Abbey National Building Society v Cann [1990] UKHL 3

House of Lords

Between

Abbey National Building SocietyAppellant

CannRespondent

Before

Lord Bridge of Harwich

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal (Civil Division) of the 3rd day of March 1989 complained of in the said Appeal be, and the same is hereby, Affirmed and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Costs of the said Respondents be paid out of the Legal Aid Fund pursuant to section 18 of the Legal Aid Act 1988, such Order to be suspended for four weeks to allow the Legal Aid Board to object if they wish: And it is also further Ordered, That the Costs of the said Appellants be taxed in accordance with the Legal Aid Act 1988.

Cler: Parliamentor:

Judgment: 29.3.90

HOUSE OF LORDS

ABBEY NATIONAL BUILDING SOCIETY (RESPONDENTS)

CANN AND OTHERS (A.P.) (APPELLANTS)

Lord Bridge of Harwich Lord Griffiths Lord Ackner Lord Oliver of Aylmerton Lord Jauncey of Tullichettle

LORD BRIDGE OF HARWICH

My Lords,

I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Oliver of Aylmerton and Lord Jauncey of Tullichettle. I agree with them that the appeal should be dismissed and, subject to what follows, I agree entirely with their reasons for reaching that conclusion.

The most important and most difficult question which arises for decision concerns the date at which to determine, in relation to the transfer or creation of a legal estate in registered land, what are the subsisting overriding interests in the land to which the estate transferred or created will be subject. One might be forgiven for starting from the a priori assumption that on its true construction the Land Registration Act 1925 must be capable of yielding a single answer to that question in the sense that the transferee or chargee either takes subject to overriding interests subsisting at the date of transfer or creation of the estate and free of overriding interests created between that date and the date of registration or that he takes subject to all overriding interests subsisting at the date of registration. But neither of these single answers will do. As my noble and learned friends cogently demonstate, to adopt either answer and apply it to all overriding interests across the board would produce at least one conveyancing absurdity. Thus it would be a conveyancing absurdity that the purchaser of a legal estate should take subject to the rights under section 70(1)( g ) of any person who was not in occupation at the date of purchase so that the purchaser could know nothing of his existence. But it would equally be a conveyancing absurdity that the purchaser should not be subject, pursuant to section 70(1)( i ), to rights under local land charges arising between the date of his purchase and the date of registration which, by virtue of the statutes creating them, bind all interests for the time being subsisting in the land.

I am entirely satified that it must be right to avoid both these conveyancing absurdities. But I confess that I have

difficulty in finding any wholly convincing and consistent construction of the statute which achieves this result. It seems to me that it makes better sense of the scheme of the Act in relation to overriding interests if one can regard the rule to be applied to an overriding interest under paragraph ( g ) of section 70(1), i.e. that it will only affect the legal estate if it was subsisting as such at the date when the estate was tranferred or created, as an example of the general rule, and the contrary rule to be applied under paragraph ( i ) as the exception. This avoids other conveyancing absurdities which would arise if the transferor of the legal estate could, between the date of transfer and the date of registration, create new overriding interests, such as profits a prendre or easements under paragraph ( a ), rights of fishing or sporting under paragraph ( j ), or leases under paragraph ( k ), which would affect the estate in the hands of the transferee. One does not, of course, expect conveyancing absurdities from the pens of the skilled parliamentary draftsmen who implemented Lord Birkenhead's great scheme for the reform of English real property law embodied in the 1925 legislation, but even they may have occasionally expressed their complex interlocking concepts in forms of words which do not precisely fit every case. If the choice is between accepting a conveyancing absurdity on the one hand and straining or even modifying the draftsman's language to avoid it on the other hand, I have no doubt that the latter alternative is to be preferred. For the present, however, I need do no more than express my concurrence in the opinion that a person not in actual occupation of land at the date when a legal estate in the land is transferred or created cannot substantiate a claim to an overriding interest in the land under section 70(1)( g ) against the transferee or chargee.

LORD GRIFFITHS

My Lords,

I have had the advantage of reading in draft the speeches to be delivered by my noble and learned friends, Lord Oliver of Aylmerton and Lord Jauncey of Tullichettle. I agree with both of them, and I too would dismiss the appeal for the reasons which they have given.

LORD ACKNER

My Lords,

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LORD OLIVER OF AYLMERTON

My Lords,

This appeal raises yet again what has become a familiar hazard for banks and building societies advancing money on the security of real property. The respondent society is the proprietor of a registered charge on property at 7, Hillview, South Lodge Avenue, Mitcham, Greater London, securing a sum of £25,000 together with interest. The property is leasehold and the title is registered at H.M. Land Registry under the provisions of the Land Registration Acts 1925-1986. The registered proprietor and the chargor under the society's charge is the son of the first appellant and the charge was given by him on the completion of his purchase of the property on 13 August 1984 in order to enable him to complete the purchase. The chargor was registered as proprietor of the property on 13 September 1984 simultaneously with the registration of the society as proprietors of the charge. The chargor having defaulted in payment of principal and interest, the society sought to enforce their security and on 5 August 1987 commenced proceedings for possession of the property against the chargor in the Croydon County Court. In fact the chargor had never lived in the property which had been purchased by him for the occupation of the first appellant, his mother, and the second appellant, the gentleman whom she subsequently married. At all material times since the completion of the purchase they had occupied the property as their home and it was therefore necessary to join them as defendants to the proceedings. Their defence was that they had an equitable interest in the property which took priority over the interest of the society and was binding on the society as an overriding interest by virtue of their occupation of the property having regard to the provisions of sections 23(1) and 70(1)( g ) of the Land Registration Act 1925.

It will be necessary in stating the issues which arise for decision on the appeal to trace in a little detail the history of the relationship between the chargor and the first appellant and of the events immediately leading up to the acquisition of the property subject to the society' charge, but before I embark upon this, it will be convenient to refer to the relevant provisions of the Land Registration Act 1925 upon which the determination of the appeal depends.

Since the appeal is concerned with land which was, at all material times, registered land, it is unnecessary to refer to those provisions which are concerned with the first registration of land not previously registered and one can go straight to the provisions relating to transfers of registered titles which are contained in Part III of the Act of 1925. Although, as was pointed out in City of London Building Society v. Flegg

[1988] AC 54

, 84, the provisions of the Land Registration Acts were designed to operate in parallel and consistently with the property legislation governing unregistered land, the powers of a registered proprietor to dispose of or create legal estates rests entirely upon statute. Section 69(4) of the Act of 1925 provides:

"The estate for the time being vested in the proprietor shall only be capable of being disposed of or dealt with by him in manner authorised by this Act."

Section 18 enables the registered proprietor of a freehold estate to transfer the registered estate "in the prescribed manner" (that is

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to say, prescribed, in the event, by the Land Registration Rules 1925 (S.R. & O. 1925 No. 1093 (L. 28)). Subsection (1) of section 18 describes a number of specific transactions (such as, for instance, grants of leases or rentcharges) which may be effected by a registered proprietor and subsection (4) refers in terms to dispositions by way of charge. It provides:

"The foregoing powers of disposition shall (subject to the express provisions of this Act and of the Law of Property Act, 1925, relating to mortgages) apply to dispositions by the registered proprietor by way of charge or mortgage; but no estate, other than a legal estate, shall be capable of being disposed of, or created under, this section."

