Registration Flashcards
Unregistered land
Rule: legal rights automatically bind the world (all subsequent purchasers, squatters etc.) and equitable rights bind all other than the bona fide purchaser of a legal estate for value without notice. Role greatly diminished by the increase in registration, and even rules of unregistered land are overlaid by registration of land charges and overreaching.
Unregistered land
- land charges
LCA 1925 (consolidated into LCA 1972) introduced a means of publicity and certainty by providing for statutory notice of certain interests affecting an unregistered estate: they are those burdens on unregistered land that are appropriate for long-term enforcement irrespective of the identity of the estate owner.
The Act modifies the traditional doctrine of notice by providing that registration in the Register of Land Charges is “deemed to constitute actual notice … to all persons and for all purposes” (LPA 1925 s198(1)).
The effect of non-registration is usually voidness of the registrable interest against most kinds of purchasers (but never as between the original parties or their donnees (recipient under a will or intestacy)
1) Class A, B, C(i-iii), F: void against a purchaser of the land charged with it, or of any interest in such land (purchaser = anyone who gives valuable consideration, precluding any enquiry into adequacy (Midland Bank v Green, Lord Wilberforce)
2) Class C(iv), D: void against a purchaser for money or money’s worth of a legal estate in the land charged (s4(6) LCA 1975)
Note: this statutory immunity can be defeated by arguments of constructive trust or estoppel (ER Ives v High).
Voidness of registrable but unregistered charges make it irrelevant that the purchaser had actual express knowledge of the existence of the interest (s199(1)(i) LPA 1925) – this effects a change “from a moral to an a-moral basis” in the protection of equitable interests in land (HWR Wade).
Briefly thought that taking a conveyance at an undervalue in a deliberate attempt to free the estate of some known but unregistered incumbrance commits a form of fraud which disables him from pleading the fact of non-registration, but in Midlande Bank v Green this was denied – the only form of notice relevant to land charges is that constituted by entry in the register, thus, there is no criterion of good faith in the operation of LCA (“it is not fraud to take advantage of legal rights, the existence of which may be taken to be known to both parties” Lord Wilberforce).
Classes of land charges:
1) Class C(iv): estate contract (contracts for the sale of a fee simple, contracts for a lease)
2) Class D(ii): restrictive covenant (a covenant or agreement other than between a lessor and lessee restrictive of the user of land)
3) Class D(iii): equitable easement (but the very persons in whose favour such charges commonly arise are those who tend to be unaware of the need to secure protection by registration: see ER Ives v High)
Unregistered land
II – Bona fide purchaser rule (equitable doctrine of notice)
- strategy of 1925 act?
- third category..? - content of the rule?
- surviving applications?
- thus a purchaser of an unregistered legal estate takes subject to:
Strategy of 1925 Act to eliminate the uncertainty of the doctrine by dividing equitable rights affecting unregistered land into ‘specific’ (registrable land charges) and ‘general’ (overreachable) burdens. But there is a third category of equitable rights whose effect can only be determined by a residual application of the bona fide purchaser rule.
Content of the rule:
The purchaser must demonstrate, in order to be released from pre-existing equitable rights:
1) Bona fides (a “genuine and honest” absence of notice: Lord Wilberforce, Midlande Bank v Green)
2) Purchaser of legal estate (purchasers of equitable interests are in principle subject to all prior equitable interests irrespective of notice: London and South Western Railway Co v Gomm)
3) Purchaser for value (must give valuable consideration (so no donnee or squatter), but the adequacy is irrelevant)
4) Without notice (actual or constructive or imputed (matters of which the solicitor or agent was aware or should reasonably be aware))
Surviving applications:
1) Beneficial interests hidden behind an implied trust of land, in the context of a dealing by a sole owner of an unregistered legal estate (i.e. Williams and Glyn’s Bank v Boland)
Thus, a purchaser of an unregistered legal estate takes subject to:
1) Any other pre-existing legal estates
2) Any registered land charge
3) Any overreached equitable interest of which he has notice (actual, constructive or imputed)
4) If leasehold, certain covenants and obligations arising under the lease
Unregistered land
Hunt v Luck [1902]
- Held: A purchaser will have constructive notice of any rights reasonably discoverable by inspection of the property, and, in particular, from enquiry of any occupier as to his interest and those of which he holds it. This does not extend to the rights of a landlord.
- Vaughan Williams LJ : ‘if a purchaser or mortgagee has notice that the vendor or mortgagor is not in possession of the property, he must make enquiries of the person in possession, of the tenant who is in possession, and find out from him what his rights are, and if he does not choose to do that then whatever title he acquires as purchaser or mortgagee, will be subject to the title or right of the tenant in possession. I do not think that there is, for the purpose of ascertaining the title of the vendor, any obligation on the purchaser to make enquiries of a tenant with reference to anything but the possession and interest of the tenant.’
Unregistered land
Kingsnorth Finance Co Ltd v Tizard [1986]
Mr Tizard was the sole registered proprietor of the matrimonial home in which his wife had a beneficial interest. The marriage broke down and Mrs Tizard moved out but returned each day to look after their twin children and would stay the night if her husband was away. Mr Tizard mortgaged the property. On his application for the loan he stated that he was single. He arranged for the inspection to take place on a Sunday when he knew his wife and children would be out. The agent inspecting the property noted that there was occupation by the children but he found no signs of occupation by the wife. Mr Tizard had said that she had moved out many months ago and was living with someone else close by.
Held: Kingsnorth Finance took the property subject to the wife’s interest. The discrepancy between what Mr Tizard had stated on his application form (single) and what the agent found when he inspected the property (referring to two children) alerted the lenders to the need for further inquiries, which were not made. Thus, C were prejudicially affected within the meaning of s199(1)(ii)(b) LPA 1925 by the knowledge of the agent.
(A purchaser is expected to inspect the land and make inquiry as to anything that appears inconsistent with the title offered by the vendor – possession constitutes notice of the rights of the possessor because possession is prima facie evidence of title. Thus, a purchaser will have notice of the rights of the possessor even though his possession is not immediately apparent.
Unregistered land
Midland Bank v Green [1981]
Facts/held
The father granted his son an option to purchase a farm, not registered. Then, wishing to deprive the son of the option, the father conveyed the farm to the mother for 1/80 of its worth. The son sought to register the option and give notice exercising it.
Held (HL): the mother took an interest in fee simple for valuable consideration and so was a purchaser for money, thus, the option, not having been registered, was void against her. The words of the Act were not to be qualified by an requirement that a purchaser must take in good faith or that the money paid must not be nominal.
Unregistered land
Midland Bank v Green [1981]
Lord Wilberforce
- Overview of the LCA
- Definition of purchaser/requirement of good faith
- Why omit good faith?
- the (LC) Act is clear and definite, and intended to provide a simple and understandable system for the protection of title to land; it should not be read down or glossed (this would destroy the usefulness of the Act).
- The definition of “purchaser” in LCA 1925 does not mention “good faith” nor its predecessors – rather, the definition of “purchaser for value” (a person who for valuable consideration takes any interest in land) in the 1888 Act was to be carried forward into the 1925 Act. Further, s13(2) of the 1925 Act doesn’t mention “good faith”, whereas several other sections do. Construction must lead to the conclusion that the omission was deliberate.
- But why the omission? Requiring good faith would bring the necessity of inquiring into the purchaser’s motives and state of mind (difficult: if the purchaser simply had notice of the option but decided to buy the land, she’s obviously in good faith. Would it change anything if the purchaser’s motive was to defeat the option? Any advantage to oneself is necessarily a disadvantage for another; to make the validity of the purchase depend on which aspect of the transaction was prevalent in the purchaser’s mind creates distinctions equally difficult to analyse in law as to establish in fact).
