MTF (NH) Limited v Havin Hevedi & Anor

For an interest to qualify as an overriding interest through actual occupation, the claimant must establish physical presence or occupation through a genuine representative. The court must evaluate the whole factual situation, including permanence and continuity, intention, absence, the property’s nature and the claimant’s circumstances. A licensee occupying for personal purposes does not occupy on behalf of the licensor. Visible occupation by licensees does not, without more, establish the licensor’s actual occupation. Where an equitable owner has placed legal title in another person’s name, supplied that person with the indicia of ownership and failed to disclose limits on their authority, the owner may bear the risk of a mortgage granted to an innocent lender.

The claimant held a legal mortgage over property registered in the sole name of the first defendant. The second defendant asserted a beneficial interest and claimed that his occupation, or occupation by his brother and the brother’s family on his behalf, gave him priority under Schedule 3 to the Land Registration Act 2002.

The court tried preliminary issues concerning the second defendant’s occupation on 23 September 2022, whether that occupation would have been obvious on a reasonably careful inspection, and whether the mortgage nevertheless took priority on the assumed basis that the property had been registered in the first defendant’s name to conceal the second defendant’s interest from HMRC.

1. Actual occupation. The second defendant failed to prove actual occupation on the relevant date. Actual occupation is an evaluative question based on primary facts. Relevant considerations include permanence and continuity, intentions, the length and reason for absence, the nature of the property and the person’s circumstances. The burden lies on the person asserting occupation.
2. The prolonged absences from the property and the absence of documentary evidence weighed heavily against permanence and continuity. The second defendant’s visits were directed principally to resisting sale and possession. He did not restore the possessions and chattels needed for permanent personal occupation. His evidence was approached cautiously because of inconsistencies and his failure to disclose assets to his trustees in bankruptcy.
3. Occupation through others. The brother and his family occupied for their own accommodation needs. They were licensees, not caretakers or agents occupying on the second defendant’s behalf. Their occupation therefore did not amount to the second defendant’s actual occupation.
4. Obvious occupation. The property had been emptied of the second defendant’s possessions and there were no visible signs of his occupation. Any apparent occupation was by the brother and his family. Their presence could not establish the second defendant’s occupation, particularly since their evidence did not indicate that they would have said they occupied on his behalf.
5. Priority. Although unnecessary to the primary conclusion, the court held that the mortgage would have taken priority under the principle applied in Wishart v Credit and Mercantile Plc [2015] EWCA Civ 655. The equitable owner had placed the legal title in the first defendant’s name and had not disclosed any limitation on her authority. It was therefore fair that he bear the risk of the mortgagee’s fraud.
6. The claimant was entitled to possession of the property against the second defendant.