Bristol and West Building Society v Henning

Where a person knowingly joins in purchasing a home with money raised on a mortgage, the common intention ordinarily imputed to the parties is that the lender will receive security over the whole legal and equitable estate. Any beneficial interest or proprietary right claimed by that person is therefore subordinate to the mortgage.

The court will not impute an intention that a lender should take security subject to an undisclosed equitable interest having priority. This remains so even if the arrangements leave the occupier vulnerable should the mortgagor default.

The building society advanced most of the purchase price of a house to Mr Henning, who took the legal title and granted the society a legal charge. Mrs Henning, his long-term unmarried partner, had supported the purchase and intended to live there with their children.

After the relationship ended and mortgage arrears accrued, the society sought possession. Judge Clarke in the Exeter County Court dismissed the claim. He rejected Mrs Henning’s asserted beneficial interest but held that an irrevocable licence gave her a proprietary interest binding the society.

The society appealed. Mrs Henning cross-appealed against the rejection of her beneficial-interest claim. The central issue was whether any interest or right she held could take priority over the purchase-money mortgage.

Disposition

The Court of Appeal unanimously allowed the building society’s appeal. Lord Justice Browne-Wilkinson gave the reasoned judgment, with Lord Justice Lloyd and the Master of the Rolls agreeing.

1. The court proceeded on the assumption, without deciding, that Mrs Henning might have had either a beneficial interest or a lesser proprietary right arising from an irrevocable licence. It was therefore unnecessary to decide whether such a licence existed, whether Re Sharpe was correct, or whether the licence was proprietary rather than contractual.

2. In the absence of an express trust or agreement, a claimed beneficial interest depends on an express or imputed common intention. Gissing v Gissing [1971] AC 886 identified that requirement for a constructive trust. The same inquiry was treated as material on the assumed case that a lesser proprietary right existed.

3. Mrs Henning knew of and supported the proposal to buy the house with the society’s mortgage. The only possible imputed common intention was that Mr Henning had authority to grant the society security over the whole legal and equitable interest. That authority necessarily included priority over any beneficial interest which Mrs Henning might have acquired.

4. The court would not impute an intention to offer the society an apparently unencumbered fee simple while conferring on Mrs Henning an equitable interest with prior effect. The fact that this left her exposed to the consequences of Mr Henning’s default could not alter the intention imputed from the transaction.

5. The priority point was open on appeal. Although not expressed in that precise form below, it was another formulation of the issue whether Mrs Henning’s rights bound the society, and no further evidence could have been adduced.

Accordingly, any right Mrs Henning had was subject to the society’s charge and gave no defence to possession. Possession was ordered to take effect in two months. Leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division) — allowed the building society’s appeal and held that any right claimed by Mrs Henning was subordinate to the mortgage: [1985] 1 WLR 778.
• Exeter County Court — Judge Clarke dismissed the building society’s possession claim. He rejected the asserted beneficial interest but held that an irrevocable licence gave Mrs Henning a proprietary interest binding the society. No citation is stated in the judgment.