Introduction to land law
Gardner (2014)
Intro
1) Establishing registration arrangements wasn’t the end in itself of LRA, but as a means to facilitate the Act’s key aspiration: that all conveyancing should take place via electronic transaction
2) So we’ve moved from “registration of title” to “title by registration” – before, registration was an “appendage” to conveyancing (dispositions were first done via traditional ways and then registered) while now dispositions were to be effected by registration
3) Act’s non-delivery of constitutive registration:
a. Overriding interests
b. Adverse possession
c. Alteration
d. Authoritative statements of the very aim of the Act: the “mirror” principle implies that the register is supposed to be an image of title of land at any given time (Law Comm 271, para 1.5), and not the very title itself, which the 2002 Act aspired to make the register. (mine could it be that the 2002 Act never intended the orthodox view?)
Introduction to land law
Gardner (2014)
Discontinuation of e-conveyancing
1) Discontinued in 2011 because it was found that conveyancers didn’t want to use it. Though it would later become mandatory, Land Registry envisaged a period when it would be optional, and during this period it would be ignored.
2) E-conveyancing would have several advantages like eliminating the registration gap, but it would also support autonomy because people would have control over their own dispositions, in that the act of electronic registration would be the disposition itself. Without e-conveyancing, registration is brought about by registry staff rather than the parties themselves. This limits people’s autonomy.
Introduction to land law
Gardner (2014)
Judicial treatment of conclusiveness/constitutiveness of registration
Decisions like Baxter v Mannion, Fitzwilliam etc. [though the latter has been disapproved] have largely undermined the claim that registration is conclusive. Conclusiveness logically doesn’t support the idea that the Registry might be wrong – this is supportable with e-conveyancing, because only the property entitled parties would be able to effect dispositions, but not if the Registry does it instead. The courts are instinctively reluctant to accept such an erosion of autonomy
Purchasers with actual notice
I. PRIORITIES
- S28 LRA – priority of an interest is not affected by later (even registered) dispositions [subject to s29 priority enjoyed by registered dispositions].
- General principles:
o A minor interest protected by notice affects the purchaser (assuming the interest is valid)
o Restrictions make inconsistent registrations unlikely, though purchasers are not bound once registered
o Unprotected interests are defeated by registered disposition (s29) subject to below
Purchasers with actual notice
II. REGISTERED DISPOSITIONS: PROTECTIONS FOR UNPROTECTED INTERESTS
- What to do with unprotected interests when purchaser is (or should be) aware of them?
- Some systems give no special protection to purchasers; others protect purchasers in every case except fraud (see Garro, The Louisiana Public Records Doctrine and the Civil Law Tradition, p 163)
- English system protections:
Purchasers with actual notice
II. REGISTERED DISPOSITIONS: PROTECTIONS FOR UNPROTECTED INTERESTS
i. Actual occupation – overriding interests
- Protects people in actual occupation
Purchasers with actual notice
II. REGISTERED DISPOSITIONS: PROTECTIONS FOR UNPROTECTED INTERESTS
ii. Bad faith or actual notice – lack of consideration
- Controversial before 2002 whether good faith was required – Peffer v Rigg said YES (Graham J) but Midland Bank Trust v Green said NO (in relation to the land charges scheme, and thus distinguishable, but there HL warned that requiring good faith would require the difficult task of investigating purchaser’s (often mixed) motives)
- 2002 Act doesn’t directly address the question, but Law Comm made it very clear that actual notice nor bad faith will have any effect (Law Comm 254 para 3.45-46) and this is now settled
- However, fraudulent transactions may persuade the court to conclude that there was no consideration as required by s29 (Halifax plc v Curry Popeck)
Purchasers with actual notice
II. REGISTERED DISPOSITIONS: PROTECTIONS FOR UNPROTECTED INTERESTS
iii. Fraud – defeating s29
- Statutes cannot be used as instruments of fraud: therefore, fraud will likely defeat s29 (eg. Lyus v Prowsa Developments Ltd)
- But some say that fraud doesn’t exclude s29 because it doesn’t mention fraud at all (Cooke and O’Connor (2004) 120 LQR 640 at 658-9, implicitly supported by Halifax plc v Curry Popeck)
Purchasers with actual notice
II. REGISTERED DISPOSITIONS: PROTECTIONS FOR UNPROTECTED INTERESTS
iv. Fraud – constructive trust
- In Peffer v Rigg Graham J said constructive trust was an alternative ground for deciding against the purchaser, but didn’t explain.
- Lyus v Prowsa used it too but there was a promise so understandable
- Ashburn Anstalt v Arnold approved Lyus – said that a purchaser who buys ‘subject to’ an interest is likely to intend no more than that he will not complain to the seller if the interest turns out to exist, and therefore will not suffice for constructive trust. It will only suffice if the purchaser promises to respect the interest. Ashburn
- Anstalt confirmed in Chaudhary v Yavuz which stressed that Lyus (while correctly decided) was exceptional on its facts and that the principle has never been successfully applied to avoid the effect of failure to register
Purchasers with actual notice
II. REGISTERED DISPOSITIONS: PROTECTIONS FOR UNPROTECTED INTERESTS
v. Actual notice – personal claims
- Most registration systems recognize that personal claims survive registration – registration is designed to protect transferees from defects in the transferor’s title and not to free him of burdens on his own (Brennan J, High Cout Australia)
- Though not consistently applied before 2002, Law Comm 254 makes clear that personal claims will survive registration (para 3.48-49)
- Personal claims = claims based on contractual, equitable or tortious duty between C and transferee (constructive trust is one example)
- These claims do not affect subsequent purchasers (Halifax plc v Curry Popeck)
- But while some cases purchasers accept the personal obligation (constructive trust based on promise), other cases obligations are imposed on them (eg. Law Comm’s suggestion of CT on purchasers for knowing receipt of trust property (probably best explanation for Rigg though criticized by Ferris and Battersby [2001] Conv 221 at 224-5) and liability for inducing breach of contract) and in these cases though the duty is personal, it would make no difference to the purchaser than if it were proprietary!
o Suggests that protection of purchasers with notice might be illusory - Now probably actual notice is needed for personal liability, but potential to spill into constructive notice is alarming: contrast 1997 21 MULR 460 with Torrens in the Twenty-first Century at 141-156
- But personal liability has benefits: Bright thinks that it is preferable to broad constructive trust liability, and would restrict it to where transfer is a direct breach of duty rather than merely disabling performance
- Torrens systems have discussed personal claims for a long time:
o Australia: High Court in Farah Constructions v Say-Dee said receipt based constructive trusts cannot be employed against purchasers who are not the primary wrongdoer because it would fly in the face of statutory protection for purchasers (if the purchaser is the primary wrongdoer then personal liability can be imposed)
o New Zealand: Imposes (by contrast) very wide personal liability (Smith v Hugh [2004] 1 NZLR 537 at [79] – [88]) - English courts haven’t yet figured out how far personal liability will extend, but the contrasting approaches show that Law Comm was unduly simplistic. But at least it will likely by construction of s29 rather than policy that will determine the outcome.
