Claim Case Study: Mortgage fraud Background The insured lender advanced the borrower a loan of £225,000. The loan was to be secured by a first charge over the property, being bought by the borrower. The insured lender subsequently applied to Land Registry to register its charge and the transfer to the borrower. However, Land Registry received an objection from the vendor, alleging that the transfer had been procured fraudulently. The borrower defaulted on his loan repayments, alleging that he was not obliged to repay the debt if the mortgage had not been registered. The insured lender notified First Title of a claim. The vendor alleged that previously she had entered into a sale and leaseback scheme with the borrower. As part of that scheme, the property was to be transferred into the borrower’s name. However, the borrower had not performed his obligations to the vendor under the scheme. The vendor, therefore, claimed that the transfer had been procured fraudulently and was void and that she was entitled to remain the registered owner of the property.
Challenge The dispute was brought before the Land Registry adjudicator. The adjudicator found that the transfer had not been fraudulently procured and that the insured lender’s funds had been used to redeem an existing mortgage at purchase. However, the transfer deed itself had been amended post-execution and was therefore void, on the basis of the Rule in Pigot’s Case.
lender to a previous mortgage, effectively placing it in the same position as the former lender, and secondly, a money judgment. First Title obtained orders against both the vendor and the borrower. The vendor appealed to the High Court against the insured lender’s order. First Title defended the appeal in the insured lender’s name, and the appeal was dismissed. Both the vendor and the borrower appealed to the High Court against the insured lender’s order. Both appeals were defended and were dismissed. The borrower then applied for leave to appeal to the Court of Appeal. The basis for the borrower’s appeal was that he had not been served with a valid default notice by the insured. Consequently, the loan debt due to the insured had not fallen due and its money judgment was void (see Esso Petroleum Limited v Alston Bridge Properties Limited [1975]). The borrower had used several addresses throughout the litigation, and he alleged that the Demand Notice had been sent to the wrong one. First Title defended the leave to appeal in the insured lender’s name. The borrower’s application for leave to appeal was dismissed. The property was subsequently sold and the insured lender received sufficient sale proceeds to redeem its charge in full. This claim took many months to resolve but First Title took all actions necessary and defended all appeals. This included paying all the legal costs. The insured lender was delighted with the outcome, especially as the sale proceeds discharged the mortgage in full.
First Title subsequently issued court proceedings in the insured lender’s name against the vendor and the borrower, seeking firstly, an order subrogating the insured
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Leading Title Insurance 1022-0219