Subsection (5) provides that the term "transfer" or "disposition" includes "any disposition authorised as aforesaid."

Registration of dispositions made by registered proprietors is provided for in section 19 (freeholds) and section 22 (leaseholds). So far as relevant, section 19 provides:

"(1) The transfer of the registered estate in the land or part thereof shall be completed by the registrar entering on the register the transferee as the proprietor of the estate transferred, but until such entry is made the transferor shall be deemed to remain proprietor of the registered estate; . .

Dispositions other than transfers are provided for in subsection (2) which similarly provides that they shall be completed by registration. Similar provisions relating to transfers of registered leasehold estates are contained in section 22.

The governing principle of the Act of 1925 is that the title to land is to be regulated by and ascertainable from the register alone. It is recognised, however, that there may be subsisting rights of third parties affecting the land such as would not, in unregistered conveyancing, be deducible from the abstracted documents of title and which, though ascertainable by enquiry, may not have been protected by entry on the register. The Act of 1925 therefore provides for a number of "overriding interests" to which the registered title is made subject. Such interests are defined in section 3(xvi) as:

"all the incumbrances, interests, rights, and powers not entered on the register but subject to which registered dispositions are by this Act to take effect ..."

Under section 69(1) the estate in registered land is deemed to have vested in the proprietor without any conveyance but subject

"to the overriding interests, if any, including any mortgage term or charge by way of legal mortgage created by or under the Law of Property Act 1925, or this Act or otherwise which has priority to the registered estate."

Section 70 contains a list of miscellaneous overriding interests to which registered land is subject. Subsection (1) provides:

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"All registered land shall, unless under the provisions of this Act the contrary is expressed on the register, be deemed to be subject to such of the following overriding interests as may be for the time being subsisting in reference thereto, and such interests shall not be treated as incumbrances within the meaning of this Act, (that is to say): ..."

There follows a list of diverse rights, easements and liabilities of which it is necessary to mention only three, viz.:

"( g ) The rights of every person in actual occupation of the land or in receipt of the rents and profits thereof, save where enquiry is made of such person and the rights are not disclosed; . . .

"( i ) Rights under local land charges unless and until registered or protected on the register in the prescribed manner; . . .

"( k ) Leases for any term or interest not exceeding twenty- one years, granted at a rent without taking a fine; ..."

The effect of registration as regards dispositions of freehold and leasehold interests respectively is set out in sections 20 and 23. Section 20(1) provides:

"In the case of a freehold estate registered with an absolute title, a disposition of the registered land or of a legal estate therein, including a lease thereof, for valuable consideration shall, when registered, confer on the transferee or grantee an estate in fee simple or the term of years absolute or other legal estate expressed to be created in the land dealt with, together with all rights, privileges, and appurtenances belonging or appurtenant thereto, including (subject to any entry to the contrary in the register) the appropriate rights and interests which would, under the Law of Property Act, 1925, have been transferred if the land had not been registered, subject -

( a ) to the incumbrances and other entries, if any,

appearing on the register; and

( b ) unless the contrary is expressed on the register, to the overriding interests, if any, affecting the estate transferred or created,

but free from all other estates and interests whatsoever . . . "

The provisions of section 23(1) are, for material purposes, similar save that the disposition, when registered, is deemed to vest in the transferee or underlessee "the estate transferred or created to the extent of the registered estate, or for the term created by the subdemise ..."

The provisions regulating the creation of charges on registered land and the powers of chargees are to be found in sections 25-35 inclusive. Section 25(1) specifically enables the registered proprietor to charge the registered land with payment of money and section 26(1) provides:

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"The charge shall be completed by the registrar entering on the register the person in whose favour the charge is made as the proprietor of the charge, and the particulars of the charge."

Under section 27 a registered charge, if not made by demise or sub-demise, takes effect as a charge by way of legal mortgage, an expression defined by reference to the Law of Property Act, 1925, so that the chargee is to be treated as if a mortgage term by demise or sub-demise were vested in him. Subsection (3) provides for the charge to take effect from the date of delivery of the deed, but subject to estates or interests registered or noted on the register before registration of the charge. Under section 25(2), the charge may be in any form which sufficiently identifies the land but there is an express prohibition against any reference to any unregistered interests affecting the land which are not overriding interests. Section 28 provides for the implication into charges of covenants for payment of principal and interest. At first sight its effect might seem curious, for it provides in subsection (1):

"Where a registered charge is created on any land there shall be implied on the part of the person being proprietor of such land at the time of the creation of the charge . . . ( a ) a covenant with the proprietor for the time being of the charge to pay. ..."

Since "proprietor" is defined in section 3(xx) as "the registered proprietor for the time being of an estate in land or of a charge" this might be thought to lead to the conclusion that "the time of the creation of the charge" must mean the time when the charge is registered, since otherwise, in the normal case of the purchaser of land charging the estate on completion of his purchase, the implied covenant would be imposed on the vendor, who remains the "proprietor" until registration. Section 29 of the Act of 1925, however, makes it entirely clear that the creation of a charge is not its registration and that it cannot refer to anything but execution of the charge. That section provides:

"Subject to any entry to the contrary on the register, registered charges on the same land shall as between themselves rank according to the order in which they are entered on the register, and not according to the order in which they are created."

In fact, when reference is made to section 37 of the Act of 1925 it can be seen that section 28 operates perfectly sensibly in the case postulated of the purchaser wishing to charge the land on completion of his purchase and contemporaneously with the transfer to him by the registered proprietor. Section 37 provides, so far as material:

"(1) Where a person on whom the right to be registered as proprietor of registered land or of a registered charge . . . has been conferred by a disposition or charge, in accordance with this Act, desires to dispose of or charge the land or to deal with the charge before he is himself registered as proprietor, he may do so in the prescribed manner, and subject to the prescribed conditions.

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"(2) Subject to the provisions of this Act with regard to registered dealings for valuable consideration, a disposition or charge so made shall have the same effect as if the person making it were registered as proprietor."

