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Does "first mortgage" really mean first?
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Peter Jenkin, Partner and Robert Evans, Lawyer
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A married couple purchased their family home in 1990, in the name of a company of which they were both directors.
The husband assured the wife that the home would "never be used in his businesses". He provided a written note saying -
"This confirms that you Antoinette being my wife and as this is our matrimonial home, this house is yours to live in for the rest of your life.
Your loving Rocky (Signature)"
In 1999 the wife resigned as a director of the company.
In 2006 the company transferred the property to a related company, which gave a declaration that it held the house on trust for the first company.
The second company then mortgaged the property to a lending institution.
The second company fell into arrears under the mortgage, and the lender obtained an order for possession of the property and gave the wife notice to vacate.
The wife applied to the Supreme Court for an injunction restraining the lender from taking possession. She claimed that she had an equitable life interest in the property as life tenant, giving her priority over the mortgage. She alleged that there was no other accommodation available for herself and her three children.
The Supreme Court granted the wife an interlocutory injunction preventing the mortgagee from taking possession until the issue could be determined in a full trial.
This is an interim injunction only. At a full trial, the wife's claim may be dismissed, but by that time the mortgagee will have been prevented from taking possession for a considerable time, thus adding to the risk of a shortfall.
The decision illustrates how important it is for a mortgagee to make full and proper inquiries concerning the property, especially in a refinance position, and where a tenant could be in continuing occupation of the property.
FURTHER ENQUIRIES
