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HSBC Bank v Dyche [2009] EWHC 2954  High Court

The house in dispute was originally owned by Mr Collelldevall and his wife which they purchased in 1976. They both held legal title and the whole beneficial interest. Mr Collelldevall was declared bankrupt in 1988 which severed the joint tenancy. An order for sale was made against the house but was never enforced. In Jan 1994 the Collelldevalls, with consent of the trustee in bankruptcy, sold the house to their daughter and son-in-law, Mr & Mrs Dyche for £25,000 which was substantially less than it was worth.  The sums received discharged the existing mortgage on the property with the remainder discharging the bankruptcy. The agreement between the Dyches and Collelldevalls was that the Collelldevalls would remain in the property and would meet the mortgage payments. Once the mortgage was repaid the Dyches would transfer the property to them. The house was duly transferred into the names of Mr & Mrs Dyche and the effect of the agreement was such to raise a constructive trust so that they held the property on trust for the Collelldevalls. Mrs Collelldevall died in August 1994. In 2002 the Dyches divorced and the property was transferred into Mrs Dyche’s sole name for a consideration of £5,000. Mrs Dyche then mortgaged the property to HSBC Bank. She had claimed on the application form that she was the landlord and Mr Collelldevall was her tenant and had forged his signature to obtain the mortgage. Mr Collelldevall was unaware of the mortgage. She failed to keep up her payments and HSBC sought possession of the property. Mr Collelldevall sought to defeat the claim based on his beneficial interest coupled with his actual occupation so as to make it an overriding interest. HSBC bank argued his interest had been overreached in the transfer from Mr Dyche to Mrs Dyche.


The claim for possession was dismissed. Mr Collelldevall’s interest was not overreached and did rank as an overriding interest. He was thus entitled to a transfer of the property free from the HSBC mortgage.

Purle J QC

“Given that Mrs Dyche was a trustee acting in dishonest breach of trust, she cannot be said to have been purchasing "in good faith". Neither she nor those claiming through her can therefore claim that she was a "purchaser" within section 2. I should, perhaps, mention that the definitions in section 205 apply "unless the context otherwise requires". Here, the context positively requires the definition to apply, as otherwise a trustee could overreach the beneficiary's interest in favour of himself.  In addition, the terms of sections 2(1)(ii), 2(2) and 27 LPA 1925 require the conveyance to be made by (and any capital money paid to or by the direction of) at least two trustees or a trust corporation. The £5,000 was not paid to two trustees or a trust corporation, but by one trustee (Mrs Dyche) to another trustee (her husband). It must however have been so paid by the direction of both of them, so I would not regard this as objectionable (assuming the £5,000 to be properly characterised as capital money) if section 2 otherwise applied.”

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