Equity and Law Home Loans Ltd v Prestidge [1992] 1 All ER 909

An unmarried couple acquired a home in one partner’s name using mortgage finance. The other partner had a beneficial interest and accepted the initial borrowing. The legal owner later arranged a replacement mortgage, using part of the advance to discharge the earlier security, without obtaining her express agreement to the new transaction. After he left and payments ceased, the new lender sought possession. The dispute concerned the priority of the beneficial interest against the refinancing lender and whether consent could properly be inferred from the acquisition arrangements and terms of the replacement borrowing.

Could consent to a replacement mortgage be inferred from the beneficiary’s accepted financing arrangement, and what limits applied to that inference?

The Court of Appeal allowed the lender’s security to prevail on the relevant consent analysis. The beneficiary’s position was considered against the mortgage arrangements which she had accepted and the use of refinancing to discharge the original loan. The reasoning allowed consent to replacement borrowing to be inferred in the circumstances, with the protection of no less favourable terms important to that analysis. It did not establish that the beneficiary had never acquired an interest or that consenting to one mortgage authorises any later increase in debt. The extent of the inference depends on the transaction and should be distinguished from a lender’s separate potential rights through subrogation.

Consent to refinancing may be inferred from a beneficiary’s accepted mortgage arrangements in appropriate circumstances, including protection against materially less favourable terms. It is not a blanket authority to impose unlimited later borrowing or to deny the beneficiary’s underlying ownership.

Prestidge is useful when a protected beneficial interest encounters replacement finance. It requires analysis of what the beneficiary authorised and on what terms, rather than an equation between initial consent and all subsequent borrowing. Compare Henning on acquisition finance. Recognising a beneficial interest does not itself decide its priority, while consenting to one security arrangement does not necessarily waive every future objection. The scope of the consent and the structure of the refinancing must therefore be identified precisely.