Investigating potential beneficial interests in property

Investigating potential beneficial interests in property
What should secured lenders do to ensure there is no overriding beneficial interest in a property? Neil Mendoza, barrister at Selborne Chambers, considers the decision in Credit & Mercantile in which he acted for the second defendant (Wishart).

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Credit & Mercantile plc v Kaymuu Ltd and others [2014] EWHC 1746 (Ch) (£)

The claimant held a charge over a property, which had been occupied by the second defendant. It sought to retain a sum of money from the net proceeds of the sale of the property. The second defendant contended that he was entitled to that sum as the beneficial owner of the property. The Chancery Division held that, while the second defendant had been the beneficial owner of the property, on the facts, he could not assert his beneficial ownership of the property in priority to the claimant’s charge. The claimant was entitled to retain the amount it held from the proceeds of sale of the property. The second defendant was entitled to the surplus paid into court in respect of the balance of the proceeds of sale.

What was the background to this case?

Sami, his brother and Wishart (W) were involved in property transactions on a very informal joint basis. As far as this case is concerned, the project related to the buying and developing of a cemetery. They intended to sell off their interest in the LLP that was holding the cemetery.

The loose plan was that W would receive over £1m in order for him to buy a house, mortgage free. W left Sami to deal with the solicitors on all aspects of the conveyancing transaction. W was persuaded by Sami that the property ought to be purchased in the name of a Jersey trust. However, when it came to completion, Sami caused the contract to be altered, so that he was named as the contractual purchaser, but with a provision in

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