Purchasers with actual notice
III. POLICY CONSIDERATIONS
- For now it’s clear that actual notice (except personal liability) and bad faith will not defeat purchaser’s protection under s29, but different options have been attractive:
i. Purchasers should only be protected in respect of constructive (and not actual) notice - FOR: registration is concerned with certainty, but there’s no uncertainty in actual notice
- AGAINST: how do you maintain the line between actual and constructive notice? Does it count if you’re aware of facts that the reasonable man would regard as highly suspicious? What if you know there’s a right but assume that it no longer exists (this has been recognized to be good faith: Smith v Morrison)?
o Roger says that if you confine it to purchasers who are “unambiguously aware” then it might be okay – but as soon as notice is introduced don’t we run the risk of expansion?
ii. Requirement of good faith
- AGAINST: meaning of ‘bad faith’ is unclear: it’s probably less than fraud, but Law Comm recommended in 1980s that protection be restricted to good faith, but that actual notice will not defeat purchasers (158, 4.15) so it’s also more than actual knowledge…
o Roger would allow actual notice to be an indicator of bad faith – then you don’t have to precisely define what actual knowledge is, but avoid unmeritorious litigation on technical failure to register
Law Com 254, Para 3.39-3.50
1) ‘Purchaser’ for the purpose of the Act does not mean purchaser in good faith – it’s anyone who takes in exchange for valuable consideration
2) Definition of “purchaser”
a. Remove the “good faith” requirement [3.40] and define a purchaser as anyone taking an interest for valuable consideration [3.42]
i. Experience from the Torrens system in Australia and New Zealand show that “fraud” is an uncertain exception that undermines the indefeasibility of title
b. Cease to recognize “marriage consideration” as “valuable consideration” because it is anachronistic, and a transfer on marriage should instead be a wedding gift [3.43]
c. Make clear that notice will not apply to dealings with registered land unless statute expressly so provides
i. Law Comm was well-aware that this goes against strong academic opinion that purchasers of registered land should be bound by registrable but unregistered interests that they have actual knowledge of, to introduce an “ethical element” into registration (Battersby, 1995) and end the courts’ struggle to hold these purchasers bound (Smith, 1997). But reached this conclusion because [3.46]:
1. It was intended that LRA 1925 should displace doctrine of notice
2. Little evidence that absence of doctrine of notice has caused injustice
3. Ethical argument is weak compared to the principles that should guide registration: it should be considered an “integral part” of the process of transferring interests, akin to the formal requirement of a deed
4. Difficult to hold the line between actual knowledge and willful blindness/constructive notice
(see Battersby 1995)
i. There does need a safety valve for parties who cannot reasonably be expected to register, but this is met by:
1. Overriding interests
2. Availability of personal remedies against the purchaser
a. Trust property: constructive trustee for “knowing receipt”
b. Transfer expressly subject to a right that doesn’t bind purchaser: constructive trust
c. Tortious liability for conspiracy to defeat proprietary rights
d. Misrepresentation/undue influence
Battersby 1995
Note: Battersby 1995 basically says that the present law lacks an “ethical element” because it allows a purchaser with actual knowledge to take advantage of an unconscionable dealing and profit from his own wrong. The policy would be justified if it were necessary for the efficient working of the registration system, but this is not the case. The land Charges Act was designed to overcome the difficulty of constructive notice (duty to make reasonable inquiries etc) which is uncertain, but there is no such uncertainty when the purchaser has actual knowledge.
Law Com 271, Para 5.1 – 5.13
- Present law: priority of minor interest in registered land is normally determined by the date of their creation, regardless of whether or not they are protected on the register.
- General rule under the Bill (Clause 28(1)): the priority of an interest affecting a registered estate or charge is not affected by a disposition of the estate or charge, whether or not the interest or disposition is registered.
- Thus, the priority of any interest in registered land is determined by the date of its creation; unlike the first in time rule that currently applies to competing minor interests, this rule is absolute and subject only to the exceptions provided for by the Bill.
- Principal exception: a registrable disposition of a registered estate or charge + made for valuable consideration + completed by registration = effect of postponing to the interest under the disposition any interest affecting the estate or charge immediately before the disposition whose priority is not protected at the time of registration.
Thus will not be postponed interests that are:
1) registered charges
2) subject of a notice in the register
3) overriding interests under Schedule 3
Law Com 271, Para 5.16-5.21
The irrelevance of notice
The irrelevance of notice
The doctrine of notice (as a general principle) has no application in determining the priority in registered land (issues of knowledge or good faith are irrelevant), except in limited situations:
1) whether a first registered proprietor is bound by interests acquired under the Limitation Act 1980 depends on notice of these interests
2) inland revenue charges
3) effect of a disposition of a registered estate after the proprietor has become bankrupt
4) two categories of overriding interests: a dispone will not be bound by
a. actual occupation interests where the occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition, and no actual knowledge
b. legal easements or profits not registered under the Common Registration Act 1965, not within actual knowledge of the disponee and would not have been obvious on a reasonably careful inspection of the servient tenement at the time of the disposition
In these cases, the issue is whether a dispone is bound by an unregistered interest, but the principles are not drawn from the notice-based principles of priority applicable to unregistered land, but by analogy from the rule of conveyancing law that a seller must disclose to the buyer any irremovable latent encumbrances of which the buyer does not actually know.
Previous law
Peffer v Rigg [1977]
Facts: Mr Rigg (registered) transferred house to Mrs Rigg on marriage breakdown, the house (as Mrs Rigg was aware) originally jointly purchased by him and Mr Peffer for their mother. Mr Rigg held the house on constructive or resulting trust for Mr Peffer, though this fact was not mentioned on the register.
Held: Purchasers must be in good faith in order to defeat unprotected interests.
NOTE: Midland Bank v Green [1981] 1 A11 E.R. 153 reached the opposite conclusion and held that good faith wasn’t required under the land charges scheme (distinguishable because the legislation is different, but there HL showed open hostility to the idea of good faith – Lord Wilberforce said it would involve an investigation of purchasers’ motives, which are often mixed and where fine lines must be drawn (“avarice and malice may be distinct sins, but in human conduct they are liable to be intertwined”, making it difficult)
NB also Lord Wilberforce said that notice is not bad faith.
Lyus v Prowsa [1982]
- Held?
- Dillin LJ:
- Should we make a separate category for cases of fraud?
- Facts: Purchaser obtained a transfer by promising to respect an unprotected interest.
- Held (Dillon J): It would be fraudulent for the purchaser to plead unregistered interest; statute cannot be used as an instrument of fraud.
NOTE:
- Here fraud is dealt with in personal obligations – is it better to make it a separate category? In forgery, fraud would not amount to personal obligations. But Swift dealt with it differently.
- Could we just make a separate case for fraud like in Australia? (But then what counts as fraud? Is it different from bad faith??)
Howell, “Notice: A broad view and a narrow view” [1996] Conv 34 at pp 40-43
There seem to be two “types” of notice applied in disputes relating to land. The paper differentiates between them and argues that the “narrow” doctrine should have a wider role than it has been given since 1925.
1) Narrow doctrine:
a. priority of interests in land is, in general, decided on the “first in time principle”
b. but where the conflict is between a prior equitable and later legal right, priority will be given to the purchaser of a legal estate who is bona fide without notice of the earlier equitable right.
2) Wide doctrine: a person is affected by prior “rights” of which he knows (has applications beyond land law: ex. in the tort of inducing breach of contract, the third party must know of the existence of the contract)
A person whose interest is registrable but unregistered, unless protected by overreaching, will be void against the purchaser with notice. He may, however, not understand the differences or their justification between the narrow (where his interests are not saved) and broad (where they might be): indeed the most recent statement on the role of notice in land law (Barclays Bank v O’Brien) doesn’t differentiate between them.
IAO the narrow doctrine of notice may have a place more generally in (registered) land law. Arguments in favour:
1) There has always been unease at the prospect of a purchaser of a legal estate defeating a prior equitable interest of which he is fully aware simply because the encumbrancer didn’t register (there’s nothing which makes a legal interest morally superior to an equitable one)
2) It’s difficult to exclude notice (foreseen by the Royal Commission on the Transfer of Land 1857: we are aware that it has been said that the judges would, notwithstanding any law to the contrary, in the course of time contrive some means of neutralising any enactment which went to exclude the doctrine of notice”, but then said “we cannot adopt these views”)
3) The retention of notice doesn’t pose insuperable problems for conveyancing (ex. in the US, registration of title was effectively abandoned notice is a vital part of the system of deeds registration)
4) Acceptance of actual notice would allow a more equitable allocation of priority by ensuring that the results of cases such as Midland Bank v Green accord with common sense. It might be argued that if actual notice were admitted, so must constructive notice. But IAO disagrees (ex. in the deed register, only actual notice displaces the priority given by the register).
