Abbey National v Cann: mind the gap?

In Abbey National Building Society v Cann ([1991] 1 AC 56) the House of Lords considered the relative priorities of a charge used to acquire a home and an unwritten equitable interest in it which came into existence simultaneously. A man bought a home for his mother. She undoubtedly had an equitable interest in the home since this was their common intention and since she had provided part of the purchase price. Title to the home was in the son’s sole name. He borrowed money from the Abbey National Building Society (‘the lender’) to finance the purchase and granted the lender a charge over the home. The son was unable to meet the repayment obligations under the loan and the lender sought possession of the home. The mother argued that her equitable interest had priority over the charge. One of her arguments was that there was a notional gap (a moment in time or scintilla temporis) between the son’s acquisition of the title and the charge granted to the lender. She argued that her equitable interest attached to the property in that moment in time and so took priority over the charge.

The interpretation of the provisions of the Land Registration Act 1925 is an important feature of the judgments. Leaving this aside, the mother failed for what appear to be two (perhaps three) separate reasons. The first was that there is no moment in time in which the son had title to the home unfettered by the lender’s rights. The home could not have been acquired by the son without the aid of the loan. The acquisition of title to the home and the grant of the charge to the lender were a single composite transaction (Lord Oliver at 93 and Lord Jauncey at 102). The second reason given for the priority of the lender’s charge was that the mother knew that a loan would be needed to finance the purchase so that she must be taken to have accepted that the charge would have priority over her own interest (Lord Oliver at 94). Lord Oliver suggested a further argument in favour of the lender’s priority. Before completion it had agreed to advance funds on the security of a loan. This gave the lender an equitable interest that arose before the mother had any such interest (at 89).

Michael Lower

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