Mortgage Express v Lambert [2017] Ch 93

Facts

  • The case concerned a property jointly owned by Ms. Lambert and her partner, Mr. Smith.
  • Ms. Lambert alleged that her consent to a mortgage with Mortgage Express was obtained by undue influence from Mr. Smith.
  • The mortgage secured a loan used for Mr. Smith’s business.
  • Ms. Lambert contended that she did not fully understand the transaction's implications.
  • After default on the loan, Mortgage Express sought possession; Ms. Lambert defended on the grounds of undue influence and overriding interests.
  • At the time the mortgage was executed, Ms. Lambert had moved out of the property.

Issues

  1. Whether Ms. Lambert’s consent to the mortgage was procured by undue influence.
  2. Whether Mortgage Express had constructive notice of the alleged undue influence, affecting the enforceability of the mortgage.
  3. Whether Ms. Lambert’s interest in the property constituted an overriding interest under Schedule 3, Paragraph 2 of the Land Registration Act 2002.
  4. Whether Ms. Lambert was in actual occupation of the property at the relevant time to qualify her interest as overriding.

Decision

  • The court determined that undue influence was alleged but Mortgage Express had fulfilled its duties by ensuring Ms. Lambert received independent legal advice.
  • The adequacy of legal advice was emphasized as critical; lenders cannot rely on mere formalities if the advice is clearly deficient.
  • The court found Ms. Lambert was not in actual occupation at the relevant time, as she had moved out prior to the mortgage completion.
  • Consequently, her interest did not qualify as an overriding interest under the Land Registration Act 2002.
  • The judgment reinforced that thorough due diligence and substantive independent legal advice are required to protect both lenders and borrowers.

Legal Principles

  • Constructive notice is avoided if lenders ensure that potentially vulnerable parties receive adequate independent legal advice regarding the transaction.
  • Actual occupation under Schedule 3, Paragraph 2 of the Land Registration Act 2002 requires physical presence or control over the property; mere ownership or a right to occupy does not suffice.
  • Undue influence claims depend on both the existence of a relationship of trust and the sufficiency of precautions taken by the lender, such as independent legal advice per Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44.
  • Overriding interests will not bind a lender if the claimant is not in actual occupation at the relevant time.

Conclusion

Mortgage Express v Lambert [2017] Ch 93 clarified the requirements for undue influence, lender responsibilities regarding independent legal advice, and the statutory criteria for overriding interests based on actual occupation under the Land Registration Act 2002. The decision provides key guidance on protecting parties in property transactions and the limits of overriding interests for absent co-owners.

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