So much for the statutory provisions. I turn now to the factual background of the appeal. The first appellant, to whom it will be convenient to refer as "Mrs. Cann," lived with her first husband in a house at 48, Warren Road, Mitcham, of which her husband was the tenant. They had two sons, George and Alan. Mrs. Cann's husband died in 1962 and she succeeded to the tenancy as his widow and was entitled to the protection afforded by the Rent Acts. In about 1970, her first husband's brother, the second appellant, Mr. Abraham Cann, came to live with her and they have been together ever since. Mrs. Cann married Mr. Abraham Cann in 1987. In 1977 the landlord's agents approached Mrs. Cann as the sitting tenant with an offer to sell the freehold of 48, Warren Road, for a sum of £5,000, a price which was much below the vacant possession value of the property having regard to her protected tenancy. Neither she nor Mr. Abraham Cann had the resources which would have enabled them to purchase the property, but George Cann offered to raise a mortgage and purchase it and on 3 May 1977 it was conveyed into the joint names of Mrs. Cann and George with the aid of an endowment mortgage covering the whole of the price. George Cann assured his mother that she would not need to pay any rent any more and that she would always have a roof over her head. It seems that Abraham Cann contributed a sum of £500 towards the completion of the transaction, which sum was expended in defraying the legal costs. Thereafter, Mr. and Mrs. Cann lived in the property and paid the outgoings until April 1979. For part of that time George Cann lived with them. In 1979, however, they came across a more attractive house, 30, Island Road, Mitcham. 48, Warren Road was accordingly sold for a sum of £20,500. 30, Island Road, was purchased in the name of George Cann alone for a sum of £26,500 of which £15,000 was, with Mrs. Cann's knowledge and acquiescence, raised on mortgage from the Nationwide Building Society. Her agreement to the house standing in the sole name of George was obtained and she signed a document dated 9 March 1979 by which she directed that course to be taken. She and Mr. Abraham Cann moved into the property and lived there until August 1984. George Cann also lived with them until 1982 when he moved out to live with a lady whom he subsequently married. Mr. and Mrs. Cann made no contribution to the mortgage but were responsible for other outgoings and some repairs. According to Mrs. Cann's evidence, George told her:

"I have bought you a nice house. This is always what you wanted."

In the summer of 1984, George Cann was in financial difficulties and told his mother that he could no longer afford to pay for two homes. He accordingly arranged to sell 30, Island Road, and to purchase instead a smaller leasehold property at 7, Hillview, Mitcham, at a price of £34,000. 30, Island Road, was sold for £45,000. Both transactions were completed on 13 August 1984. It is necessary to set out the sequence of the transaction in a little detail. In May 1984, George applied to the society for a loan of £25,000 to be secured on a mortgage of 7, Hillview, stating that that property was being purchased for his own sole

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occupation. The society, having inspected and approved the property on 15 May, made a formal offer of an advance of the amount sought on 18 May and that was accepted. Contracts for the sale of 30, Island Road, and the purchase of 7, Hillview, were exchanged on 19 July 1984 with the completion date for both transactions fixed for 13 August. On 2 August 1984, Messrs. H. C. L. Hanne & Co., George Cann's solicitors, wrote to the society asking for a cheque for the mortgage advance to be provided before 8 August and that was duly dispatched to them on 6 August. Prior to 13 August George Cann duly executed a legal charge on the property in favour of the society to secure the sum advanced. Thus the solicitors were in a position to complete the purchase on the completion date subject only to completion of the sale of 30, Island Road, from which, presumably, the balance of the purchase price was to come.

It is Mrs. Cann's case that by reason of her contribution to the purchase of 48, Warren Road, represented by her status as sitting tenant and, more particularly, by reason of the assurance given to her by George that she would always have a roof over her head, she had, on or immediately prior to completion, an equitable interest in 7, Hillview which takes priority to the society's charge as an overriding interest. She was, she claims, in "actual occupation" of the property and so had her rights secured against the society by virtue of section 70(1)( g ) of the Act of 1925. It is not disputed that she was certainly in actual occupation of the property on 13 September when both George's title to the property and the society's charge on it were registered, but the society relies on the decision of the Court of Appeal in Lloyds Bank Plc. v. Rosset

[1989] Ch 350

as establishing that the relevant date for ascertaining the existence of an overriding interest is not the date of registration but the date of completion of the purchase. Even on that footing, however, Mrs. Cann claims a priority because, so she claims, she was in actual occupation of the property prior to actual completion of the purchase. That claim was rejected by the trial judge, who inferred that the purchase and the charge were completed by 9.00 a.m. on 13 August by which time it is common ground that nothing had occurred which could possibly support a claim that she was in actual occupation. The Court of Appeal [1989] 2 F.L.R. 265, however, held that the inference drawn by the judge was not one which, having regard to the time taken to effect telegraphic transfers of money and to the normal hours of banking business, could legitimately be drawn and the leading judgment, delivered by Dillon L.J., contains a careful analysis of the available evidence and of the practical probabilities which is, I think, very difficult to fault and which has not been challenged by the society. The result of that analysis, which it is unnecessary to consider in any detail, is that actual completion of the purchase of 7, Hillview and the contemporaneous charge to the society took place at or shortly after 12.20 p.m. on 13 August. At that time the situation on the ground was this: Mrs. Cann herself was not in Mitcham, having gone on 11 August to the Netherlands on a holiday from which she did not return until 18 August. Mr. Abraham Cann and George Cann, however, had prepared to move into the property and they arrived there with a van containing Mrs. Cann's furniture and carpets at about 10.00 a.m. At that time the vendor, Mr. Watson, was still there loading a van with his belongings, but he vacated the house at about 11.45 a.m. at which time carpet-layers went in

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to lay Mrs. Cann's carpets and her furniture began to be unloaded and brought in. Thus there was a period of about 35 minutes prior to actual completion during which there were on the premises chattels belonging to Mrs. Cann and persons unloading and arranging them on her behalf.

In the Court of Appeal Mrs. Cann's claim failed because, in the view of all members of the court, she was aware that the balance of the purchase price of 7, Hill View, over and above the net amount to be produced by the sale of 30, Island Road, was going to be raised by George Cann by mortgage of the premises. Having thus impliedly authorised him to raise this amount on mortgage she must necessarily have authorised him to that extent to create a charge to the society having priority to her interest and could not, as against the society, complain that George had exceeded a limitation on his authority of which the society was unaware. Dillon L.J., however, took the view that the events which took place between 11.45 a.m. and 12.20 p.m. on 13 August did constitute actual occupation of the property by Mrs. Cann sufficient to enable her to claim an overriding interest, a proposition which was doubted by Ralph Gibson and Woolf L.JJ.

If, of course, the ground upon which the Court of Appeal rejected Mr. and Mrs. Cann's claim to resist an order for possession in the society's favour is correct, it is strictly unnecessary to determine any of the other points which arise, but since they have been fully argued and having regard to the pending appeal in Lloyds Bank Plc. v. Rosset which immediately follows this appeal, it is desirable that they should be decided.

First in logical order is the question of the appropriate date for ascertaining the existence of overriding interests under the Land Registration Acts. Curiously enough the point appears never to have arisen directly for decision in any reported case prior to Rosset, save in one case in 1985 in the Bristol County Court which was decided on appeal on a different point (Paddington Building Society v. Mendelsohn (1985) 50 P. & C.R. 244). In In re Boyle's Claim [1961] 1 W.L.R. 339, 344, Wilberforce J. expressed the view that the relevant date was the date of acquisition of the registered title, but the issue in that case was quite a different one and the point does not appear to have been argued. That case has, however, been used as the basis for statements in a number of leading conveyancing textbooks that that is the date at which occupation for the purposes of section 70(1)( g ) has to be ascertained (see, e.g., Wolstenholme and Cherry's Conveyancing Statutes, 13th ed. (1972), vol. 6, p. 65; Emmet on Title , 19th "ed. (1986), para. 5-197). The question arose directly in Rosset in which the Court of Appeal decided unanimously that the relevant date was the date of completion of the purchase and not that of registration. Your Lordships are now invited to overrule that decision.

