Mortgage Express v Lambert [2017] Ch. 93

Mrs Lambert sold her flat while in financial difficulty for a price far below its true value. The purchasers told her that the property was worth much less than it was and offered terms under which she could remain in occupation, initially without rent. They later mortgaged the property to Mortgage Express. She continued living there and resisted possession, relying on the unconscionable nature of the sale and her right to have it set aside. The litigation required the court to decide how that equitable claim interacted with the lender’s security and the statutory rules for overreaching.

Could Mrs Lambert’s equity to set aside the sale bind the mortgagee through her occupation, or had that equity been overreached by the mortgage transaction?

The Court of Appeal held that the lender’s security prevailed. Mrs Lambert’s right to set aside the unconscionable bargain was an equity with proprietary significance, rather than merely a personal complaint incapable of affecting land. That did not mean it necessarily bound the mortgagee. The mortgage money was paid to two trustees, bringing the transaction within the statutory overreaching machinery. The equity was accordingly transferred away from the land to the proceeds. Her actual occupation did not prevent that consequence. The result depended on overreaching and the particular transaction, not on a rule that a lender invariably takes free of an occupier’s equitable rights.

An equity to rescind an unconscionable conveyance may be proprietary in character yet still be overreached when the statutory requirements are satisfied. Actual occupation does not preserve an interest against a disposition that has validly overreached it.

The case connects the classification of an equitable right with the separate machinery governing its priority. Section 116 of the Land Registration Act 2002 recognises the proprietary character of certain equities, but does not exempt them from overreaching. An exam answer should first identify the right, then examine payment to the required trustees and the relevant disposition. Treating occupation as an automatic veto on mortgage enforcement misses the central step in the reasoning.