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Mortgages and beneficial occupation: A recent, useful case

In the recent case of AIB v Turner [1] the lender was about to take possession of a large Regency house and estate, including a separate cottage in the grounds, (the Property), when it received a late defence and counterclaim from the bereaved daughter-in-law, Maxine Turner (Maxine), of the registered proprietors and borrowers (Mr and Mrs Turner).

Maxine resisted possession claiming that she held the entire beneficial interest in the cottage via a common intention constructive trust [2] or via proprietay estoppel [3]; and on the basis that she was in actual occupation [4] of the cottage at the time the Turners mortgaged the Property. Following the death of her husband and the Turners’ son, Maxine had paid her death in service benefit and the proceeds of the sale of her family home to the Turners and had moved into the cottage with her son.

Legal points to note

Finding for the lender, the High Court took the opportunity to provide a very clear and helpful commentary on some of the legal principles underpinning common intention constructive trusts; proprietary estoppel; what constitutes ‘actual occupation’ of premises; and even another important issue for lenders: subrogation (see below). The judgment is certainly worth a read.

For the purposes of this article, the key points to note are as follows:

  • Maxine did not have a beneficial interest in the property despite her payments to the Turners of her death in service benefit and family home sale proceeds. By virtue of that payment Maxine became an investor in the Turners’ then-very successful business and derived an income. The Turners paid the bills and maintenance on the cottage and also paid for their grandson’s school fees. The evidence also confirmed that the reason Maxine had paid over her monies was to protect against the possibility of any future marriage placing pressure on her as to how she should spend that money.
  • Crucially, there had been no agreement or arrangement that she should have a beneficial interest in the cottage and therefore no common intention constructive trust existed.
  • Similarly, no representation or promise had been made to Maxine in respect of ownership of the cottage which it would then be unconscionable for the Turners or the lender to deny. There was therefore no proprietary estoppel.
  • Whether or not a person is in actual occupation of premises will be a question of fact and reality to be determined in any individual case. Permanent physical occupation is not required; the presence of personal possessions may be persuasive (but not conclusive); occupation by another will not count unless that person is clearly the agent or representative of the claimant; and whether occupation is ‘actual’ may depend upon the type of property involved as well as on other background facts. Here, Maxine had effectively moved to Barbados by the time the mortgage was executed and although she still kept possessions in the cottage and her son sometimes occupied, that did not suffice to make it a second home which she ‘actually’ occupied.
  • Subrogation is an equitable remedy which enables a party to stand in the shoes of another in order to reverse or prevent unjust enrichment which is not based upon any agreement or common intention of the party enriched or the party deprived [5]. Had the bank not already succeeded in this case on the grounds explained above, it may have been able to defeat Maxine’s defence and counterclaim on the basis of subrogation in any event.
  • Finally, it may often be open to a lender to argue that very late resistance to possession, such as happened here, is an abuse of process. The res judicata public interest and legal principle states that there should be finality to litigation and that parties should not face repeated litigation in respect of the same set of circumstances; and the case of Henderson v Henderson [6] established that it can be an abuse of process (and therefore proceedings can be struck out), for claims or arguments to be advanced when they could and should have been raised earlier. In this particular case, although Maxine’s arguments were advanced at a very late stage, the court found that she had not committed an abuse because she had not previously been independently advised and, in fact, the Turners had reassured her that they would be able to resolve matters with the lender and that she would be safe in the cottage.

WM Comment

The AIB v Turner case is an example of a beneficial interest claim being considered with great care by the courts and it gives a helpful overview of some key principles. Apart from its favourable outcome, it will be welcomed by lenders for its clarity and the fact that it pulls together so many of the issues upon which parties to possession claims often seek to rely.


[1] AIB Group (UK) plc v Turner & Ors [2015]EWHC 3994 (Ch)
[2] See our earlier briefing on the requirements for a common intention constructive trust.
[3] For a proprietary estoppel to arise, there has to have been a representation or promise made to the claimant, which it is unconscionable to subsequently deny. Proprietary estoppel is an equitable remedy. Equitable remedies are underpinned by fundamental fairness and awarded by the court at its discretion.
[5] Ibid. para 93
[6] (1843) 3 Hare 100
[4] Pursuant to sections 29 and 30 and Schedule 3, paragraph 2 of the Land Registration Act 2002.

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