The admission of notice would present “far fewer problems than is feared”.
Farah Constructions V Say-Dee (2007) 81 ALJR l 107 at [190]-[198] (High Court of Australia)
- Held?
- what is the Australian courts’ analysis coloured by?
- Held: Receipt based constructive trusts cannot be employed against purchasers who are not the primary wrongdoer because it would fly in the face of statutory protection for purchasers (if the purchaser is the primary wrongdoer then personal liability can be imposed)
NOTE:
- Australian analysis is coloured by:
(i) Wider acceptance of receipt-based liability than English law
(ii) Statutory provision where fraud defeats registered disponees: see Cooke and O’Connor, Purchaser Liability to Third Parties in the English Land Registration System: A Comparative Perspective (2004) 120 LQR 640 at 660-665:
* “We have seen that under the New Zealand approach to Torrens fraud, a purchaser who has actual, or perhaps even constructive, knowledge that the transfer is in breach of trust is likely to be defeasible for Torrens fraud. In Australia, Mr Peffer would have to argue anin personamclaim against Mrs Rigg. This might be formulated as a claim that she either knowingly assisted the trustee in a breach of trust, or was a knowing participant in a breach of trust, pursuant to both limbs ofBarnes v Addy.On the present state of the authorities, it is difficult to say whether such a claim would succeed. The difficulty is that even if the elements of the claim are proved, the Australian courts will not allow anin personamclaim to upset the registered proprietor’s title if it would undermine the principle of indefeasibility. But this limitation is indeterminate, for it can be said that anyin personamclaim that upsets a registered title circumvents the principle of indefeasibility. The limitation, in effect, requires the court to balance the equitable or remedial considerations against the registrations system’s object of security of transaction. Judges differ as to how they balance the competing policy interests.” - What lessons can be learnt by English law? Should English law also distinguish between obligations accepted by a purchaser and obligations imposed by law?
Forgery
Swift 1st Ltd v CLR [2015] EWCA Civ 330
Lees (2015) 131 LQR 515
- What issues were considered by the court?
- What was the decision?
- Unanswered questions?
- What must we wait for?
- The case:
- Issues considered by the court:
(i) What guarantees are provided by registration
(ii) Meaning of rectification
(iii) Process of indemnity
- Decision: whenever B derives title under a forged disposition, B will be entitled to an indemnity following rectification. Cheshire Homes was decided per incuriam.
- Unanswered questions:
(i) What is the position where there is no forgery (eg. mistaken registration like Knights Construction v Roberto Mac)? It appears that they wouldn’t be entitled to an indemnity because it would fall under the general rule as it is not covered by para 1(2)(b)). This highlights the problem with the court focusing on para 1(2)(b) rather than (say) s58 (conclusiveness); it doesn’t get to the heart of the issue raised by such cases: what does the fact of being registered mean that you are entitled to if that register is changed, and why?
- Consequence: forgery cases are now treated differently from other cases. Whether that is justified is a different matter, but forgery is not unique – it is a void disposition just like a mistaken one, or one where the transferee did not have capacity to transfer; it is fraudulent, but not all fraudulent transfers involve forgery!
(ii) How does it fit together with Gold Harp v McLeod (2015) (read the damn case), whose tenor is somewhat inconsistent with Swift, in that it appeared to hold that rectification was an entirely separate issue to overriding interests and loss, and doubted that the right to rectify could amount to an actual occupation overriding interest. - Thus we wait for a court to tell us a complete picture of what the “statutory magic” of guaranteed title achieves, but perhaps the provisions in LRA 2002 aren’t amenable to a single picture
- The case:
(i) First had to show a rectification and not alteration, which depends on establishing that Swift had more than a bare legal title (which was always subject to the owner’s right to rectify which overrode the charge because of actual occupation). Patten LJ reached this conclusion by deciding that Malory, while indistinguishable, was decided per incuriam.
(ii) Then argued that para 1(2)(b) meant that Swift’s charge must be treated as if not a forgery for the purpose of calculating loss.
Forgery
Swift 1st Ltd v CLR [2015] EWCA Civ 330
Lees (2015) 131 LQR 515
The issues:
- Malory v Cheshire Homes:
- Was the charge (no longer bare) always flawed because of the owner’s overriding interest?
- Was the right to rectify capable of existing as an overriding interest?
- reflections
- Malory v Cheshire Homes:
(i) First Instance had effected a statutory work-around Malory but CoA’s “more satisfactory” conclusion was that the decision that transferee would hold on trust for transferor where the registered transfer was forged, was wrong.
(ii) That conclusion in Malory has been subject to sustained criticism from two perspectives:
(a) The case fatally undermines the point of registration (since it means that registration only confers legal title) because it robs the guarantee of title of any value (Cooke (2013)) and
(b) is therefore inconsistent with the principles underpinning LRA 2002
(ii) There is nothing that can be said to trigger the imposition of a trust, so Malory is at odds with Westdeutsche
2. Was the charge (no longer bare) always flawed because of the owner’s overriding interest?
(i) CoA held that though alteration to give effect to an overriding interest doesn’t constitute rectification (Re Chowood) in cases of forgery para 1(2)(b) deems that the alteration is prejudicial and therefore can constitute rectification
3. Was the right to rectify capable of existing as an overriding interest?
(i) CoA said yes – but Gold Harp (2015) doubted the validity of the argument (at [34]). Lees thinks that the Swift decision is preferable because it strikes the right balance between protecting the careful purchaser and protecting those for whom the loss of the home would be particularly difficult – it allocates the land to those who desire it most. But it loses this balance if the purchaser doesn’t get an indemnity because of the existence of this overriding interest – which makes the CoA’s reliance on para 1(2)(b) somewhat unfortunate. Re Chowood (rectification made the applicants in no worse position than before no indemnity) would make sense if the overriding interest is a substantive right like a long equitable lease, but not the right to rectification because it is a discretionary right!
- My reflections:
1) Sure it might be desirable that the CoA took a broader view and didn’t focus on forgeries, but if it did then would it not deprive para 1(2)(b) of any meaning? Why was the paragraph enacted anyway? Smith appears to suggest that its predecessor (a special provision inserted into the LRA 1925) was enacted in response to the A-G v Odell principle that a purchaser under a forged transfer obtained no good title and was not entitled to an indemnity. Therefore, if that provision, inserted to counter these specific facts, was hastily transferred into the 2002 Act, so as to create an exception to s58 conclusiveness (rectification to give effect to an overriding interest does not cause loss – Re Chowood) by appearing to remedy an exception that by virtue of s58 no longer exists, then Lees’ position might be more defensible.
Milne [2015] Conv 356
- if title is registered, then what flows from HMLR’s guarantee?
- is indemnity always possible?
- what does Milne say re lenders in Swift? - Re Chowood?
- Problems with the right to seek alteration operating as an overriding interest?
- problems with para 1(2)(b)?
- why is it unfortunate that the COA used para 1(2)(b)?
- what was the para intended to do (nb odell)?
1) Where a person is registered as the proprietor of an estate in registered land, HM Land Registry guarantees that title. This means that if it is necessary to rectify the register to correct some mistake that has occurred, any person suffering loss as a result is entitled to payment of an indemnity from the Registry.”
2) Indemnity is not always available where there is rectification – sch 8 para 5 says that where the loss is suffered wholly or partly as a result of C’s fraud or wholly as a result of their proper care, they are not entitled to indemnity (but the High Court had held that Swift did not lack proper care because it had done everything to the industrial standard at the time – though Milne thinks more would be expected of lenders today [this took place in 2006])
3) Re Chowood
a. Concerned a registration inconsistent with a squatter who had acquired rights to the land, where the registered proprietor had notice. It was not rectification in that case because (per Law Comm 271) rectification is when the correction prejudicially affects the title of the registered proprietor; in this case it doesn’t so prejudicially affect it.
