Abbey National Building Society v Cann

Abbey National Building Society v Cann [1990] UKHL 3 is an English land law case concerning the right of a person with an equitable interest in a home to remain in actual occupation, if a bank has a charge and is seeking repossession. A controversial decision, it held that "actual occupation" entails some degree of permanence, and that if someone buys a property with a mortgage, the bank's charge is to be treated as having priority over any equitable interest.

Facts

George Cann lived with his mother, Daisy, in Island Road, Mitcham. She had contributed to the purchase price, and so George held the house on trust for himself and her, even though it was solely registered in her name. They moved to a smaller house that cost £4000 more in South Lodge Avenue. To buy it they used the proceeds of selling the Island Road home and got a mortgage from the Abbey National. Daisy knew this was necessary. She did not know that George had also taken another mortgage for £25,000. Later he could not repay and Abbey National wished to repossess the property. Daisy, whose new partner was also living there, argued that she had a right to remain in the home, because her equitable proprietary right arose before Abbey National, and this coupled with her actual occupation gave her an overriding interest under LRA 1925 section 70(1)(g) (now LRA 2002 Sch 3). She had started to move in carpets 35 minutes before the charge was completed. Abbey National argued that when the house was bought with its loan, her right could not arise before.

Judgment

Court of Appeal

Court of Appeal, Dillon LJ, held that Daisy’s right arose before Abbey National’s, but that Abbey National succeeded in any case because Daisy had only been on the property for 35 minutes before completion, and the building society could not be expected to be put on inquiry in those circumstances. Ralph Gibson LJ gave a short concurring judgment and Woolf LJ expressly stated he thought it would be unsatisfactory if on the facts Daisy Cann could be regarded as in actual occupation.

House of Lords

The House of Lords held that Daisy was not only not in actual occupation, but also that when the house was purchased with the mortgage, Daisy’s proprietary interest could not realistically be seen to arise before the building society’s. Actual occupation had to have some degree of permanence or continuity and acts of a preparatory nature, carried out by courtesy of the vendor, were not enough.

Lord Oliver said the following.[1]

“ The reality is that, in the vast majority of cases, the acquisition of the legal estate and the charge are not only precisely simultaneous but indisolubly bound together. The acquisition of the legal estate is entirely dependent upon the provision of funds which will have been provided before the conveyance can take effect and which are provided only against an agreement that the estate will be charged to secure them. Indeed, in many, if not most, cases of building society mortgages, there will have been, as there was in this case, a formal offer and acceptance of an advance which will ripen into a specifically enforceable agreement immediately the funds are advanced [sic] which will normally be a day or more before completion.@A son bought a house for occupation by his mother and step father, with the aid of a cash contribution by the mother. The purchase and mortgage were both completed one August, when Mrs Cann was on holiday in the Netherlands, but she took up occupation on her return, well before application was made for registration of the transfer and charge in September. Mrs Cann claimed an overriding interest through contributions supported by The way in which subordination works can be seen in the case of Abbey National Building Society v Cann [1991] 1 AC 56. Mr C purchased a leasehold flat for his mother to live in, with the benefit of a mortgage from Abbey National and with monies provided by his mother, from the sale of a previous property. It transpired that the mother had been let into occupation some 35 minutes before completion of the mortgage. Mr C subsequently defaulted in payment of the mortgage and Abbey National sought possession. The mother claimed that by reason of her contribution to the purchase price coupled with her actual occupation of the property prior to completion, she had an overriding interest which took priority to Abbey National's mortgage.

The trial judge rejected the mother's claim to have been in actual occupation prior to completion and made an order for possession. The Court of Appeal disagreed but nonetheless held that she had impliedly authorised her son to create a mortgage having priority to her interest. On appeal to the House of Lords, it was held that the correct date for determining the existence of an overriding interest was the date of registration, rather than the date of completion. However, where a purchaser relied on a bank or building society loan to complete his purchase, the transaction - that is the transfer of the property and the completion of the mortgage - were one indivisible transaction, and that there was no moment in time (scintilla temporis) during which the property vested in the purchase free of the mortgage. The court would therefore accede to the argument that the mother's interest should be subordinated to the lender's.occupation at the date of the registration.