My Lords,

the conclusion at which the Court of Appeal arrived makes good conveyancing sense and, speaking for myself, I should be extremely reluctant to overrule it unless compulsively driven to do so, the more so because it produces a result which is just, convenient and certain, as opposed to one which is capable of leading to manifest injustice and absurdity. It has, I think, to be acknowledged that the interrelation between the provisions of

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sections 3(xvi), 20 and 23, 37, 69 and 70(1) is not altogether easy to understand, particularly in relation to the position of a chargee whose charge is created by a purchaser of land who is not yet himself the registered proprietor. The solution propounded by the trial judge and by counsel for the bank in Rosset depends upon the words "affecting the estate transferred or created" in sections 20(l)( b ) and 23(l)( c ) and construes them as if there were added the words "at the time at which it was transferred or created," thus excluding from the category of interests affecting the estate the rights of a person entering into occupation after the transfer or creation of the estate effected by completion of the transaction. It will be convenient to refer to this as "the judge's construction."

This is an attractive solution because it is, as Nicholls L.J. observed in the course of his judgment in Rosset, at p. 373, a conveyancing absurdity that, for instance, a mortgagee should, after completion and after having made all possible inquiries and parted with his money, be bound by the interest asserted by a newly-arrived occupant coming in between completion and the registration of his charge. So far as registered interests are concerned the chargee can protect himself by an official search which will preserve his priority over any further registered entries during a priority period well sufficient to enable him to have his charge stamped and lodged for registration: see rules 3 and 5 of the Land Registration (Official Searches) Rules 1981 (S.I. 1981 No. 1135). There is, however, no similar protection against overriding interests which are not recorded on the register and whose existence can be ascertained only by inquiry and there is, accordingly, good sense in so construing sections 20(1) and 23(1) as to preserve the priority of the purchaser or chargee as from the date of completion when both are irrevocably committed to the transaction, which only awaits the formal step of registration in order to vest the legal estate.

In Rosset, however, the Court of Appeal found some difficulty in accepting that the solution could be found simply in construing sections 20(1) and 23(1) in the manner suggested. Nicholls L.J. pointed out, at p. 371, that it was common ground that paragraph ( a ) of section 20(1) (paragraph ( b ) of section 23(1)), which subjects the land transferred to entries appearing on the register, undoubtedly refers to entries so appearing at the date of registration. This appears to me to be beyond doubt. One would, therefore, expect that the paragraph subjecting the land to overriding interests would be related to the same date. Nicholls L.J. reached, in relation to overriding interests within section 70(1)( g ), the same result as that produced by the judge's construction but by reference to the words "for the time being subsisting" in section 70(1) and by holding that, in relation to paragraph ( g ) specifically, an interest was not a subsisting interest except in a case in which the claimant was in occupation of the land prior to and at the date of completion of the purchase.

I share the difficulty that Nicholls L.J. felt in accepting the attractive solution of the judge's construction and I agree with him that the key to the problem lies in the words of section 70(1) rather than in the reference to the interests affecting the estate transferred or created in sections 20(1) and 23(1). The Act of 1925 displays a degree of circularity in its general definition of what an overriding interest is. Section 3(xvi) defines it as an

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unregistered encumbrance "subject to which registered dispositions take effect," but when one turns to inquire to what unregistered encumbrances a disposition is subject, sections 20(1) and 23(1) merely specify that they are "overriding interests if any, affecting the estate transferred or created." As a definition, therefore, this is a little less than satisfactory, for it simply means "overriding interests" are "overriding interests." It does, however, involve this consequence, that if the judge's construction is correct, no interest which does not affect the estate or interest at the time when a relevant disposition is effected by transfer, grant or charge can be an overriding interest. That, of course, does not demonstrate that the judge's construction is erroneous, but it might be thought to be a surprising result when consideration is given to the remaining words in sections 20 and 23 and to the terms of sections 69 and 70.

I turn to those sections, because the circularity of the definition so far compels a reference to other provisions of the Act of 1925 in order to ascertain the nature of the interests which are to override. They are, to begin with, not "minor interests" (section 3(xv)), that is to say, interests not capable of being disposed of or created by registered dispositions and interests created by unregistered dealings and subsisting only in equity. Unless protected by notice, caution, inhibition or restriction entered on the register, these will be overridden by registered dispositions for valuable consideration. Specifying what overriding interests are not does not, however, assist in determining what they are and, moreover, it is clear from Williams & Glyn's Bank Ltd. v. Boland

[1981] AC 487

that a minor interest may become an overriding interest if the claimant is in actual occupation. Section 69 is of some assistance in that it demonstrates that the list of miscellaneous overriding interests contained in section 70(1) is not exhaustive, since the legal estate is vested in the registered proprietor under this section subject to

"the overriding interests . . . including any . . . charge by way of legal mortgage created . . . under . . . this Act or otherwise which has priority to the registered estate" (subsection (1)).

Section 70(1) contains no reference to a mortgage or charge as an overriding interest, but section 69(1) necessarily implies that it is one so long as it has priority to the registered estate.

When regard is had to the list of overriding interests in section 70(1) it is apparent that all of them are interests which can come into being at any time, and some of them may arise without any volition on the part of the registered proprietor or anyone else seized of an estate in the land. A right of way or a profit a prendre may be acquired by a neighbouring landowner by prescription. A third party may acquire title to the land by adverse possession. A local land charge may be imposed on the land at any time under a variety of different statutes. A lease at a rent for a term not exceeding 21 years may be granted at any time. Yet on the judge's construction, a purchaser would, on registration, take free from any such interests arising after completion of his purchase (in the sense of payment of the price against delivery of the executed transfer) even though, if the land were unregistered land, he would clearly be subjected to them.

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This necessarily follows, if the judge's construction is right, from the words which immediately follow paragraph ( b ) of section 20(1) (paragraph ( c ) of section 23(1)) - "but free from all other estates and interests" whatsoever . . ." It also involves, I think, a conflict between sections 20(1) and 23(1) on the one hand, and sections 69(1) and 70(1) on the other. Section 69, as it seems to me, is looking at the continuous position of the registered proprietor and providing that the legal estate is deemed to be vested in him subject to such overriding interests as shall from time to time subsist during his proprietorship, whereas, if the judge's construction is correct, it is indeed subject to all such interests but with the exception of those which come into being between the date when he took his transfer and the date when he became registered. Moreover it would also follow that the effect of registration of the transferee would be to free him even from overriding interests which he himself had created in the interval between completion and registration.

