Credit and Mercantile Plc v Wishart [2015]
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Credit and Mercantile Plc v Wishart [2015] EWCA Civ 655 is an important land law case, where the Court of Appeal examined the application of the Brocklesby Principle in determining whether an occupier can claim an overriding interest against a mortgagee. The decision clarifies that mere actual occupation is not always sufficient to assert an overriding interest; the occupier must also demonstrate rights capable of binding the purchaser or mortgagee.
The property, Dalhanna, was purchased in 2010 by Kaymuu Ltd, a company controlled by Mr Sami Muduroglu, who later defrauded the defendant and lost the borrowed £500,000 gambling. The defendant, a close friend of Mr Muduroglu at the time, was the beneficial owner of the property and in occupation when the mortgage was taken. When Kaymuu defaulted, the claimant, Credit and Mercantile Plc, sought possession and sale of the property to recover its loan.
The defendant claimed an overriding interest, asserting his beneficial ownership and occupation, while the claimant argued that the defendant's rights were defeated by the application of the Brocklesby Principle, which is a doctrine that prevents an occupier of a property from having rights against the legal owner. The doctrine is based on a combination of factors, including the owner giving an agent the authority to deal with the property and the owner giving the agent the means to represent themselves as the beneficial owner.
Initially, the court ruled that although the defendant was the beneficial owner and in actual occupation at the time of the charge, his conduct, leaving the transaction entirely in the hands of Mr Muduroglu, gave the latter the apparent authority to act as the beneficial owner. This representation allowed the Brocklesby Principle to apply, preventing the defendant from asserting an overriding interest against the claimant. The court also limited the claimant's ability to recover legal costs to those related to possession proceedings, excluding costs incurred in litigation against the defendant.
The Court of Appeal upheld the application of the Brocklesby Principle, emphasising that actual occupation alone does not establish an overriding interest. The defendant's abdication of involvement in the property's purchase allowed Mr Muduroglu to represent himself as the beneficial owner, undermining the defendant's ability to claim an overriding interest. The court also reversed the lower court's decision on costs, finding that the mortgage deed entitled the claimant to recover all costs, including those arising from its claim against the defendant.
This case reinforces the principle that for an occupier to assert an overriding interest, they must not only demonstrate actual occupation but also prove enforceable rights that bind third parties. The decision highlights the importance of occupiers actively managing their property interests and avoiding conduct that could be construed as granting third parties authority to act on their behalf. For lenders, the case demonstrates the necessity of investigating both the nature of an occupier's rights and their potential actions or inactions that might prevent them from claiming an overriding interest.
The property, Dalhanna, was purchased in 2010 by Kaymuu Ltd, a company controlled by Mr Sami Muduroglu, who later defrauded the defendant and lost the borrowed £500,000 gambling. The defendant, a close friend of Mr Muduroglu at the time, was the beneficial owner of the property and in occupation when the mortgage was taken. When Kaymuu defaulted, the claimant, Credit and Mercantile Plc, sought possession and sale of the property to recover its loan.
The defendant claimed an overriding interest, asserting his beneficial ownership and occupation, while the claimant argued that the defendant's rights were defeated by the application of the Brocklesby Principle, which is a doctrine that prevents an occupier of a property from having rights against the legal owner. The doctrine is based on a combination of factors, including the owner giving an agent the authority to deal with the property and the owner giving the agent the means to represent themselves as the beneficial owner.
Initially, the court ruled that although the defendant was the beneficial owner and in actual occupation at the time of the charge, his conduct, leaving the transaction entirely in the hands of Mr Muduroglu, gave the latter the apparent authority to act as the beneficial owner. This representation allowed the Brocklesby Principle to apply, preventing the defendant from asserting an overriding interest against the claimant. The court also limited the claimant's ability to recover legal costs to those related to possession proceedings, excluding costs incurred in litigation against the defendant.
The Court of Appeal upheld the application of the Brocklesby Principle, emphasising that actual occupation alone does not establish an overriding interest. The defendant's abdication of involvement in the property's purchase allowed Mr Muduroglu to represent himself as the beneficial owner, undermining the defendant's ability to claim an overriding interest. The court also reversed the lower court's decision on costs, finding that the mortgage deed entitled the claimant to recover all costs, including those arising from its claim against the defendant.
This case reinforces the principle that for an occupier to assert an overriding interest, they must not only demonstrate actual occupation but also prove enforceable rights that bind third parties. The decision highlights the importance of occupiers actively managing their property interests and avoiding conduct that could be construed as granting third parties authority to act on their behalf. For lenders, the case demonstrates the necessity of investigating both the nature of an occupier's rights and their potential actions or inactions that might prevent them from claiming an overriding interest.
