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Midland Bank Trust Co Ltd v Green (No. 1) [1981] 1 AC 513

It is not fraud to rely upon rights conferred by statute.

Facts:

A father granted his son, Green, an option to purchase a farm. The option was not registered on the Register of Title. To avoid the option, the father sold the farm to his wife for £500. The farm was really worth £40,000. After the mother died, the son sought a declaration from the courts that the option was binding on the mother’s estate. At first instance, the judge held that there had been a genuine sale that defeated the son’s unregistered option. However, the Court of Appeal reversed this decision. The mother’s estate appealed to the House of Lords.

Issues:

Under s.13 Land Charges Act 1925 a land charge is void unless registered against a purchaser of the land charged provided the purchase is ‘for money or money’s worth’. The son argued that the purchases for a very minimal consideration should be excluded. He also argued that s.13(2) did not protect a person who was acting in bad faith. In this case the purchase was made purely to defeat his option. Therefore, it was in bad faith and his option should still be binding.

Held:

Their Lordships allowed the appeal. They stated there was no requirement in s.13(3) of the 1925 Act that the purchaser should act in good faith. The section did not exclude a nominal sum of money provided the purchase was for money or money’s worth.  Their Lordships held that it was not fraud to rely on rights conferred by statute even if these rights were exercised in bad faith. Therefore, the son’s option was not binding on the mother’s estate. 


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