4) Problems with the right to seek alteration operating as an overriding interest:
a. For a right to override it must affect the estate immediately before the disposition (s29(1)). If the fraudster registers before the disposition to the purchaser, then it can override, but if the fraudster never registers, then it can’t possibly override because prior to the disposition to the purchaser, there is no right to apply for alteration!
b. Secondly, theLRA treats a pending land action as a proprietary right for the purposes of the Act, but provides that it shall not be capable of being an overriding interest as a result of belonging to a person in actual occupation. So an application to the court for an order for alteration of the register to correct a mistake, which would give rise to a pending land action, cannot operate as an overriding interest. It would be odd then if the right to seek alteration when it was not being enforced by court proceedings could be an overriding interest.
5) Problems with para 1(2)(b)
a. It’s unnecessary in light of s58, even for the avoidance of doubt. Law Comm 271: “Under the legislation then current [at the time ofOdell], registration was merely a ministerial act by the registrar. It did not confer on the transferee any estate or right that he or she did not have before the registration. That principle was itself changed by theLand Registration Act 1925: sees 69(1). Its effect is replicated in Cl 58 [s58 LRA] of the Bill.”
b. Drafting: the provision uses “rectified” and “rectification” rather than “altered” and “alteration” – had it meant what it says it meant, then a pre-condition for the operation of para 1(2)(b) would have been the very thing that the paragraph is there to establish – loss (mine but this can readily be explained because if it had used ‘alteration’, then the provision saying that there was loss means that it should have said rectification (while if it said rectification, then it was supposing the very thing it was set out to provide) – grandfather paradox?)
c. Problematic when the registration is void for reasons other than forgery
6) Unfortunate that the CoA used para 1(2)(b) – it could have decided that Chowood didn’t apply where the right concerned was the right to apply for alteration of the register because:
a. It wasn’t an interest in land
b. It couldn’t be an overriding interest
c. It couldn’t be intended that Chowood should extend to this right
7) It’s not at all clear that the para was intended to neutralize Chowood – it’s simply to counter the Odell argument that the dispone under a forged disposition doesn’t suffer any loss when the registration is removed.
Smith [2015] CLJ 401
- common problem re fraud/how does Common Law address this?
- how does registration improve the situation?
- when is indemnity available?
- Re Chowood?
- 3 issues discussed in Swift?
1) A common problem is that an interest in land is claimed by two people as a result of a mistake or fraud of a third party who is not worth suing. Common Law usually takes an all-or-nothing approach, but Registration improves this situation with the possibility of indemnity when 1) a loss is caused by rectification or 2) a loss requires rectification to be remedied. So if the wrong person is registered, whoever loses the interest is indemnified.
2) Re Chowood: a purchaser bound by an overriding interest is not entitled to indemnity because rectification recognizes existing legal rights and doesn’t cause any loss to the purchaser.
Three issues discussed in Swift
1) Effect of forgeries
a. Cheshire Homes, followed by Fitzwilliam, held that a registered transfer vested legal title in the transferee but left the equitable title in the original proprietor whose signature had been forged.
i. This was criticized because it diminished the effect of protection for purchasers but commentators couldn’t agree on whether the purchaser should be protected by s58 (conclusiveness) or s29 (defeating unprotected interests)
b. Swift decided not to follow Cheshire Homes – the decision is widely welcomed because of the desire to make land transactions more secure by protecting the registered proprietor, but despite the language of some commentators, no one approach is better than the other. The purchaser wasn’t misled by the register, but by the identity of the vendor! But Swift is probably rightly welcomed because the registration can still be challenged on rectification, allowing the relative merits of the parties to be heard.
i. However, the reasoning (that Malory was per incuriam s114) is curious, because s114 could have other meanings, and because it has been dropped from the Act
ii. Whether it is s29 or s58 that confers equitable title can be important because s29 applies only to dispositions for value and subject to overriding interests, while s58 is unlimited. As Swift does assume that overriding interests bind the new proprietor, it’s probably s29 that is providing the protection (mine CF Lees who says the court should instead have relied on s58 – she appears not to have noticed the inconsistency. It highlights how easily you can manipulate something to fit one outcome, only to have it have a much bigger effect on other unrelated things. If the court had used s58 then it would imply that s58 is also subject to overriding interests (mine but surely this is the case?!?), or something else…)
2) Para 1(2)(b) itself
a. Was enacted in response to Odell; its application to this case appears “entirely fortuitous”. But it is supported by the fact that in most cases, the actual occupation is by someone other than the vendor, so you should make inquiries. But it’s nonsense to make inquiries of the interest claimed by the vendor, who is himself in occupation. (mine perhaps this is one objection to only the occupation having to be reasonably discoverable, and an argument to say that their interest must also be discoverable? This would also allow the court in Hypo-Mortgage v Robinson to conclude that the child was in occupation but that his interest was not readily discoverable, as it would be nonsense to inquire whether an infant child consents to sale. But this would be indistinguishable from a doctrine of notice – is it proof for the contention that this actual occupation doctrine is actually no different from notice?)
3) Right to rectify as an overriding interest
a. Maybe this is unlike other overriding interests in that indemnity should be payable without recourse to para 1(2)(b) in that the right to rectify is one where indemnity is usually available. The nature of the right is linked with indemnity entitlement; actual occupation might indicate fault on the purchaser’s part, but this can be reflected by refusing or reducing indemnity. (mine is this realistic? You’re at fault so you get compensated less? Like contributory negligence? So you’re getting a diminished share of a property right because you were negligent? Does it turn a property right into a personal right? I guess rectification is a personal right against the registry, but it’s supposed to be in lieu of a proprietary right?)
b. Should it be an overriding interest in the first place? In Swift it was conceded, but in both Swift and Gold Harp there was no need for an overriding interest because rectification was available against the transferee anyway. The overriding interest analysis adds little to registration – should it be discarded?
Overriding interests
Smith
I. INTRODUCTION
Overriding interests will bind purchasers and/or lead to alteration of the register without compensation. Why do we have them?
1) Register replaces title deeds, so overriding interests should be whatever interests are not usually found on title deeds (historical explanation, rejected by Law Comm)
2) In the interest of simplicity and certainty overriding interests should be narrow, but they should include all interests that require protection against purchasers, but that are not reasonable to expect or sensible to require registration (Law Comm 158)
3) Ease of discovering the interest by purchaser (balancing unreasonableness of requiring registration and fairness of binding the purchaser)
Sch 1 lists overriding interests for first registration; Sch 3 lists them for registered dispositions. The following discussion is on Sch 3:
Overriding interests
Smith
II. PARA 1 – LEGAL LEASES
Legal leases < 7 years are overriding interests, except those requiring registration under s4 (compulsory first registration) and s27 (registrable dispositions). They must be legal leases (City Permanent BS v Miller) because of the wording ‘grant’ implying deed, and because only legal leases bind purchasers automatically.
Why are short leases overriding interests?
1) Often executed without legal advice; unreasonable to require registration
2) Usually full rent, so even if purchasers cannot get vacant possession there’s usually an income
3) Unlikely to be sold or mortgaged; registration would bring little benefit
2002 Act removes overriding status of future and discontinuous leases; these are undiscoverable risks for purchasers but para 1 lessees aren’t always in occupation because they might have sublet!
Overriding interests
Smith
III. PARA 2 – ACTUAL OCCUPATION
- why is it controversial?
- is it the right or actual occupation which binds?
- what 2 elements must C prove?
- which rights are proprietary?
- are statutory rights to alter the register overriding?
- does overriding status improve the right?
- what if the occupier approved of the registered transaction?
