Source: All England Reporter
Publisher Citation: [2002] All ER (D) 457 (Mar)
Court: Court of Appeal, Civil Division

Aldous and Jonathan Parker LJJ

Representation John de St Croix of Norton Rose for the applicants.
  Guy Newey QC and Andrew Westwood (instructed by Weil, Gotshal & Manges) for the first, second and third respondents.
  David Hodge QC and Katherine Holland (instructed by Pinsent Curtis Biddle & Co, Leeds) for the fourth and fifth respondents.
  Peter Arden (instructed by Hammond Suddards Edge, Leeds) for the sixth and seventh respondents.
Judgment Dates: 27 March 2002


Land - Lease - Equitable charge - Priority of interests - Company granting debenture creating equitable charge over leasehold property - Company acquiring headlease of land and granting underlease simultaneously - Company going into administrative receivership - Dispute as to priority between debenture and underlease - Judge finding grant of headlease and underlease in substance one transaction - Judge concluding underlease having priority over debenture - Whether judge in error.

The Case

It was settled law that in determining the priorities of competing interests in land, the court had to have regard to the substance, rather than the form, of competing equitable interests. That principle was to be adopted generally in every case where there were competing equitable interests and was not confined merely to property acquisition charges. A headlease and underlease were capable of comprising a single transaction and they had done just that in the instant case where there had been a simultaneous acquisition of a headlease with an underlease. The judge had therefore been entitled to find that where a company had never acquired the headlease free of the obligation to grant the underlease, the only interest upon which an equitable charge under a debenture issued by the company could bite was a nominal three day reversion expectant upon the determination of the underlease. The judge had therefore been correct in finding that the underlease took precedence over the equitable charge arising from the debenture.

Practice Areas

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