That cannot, I think, have been the intention of the legislature and the difficulty can be illustrated by a number of examples. Section 70(1)( i ) specifies as overriding interests "rights under local land charges unless and until registered . . . ," etc. This was cited by Nicholls L.J. in the course of his judgment and it is a useful example. I pause to remark that the reference to "registration" here is clearly a reference to registration under the Act of 1925, a necessary step before realisation of the charge. Under the Land Charges Act 1925, and until the Local Land Charges Act 1975, local land charges required to be registered in the register of local land charges if they were not to be void against a purchaser for money or money's worth of the legal estate pursuant to section 15 of that Act. That applied equally whether the land affected by the charge was registered or unregistered. Now if we suppose a simple purchase of the freehold without the added complication of an advance on mortgage, the purchaser would take free from any local land charge which had arisen but had not been registered under the Land Charges Act prior to his acquisition of the legal estate, and that would be the case whether the land was registered or unregistered. Assuming a local land charge arising prior to that date but not then registered, there is nothing in section 70(1)( i ) which would or could have the effect of reviving the charge against the land if it were subsequently to be registered in the register of land charges for there could be no "right under" the charge once it had been avoided. But suppose that the charge did not even arise until the day after the completion of the purchase by delivery of the transfer or conveyance and that it was then immediately registered under the Land Charges Act 1925. In the case of unregistered land there is no difficulty. The charge attached to the land in the hands of the purchaser as the estate owner for the time being pursuant to the statute imposing it. I can see no reason why the purchaser of registered land should be in any different position simply because his transfer had not yet been registered. Thus, for instance, the local authority was enabled under section 144 of the Highways Act 1959, to take steps to alleviate a danger on land adjoining the highway and to recover the expenses of so doing from the owner of the land for the time being. Under section 264(1) such expenses were a charge on the premises "as from the date of the completion of the works" and such charges were registrable under section 15(1) of the Land

- 12 -

Charges Act 1925. Let it be assumed for the purposes of the example that the work of the appropriate character had been undertaken by the authority on land which was the subject matter of a pending sale and that it was completed after completion of the sale but before the purchaser was registered as proprietor. Let it also be assumed that the local authority's charge was duly registered immediately under the Land Charges Act 1925. In the case of unregistered land there would be no question but that the charge attached to the land in the hands of the purchaser as the owner for the time being and I cannot accept that the legislature could have intended that the purchaser of registered land should take free from it as a result of the accidental circumstance that the work came to be completed and the charge arose on a date between completion of the purchase and that of registration of the purchaser as proprietor.

It is not difficult to think of other examples of local land charges coming into being after the date of completion but before registration of the purchaser as proprietor, for instance, the designation of the property purchased as a listed building under section 54(1) of the Town and Country Planning Act 1971. That section requires the list to be deposited with the appropriate borough or district council and registered as a local land charge under the Land Charges Act 1925. Again, I cannot accept that the effect of section 20(1) was that the purchaser, prior to the Local Land Charges Act 1975, held free from the restriction which is the consequence of listing because of the circumstance that the list was deposited on a date falling between completion of the purchase and registration. Another example would be, for instance, the issue of a certificate by the Secretary of State under section 19 of the Leasehold Reform Act 1967, which happened to occur between completion of a purchase of the freehold reversion and the registration of the purchaser as its proprietor.

Now I do not think that this difficulty can be overcome by reference to the fact that local land charges, being imposed by statute, are, as it were, free-standing and attach to the land by virtue of their own statutory force so that section 20(1) and 23(1) fall to be construed as if the words "free from all other estates and interests" were followed by the words "other than interests conferred by local land charges." There appear to me to be insuperable difficulties about this as a matter of construction.

I conclude, therefore, like Nicholls L.J., that the relevant date for determining the existence of overriding interests which will "affect the estate transferred or created" is the date of registration. This does, of course, give rise to the theoretical difficulty that since a transferor remains the registered proprietor until registration of the transfer, it would be possible for him in breach of trust, to create overriding interests, for instance, by grant of an easement or of a lease, which would be binding on the transferee and against which the transferee would not be protected by an official search. That would, of course, equally be the case in a purchase of unregistered land where the purchaser pays the price in advance of receiving a conveyance. I cannot, however, find in the theoretical possibility of so improbable event a context for preferring the judge's construction.

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The question remains, however, whether the date of registration is also the relevant date for determining whether a claimant to a right is in actual occupation. It is to be noted that it is not the actual occupation which gives rise to the right or determines its existence. Actual occupation merely operates as the trigger, as it were, for the treatment of the right, whatever it may be, as an overriding interest. Nor does the additional quality of the right as an overriding interest alter the nature or quality of the right itself. If it is an equitable right it remains an equitable right. As was observed in Williams & Glyn's Bank Ltd. v. Boland

[1981] AC 487

, 504, the purpose of section 70(1)(g) was to make applicable to registered land the same rule for the protection of persons in actual occupation as had been applied in the case of unregistered land in, for instance, Hunt v. Luck

[1902] 1 Ch 428

. In relation to legal rights it does nothing, for it is not easy to conceive of a legal right in the land which would not already be an overriding interest under some other head, as, for instance, paragraphs ( a ) or ( k ). Again, as regards equitable rights in an occupier which arise before completion and are supported by occupation at that date there is no difficulty. A chargee who advances money and so acquires an equitable charge prior to the creation of the occupier's right does not lose his priority because the occupier's right becomes an overriding interest. That interest remains what it always was, an interest subject to the prior equity of the chargee which, on registration, is fortified by the legal estate. Equally, a chargee advancing his money after the creation of the occupier's equitable right is, as one would expect, subject to such right.

The case which does give rise to difficulty if the date of registration is the relevant date for determining whether there is a claimant in actual occupation is one in which the sequence of events is that the right, unaccompanied by occupation, is created before completion and before the chargee has advanced his money and then subsequently the claimant enters into actual occupation after completion and remains in occupation up to the date when the registration of the charge is effected. The chargee in that event would have no possibility of discovering the existence of the claimant's interest before advancing his money and taking his charge, but would nevertheless be subject, on registration, to the claimant's prior equitable interest which, ex hypothesi, would not have been subject to the charge at its creation.

