & Glyn’s Bank v Boland [1981] AC 487 House of Lords.
Retrieved from: http://e-lawresources.co.uk/Land/Williams--and--Glyns-Bank-v-
Boland.php
E-Law Resources. (2017b). Constructive trusts. Retrieved from:
http://e-lawresources.co.uk/Land/Constructive-trusts.php
E-Law Resources. (2017c). Eves v Eves [1975] 1 WLR 1338 Court of Appeal. Retrieved from:
http://e-lawresources.co.uk/Land/Eves-v-Eves.php
Hudson, A. (2013). Equity & Trusts (3rd ed.) London: Cavendish Publishing Limited.
Lexicon. (2008). Land cases. Retrieved from: http://littlelawlexicon.blogspot.in/2008/12/land-
cases.html

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Moffat, G., Bean, G., & Probert, R. (2009). Trusts Law: Text and Materials (5th ed.). Cambridge:
Cambridge University Press.
Swarb. (2017). Paddington Building Society v Mendelsohn: 1985. Retrieved from:
http://swarb.co.uk/paddington-building-society-v-mendelsohn-1985/
Wilken, S., & Ghaly, K. (2012). The Law of Waiver, Variation and Estoppel (2nd ed.). Oxford:
Oxford University Press.