The defendant supplied drink to the owner of a club, the cost of which was secured by a charge over the club premises. The owner wished to re-finance his debt to the defendant and took a remortgage with the claimant to be secured as a fist legal charge on both the club and the owner’s house. Part of the remortgage monies were paid to the defendant in partial satisfaction of the sums outstanding. Both the claimant and defendant were granted legal charges over the house. Contrary to intention, the defendant’s charge was registered first so took priority to the claimant’s under the Land Registration Act 1925. The owner fell into arrears, the club and house were repossessed and sold but the proceeds were insufficient to repay both the claimant’s and defendant’s legal charges. The claimant brought proceedings for a declaration that its charge ranked in priority to the defendant’s charge even though the defendant’s charge had been registered first.

The Court of Appeal held that the requirements of proprietary estoppel were made out. The defendant knew the claimant had an expectation of priority in relation to the charge. It had passively acquiesced in the claimant making the advance in that expectation, had taken a benefit from it, but had later asserted priority to counter the claimant’s claims to the proceeds of sale. The appropriate relief here was not rectification of the register but a declaration that the claimant was entitled to be paid first and in full out of the proceeds of sale of the house.

Lancashire Mortgage Corporation Ltd v Scottish & Newcastle Plc