MENELAOU V BANK OF CYPRUS UK LTD

[2013] EWCA Civ 1960, Court of Appeal, Lord Justice Moses, Lord Justice Tomlinson and Lord Justice Floyd, 2 July 2013

Subrogation - Unjust enrichment - Unpaid vendor??A?A?s lien - Whether bank entitled to be subrogated to unpaid vendor's lien even though not directly providing the funds for the purchase

Mr and Mrs Menelaou owned a property, Rush Green Hall. They were indebted to the bank in the sum of £2.2 million, secured by two legal charges. They proposed to sell Rush Green Hall for £1.9 million and then to purchase another property, Great Oak Court, for a price of £875,000. The bank agreed that it would release its charges in return for repayment of £750,000 and a charge over Great Oak Court. The charge was not signed by the claimant, the daughter of Mr and Mrs Menelaou, who was to be the owner of Great Oak Court. In the present proceedings the bank sought a declaration that it was entitled to an equitable charge arising as a result of subrogation to an unpaid vendor's lien over Great Oak Court in that the bank had in effect discharged the liability of the claimant to the vendors of Great Oak Court and was subrogated to the vendor's rights against the claimant. The Court of Appeal granted the declaration. The claimant had been unjustly enriched by obtaining Great Oak Court free of any charge, and the unjust enrichment had been at the expense of the bank even though the bank had not actually provided the funds which had been used to pay the vendors of Great Oak Court. Accordingly the bank was subrogated to the vendors' lien over the property which had been discharged by payment of the purchase price.