This does indeed produce a conveyancing absurdity and there is, as Nicholls L.J. observed, an internal context for supposing that the legislature, in enacting paragraph ( g ), must have been contemplating an occupation which preceded and existed at completion of a transfer or disposition. Not only was the sub- paragraph clearly intended to reflect the rule discussed in Hunt v. Luck with regard to unregistered conveyancing, but the reference to enquiry and failure to disclose cannot make any sense unless it is related to a period in which such enquiry could be other than otiose. That absurdity can, I think, be avoided only by the route which the Court of Appeal adopted and by referring the "actual occupation" in paragraph ( g ) to the date of completion of the transaction by transfer and payment of the purchase money. Section 70(1) refers to such interests "as may be for the time being subsisting" and in order to affect "the estate transferred or created" on registration such interests would no doubt require to

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be subsisting on that date. But I see no insuperable difficulty in holding that the actual occupation required to support such an interest as a subsisting interest must exist at the date of completion of the transaction giving rise to the right to be registered, for that is the only date at which the enquiry referred to in paragraph ( g ) could, in practice, be made and be relevant. I agree, therefore, with the conclusion of the Court of Appeal in Rosset that it is at that moment that it falls to be determined whether there is an actual occupation for the purposes of paragraph ( g ). I do not think that I can improve upon Nicholls L.J.'s analysis when he said, in the course of his judgment in Rosset, at p. 374:

"If this is right, the pieces of the jigsaw fit together reasonably well. A purchaser or mortgagee inspects and inquires before completion, in the established fashion. Or he fails to do so, at his own risk. He then completes the transaction, taking an executed transfer or mortgage. Whether or not an overriding interest under paragraph ( g ) subsists so far as his freehold or mortgage is concerned falls to be determined at that moment. If an overriding interest does subsist, then his estate when registered takes subject to that interest. If it does not, then subsequent entry of a person into occupation before the transfer or mortgage has been registered, and 'completed' for the purposes of section 19, does not have the consequence of creating an overriding interest under paragraph ( g ) in relation to that freehold or mortgage."

If, then, the date at which it falls to be considered whether the claimant to an interest in the land is in actual occupation is the date of completion of the purchase, what has next to be determined is the nature, extent and effect of the interest claimed by him as an overriding interest. I defer for the moment the question whether the facts of the instant case disclose that Mrs. Cann was in actual occupation at the relevant time. Up to the moment of completion she had, of course, a beneficial interest under the trust for sale affecting 30, Island Road in the hands of her son, George. He was, I will assume, also estopped by his promise to keep a roof over her head from denying her right as against him to terminate her occupation of the property without her consent, although that estoppel clearly could not have bound the Nationwide Building Society, whose charge had been effected by George with her consent. But it is difficult to see how she could, at that stage, have acquired any interest in 7, Hillview. She was not a party to the contract for the purchase of that property which was entered into by George alone. She assumed and, indeed, may have been led to believe that she would have an interest in and the right to occupy that property when George acquired it, but at the stage prior to its acquisition she had no more than a personal right against him. As against this, the society, which had no notice, either actual or constructive, of any rights which Mrs. Cann might be minded to claim, had entered into an agreement to advance £25,000 on the security of the first legal charge on the property and that agreement had become binding and specifically enforceable against George on 6 August when the money was advanced at the request of his solicitors. In so far, therefore, as it is relevant to consider the priority of equities, the society, as an equitable chargee for money actually

- 15 -

advanced, had an interest ranking in priority to what, at that stage, was merely Mrs. Cann's expectation of an interest under a trust for sale to be created if and when the new property was acquired. One can, perhaps, test it in this way. If, prior to the acquisition of 7, Hillview, George Cann had been able to complete the sale of 30, Island Road, and had absconded with the proceeds, financing the purchase of 7, Hillview entirely by means of a mortgage advance, could his mother have claimed any interest in that property? I should have thought clearly not, save in so far as she might be entitled to a right of occupation by estoppel based on his promise to accommodate her and her having, in reliance on that promise, vacated 30, Island Road to enable that sale to be completed.

It is argued, however, that because the creation of a charge on property in favour of the society necessarily posits that the chargor has acquired an interest out of which the charge can be created, there must notionally be a point of time at which the estate vested in him free from the charge and in which the estoppel affecting him could be "fed" by the acquisition of the legal estate so as to become binding on and take priority over the interest of the chargee. This is a puzzling problem upon which it is not easy to reconcile the authorities.

The appellants rely upon the decision of the Court of Appeal in Church of England Building Society v. Piskor

[1954] Ch. 553

, a case concerned with unregistered conveyancing. The sequence of events in that case was that an agreement to purchase leasehold property was entered into in September 1946, the purchaser being let into possession in the following month on part payment of the price. He proceeded to grant a number of weekly tenancies under which the tenants took possession in November. At that stage the contract remained uncompleted and the tenancies were, therefore, necessarily equitable only. On 25 November 1946, completion took place and the property was assigned to the purchaser, being simultaneously charged by him in favour of the building society whose moneys had enabled the purchase to be completed. The charge contained the usual provision against leasing by the chargor. Default having been made in payment of principal and interest, the society sought possession against the tenants who argued that they had acquired tenancies by estoppel which was "fed" by the acquisition of the legal estate, thus converting their tenancies into legal tenancies binding on the society. The argument of the society was that the conveyance and the charge were in reality one single transaction with the result that the legal estate vested in the purchaser was, from the outset, subject to the society's charge and so could not be available to feed the estoppel free from it. This argument was rejected by the Court of Appeal. It was held that, despite the fact that the two documents were executed contemporaneously, the transaction necessarily involved conveyancing steps which, in contemplation of law, must be regarded as taking place in a defined order, so that there was a "scintilla temporis" between the purchaser's acquisition of the legal estate and the creation of the society's charge during which the estoppel could be fed. Reliance was also placed on a recital in the charge that the legal estate was "now vested in the mortgagors" which precluded the society from denying that the estate had not already vested at the time when the charge was granted. This was, however, only a

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subsidiary ground for the decision which rested squarely upon the acquisition of the estate out of which the charge was granted as an essential preliminary to the charge.

On the other side of the line are In re Connolly Brothers Ltd. (No. 2)

[1912] 2 Ch 25

and Security Trust Co. v. Royal Bank of Canada

[1976] AC 503

. In the former, a company had granted debentures creating a first and floating charge on all the property present and future of the company and prohibiting the creation of any charges ranking in priority to or pari passu with the debentures. Subsequently, the company, being desirous of acquiring further freehold property, approached a Mrs. O'Reilly, who agreed to advance the price but on terms that the loan be secured by a charge on the property. The company then agreed to buy the property. The contract was completed on 31 March 1904 and Mrs. O'Reilly was present at completion. She drew a cheque in favour of the company, which was paid into its account, and, at the same time, it drew a cheque for the balance of the price in favour of the vendor, the same solicitor acting for all parties. The conveyance was executed but was retained, together with the other title deeds, by the solicitor on the vendor's behalf, and a few days later, the company executed a memorandum of deposit in her favour. Warrington J. held that her charge had priority over the charge created by the debentures and his decision was upheld by the Court of Appeal, Cozens-Hardy M.R. remarking, at p. 31:

"we should be shutting our eyes to the real transaction if we were to hold that the unencumbered fee simple in the property was ever in the company so that it became subject to the charge of the debenture holders."

The reasoning, both of the Master of the Rolls and of Buckley L.J., seems to have been that, since Mrs. O'Reilly had a contractual right to the security at the time when she advanced the money, she necessarily had priority over the debentures. But that is, of course, always the case when a lender advances money on the understanding that he will get a security.

