United Bank of Kuwait Ltd v Sahib [1997] Ch 107

Court of Appeal

Basic Facts: The defendant, Sahib, owned a half interest in a house and had deposited the title deeds with Société Générale Alsacienne de Banque SA (SGA) as collateral for a loan. The plaintiff, United Bank of Kuwait, secured a charging order over Sahib’s share of the proceeds from the house sale. SGA argued that their possession of the title deeds constituted an equitable mortgage, making them the mortgagee. The plaintiff requested a court declaration asserting that SGA did not hold an equitable mortgage.

Issue for the Court : When can an equitable mortgage be created?

Held: The court ruled that an equitable mortgage created without a formal deed could not bind third parties unless the mortgagee had taken possession or registered the charge.

Peter Gibson LJ

• Under section 2 of the Law of Property (Miscellaneous Provisions) 1989 Act, a mortgage must be in writing, signed by all parties, and include all terms agreed upon.

• Mere deposit of title deeds is not sufficient to create an equitable mortgage without a formal document.