Bank of Scotland Plc v King & Ors

A transfer of registered land may be delivered as a deed or in escrow. The issue depends on the parties’ intention, assessed from all circumstances attending delivery. Although non-payment of part of the purchase price ordinarily supports an inference of escrow, that inference may be rebutted by the transaction’s surrounding circumstances. Knowledge that a mortgage advance requires an unconditional transfer, delivery of the transfer without reservation, and use of the monies to redeem existing charges may establish unconditional delivery. Section 1(5) of the Law of Property (Miscellaneous Provisions) Act 1989 concerns the agent’s authority to deliver a deed; it does not convert an escrow into an unconditional deed.

The claimant bank advanced approximately £1.2 million to the first defendant to purchase residential property from the second and third defendants. The sellers executed a TR1, which was sent to the purchaser’s solicitors, although part of the purchase price remained unpaid. The monies received were used to discharge existing charges and partly retained by the sellers.

The sellers later contended that the transfer had been delivered conditionally, that the sale had not completed, and that any vendor’s lien had priority over the bank’s charge. The bank sought summary judgment for declarations concerning completion, its mortgage, and registration of the charge. The central issue was whether the TR1 had been delivered as an unconditional deed or in escrow.

1. Summary judgment granted. The claimant established that it was entitled to the relief claimed. The applications concerning judgment in default and relief from sanctions therefore did not require determination.
2. The legal effect of delivery depended on the parties’ intention, determined from all facts and circumstances attending delivery. The principles were drawn from Thompson v McCullough [1947] 1 KB 447, together with the authorities concerning delivery to a solicitor acting for the intended beneficiary.
3. Had the only material facts been execution of the TR1 while a substantial balance remained unpaid, delivery as an escrow would have been inferred. The draft transfer’s contemplated execution by the purchaser and covenant concerning restrictive covenants would also have supported that inference.
4. Those inferences were rebutted here. The transfer was sent to the purchaser’s solicitors without any reservation. The sellers knew that the purchaser was borrowing against a mortgage and that the bank would require an effective unconditional transfer before releasing the advance. The sellers’ solicitors treated the money as irrevocably released, used it to discharge earlier charges, and confirmed arrangements consistent only with completion under the Law Society’s Code for Completion by Post.
5. The sellers’ use of the money also waived, or at least waived any condition requiring, execution of the transfer by the purchaser. The TR1 was therefore delivered as a deed, not in escrow.
6. Section 1(5) of the Law of Property (Miscellaneous Provisions) Act 1989 conclusively presumed the solicitors’ authority where they purported to deliver the instrument as a deed. It did not apply to an escrow and did not alter the general law governing whether delivery was conditional.
7. The purchaser became entitled to registration, and could grant an effective charge before registration. Under section 24(b) of the Land Registration Act 2002, the bank was entitled to registration of its charge even if the sellers remained the registered proprietors. Any vendor’s lien was subordinated to the bank’s mortgage because the sellers knew the purchaser was acquiring the mortgage advance to pay them.