In re Connolly was cited in Piskor's but was distinguished by Sir Raymond Evershed M.R. on the ground that it involved a question of equitable priorities. So it did but I respectfully question whether this can be a valid ground of distinction. The debentures in In re Connolly's were duly registered and Mrs. O'Reilly clearly had constructive notice of their terms. The question was whether there was ever property upon which those terms could operate and the fact that both the charge in the debentures and Mrs. O'Reilly's charge under her contract and the memorandum of deposit were equitable only was entirely immaterial. The question in issue was whether the company's legal estate, without the existence of which her charge could never have taken effect, existed at any point of time free from her charge so that the prior interest of the debenture holders could attach. No other analysis of the decision is possible save that the court considered the transaction consisting of the conveyance, the advance and the memorandum of deposit as a single transaction.

The more recent decision of the Privy Council in Security Trust Co. v. Royal Bank of Canada

[1976] AC 503

, is equally

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capable of analysis only on the "single transaction" basis. The facts were complicated but reduced to their simplest terms involved a contract for the purchase by a company of certain real estate on terms that a certain proportion of the price should be paid by a fixed date and that the balance should be secured by mortgage to the vendor. A conveyance and mortgage were executed and were held in escrow pending payment of the agreed proportion of the price. Default was made in payment by the fixed date but there was no rescission. The purchaser then created a debenture, creating a fixed charge on its existing property and a floating charge on future property. Under that debenture a receiver was appointed. Whether the sale agreement was then still on foot is open to doubt but the date for completion was extended in January 1971 by agreement with the receiver to 30 April of that year. On 30 April the contract was completed. The question which arose in the subsequent liquidation of the purchaser was whether the charge in the debenture took priority over the vendor's mortgage. In delivering the judgment of the Board, Lord Cross of Chelsea contrasted Piskor and In re Connolly observing, at pp. 519-520:

"But the basic difference between the two lines of cases is that in cases such as In re Connolly Brothers Ltd. (No. 2) and this case the charge under the debenture only bites on property which is already fettered by the agreement to give the other charge, whereas on the facts of Church of England Building Society v. Piskor the tenancy was created out of an interest which was then unfettered by any such agreement."

Again, I respectfully question whether this, although it records accurately what the Court of Appeal held in Piskor, really affords a valid ground for distinction. However one looks at it, the interests of the tenant in that case had to be legal interests in order to gain any priority and they could only be so by separating the conveyance and the charge and treating them as separate transactions. Although Romer L.J., in the course of his judgment, touched on the question of what the position would have been had there been evidence of some prior agreement to create the charge, this was never fully considered and the court never grasped the nettle that the transaction necessarily involved an enforceable agreement for the grant of a charge at the stage when the money was advanced in order to enable the conveyance to take place.

These three authorities were carefully reviewed by Mustill L.J. in the course of his judgment in Lloyds Bank Plc. v. Rosset

[1989] Ch 350

, at pp. 388-393. He concluded that it was difficult to see how they could live together. I agree. I do not, for my part, consider that they can be reconciled. In neither In re Connolly nor the Security Trust Co. case could the charge which was given priority have been created unless and until the legal estate had been obtained by the chargor. In both cases the chargee had notice of the existence of the charge which failed to achieve priority. Both necessarily rest therefore upon the proposition that, at least where there is a prior agreement to grant the charge on the legal estate when obtained, the transactions of acquiring the legal estate and granting the charge are, in law as in reality, one indivisible transaction. It may be possible to justify the actual decision in Piskor on the subsidiary

- 18 -

ground there advanced of an estoppel by deed, but I do not, for myself, see how it is possible to uphold the principal ground for the decision except by rejecting the ratio of In re Connolly, and the Security Trust Co. case.

One is therefore presented with a stark choice between them. Of course, as a matter of legal theory, a person cannot charge a legal estate that he does not have, so that there is an attractive legal logic in the ratio in Piskor. Nevertheless, I cannot help feeling that it flies in the face of reality. The reality is that, in the vast majority of cases, the acquisition of the legal estate and the charge are not only precisely simultaneous but indissolubly bound together. The acquisition of the legal estate is entirely dependent upon the provision of funds which will have been provided before the conveyance can take effect and which are provided only against an agreement that the estate will be charged to secure them. Indeed, in many, if not most, cases of building society mortgages, there will have been, as there was in this case, a formal offer of acceptance of an advance which will ripen into a specifically enforceable agreement immediately the funds are advanced which will normally be a day or more before completion. In many, if not most, cases, the charge itself will have been executed before the execution, let alone the exchange, of the conveyance or transfer of the property. This is given particular point in the case of registered land where the vesting of the estate is made to depend upon registration, for it may well be that the transfer and the charge will be lodged for registration on different days so that the charge, when registered, may actually take effect from a date prior in time to the date from which the registration of the transfer takes effect (see section 27(3) of the Act of 1925 and the Land Registration Rules 1925 (S.R. & O 1925 No. 1093), rule 83(2)). Indeed, under rule 81 of the Rules of 1925, the registrar is entitled to register the charge even before registration of the transfer to the chargor if he is satisfied that both are entitled to be registered. The reality is that the purchaser of land who relies upon a building society or bank loan for the completion of his purchase never in fact acquires anything but an equity of redemption, for the land is, from the very inception, charged with the amount of the loan without which it could never have been transferred at all and it was never intended that it should be otherwise. The "scintilla temporis" is no more than a legal artifice and, for my part, I would adopt the reasoning of the Court of Appeal in In re Connolly Brothers Ltd (No. 2).

[1912] 2 Ch 25

and of Harman J . in Coventry Permanent Economic Building Society v. Jones [1951] 1 All E.R. 901 and hold that Piskor's case was wrongly decided. It follows, in my judgment, that Mrs. Cann can derive no assistance from this line of argument.

I have, up to this point, been content to assume that the facts of the instant case justify the proposition which found favour with Dillon L.J., that she was in actual occupation of the property at the material time. This is, of course, essentially a question of fact, but there is the serious question of what, in law, can amount to "actual occupation" for the purposes of section 70(1)( g ). In Williams & Glyn's Bank Ltd. v. Boland

[1981] AC 487

, 504, Lord Wilberforce observed that these words should be interpreted for what they are, that is to say, ordinary words of plain English. But even plain English may contain a variety of shades of

- 19 -

meaning. At the date of completion Mrs. Cann was not personally even in England, leave alone in personal occupation of the property, and the trial judge held that the acts done by Mr. Abraham Cann and Mr. George Cann amounted to

"no more than the taking of preparatory steps leading to the assumption of actual residential occupation on or after completion, whatever the moment of the day when completion took place ..."

