The Dangers For Lenders Of Occupier Rights In Land Following The Decision Of The Grand Court Of The Cayman Islands In CIBC Cayman Limited v R. Christiansen and E. Christiansen

In this article Ian Jamieson, Head of Property and Banking at Solomon Harris, examines the case of CIBC Cayman Limited v R. Christiansen and E. Christiansen [2008 CILR 103] and provides advice to lenders on the ramifications thereof.

The Facts

The plaintiff in the case was a bank which applied for orders to assist it in enforcing its security over land owned by the first defendant ("Mr A").

Mr A was the registered owner of four parcels of land, which he had used as security for a significant personal loan from the bank. Soon after, in December 1995, he married the second defendant ("Mrs A"). Although she was not made a registered co-owner of the land, before marrying him she agreed that, in exchange for relinquishing her job and undertaking domestic responsibility for the matrimonial home, she would acquire a half interest in it.

Mr A subsequently extended the first loan and more loans were subsequently secured against the land, although Mrs A was unaware of any except the first. At no time did he reveal to the bank that he had granted Mrs A a half interest in the land, and he even made misrepresentations as to the true state of ownership. In turn, Mrs A made no effort to conceal her beneficial interest in, or occupation of, the matrimonial home, which was situated on the largest of the four parcels of land in contention.

In May 2004, due to Mr A's default on the loans, the bank commenced the steps which would lead to foreclosure, which were challenged by Mrs A, who claimed an overriding equitable interest in the land, taking priority over any interest of the bank.

The bank applied to the Grand Court that orders should be made assisting it in enforcing its security over the land because (a) Mr A had defaulted on loans secured against that land; (b) he was the only registered owner of that land and he had not brought to its attention any interest that Mrs A had in the land, misrepresenting the true state of ownership; and (c) any beneficial interest that Mrs A did have in the land could not take priority over its own, as it was aware of her occupation and no further inquiry was necessary.

Mr and Mrs A submitted in reply that (a) Mrs A had acquired a beneficial half interest in their home and the land upon their marriage, as they had made a bargain to that effect, which had led her to alter her position significantly, relinquishing her job and undertaking responsibility for all of the domestic arrangements in the home; (b) the bank was aware...