Link Lending Ltd v Bustard [2010] EWCA Civ 424

This was an appeal from a mortgage possession case, centred on the issue of whether Ms Bustard could be said to be in actual occupation of the property such that she had an overriding interest under Land Registration Act 2002 (the 2002 Act) s29, schedule 3, paragraph 2 (Land Registration Act 1925 s70(1)(g) as was), which took priority over Link Lending’s charge.

The history is a sorry one and it would be fair to say that Link Lending did not pursue the appeal with an eye to their PR. Ms Bustard was the freeholder and occupant of the property concerned from 2001. She suffered from Korsakoff’s Psychosis, a severe medical condition which affected her understanding, memory, insight, cognitive faculties and judgement. She underwent periods of in-patient treatment.

In 2004, Ms Bustard apparently executed a transfer of the Property to Mrs Noreen Hussain, who was acting as a nominee for her husband, Mr Muhammed Hussain, with a stated consideration of £100,000. The first instance court had found that advantage had been taken of Ms B’s vulnerability and that the Hussains’ were aware that Ms B did not have capacity to enter into the transfer. No payment of £100,000 had been made and Ms B remained in occupation of the property.

Mrs Hussain promptly took out a mortgage for £100,000 with HSBC. In January 2007, Ms B was sectioned and later transferred to a residential unit at the hospital. She was not allowed to return home during this time. In February 2008, Mrs Hussain took out a secured bridging loan of £107,250 from Link Lending. She discharged the HSBC mortgage, but failed to make any payments of interest to Link Lending.

Link brought possession proceedings in June 2008, which Ms B only found out about when briefly visiting the property under supervision. She, via a litigation friend, applied to be joined as a defendant.

At first instance, the Court found that:
i) On the facts of the transfer, Ms B had an equity in the property in the form of a right to have the 2004 transfer set aside.
ii) Link were entitled to judgment against Mrs Hussain for the loan amount and interest.
iii) That although Ms B was not living at the property at the time of the charge:

She genuinely wanted to return home even though prevented from doing so by an order under the Mental Health Act. Her furniture remained there. Arrangements had been made by those who had taken over responsibility for her finances to pay the regular bills such as the community charge from her funds. She was visiting the property, admittedly supervised, but precisely because she still considered it her home […] while Mrs Bustard was not physically present on the land her occupation was manifested and accompanied by a continuing intention to occupy.

The order was that the transfer be reversed and Link Lending discharge the charge. Mrs Hussain and Link to pay Ms B’s costs.

Link Lending appealed. There was no appeal against the finding on capacity to enter the transfer. Further, Link Lending acknowledged that if the charge stood, Ms B would be left with nothing at all. In addition, Link did not rely on “the exception to an overriding interest available in the case of a person whose occupation would not have been obvious on a reasonably careful inspection of the Property at the relevant date: 2002 Act schedule 3 paragraph 2 (c) (i). The only inspection of the Property by Link prior to taking the charge on it was a “drive-by” inspection by a surveyor, who noted signs of occupation.”

Link Lending’s ground of appeal was that the Judge was wrong in law that Ms B was a person in actual occupation as she was not present in the property on the day of the charge and had not resided there for the previous year. Per Lord Oliver in Abbey National BS v. Cann [1991] 1 AC 56, her occupation had “ceased to have that quality of permanence and continuity required for actual occupation after a year of residence at” the care accommodation. After such an extended period of absence it could not be said that her connection with the Property was any longer one of actual occupation. Or, as per Robert Walker J in Stockholm Finance Ltd v. Garden Holdings Inc [1995] LTL (26 October 1995, the absence had been so prolonged that the notion of her being in occupation became ‘insupportable’. The passage relied upon by the Judge below from Thompson v Foy [2009] EWHC 1076 at 127 on the manifesting of an intention to return was obiter and in any event the concept derived from a Landlord and Tenant case, not a Land Registration case.

Held:

The facts in the case went both ways:

Some of the primary facts point against Ms Bustard’s actual occupation of the Property at the relevant date: she was not personally present in the Property on 29 February 2008; she had been in a residential care home since January 2007; she was incapable of living safely in the Property; and her visits to the Property were brief and supervised.

Some of the primary facts point to Ms Bustard’s continuing actual occupation of the Property: it was her furnished home and the only place to which she genuinely wanted to return; she continued to visit the Property because she still considered it her home; those who had taken responsibility for her finances regularly paid the bills, such as the community charge, from her funds; she was in the process of making an application to the Mental Health Review Tribunal in order to be allowed to return home; and no-one took a final and irrevocable decision that she would not eventually be permitted to return home.

The Judge’s decision on the facts would only be overturned if wrong on statutory construction or as a judgment of fact and degree. The Judge did not misconstrue the statute and precedent cases on what could constitute actual occupation. Nor was his evaluation of the facts unsupportable. The precise circumstances of the precedent cases were not in themselves set conditions. The role of the authorities was to clarify legal principles and each was clearly distinguishable in terms of the facts involved.

In this case the new and special feature is in the psychiatric problems of the person claiming actual occupation. The judge was, in my view, justified in ruling, at the conclusion of a careful and detailed judgment, that Ms Bustard was a person in actual occupation of the Property. His conclusion was supported by evidence of a sufficient degree of continuity and permanence of occupation, of involuntary residence elsewhere, which was satisfactorily explained by objective reasons, and of a persistent intention to return home when possible, as manifested by her regular visits to the Property.

Finally, the summary by Lewison J in Thompson v Foy was an accurate and helpful summary of the law, contra Link Lending’s arguments.

Appeal dismissed.