(i) Bristol v Henning
(ii) Paddington BS v Mendelsohn
(iii) Abbey National v Cann - summary of case law?
- should more rights be recognised as proprietary?
- meaning of actual ocupation
- must the AO be obvious?
- before 2002 vs after 2002?
- Most controversial, because it doesn’t identify a specific interest, opening the potential for a wide range of interests to bind purchasers by virtue of actual occupation.
- It’s the right and not actual occupation that binds purchasers.
- Therefore, C must prove two elements:
1) Actual occupation
2) Interest in land (legal or equitable – though legal interests bind automatically) – must be a proprietary and not personal right: National Provincial Bank v Ainsworth
- Which rights are proprietary?
2002 Act identifies three
categories:
1) Equities (claims to equitable remedies) – s116
2) Estoppel claims – s116
3) Rights of pre-emption – s115
- Statutory right to alter the register is an overriding interest – Malory Enterprises v Cheshire Homes. The result in that case was expected because C already had a beneficial interest which could be an overriding interest, but it remains to be seen what would happen if C had no conventional proprietary interest.
- Overriding status doesn’t improve the right – it just removes the susceptibility to being defeated by failure to register. Therefore the overriding interest arising from the trust in Boland is still capable of being overridden if the mortgage money had been paid to two trustees, as in Flegg, where CoA held that the right was overriding no matter how many trustees, but HL reversed the finding. This is surely correct, as there is no reason why overriding interests should get extra protection in registered land.
- What if the occupier approved of the registered transaction?
(i) Bristol v Henning: two people bought a house together, both aware that a mortgage was required in order to fund the purchase. The conveyance and mortgage were taken in the name of one of them; CoA held that the other could not claim an interest binding the mortgagee because she authorized him to raise the money by mortgage (the intention being imputed from the fact that the house couldn’t have been bought without the mortgage)
(ii) Paddington BS v Meldelsohn: Sch 3 doesn’t change the priority of rights; if nothing in the general law gives priority over registered rights, then Sch 3 won’t give them a bigger right (Lord Browne-Wilkinson)
(iii) Abbey National v Cann: extended the principle – here C was aware that some money had to be raised on their joint purchase, but the sum that ended up being raised was far greater than necessary for the purchase. Mortgagee was nevertheless held to have priority for the entire sum raised. - Therefore a mortgage to fund a purchaser, or to enable something to be built, will likely be within Henning, but a later mortgage will usually be to the proprietor’s sole benefit, and would fall under Boland. If the occupier clearly approves a mortgage, it will fall under Henning, but more problematic will be situations where C is aware of the mortgage but approval is neither sought nor given.
- From a policy viewpoint, perhaps more rights should be recognized as proprietary now that registration is the norm, because purchasers will only be bound when a right is registered, or C is in actual occupation.
10 .Actual occupation
Meaning of actual occupation used to be debated between the dictionary meaning, and one embodying a doctrine of notice, but these debates are silenced by the 2002 Act. Law Comm stresses that notice is not being applied (271, 8.62), but then says at para 2(c) that a purchaser is not bound by an interest, absent actual knowledge, where the occupation wouldn’t have been obvious on a reasonably careful inspection of the land at time of disposition. This is well-justified because certainty (actual occupation being more certain than notice) cannot be used to defend purchasers being bound by difficult to discover interests.
- The occupation must be obvious – not the fact that an occupier has a beneficial interest.
- Before 2002, it was clear that if the person is living in the house (Boland) it counts as actual occupation (regardless of whether the owner is also living there). But problems arose when occupation was alleged before completion of purchaser (Rosset, Cann). Roger thinks that the result after the 2002 Act will probably be the same, though the analysis may shift to the statutory language, asking instead of whether they were in actual occupation, whether the occupation was discoverable on a reasonable inspection
Overriding interests
Smith
III. PARA 2 – ACTUAL OCCUPATION
Problems:
- agency principle
- temporary absence
- how far do we consider the specific circumstances of the purchaser?
- When does occupation end?
- can the exercise of an easement amount to actual occupation?
- must C occupy the entire premises?
1) The agency principle in Rosset can’t be taken too far. Strand Securities v Caswell held that the licensor allowing his stepdaughter to occupy the flat doesn’t mean that she was occupying on the licensor’s behalf, and the latter was therefore not in actual occupation.
2) Temporary absences: Chhokar v Cchokar held that someone who went to hospital for a few days to have a child retained occupation. Tizard held that a wife who went to the house everyday to visit the children also had actual occupation. Difficulty is drawing the line: what if I went on holiday for a year?
3) How far do we consider the specific circumstances of the purchaser? What if in Chhokar the husband removed all the wife’s belongings before selling, so that the purchaser couldn’t reasonably have discovered her presence? (shows the indefeasibilityis undesirable! In practice, she would have to move house with a new baby!)
4) When does occupation end? Thompson v Foy – occupier had removed her belongings but left her furniture. Nobody else had taken possession. Held that her intention to permanently leave the property was fatal to actual occupation. Approved in Link Lending v Bustard, which came to the opposite conclusion because C left for a care centre but intended to return to the home when her health improved. What is significant is how much the outcome in each case depends on the subjective intention of the claimant – something surely indiscoverable by the purchaser. But Roger thinks it can be defended because of para 2(c).
5) Can the exercise of an easement ever amount to actual occupation? Chaudhary v Yavuz said that the exercise of a right of access by a staircase didn’t suffice because it was an example of use rather than occupation, but the court left open the question for easements for storage or parking (closer resemble occupation).
6) Must C occupy the entire premises over which the interest is claimed? The wording of para 2 suggests yes (the overriding interest relates only to land over which there is actual occupation) and this is welcome because purchasers should be protected from seemingly innocuous interests turning out to be of a far greater extent, but actual occupation probably won’t require physical occupation of the entire plot (analogy with adverse possession: Higgs v Nassauvian Ltd).
Overriding interests
Smith
IV. PARA 3 – EASEMENTS AND PROFITS
- are equitable easements and profits overriding?
- what are the policy argument against this?
- response? - what does para 3 include? what does it not include?
- when do these overriding interests cease to bind?
- What did the Law Comm argue and it is convincing?
- Equitable easements and profits are no longer overriding interests.
- Policy argument against this is that these easements are likely more beneficial to dominant land than harmful to servient land: Pritchard [1987] Conv 328. If this this true then it might be better to hold purchasers bound but compensate them, but this might reduce the incentive to register easements, and encourage purchasers to make expensive inquiries.
- Para 3 includes implied and prescriptive easements, and those created prior to first registration of the fee simple (express easements are registrable dispositions and outside para 3).
- these overriding interests will cease to bind the purchaser after 1 year of non-exercise unless there is actual knowledge or its existence is discoverable on a reasonable inspection.
- Law Comm attached great significance to this change, arguing that it would allow purchasers to escape indiscoverable easements. But pre-2002 easements are an exception, and it is these easements that are most likely not to be exercised than modern easements.
Overriding interests
Smith
V. SUCCESS OF REDUCING OVERRIDING INTERESTS
- abolished categories
- reductions to individual categories
- notice
Abolished categories: eg. adverse possession (though still protected by para 2 if possessor is in actual occupation)
Reductions to individual categories: leases, actual occupation, easements/profits
Encouraging registration of overriding interests: except leases < 3 years.
Notice: once an interest has been protected by notice it can never again be overriding (s29(3)) – it appears therefore that unilateral notices that are objected to by the owner and then cancelled, cannot be overriding if later proved to exist. This might discourage applying for a notice if there is a risk that there will be difficulty proving the interest to exist.
Law Com 254, Parts IV and V
- why might abolishing overriding interests contravene ECHR?
- principal objectives in overriding interest reform?
Notes:
what is the justification for unilateral approach to overriding interests?
