United Bank of Kuwait plc v Sahib

Modified: 17th Jun 2019
Wordcount: 312 words

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United Bank of Kuwait plc v Sahib [1997] Ch 107

Deposit of title deeds and equitable mortgages.

Facts

The defendant, Sahib, had a half share in a house. He held the title deeds to the house to the order of the other defendants, the Société Générale Alsacienne de Banque SA (SGA) as security for a loan. The plaintiff, the United Bank of Kuwait, obtained a charging order over Sahib’s interest in the proceeds of the sale of the house. SGA claimed that because the title deeds were deposited with them this had created an equitable mortgage in which they were the mortgagee. The plaintiff sought a declaration from the court that SGA did not have an equitable mortgage.

Issues

The defendants argued that the equitable mortgage was established by the deposit of the title deeds with the lender according to Russel v Russel(1783) 1 Bro CC 269. However, the plaintiff’s argued that this rule had not survived the enactment of the Law of Property (Miscellaneous Provisions) Act 1989, s.2(1), which stated that ‘A contract for sale or other disposition of an interest in land’ had to be in writing.

Decision/Outcome

The Court of Appeal held that s.2(1) of the 1989 Act stated that a ‘disposition’ was to have the same meaning as under the Law of Property Act 1925. Section 205(1)(i) of the 1925 Act said that a ‘disposition’ included any conveyance, charge or mortgage. Therefore, a deposit of title deeds was an agreement to create a charge and was caught by s.2(1) of the 1989 Act. Consequently, the rule in Russel v Russel did not survive the 1989 Act regarding mortgages.

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