2nd September 2016
Like so many cases in recent years, the background to Mortgage Express v Lambert  involves fraud. When the owner of a leasehold flat, Ms Lambert, got into financial difficulties, she fell prey to a sale and leaseback scam whereby she sold her property, at a significant undervalue, to two fraudsters. While Ms Lambert continued to occupy, the fraudsters obtained a mortgage loan secured against the property at its true value and then made off with the proceeds. When the lender sought possession, Ms Lambert claimed she was entitled to unravel her sale to the fraudsters on the basis that it was an unconscionable bargain. She also claimed that she was entitled to receive her flat back free from the mortgage.
The Court of Appeal had to consider the legal nature of Ms Lambert’s right to set aside her sale of the flat on the basis that it was an unconscionable bargain; how such a right fitted into the system of land registration; and whether Ms Lambert’s right could be overreached in any event.
The Court of Appeal undertook some academic analysis which will be of interest to lenders, which can be summarised as follows:
The Court of Appeal concluded:
This case clarifies, for the first time, that the right to set aside an unconscionable bargain is an equity that is, at least in principle, capable of being an overriding interest and of binding successors in title. As the Court of Appeal’s conclusion demonstrates, however, much will depend on the facts of the case, and an occupier’s rights will not override those of a subsequent registered chargeholder if those rights were not obvious or asserted upon a reasonable inspection. Lenders will also be pleased with the confirmation provided in this case that overreaching of an equity can nevertheless occur if other necessary legal requirements are met.
  EWCA Civ 555
 At its broadest sense, equity in English law means ‘fairness’. The law of equity and equitable principles may, in some circumstances, be able to provide a fair solution where the common law or statute cannot. Equity and equitable principles play a significant role in the law of mortgages, helping to balance the often-competing rights of mortgagee, mortgagor and occupier.
 pursuant to section 26 of the LRA and section 2 of the Law of Property Act 1925.