In Credit and Mercantile Plc v (1) Kaymuu Ltd (2) Kevin Michael Wishart and (3) Ian Mark Defty (as Trustee in Bankruptcy for Mr Sami Muduroglu) [2014] EWHC 1746, the court held that whilst a beneficial interest was created in favour of Mr Wishart, it did not take priority to the claimant’s charge.


Mr Wishart and Mr Muduroglu were partners in the business of development projects. They had no formal contract between them but obtained a verbal agreement that Mr Muduroglu would purchase a family home on Mr Wishart’s behalf with the business proceeds.  

Without Mr Wishart’s knowledge, Mr Muduroglu purchased the property through his company, Kaymuu, and secured a mortgage with the claimant. At all material times, Mr Wishart resided at the property. Mr Muduroglu defaulted upon the mortgage and subsequently became bankrupt. The claimant obtained possession of the property and redeemed its charge via a sale.


  • Mr Wishart asserted a beneficial interest which overrode the Claimant’s charge.
  • Mr Wishart and Ian Defty (as trustee in bankruptcy for Mr Muduroglu) made claims on the remaining surplus. 
  • The claimant and Mr Defty claimed their costs.


The claimant was entitled to redeem its charge including its full costs. Although Mr Wishart did have a beneficial interest in the property, Mr Muduroglu had acted as his agent in respect of purchasing it. In order to take priority to the claimant’s charge, the onus was on Mr Wishart to alert the claimant to his interest.

The following useful points arise from the judgment in this case:

  • The court found that although there was no contractually enforceable agreement between Mr Wishart and Mr Muduroglu, Mr Wishart had relied on Mr Muduroglu to obtain the property for his benefit and became a beneficial owner of the property upon purchase.
  • In allowing Mr Muduroglu to act as his agent, Mr Wishart had deferred sufficient authority and it was then incumbent upon him to notify the claimant of any competing claims to the property.
  • Since the claimant now defended the title to its security, it could not add its further costs to the mortgage account. The claimant was however entitled to recover the initial costs of the possession proceedings.


A lender is only required to make reasonable enquiries into beneficial interests in a property.  If would be beneficiaries unreasonably fail to disclose such a right, or rely on agents to affect the mechanics of the sale, the claimant’s charge will take priority.