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Bank of Cyprus UK Ltd v Menelaou
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1 User Commentary

Melanie Davidson (In-house lawyer) 13 November 2015

Case Digest: Bank of Cyprus UK Limited v Menelaou [2015] UKSC 66

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Was the Bank of Cyprus entitled to an equitable charge over residential property by subrogation to an unpaid vendor's lien?

The Supreme Court of England and Wales handed down judgment in the case of Bank of Cyprus UK Limited v Menelaou [2015] UKSC 66 on 4 November 2015.

The appeal was heard before Lord Neuberger (President), Lord Kerr, Lord Clarke, Lord Wilson and Lord Carnwath.

The court was tasked with deciding whether it was correct for the Court of Appeal to unanimously allow the Bank's appeal. Previously the Court of Appeal had held that the Bank was entitled to be subrogated to an equitable charge by way of an unpaid vendor's lien. The Bank's involvement in the acquisition of Great Oak Court was merely an agreement to release charges over a previous property.

Lord Clarke delivered the lead judgment. The critical question in a case of unjust enrichment, he said, was whether the appellant was enriched at the bank's expense; see the criteria laid out in Benedetti v Sawiris [2013] UKSC 50. There was no doubt that Melissa became unjustly enriched when she became the owner of Great Oak Court. It was "thanks to the Bank" that she became the owner subject to the charge; the Bank having agreed to release a part of debt on the previous family home.

The appropriate equitable remedy was for the Bank to be subrogated to the unpaid seller’s lien, reinstating the appellant's liability under the charge and reversing her unjust enrichment; see Orakpo v Manson Investments Ltd [1978] AC 95, 104 and Lord Hoffman’s observations in Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221. The effect of this was to therefore allow the Bank to enforce its equitable interest in the Property by sale.

Lord Neuberger agreed with Lord Clarke. Lord Kerr and Lord Wilson favoured Lord Neuberger's reasoning in paragraphs 80 to 82 and dismissed the claim. 

Lord Carnwath concurred but favoured a strict application for the traditional rules of subrogation; Boscawen v Bajiwa [1996] 1 WLR 328 is the leading modern authority in this area.

Appeal unanimously dismissed. 


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