#equity #law #tracing

Boscawen v Bajwa [1995] 4 All ER 769

The simplified facts were that Mr Bajwa had entered into a contract to sell his house. The house was mortgaged to the Halifax Building Society. The contract, unknown to the parties, failed to comply with s2 Law of Property (Miscellaneous Provisions) Act 1989 and so was void. The purchaser sought a loan from Abbey National, which paid the loan money to the purchaser’s solicitors. As a result of a muddle between them and Mr Bajwa’s solicitors, this money was paid over to the Halifax Building Society before the transfer of title to the purchaser was completed. The Halifax used the money to discharge its mortgage. The transfer was not completed and the sale fell through. Abbey National sought to trace its money and have a charge over the property by way of subrogation to the Halifax Building Society; that is, Abbey National wished to step into the shoes of the Halifax and have a charge over Mr Bajwa’s house. The Court of Appeal allowed this, holding that the charge had not been redeemed for Mr Bajwa’s benefit. Thus where the claimant’s money has been used to pay off secured debts, he may be subrogated to the position of the creditor and be given a charge over the property. However, it is important to realise that the terms of the revived mortgage can be no more favourable to the claimant than the terms of the original mortgage were to the original lender.