Part IV
1) The danger of abolishing an overriding interest is that it might contravene ECHR provisions. Abolishing can only be justified where:
a. The right is obsolete or
b. The beneficiary of the right consents or
c. There are significant policy grounds for doing so and appropriate transitional provisions are made
Part V
1) The principal objectives in overriding interests reform are:
a. High degree of security for registered titles
b. Rights enjoy overriding status only where it is unreasonable or unrealistic to expect registration
2) Particularly rights expressly created shouldn’t normally be overriding unless there is good reason
Notes
Law Comm appears to take a unilateral approach to justifying protection of overriding interests, looking at it solely from the angle of the beneficiary of the interest rather than as a balancing exercise taking into account the need to protect purchasers. These justifications are essentially that registration is ‘unrealistic’ (para 4.5 – prescriptive or implied easements, adverse possession, estoppel or constructive trust), “inconvenient” or “pointless” (para 4.9 – short leases), or “otiose” because otherwise protected (para 4.10 – local land charges registered elsewhere, actual occupation). They do not consider the position of the purchaser at all, who will be bound without compensation. This can perhaps be justified because Law Comm at 4.4 says that “as to these, persons dealing with registered land must obtain information aliunde in the same manner and from the same sources as persons dealing with unregistered land obtain it”. Because the whole registration system is designed to protect buyers, it’s no objection that in respect of certain rights, the registration system makes no difference for buyers, as long as it doesn’t make the position worse.
Law Com 271, Part VIII (we study Schedule 3, though some of the material is discussed in relation to Schedule 1 - first registration)
Overriding interests are a major obstacle to the principle objective of the Bill: to create a faster and simpler conveyancing system under which it is possible to investigate title to the land almost entirely online with the bare minimum of additional enquiries.
Unregistered interests which override first registration:
1) Short leases (not exceeding seven years) except future leases over three months in the future, or a lease granted out of an unregistered legal estate under the right to buy provisions of the Housing Act [or one more without interest]
2) Actual occupation overriding interests (Law Com recommends keeping the overriding status of occupiers’ rights because these people often don’t appreciate the need to enter a caution against first registration, especially in relation to informally created rights)
3) Legal easements and profits (Law Com recommends that equitable easements no longer take effect as overriding interests – they have to be registered as Class D(iii) land charges otherwise they won’t be binding on purchasers of the legal estate in the servient land for money or money’s worth
Overriding Interests (Paragraph 1)
City Permanent BS v Miller [1952] Ch 840
Equitable leases (i.e. mere agreement for a lease that does not create a term of years but only operating at best to give a right in a court of equity to specific performance of a contract to grant a lease) are not overriding interests, because of the wording “granted”, which implies that the agreement must be a lease or agreement effective to create a term if it is to be an overriding interest (Evershed MR).
Overriding interests (Paragraph 2)
National Provincial Bank Ltd v Ainsworth [1965] AC 1175 at pp 1226-1227 and 1259-1262
The deserted wife’s equity (right to occupation) is a mere personal right against her husband and her occupation made no difference, and did not turn the right into one that could bind purchasers.
Lord Hodson: Agrees with Russell LJ’s dissenting opinion in CoA that s70 (Sch 3 para 2) deals with rights that have the quality of enduring through different ownerships; it is the right and not the actual occupation that must be examined.
Lord Wilberforce:
1) All that s70 does is to adapt the system of registration and the modified form of inquiry which is appropriate to that system to the same kind of right as under the general law would affect a purchaser finding a person in actual occupation of the land. It does not hold a purchaser bound to personal interests of the type enjoyed by the wife.
2) We can accept that there is a difference between unregistered land and registered land as to what kind of notice binds purchasers, or what kinds of inquiries the purchaser has to make, but nothing in the Act suggests that the nature of the rights which bind purchasers is to be different
NOTE:
1) Should all types of rights fall within para 2? Otherwise, does para 2 risk influencing our thinking as to what rights should count as proprietary? (mine) Read: Tee [1998] CLJ 328
Overriding interests (Paragraph 2)
Epps v EssO Petroleum [1973] 2 All E.R. 465
Facts: C owned two adjoining properties (a house and a garage) and let both to J. C died, and his personal representatives sold the house to J’s wife. C’s representatives then granted a new lease of the garage to J but mistakenly included a strip (the disputed strip) that had already been sold to J’s wife. C then sold the garage to B (purporting to include the strip), who registered his title. When both properties were subsequently sold (the garage to D and house to C(laimant)), the error was discovered and Claimant sought rectification.
Held (Templeman J): Parking a car in the present case did not constitute actual occupation because:
1) Parking occupied only an insubstantial part of the large plot of land
2) Parking on an unidentified piece of land didn’t assert occupation over anything
However, if there had been actual occupation, the judge appeared convinced that rectification could be given.
PALK (1974) 38 Conv. 236
Intro
- heated debate re what the registration system creates
- has judiciary shown any inclination to adopt idea of a registered estate?
- what is effect of first registration?
- confer equitable interest? - -
- what if transferee takes subject to a trust? S. 5 LRA?
- Epps v Esso:
(i) what did judge suggest?
(ii) is rectification a right?
1) A heated debate: Does the registration system create new kind of “statutory” or “registered” estate or does it merely continue in existence the legal and equitable estates in general law?
2) Whatever the merits of both sides, it’s clear that the judiciary has shown little inclination to adopt the idea of a registered estate: City Permanent BS v Miller: main purpose of the 1925 (LR) Act is to simplify legal estates (Lord Evershed)
3) What, then, is the effect of first registration? It’s clear that it confers the legal fee simple, and irrespective of whether the registered proprietor is otherwise entitled to it. But does it also confer the equitable estate?
4) Normally the equitable estate will vest without recourse to LRA because registration will be preceded by an unregistered conveyance (which transfers both legal and equitable estates), but LRA will be relevant where the vendor doesn’t transfer the equitable estate before registration (eg. because the transferor doesn’t have the legal or equitable estate to transfer, or conveyance was void for forgery etc)
5) Clearly if transferee takes subject to a trust he will not get the equitable title, but otherwise, will s5 LRA confer it?
6) Epps v Esso Petroleum
a. The judge appeared to suggest that if Mrs J had been in actual occupation then rectification would have been possible.
b. Rectification is discretionary, so even if one of the grounds is established the judge still doesn’t need to grant it. Therefore, Epps shouldn’t have sought rectification at all; it’s a trap. If rectification is refused on discretionary grounds, then the registered owner will have the equitable interest (because the court held that the latter would continue as owner of the land), and Epps will have a claim for indemnity (s83(2)). So Epps seeks rectification and risks losing equitable estate to the judge’s discretion; seeking rectification may replace a valuable equitable estate with a claim to indemnity that may prove illusory (eg. because the claim is out of time (s83(1))). Therefore, instead of applying for rectification, Epps should have sought the remedy in the Saunders v Vautier rule [all the beneficiaries of a trust can demand the trustees to transfer the legal interest and terminate the trust] if he has the equitable interest and it can constitute an overriding interest.
PALK (1974) 38 Conv. 236
The issues
- 3 consequences if registration confers only legal and not equitable title:
(a) re Saunders v Vautier?
(b) overriding interest?
(c) re rectification?
