Equity and Law Home Loans v Prestidge [1992] 1 WLR 137

• A couple bought a property in Defendant’s name, but B had a beneficial interest. Defendant extended their initial mortgage (to which B had consented) from Plaintiff whom he told of B’s beneficial interest and assured that B would agree to the mortgage although she had not done so yet.

• Part of the extra money was used to pay off the existing mortgage on the house, and part for Defendant’s private purposes.

• When Defendant defaulted, Plaintiff sued Defendant and B for possession.

• CA granted possession to Plaintiff. The reasoning was that:

  1. Had there been no extension on the mortgage and it had been merely the initial mortgage on which the parties had defaulted, Plaintiff could succeed clearly on grounds of consent (obviously - see Henning).

  2. Since some of the extension mortgage money had been used for B’s benefit (paying off initial mortgage), and was really just a replacement for the first mortgage (to which B had consented) the bank ought to retain priority over B, as though it were dealing with default on the initial loan. 

Mustill LJ

• The question is what was the imputed common intention (since, in the absence of an express or implied agreement, as in Henning, the courts must discover one)?

• Here, it was that B ought to have a beneficial interest and that this ought to be subservient to the bank’s interest regarding the initial mortgage at least. This was because she had consented to the initial mortgage impliedly, as, without this, the house could never have been bought and thus nor could her beneficial interest have been created.

• If the first mortgage can be enforced, so must the second, as B’s consent could be imputed to both, the second being “no less favourable” than the first. 

RELATED CASES

• Bristol and West BS v Henning