• In the case of Equity and Law v Prestidge 1992 1 all er 909 it is decided that a beneficiary’s consent to a second mortgage is allowed to be imputed when used to pay off the first mortgage.

Facts of the Case

  • An unmarried couple bought a house “together,” and this was done under only one of the partners’ names. The house was bought subject to a mortgage to which the non-owner in the couple, the defendant (D), Mrs. Prestidge, contributed a significant amount.
  • This being said,  without the consent of the non-owner, the owner took out a second mortgage for a more significant sum, with the claimants, Equity and Law. The landowner used a portion of the money to pay off the first mortgage and then left the property without making repayments, thus the lender (C) sought possession of the property.

Issues in Equity and Law v Prestidge 1992 1 all er 909

  • What beneficial interest did the defendant acquire as a result of the transactions leading up to the mortgage and purchase and can the defendant prevent the claimants from seeking possession of the property?

Held by Court

  • The claimant’s order for possession was granted as the defendant did not have any beneficial interests in the property.

Lord Justice Mustill

  • Consent by the defendant to the second mortgage could be imputed despite her lack of knowledge of it given that the man acted in good faith
  • Mustill L.J. adopted the view that if an equitable owner consents to a first mortgage, they must be taken to consent/agree to a second mortgage, made on no less favourable terms.