HSBC Bank Plc v Dyche [2009]

1. Facts

• The Dyche parents sold their house to their daughter (Dyches) for a significantly low price of £25,000 after declaring bankruptcy.

• An agreement was made that the parents would continue to live in the property and meet the mortgage payments.

• Once the mortgage was repaid, the property would be transferred to the daughter, which eventually occurred.

• The Dyches later divorced, and the daughter mortgaged the property without informing her ex-husband.

• She falsely claimed that her ex-husband was merely a tenant and forged his signature to obtain his consent for the mortgage.

• When she defaulted on the mortgage, HSBC sought possession of the property.

2. Outcome

• The court held that the ex-husband had a beneficial interest in the property due to his prior contributions and status as a co-owner.

• His beneficial interest, combined with his actual occupation (AO) of the property, constituted an overriding interest that protected him against the bank’s claim.

• The mortgage failed to satisfy the two trustee rule, as the transaction was conducted without his knowledge or consent.

• Additionally, the court found that HSBC had not purchased the property in good faith, further undermining their claim to possession.

3. Impact and Analysis

• Overriding Interest: The case illustrates the power of overriding interests, particularly when a beneficial interest is coupled with actual occupation. Such interests can take precedence over a lender’s claim, even when a mortgage has been secured on the property.

• Two Trustee Rule: This case reinforced the importance of the two trustee rule in protecting beneficial interests. The mortgage was invalid because it was secured without the consent of both beneficial owners, which highlights the risk of lenders bypassing this requirement.

• Good Faith: The court's finding that HSBC had not acted in good faith further emphasises the need for diligence by lenders when assessing the validity of transactions. The bank’s failure to ensure proper consent from all parties involved in the property transaction ultimately led to the failure of its claim for possession.