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Cook v The Mortgage Business

Citation[2012] EWCA Civ 18

The Facts

During the property boom, sale and rent-back transactions became more widespread, often involving home owners struggling to meet mortgage payments and trying to avoid repossession.    There were many such transactions in the north east of England involving North East Property Buyers (NEPB) which gave rise to these cases, and hundreds more (not involving NEPB) around the country.  Problems arose when the purchasers defaulted on their mortgages.  The mortgage lenders - unaware that the transactions were sale and rent-backs - would bring mortgage possession proceedings to be met by claims from the former owners, now tenants, alleging that the purchasers had promised that they could stay in the properties for many years or for life.  The former owners claim that these promises gave rise to interests under proprietary estoppel or constructive trust that were binding on the mortgage lenders.  The lenders say that they are not affected by those claims and are entitled to repossess the properties as a result of mortgage defaults.

Nine NEPB cases were heard together as test cases in 2010 in Leeds (North East Property Buyers’ Litigation [2010] EWHC 2991 (Ch)).  The judge held that the lenders' interests had priority over that of the occupiers (the former owners) and made possession orders in the test cases.  The occupiers appealed to the Court of Appeal.   Five of the test cases settled or were stayed leaving four to be heard by the Court of Appeal.

Daniel Gatty of Hardwicke acted for the Mortgage Business plc in one of the High Court test cases and acted for all the respondent lenders in the Court of Appeal (where he was led by Jonathan Seitler QC).


The appeals were dismissed.