One of the purposes of the Land Registration Act 2002 (LRA2002) was to clarify and

simplify the rules to the priorities of registered land.1 In order to bring land
conveyancing and registration into the 21st century the uncertain rules of equity were
supposed to determined purely by statute2 under S.28 LRA2002 which has been
described as ‘a new, surprisingly stark “Basic Rule” to arrange priority simply as a
matter of temporal order of creation’.3

In Credit & Mercantile Plc v Kaymuu Ltd4 not only have the courts reverted back to
the principles of equitable priorities to registered land, they have ignored the rule of
law as found in Williams & Glyn’s Bank Ltd v Boland5.

Mr. Wishart and Mr. Sami Maduroglu (Sami) were informal business partners. On
completion of a lucrative deal, Wishart wanted to purchase a residential property for
himself and his family. In May 2010 Wishart entrusted Sami to purchase property on
registered land called Dalhanna. Sammi made the purchase, but through a company
he solely controlled, Kaymuu Ltd. In June 2010 Kaymuu was registered as the legal
owner.

On 22 June acting without Wishart’s knowledge Sami borrowed £500,000 from C&M
in return for a charge given by Kaymuu by way of mortgage. Sami gambled and lost
the money, disappeared, and declared himself bankrupt. Kaymuu defaulted on the
loan and C&M commenced proceeding to obtain possession of the property and
arranged it to be sold for £1.1m.

C&M sought to retain a balance of £694,072.75 from the net proceeds of sale. They
also sought to recover its legal costs from the surplus. This included the legal costs
not only in seeking redress from Kaymuu, but also against Wishart.

At the Appeal Court Lord Justice Sales, with full agreement from Logmore and
Tomlinson LJJ dismissed the appeal of Wishart and allowed the cross-appeal by
C&M. The cross-appeal was dealt with by means of the construct of the mortgage
deed. It deemed the judges had erred in his interpretation of the mortgage deed. As
C&M had acted in ‘enforcing or attempting to enforce the rights and powers of the
Lender’ Sale LJ took a straightforward and natural test to the words.6

Wishart argued that his occupation, discoverable on a reasonably careful inspection

of the land at the time of the disposition, meant that his interest was an overriding

1Law Commission, Land Registration for the Twenty-First Century (Law Com No 271), para
1.14

2 Megarry, R., Wade, W., Harpum, C., Bridge, S. and Dixon, M. (2012) The Law of Real Property.
(8th ed.) London: Sweet & Maxwell.

3 Gray k and Gray F Elements of Land Law 5th Ed. Oxford, Oxford University Press, 2009
[8.2.4]
4 Credit & Mercantile Plc v Kaymuu Ltd [2015] EWCA Civ 655
5 Williams & Glyn’s Bank Ltd v Boland [1981] AC 487
6 Credit and Mercantile PLC v Kaymuu Ltd [2015] EWCA Civ 655 paras 68,71
interest as per S.29 and para.2 of Sch. 3 of the Land Registration Act 2002
(LRA2002), and that C & M was subject to it. This was dismissed; Wishart, whilst it
was accepted that Wishart had a beneficial interest, based on Pallant v Morgan7
equity and that he was in actual occupation of the land in which the tests from case
law in Thompson v Foy8 and Link Lending v Bustard9 were applied was prevented
from having a right enforceable against C & M by the Brocklesbury principle10.

The court relied on a principle made 30 years before the introduction of the Land
Registration Act 1925. The Brocklesby principle in its simplest form provides that
where an owner of an equitable trust of land (Wishart) has allowed another (Sammi
(Kaymuu)) to manage the asset (Dalhanna) any limitations to the powers and
limitations to Kaymuu must be brought to the attention of a third party dealing with
the asset (C &M). It is also the doctrine of ostensible authority which states that
where Wishart has authorised Kaymuu to hold Dalhanna on trust, then Kaymuu will
always be treated as an agent to Wishart.

The facts of the case are analogous to Abbey National Building Society v Cann11,
Paddington Building Society v Mendelsohn12, Thompson v Foy and Bank of Scotland
v Hussain13. Critical to the reliance held in the Wishart ruling is that in each of these
cases the equitable owner knew of the mortgage, or that one was necessary for the
purchase. The fact that the legal owner exceeds the authority is crucial to the
Brocklesbury principle. However, Wishart was not in this position. A mortgage was
not required for the purchase and he didn’t know that the raising of a mortgage was
even a possibility. To add emphasis and clarity to this, Sales LJ in his ruling stated
‘Mr Wishart gave Sami authority to make whatever arrangement he saw fit to acquire
Dalhanna, so long as the net result was that Mr Wishart would have the beneficial
ownership of it free of any mortgage14’

In his ruling Sales LJ states that by precluding himself from the mechanics of the
purchase, then he had given Sami the means of representing himself with full
authority to deal with third parties as the owner. This directly questions the well-
respected ruling in William and Glyn’s Bank Ltd v Boland15 the reasoning in present
case makes Boland redundant. Mrs Boland left all matters to her husband, she did
not know of the existence of the mortgage, nor should she, exactly like Wishart. How

7 Pallant v Morgan [1953] Ch.43 – arising when an informal acquisition agreement is

enforced through the imposition of a constructive trust on the person who formally acquires
the property because it would be inequitable for the acquirer to retain the full interest.
8 Thompson v Foy [2009] EWHC 1076 (Ch)
9 Link Lending v Bustard [2010] EWCA Civ 424
10 Brocklesbury v Temperance Permanent BS [1895] AC 173
11 Abbey National Building Society v Cann [1991] 1 AC 56
12 Paddington Building Society v Mendelsohn [1985] 50 P.& C.R. 244
13 Bank of Scotland v Hussain [2010] EWHC 2812 (Ch)
14 supra 4 para.57
15 Williams and Glyn’s Bank v Boland [1981] AC 487 (HL)
was Wishart to communicate his limitation of power on Sami when a) he didn’t know
Sami was the legal owner16

This decision raises questions regarding the Court’s interpretation of Brocklesbury,

which is in effect the doctrine of apparent authority and the effect of the statutes
have on conveyancing of land and the overriding interests.

16Wishart was under the impression the legal title was held by a Jersey trust company,
formed for the purpose of the purchase.