As safe as houses?

A recent Court of Appeal decision has invoked an old and infrequently used legal principle to provide lenders with a potentially useful means of avoiding being bound by an overriding interest in a case of mortgage fraud. Its implications for equally innocent beneficial owners, however, may be less welcome.

Credit & Mercantile Plc v Kaymuu Ltd

In Credit & Mercantile Plc v Kaymuu Ltd [2015] EWCA Civ 655, [2015] All ER (D) 64 (Jul), W relied upon a long-time friend and business acquaintance, SM, to purchase a family home for W and his partner out of the proceeds of a joint business venture. Their previous business and financial arrangements were described as “loose” and informal. W trusted SM to the extent that he did not even see the contract for the purchase of the property, “Dalhanna”. Unknown to W, SM purchased Dalhanna through his own company, Kaymuu Ltd and subsequently, after W had moved into the property, obtained a mortgage