1) If first registration confers only legal and not equitable title, then three consequences:
a. Such cases as Epps would mean that the registered proprietor will hold the land on a bare trust for the original owner, who can invoke Saunders v Vaultier to get the land back.
b. It can also be an actual occupation overriding interest (this applies if the land was subsequently sold, as a bare trust is not enforceable against subsequent purchasers (also subsequent purchasers get the equitable title))
i. But if the original owner wasn’t one but two, then it’s not a bare trust, but a trust for sale. Here it’s not at all clear that it can also constitute an overriding interest (the debate is that in trusts for sale Equity sees as done that which ought to be done, and so conclude that the interest is not in land but in personalty (Hayton), but on the other hand the court has also treated such a trust as an interest in land “if it suited their purpose” (Bull v Bull)).
ii. It would be arbitrary if in one situation you can assert an overriding interest but not the other…
c. If the original owner retained the equitable interest, and that gave rise to an overriding interest, then he can potentially use that as a ground for rectification against a registered proprietor in possession (as rectification against these is only given 1) to give effect to an overriding interest, 2) because the registered proprietor has contributed substantially to the mistake, 3) because the disposition was void and 4) because it would be unjust not to rectify
Swift 1st Ltd v Chief Land Registrar [2015] EWCA Civ 330
Facts: Lender made a loan on the security of a legal charge over a house, registering the charge. But when he tried to enforce the charge the owner of the house denied all knowledge of the transaction; it turned out that the landowner’s signature on the charge had been forged. The charge registration was cancelled; lender sought indemnity for loss.
Issue: whether rectification of the register entitled the lender to an indemnity, or if registration had never been de facto enforceable but had always been subject to the owner’s right to have the forged disposition removed from the register (which took effect as an overriding interest).
Held (CoA): The lender was entitled to indemnity even though there was an overriding interest (owner’s occupation), because the lender was claiming in good faith under a forged disposition. The lender was deemed to have suffered loss by reason of rectification as if the charge had not been forged.
1) Rectification must fulfill the test under Sch 4 para 1: 1) correction of a mistake and 2) prejudicially affects the title of the registered proprietor. If it doesn’t satisfy the test it’s an alteration. The distinction is important because indemnity is available for rectification only.
2) Court must consider whether the decision in Malory Enterprises v Cheshire Homes (that fraudulent registrations transfer only legal and not equitable title) is correct – if so, then the transferee never received anything more than the legal estate and so there would be no loss if the register was altered.
Patten LJ:
1) Cheshire Homes on the beneficial ownership point is binding unless it was decided per incuriam. Two points lead to this conclusion:
a. It ignores Argyle BS v Hammond
b. It ignores s114 LRA 1925
Therefore satisfied that this point was decided per incuriam and is wrong.
2) The Law Comm should consider the issue of forgery coupled with an overriding interest.
NOTE: This means that charge holders who are innocent victims of fraud may be able to seek indemnities for losses despite any overriding interests.
Williams and Glyn’s Bank v Boland [1980] 2 All E.R. 408
Facts/held
Facts: Boland held land on trust for himself and wife; mortgaged land to bank without wife’s knowledge. No overreaching because mortgage money was paid to one trustee only.
Held (HL): wife’s beneficial interest could be an actual occupation overriding interest.
Williams and Glyn’s Bank v Boland [1980] 2 All E.R. 408
Lord Wilberforce:
On whether equitable interest can be actual occupation overriding interests (yes)
1) Debatable whether equitable interests can be actual occupation overriding interests, because they are minor interests and the two categories (minor interest and overriding interests) are mutually exclusive.
2) But the line between the two categories is not unbridgeable; there is no reason why, if there is actual occupation, a minor interest cannot acquire the status of overriding interests.
NOTE:
1) The category of minor interests was abolished in the 2002 Act – this perhaps makes the discussion in Boland obsolete and removes the difficulty of recognizing equitable interests as actual occupation overriding interests (mine).
2) This is probably a positive development; keeping the two categories strictly separate would discourage the development of encouraging the registration by notice of overriding interests (because the distinction between minor interests and overriding interests was that the latter had to be entered by notice), which was one of the main improvements of the 2002 Act. (mine – not sure if correct)
Williams and Glyn’s Bank v Boland [1980] 2 All E.R. 408
Lord Wilberforce:
- purpose of registration
- what does purchaser’s interest depend on (unregistered vs unregistered land)
- meaning of actual occupation?
- is wife in actual occupation?
- can numerous parties be in actual occupation?
- how might requiring enquiry be contrary to Law Com’s purpose of simplifying conveyancing vs justifiable?
1) Registration is supposed to simplify and cheapen conveyance, protecting the purchaser from the hazards of notice by allowing him to take free of any unregistered interests with one exception. Therefore, notice has no application to registered land; whether a particular right is an overriding interest depends solely on construction of s70.
2) With regard to actual occupation overriding interests, the purchaser’s position depends on what he has notice of, and whether the notice is constructive or actual. But to registered land, it is the occupation that matters, not the notice.
3) Actual occupation is to be interpreted as the dictionary meaning of the words.
4) Is the wife in actual occupation?
a. The vendor is also in occupation, but this doesn’t exclude others from being in occupation as well. This includes the possibility of the wife being in occupation even if her husband is in occupation too. Everyone knows that wives have rights – they might even have a share in the matrimonial home. It would not be right to disregard her right just because her husband is also in occupation.
5) It is true that subjecting purchasers to enquiry into occupation may be contrary to the Law Comm’s purpose of simplifying conveyance, but insofar as the Act specifically recognizes occupation, this conclusion is justifiable especially seeing the increased prevalence of shared ownership.
Smith [1981] L.Q.R. 12
- what did judges stress in Boland?
- What did HL decide re trust for sale and AO?
- Can Lord Wilberforce’s statement be reconciled with Peffer v Rigg?
- should the position be the same if the mortgage was granted at the time the property was purchased?
1) Both judges delivering speeches stressed the role of current social considerations and social justice, but didn’t develop the concept, content to accept that a wife contributing to the purchase price deserves protection against later purchasers and mortgagees and that these considerations are important enough to outweigh inconvenience to the latter
2) Whether a beneficiary under a trust for sale can have an overriding interest: HL decided that a minor interest jointed with actual occupation can be an overriding interest: Roger identifies this as “registered land orthodoxy”
3) Peffer v Rigg is difficult to reconcile with Lord Wilberforce’s statement that “the [land registration] system is designed to free the purchaser from the hazards of notice – real or constructive”; “the only kind of notice recognized is by entry on the register”
4) Should the position be the same if the mortgage was granted at the time the property was purchased? Roger thinks no, because otherwise the wife would receive half the house largely at the mortgagee’s expense. Further, she would likely have acquiesced (through knowledge) to her husband getting the mortgage.
Sydenham [1980]
- purpose of the article?
- what is ratio in Boland limited to? (any difference in judgments of the judges?)
- what wider view is possible?
- implications of narrow view?
- implications of wider view?
- conclusion?
Others have confidently asserted that Boland would have been decided differently if there had been two trustees, because of overreaching. This article highlights an obstacle to this view.
1) There is no doubt that the ratio of CoA’s decision is limited to the case of the single trustee; it’s clear from Lord Denning’s speech at 330 and Omrod LJ’s speech at 337. But nothing in Lord Wilberforce’s speech in HL restricts it to the case of one trustee – and Lord Roskill specifically dissociates the House from the passage in Ormrod LJ’s speech at 418.
2) Therefore, a wider view than CoA’s is possible – Lord Wilberforce said that the wife’s interest as tenant in common was a minor interest which when combined with actual occupation became an overriding interest. This applies equally to the case of two trustees! Lord Roskill does even more – discrediting a key passage restricting CoA’s ratio.
The implications of the narrow view
1) That conveyancers must make extended inquiries in registered houses with a single proprietor
The implications of the wider view
1) The “total breakdown of the overreaching machinery” in its application to registered land on trust for sale
Conclusion
1) Some inquiries cannot realistically be made (future occupants (because the date when the overriding interest bites is the date of registration and not the date of inquiry), occupants who cannot be identified, occupants not legally competent to give a binding answer etc.) – the solution may lie in insurance indemnity against undiscoverable rights (mine analyse how these different situations have been resolved – future occupants (?), those not legally competent (they aren’t in occupation). The idea of insurance is interesting – indemnity could operate as almost an insurance scheme, but it excludes claims by careless claimants (at least Roger says so, but don’t insurance schemes usually exclude carelessness?))
