National Provincial Bank Ltd V Ainsworth.

David Hand Applied Banking Law ID: A255046

Tutor: Professor J B Howcroft 11/11/03

Case 1: National Provincial Bank Ltd V Ainsworth (May 1965)

Case Outline

Mr and Mrs Ainsworth lived together in their home of which the mortgage was in the name of Mr Ainsworth with National Provincial Bank. The land was registered.
During the term of the mortgage repayment Mr Ainsworth fell into arrears and on defaulting on the mortgage Mr Ainsworth deserted Mrs Ainsworth who was still living in the house.
On National Provincial Bank attempting to evict Mrs Ainsworth she resisted and as a consequence the case went to court.
At a final court of appeal it was found that Mrs Ainsworth held an Equitable Interest* in the property and thus the bank was in no position to sell while the wife had rightful occupation of the property.

*An equitable interest or an overriding interest takes precedence over everything else. This interest does not need to be registered to affect other people (in this case the bank) dealing with the land.

National Provincial Bank appealed against this decision and the case went to the House of Lords. At the appeal hearing the decision originally made was reversed and the bank was given the right to evict Mrs Ainsworth.
The House ruled that appeal would be held because otherwise it would work as a “clog on the legal title” and it was “contrary to the sanctity of contract”.

Evaluation and Consequences

What the judge meant when he said that it was “contrary to the sanctity of contract” was that it had not been written anywhere that Mrs Ainsworth should have rights of occupation. Thus to pass in favour of Mrs Ainsworth would cloud the issue of contracts in general and negate the need for them in specific cases.

If the appeal was rejected it would also act as a “clog on the legal title”. This meant that the issue of who has legal title to a property is made far more difficult. Does Mr or Mrs Ainsworth have legal title if they both have right of occupation? In holding the appeal this issue is not made more debatable in future.

In this case it was further held that the wife’s right in the matrimonial home was not an overriding interest, referring to the Land Registration Act (1925) s.70 (1) (g). This act ...

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In this case it was further held that the wife’s right in the matrimonial home was not an overriding interest, referring to the Land Registration Act (1925) s.70 (1) (g). This act only applies to registered land; there is a further act that applies to unregistered land, as we will find later.

Therefore what Mrs Ainsworth had was a Minor Interest* in the property but at such time there was no means of registering this interest.

*A minor interest is fairly insignificant interest unless it is registered at an appropriate land registry. However, at the time of this case there was no such means of registering a minor interest in property so was worthless.

As a result of this case in 1967 the Matrimonial Homes Act was passed. This gave a spouse the ability to register their minor interest, this is done via a Caution (right of occupation) with land that is registered and a “Class F” charge with unregistered land. For the spouse to have rights of occupation they would have to register the right before the mortgage is signed. However, a bank will attempt to get the spouse to sign a Deed of Postponement, basically removing the spouse’s rights. As a simple solution the land should be registered in both names of the married couple.

Thus, with the introduction of this act the problem can no longer arise when a property is only registered in the name of one of a married couple.

Case 2: Caunce V Caunce (1969)

Case Outline

Mr Caunce was the legal owner of the property with the mortgage in his name. The land was unregistered.

Without the knowledge of Mrs Caunce Mr Caunce conveyed the property into his own name. He then falls into arrears and defaults on the mortgage on the house. He subsequently deserts Mrs Caunce leaving her in the household but with the household no longer in both of their names.

At this time Mrs Caunce has no “Class F” charge (applicable only for unregistered land) but still tries to argue that she has an overriding interest in the property.
The case was heard at the House of Lords but the judge did not hold the case of Mrs Caunce stating that we could not have banks being “snoopers and busybodies”.

Evaluation and Consequences

The judge was implying in this case that there was no means for banks of identifying whether someone has an overriding interest in a property or not. If this case was therefore held banks would have to become “snoopers and busybodies” to obtain this information in future. He argued that this is not in the interest of the public as a whole and thus the case was dismissed.

The Law of Property Act (1925) s.87 states it is not the responsibility of the bank to enquire as to whether the spouse has made a contribution to the purchase price of the house on acquisition, whether he/she has an account with the same bank or not. If this was the case then the bank would have been informed of the spouse’s financial contribution and he/she would thus have an equitable interest and rights of occupation.

A direct consequence of this case was the passing of the Matrimonial Homes Act (1983) to clear up the apparently clouded issues surrounding spouse’s rights in the matrimonial home. Under Section 2 (8) it expressly declares that the spouse’s rights of occupation are not an overriding interest. However under certain circumstances the spouse can obtain certain rights in land, and these are rights of occupation, provided that their interest is registered and:

There is no contrary intention (no statement or other means stating that the spouse cannot have rights.
The spouse has made a financial contribution to the house e.g. mortgage repayment or contribution to the deposit on the house.
The spouse is in occupation.

This passing of the updated matrimonial homes act thus cleared up the issues that were unclear and set out exactly what the spouse must do to obtain an equitable interest and thus rights of occupation. The effectiveness of this updating is well illustrated in next case to be analysed.

Case 3: Lloyds Bank Plc V Rosset (March 1990)

Case Outline

Mr and Mrs Rosset decided to purchase a semi-derelict farmhouse in need of renovating.
Mrs Rosset understood that the purchase price would come out of a family trust fund and the house would be under the name of both partners. However Mrs Rosset was not aware that the trustees of the fund had insisted that the property be in Mr Rosset’s sole name.
During the period when the property was being worked on Mrs Rosset spent a lot of time co-ordinating the builders work, fetching materials, decorating several rooms (Mrs Rosset was a skilled painter and decorator) and so on.
Unbeknown to Mrs Rosset was that Mr Rosset was unable to fund the entire cost of the property with just the money from the trust and he obtained a £18,000 overdraft from Lloyds Bank secured on the property.
Mr Rosset later defaulted on repayments and the bank sought possession of the property.
Mrs Rosset resisted and claimed a beneficial/equitable interest on the property due to her many contributions in the renovation of the house.
The case went all the way to the House of Lords where it was held that Mrs Rosset did not have beneficial interest in the property.

Evaluation

Despite the fact that Mrs Rosset argued she had an overriding interest under the Land Registration Act (1925) s.70 (1) (g). Mrs Rosset lost the case for a number of reasons. Firstly it was dubious whether Mrs Rosset was in occupation when the charge was created to rely upon the land registration act. Secondly there was contrary intention from the trustee(s) who left the money; the house must be in the name of Mr Rosset solely. Thirdly Mrs Rosset had made substantial contributions to the building work on the house but as the Matrimonial Homes Act (1983) states there must be a financial contribution such as a mortgage repayment. Furthermore Mrs Rosset had not registered her interest in the property and therefore could have no claim to rights of occupation even if she had been deemed to make a financial contribution to the property.

This case illustrates perfectly how the Matrimonial Homes Act (1983) tidied up the problematic areas surrounding the issue and thus cases are far more clearly cut and indisputable in future.

References

Law Relating to Financial Services – G. Roberts (5th edition)

Pagets Law of Banking – Megrah and Ryder (8th edition)

Practice and Law of Banking – H.P Sheldon