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The editor of this section of the site is Nigel Clayton of Kings Chambers, Leeds and Manchester. Nigel also maintains the specialist website dealing with mortgages at www.legalmortgage.co.uk

There are three cases this month:
  • To displace the equity of exoneration, a benefit must be capable of carrying a financial value.
  • A borrower has no direct cause of action to challenge the level of fees charged by solicitors appointed by receivers.
  • A bank was entitled to the protection of equitable mortgages and a legal mortgage in respect of certain loans.

Equity of exoneration

Indirect benefit

Armstrong v Onyearu
[2017] EWCA Civ 268


For a benefit to a co-owner/surety to displace the equity of exoneration, it must be direct or closely connected to the secured indebtedness, and must be capable of carrying a financial value.


Mr O was the sole registered proprietor of a property that was his matrimonial home with his wife. Following an application for sale of the property by his trustee in bankruptcy a declaration was made by the Registrar that that the beneficial interest in the property was owned by himself and Mrs O in equal shares. He had previously charged the property to a bank. It was subsequently held that Mrs O was entitled to an equity of exoneration, the effect of which was that the charge exhausted Mr O’s share, so the court refused to make an order for sale.

Mr O’s trustee in bankruptcy appealed to the High Court, contending that the equity of exoneration did not apply. Although the charge was for Mr O’s direct benefit only, in enabling him to discharge his business debts, Mrs O had obtained an indirect benefit because the borrowings had enabled Mr O to continue in business and service the original mortgage loan, secured on the property. The appeal was dismissed.

The trustee in bankruptcy sought permission for a second appeal on the basis that the case raised an important and novel point of law as to the application of the equity of exoneration where the joint owner has received an indirect, as opposed to a direc ... THIS IS AN EXTRACT OF THE FULL TEXT. TO GET THE FULL TEXT, SEE BELOW

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