Depend on a friend? Get advice!
Posted: 23rd July 2015
Those who fail to take legal advice before entering into business relationships or important transactions leave themselves open to fraud. In one case, a man whose friend and partner betrayed him ended up under a deluge of debt and losing his home.
The partnership was conducted on an informal and improvised basis and the man trusted his friend to arrange the purchase of his home. The friend put the property in the name of a company which he controlled. He mortgaged it for £500,000 and gambled away the money before disappearing, leaving his partner in the lurch.
The mortgage lender launched proceedings and ultimately obtained possession of the property, which was sold for £1.1 million. It retained almost £700,000 of that sum, reflecting the value of the loan plus interest. Although the man was the beneficial owner of the property, he failed to persuade a judge that his interest in it overrode that of the lender.
In dismissing his challenge to that ruling, the Court of Appeal noted that the man had given his partner free rein in handling the property purchase. His abstinence from any involvement in the transaction had given his partner the opportunity to present himself as the property's beneficial owner and to deal freely with the lender which was also entitled to recoup its legal costs from the balance of the sale proceeds.