Bank of Scotland v Hussain

Under section 70(1)(g) of the Land Registration Act 1925, the enquiry required to disapply an overriding interest has two stages. The mortgagee must first enquire whether anyone will be in actual occupation. If so, it must then enquire of that person about the rights claimed in the property or entitling occupation. Enquiry about vacant possession, or about the reasons for an undervalue transaction, does not by itself satisfy the proviso. A defence raised in later proceedings is not necessarily an abuse merely because it could have been raised earlier. The court must make a broad, merits-based assessment of all the circumstances, including whether the later proceedings constitute unjust harassment.

The Bank sought possession of a property following earlier proceedings in which Mona Qutb had obtained an order for re-registration of the property in her name, subject to the Bank’s charge. Mona defended the possession claim by asserting an overriding interest under section 70(1)(g) of the Land Registration Act 1925.

Master Moncaster refused to strike out that defence but granted the Bank summary judgment on the overriding-interest issue. The appeals concerned whether the Bank’s enquiries triggered the statutory proviso and whether raising the defence in the possession proceedings was an abuse of process.

1. Summary judgment appeal allowed. Section 70(1)(g) of the Land Registration Act 1925 protects the rights of every person in actual occupation, subject to the proviso that an enquiry is made of that person and the rights are not disclosed.
2. The proviso operates in two stages. The Bank must first enquire whether a person will be in actual occupation at or after completion. Once such a person is identified, the Bank must enquire about the rights claimed in the property or which entitle that person to occupy it. The enquiry is mechanical, but it must be directed so as to elicit disclosure of those rights.
3. Enquiries directed to vacant possession, or to the reasons for a gift at an undervalue, did not amount to the enquiry required by the proviso. The Bank therefore had not established that Mona’s possible overriding interest was defeated. The issue could not be determined summarily without further evidence.
4. The court left open a possible separately pleaded defence based on representations, estoppel or misrepresentation. It did not decide that issue or encourage an amendment.
5. Strike-out appeal dismissed. Applying the broad, merits-based approach in Johnson v Gore-Wood [2002] 2 AC 1, the court considered the public interest in finality, the parties’ interests and all the circumstances. Mona’s defence was not a collateral attack on the earlier judgment, which she accepted. Nor did its pursuit constitute unjust harassment. The possession proceedings had been stayed pending the earlier proceedings, and the Bank could have sought a joint trial.

• High Court (Chancery Division): Appeal from Master Moncaster’s refusal to strike out Mona’s defence and grant of summary judgment to the Bank. The summary judgment was set aside and the strike-out appeal was dismissed.