Can a chargor be estopped from challenging the validity of an incorrectly executed legal charge?

Can a chargor be estopped from challenging the validity of an incorrectly executed legal charge?

What does the recent case of Bank of Scotland Plc v Waugh [2014] EWHC 2117 (Ch) tell us about the court's approach to incorrectly executed legal charges?

What were the facts in this case?

Bank of Scotland plc provided a number of banking facilities to the Nelson Trust. This particular case concerned a charge granted over Asquorn House in August 2003 (the charge) and monies due under a facility letter dated 18 July 2007 (the facility letter) which was addressed to, and signed by the trustees.

The charge was signed by the three trustees but none of the signatures were witnessed as is required by the Law of Property (Miscellaneous Provisions) Act 1989, s 1(3) (LP(MP)A 1989) for execution as a deed by an individual.

The Bank of Scotland appointed a receiver to enforce the charge. The trustees applied to the Land Registry in March 2013 for cancellation of the charge and rectification of the register onthe grounds that the charge had not been properly attested. Their application had been stayed pending the outcome of these proceedings.

What was the Bank of Scotland's position?

In these proceedings, the Bank of Scotland sought:

  • summary judgment against the trustees in relation to the sums due under the facility letter
  • a declaration that the trustees/Nelson Trust be estopped from denying the validity of the charge
  • as a fall back, a declaration that the charge was effective as an equitable mortgage and/or that it was entitled to perfect the charge, or require the Nelson Trust to do so, pursuant to its standard terms and conditions

What did the trustees argue?

The trustees contended there should be no summary judgment in relation to the sums due under the facility letter. The trustees put forward various arguments for this, including that the Bank of Scotland had stated in a letter

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About the author:

Miranda is a solicitor specialising in leveraged and acquisition finance. She trained at Hogan Lovells International LLP and qualified into the international banking and finance team. During her time at Hogan Lovells she worked on a variety of domestic and cross-border transactions, acting for both borrowers and lenders. She also experienced secondments to Barclays Bank PLC and Kaupthing Bank hf.