Bank of Scotland –v- Waugh & Ors [2014] EWHC 2117 (Ch)
The Facts

Bank of Scotland made a loan to a Trust in 2003 secured by a legal charge over a property owned by the Trust. The document was duly registered at Land Registry. The Trustees’ signatures to the legal charge were not witnessed and therefore it had not validly been executed as a deed. The deed did not even include reference to witnesses or spaces for their attestations. The Trustees applied to Land Registry for rectification of the title and for the charge to be removed. The bank resisted.

The Arguments

The Trustees argued that the charge was not executed as a deed and so therefore failed to comply with the requirements of s.52 Law of Property Act 1925. This was because s.1(3) of the Law of Property Act (Miscellaneous Provisions) Act 1989 (the 1989 Act) requires that for an instrument to be validly executed as a deed by an individual, it must be signed by him in the presence of a witness who attests his signature.

This meant that it failed to convey a legal estate in land. The Bank claimed that the Trustees were estopped from relying on s.1(3) of the 1989 Act because the Trustee’s solicitor (who was also the acting as the Bank’s solicitor) wrote to the back confirming that “We have had the mortgage executed by the Trustees and are now enclosing a certified copy of it” and in reliance upon this representation the Bank released the loan advance.

The Court held…

That the Bank could not invoke the doctrine of estoppel where the legal charge did not appear, from the face of the document itself, to have been executed correctly. This should have been spotted by the Bank or its solicitor, who of course acted for the Trustees as well.

The court held however that whilst the document failed as a legal charge, by reason of the fact it was not executed as a deed, it could continue as an equitable charge. Support for this finding was found in s.2 of the 1989 Act which says that a contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each.

The terms may be incorporated in a document either by being set out in it or by reference to some other document. The charge was signed by the Trustees and the Bank and incorporated the Bank’s standard terms. The Court was therefore able to give effect to the document as an equitable mortgage.

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