• This case concerned the relationship between overreaching and equitable interests created by virtue of proprietary estoppel. To preface this case summary, a brief foreword on overreaching is necessary.
  • Overreaching is where a beneficial interest in a property does not bind the disponee in the conveyance of a property. Overreaching occurs when there is a conveyance of a property by trustees of land and the monies of paid over to at least two trustees.
  • In this case the Court of Appeal held that beneficial interests created by virtue of proprietary estoppel also do not bind the disponee if overreaching occurs.

Facts of the Case

  • D, her two sons and their families lived together in one house.
  • D’s sons held the legal title in the house, and D held a beneficial interest by virtue of constructive trust.
  • D’s sons fell into arrears and the C, the mortgage company, initiated possession proceedings against her sons.
  • D argued that her beneficial interest must bind the mortgage company, because it was acquired through proprietary estoppel and thus was not able to be overreached.

Issues in Birmingham Midshires Mortgage Services Ltd v Sabherwal [2000]

  • The issue in this case was whether a beneficial interest acquired through proprietary estoppel could be overreached by the mortgage company.

Court of Appeal Held

  • The CA found in favour of the defendant. They stated that whilst proprietary estoppel could give rise to an overriding interest, that interest could still be overreached.
  • The CA also stated that in family matters, it was generally immaterial whether the right was acquired through trust or estoppel, as they are ‘almost interchangeable, and both are affected in the same way by the statutory mechanism of overreaching’.
  • The CA caveated that point by saying that this does not apply to commercial dispositions for reasons of commercial practicality.

Walker LJ

  • [27] “If she had made no financial contribution, but had nevertheless acted to her detriment in reliance on her sons’ promises, she might have obtained (through the medium of estoppel rather than through the medium of a trust) equitable rights of a proprietary nature. Her actual occupation of the house would then have promoted those rights into an overriding interest… Equitable interests of that character ought not to be overreached, since they are rights which an adjoining owner enjoys over the land itself, regardless of its ownership from time to time.”
  • [31] “In this type of family situation, the concepts of trust and equitable estoppel are almost interchangeable, and both are affected in the same way by the statutory mechanism of overreaching, the substance of which is not affected by the 1996 Act.”