Bank of Scotland Plc v Waugh & Ors

A defective deed may still take effect as an equitable mortgage where it is otherwise a valid written agreement containing the agreed terms. Registration of a charge may give it effect as a legal mortgage despite defects in execution, subject to any later rectification. However, estoppel cannot ordinarily validate a document which is visibly non-compliant with the statutory formalities for execution of a deed. The distinction is between a document which appears valid but was improperly attested and one which is plainly defective on its face.

The Bank sought summary judgment against trustees of a property-development trust for sums due under a 2007 facility letter and declarations concerning a charge over Asquorn House. The charge had been signed by the individual trustees but no signatures were attested, contrary to section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989. The Bank argued that the trustees were estopped from relying on that defect and, alternatively, that the charge was effective as an equitable mortgage.

The defendants raised various defences, including non-compliance with section 2 of the 1989 Act, alleged reliance on a later letter, and challenges to the debt. The central issues were whether there was any realistically arguable defence to the facility claim, whether estoppel could operate despite the visible defect in the charge, and whether the charge created an equitable mortgage.

1. Facility letter. The Bank established the facility, demand, failure to repay and amount due. There was no realistically arguable defence. The argument under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 had already been rejected and was also res judicata. The Bank was entitled to summary judgment for the sums claimed.
2. Execution of the charge. Under section 52 of the Law of Property Act 1925, the charge was void for the purpose of conveying or creating a legal estate because it was not made by deed. Section 1(3) of the 1989 Act was not complied with because the trustees’ signatures were unattested. Registration nevertheless gave the charge effect as a charge by deed by way of legal mortgage under section 51 of the Land Registration Act 2002, unless and until the register was rectified. Rectification operated prospectively, so prior acts of the Bank and its receivers were not void.
3. Estoppel. Shah v Shah [2001] EWCA Civ 527 concerned a document regular on its face, where the witness had not been present when the signatures were made. The present charge was materially different because it contained no attestation clause and was visibly non-compliant. Applying the reasoning in Briggs v Gleeds [2014] EWHC (Ch) 1178, the trustees were not estopped from relying on the invalid execution.
4. Equitable mortgage. Although the charge failed as a legal mortgage, it was signed by the parties, incorporated the agreed standard terms and was otherwise sufficient to support specific performance. It therefore took effect as an equitable mortgage, subject to determination of whether further documents should be executed to perfect it.

The judgment describes related earlier proceedings concerning the same dispute.

• High Court: Judge Walton struck out a related claim as totally without merit on 22 October 2010.
• Court of Appeal: Lloyd LJ refused permission to appeal on 9 February 2011 and certified the application as totally without merit.
• High Court: Subsequent attempts to reopen or judicially review the earlier decision were refused.