For my part, I am content to accept this as a finding of fact which was amply justified by the evidence before him, and I share the reservations expressed by Ralph Gibson and Woolf L.JJ. in the Court of Appeal. It is, perhaps, dangerous to suggest any test for what is essentially a question of fact, for "occupation" is a concept which may have different connotations according to the nature and purpose of the property which is claimed to be occupied. It does not necessarily, I think, involve the personal presence of the person claiming to occupy. A caretaker or the representative of a company can occupy, I should have thought, on behalf of his employer. On the other hand, it does, in my judgment, involve some degree of permanence and continuity which would rule out mere fleeting presence. A prospective tenant or purchaser who is allowed, as a matter of indulgence, to go into property in order to plan decorations or measure for furnishings would not, in ordinary parlance, be said to be occupying it, even though he might be there for hours at a time. Of course, in the instant case, there was, no doubt, on the part of the persons involved in moving Mrs. Cann's belongings, an intention that they would remain there and would render the premises suitable for her ultimate use as a residential occupier. Like the trial judge, however, I am unable to accept that acts of this preparatory character carried out by courtesy of the vendor prior to completion can constitute "actual occupation" for the purposes of section 70(1)( g ). Accordingly, all other considerations apart, Mrs. Cann fails, in my judgment, to establish the necessary condition for the assertion of an overriding interest.

The view that I have formed renders it strictly unnecessary to consider the ground upon which Mrs. Cann's claim failed in the Court of Appeal. What was said was that, despite her initial evidence (in her affidavit) that she did not know of her son's intention to raise any of the money required for the purchase on mortgage, nevertheless her oral evidence before the judge disclosed that she was well aware that there was a shortfall which would have to be met from somewhere. Her own account of the matter was that his reason for selling was that he was in financial difficulties, so that she must have known that he was not going to be able to meet it out of his own resources. Dillon L.J. (with whom on this point, the other two members of the court agreed) inferred that "she left it to George Cann to raise the balance," from which he further inferred that George Cann had authority to raise that sum from the society. There was no finding to this effect by the judge, but I think, for my part, that it is a necessary conclusion once it is accepted, as it has to be, that she knew that there was a shortfall of some £4,000 apart from conveyancing costs, that George Cann was going to raise it, and that he was in financial difficulties. It is said that there was no evidence that he was going to raise it on the security of this

- 20 -

property. There might, for instance, be other property available to him. He might obtain an unsecured loan. In the circumstances of his known lack of resources, however, this is fanciful and in my judgment the court was entitled to draw the inference that it did draw. If that is right, it follows that George Cann was permitted by her to raise money on the security of the property without any limitation on his authority being communicated to the society. She is not, therefore, in a position to complain, as against the lender, that too much was raised and even if, contrary to the view which I have formed, she had been able to establish an interest in the property which would otherwise prevail against the society, the circumstances to which I have alluded would preclude her from relying upon it as prevailing over the society's interest for the reasons given in the judgment of Dillon L.J. in the Court of Appeal. For all these reasons, I would accordingly dismiss the appeal.

LORD JAUNCEY OF TULLICHETTLE

My Lords,

The facts in this appeal and the relevant statutory provisions are set out in detail in the speech of my noble and learned friend Lord Oliver of Aylmerton. I gratefully adopt his narrative and as a result thereof I shall only require to refer to such facts and statutory provisions as are particularly relevant to what I have to say.

The first appellant (Mrs. Cann) contends that she had an equitable interest in 7, Hillview which commenced on 20 July 1984 when a specifically enforceable contract for the purchase of that house was entered into and which subsisted at the date of completion of the various transactions on 13 August 1984 and thereafter. That equitable interest, was, by virtue of her actual occupation, an overriding interest for the purposes of the Land Registration Act 1925, to which the mortgage in favour of the society, when registered, was subjected. Mr. Aylen for the appellants began his submissions with a detailed analysis of the relevant provisions of the Land Registration Act 1925 and placed reliance upon: (i) section 23(1) which so far as relevant is in the following terms:

"In the case of a leasehold estate registered with an absolute title, a disposition (including a subdemise thereof) for valuable consideration shall, when registered, be deemed to vest in the transferee or underlessee the estate transferred or created to the extent of the registered estate . . . but subject as follows:

. . .

( c ) Unless the contrary is expressed on the register, to the overriding interests, if any, affecting the estate transferred or created

(ii) section 70(1) which provides, inter alia:

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"All registered land shall, unless under the provisions of this Act the contrary is expressed on the register, be deemed to be subject to such of the following overriding interests as may be for the time being subsisting in reference thereto, and such interests shall not be treated as incumbrances within the meaning of this Act, (that is to say):

. . .

( g ) The rights of every person in actual occupation of the land or in receipt of the rents and profits thereof, save where inquiry is made of such person and the rights are not disclosed;

. . .

( i ) Rights under local land charges unless and until registered or protected on the register in the prescribed manner;

( j ) Rights of fishing and sporting, seignorial and manorial rights of all descriptions (until extinguished), and franchises;

( k ) Leases for any term or interest not exceeding twenty- one years, granted at a rent without taking a fine;. .

. "

It is to be noted that these provisions neither alter the scope or the character nor define the nature of the rights to which they apply. Rights of a limited nature remain so limited albeit a registered disposition may be subject thereto. In these circumstances I consider that the first matter to be examined in this appeal is the nature of the rights possessed by the parties.

As a result of the various transactions to which my noble and learned friend has already referred Mrs. Cann had, prior to its sale in August 1984, an equitable interest in 30, Island Road. On its sale she ceased to have any further interest in that house but acquired rights against her son George Cann in relation to the proceeds of sale. On completion of the purchase of 7, Hillview she once again acquired an equitable interest in that house. Since that interest derived from George Cann it followed that she could acquire no equitable interest in the house prior to his acquisition of an equitable interest therein on completion, nor could she acquire an interest greater than he acquired. Mr. Aylen argued that the equitable interest which Mrs. Cann took on completion had priority over the equitable interest which the society took at that time. This argument necessarily presupposed that there was a moment of time when George Cann had a right to the unincumbered leasehold estate whereby he could grant to Mrs. Cann an interest which took priority over that of the society as mortgagees. Mr. Munby countered that argument by submitting that the two transactions of purchasing 7, Hillview and borrowing money from the society must be looked at as one and that in reality George Cann never acquired more than the equity of redemption in 7, Hillview from which it followed that any equitable interest acquired by Mrs. Cann could only be carved out of this limited interest.

- 22 -

In order to consider these arguments it is necessary to look at a number of authorities. In re Connolly Brothers Ltd. (No. 2)

[1912] 2 Ch 25

. a company issued debentures creating a floating charge over all their property present and future and subject to a condition that it should not be in a position to create any other mortgage or charge in priority to the debenture. Thereafter the company bought a property after borrowing a sum of £1,000 for that purpose from a Mrs. O'Reilly. It was a condition of that loan that Mrs. O'Reilly should have a charge upon the property purchased. It was held that the company only acquired the equity of redemption in the property with the result that Mrs. O'Reilly was entitled to priority over the debenture holders. Warrington J. said, at pp. 28-29:

'It must be borne in mind that these debentures and the trust deed, so far as this after-acquired property is concerned, amount to nothing more than a contract by the company to give to the debenture holders a security upon this particular item of property by its description as appearing in the conveyance, but only on such interest as the company may in fact acquire in that and their other after-acquired property. Now, in my judgment, the company on the facts of this case never acquired as against Mrs O'Reilly any interest in this property at all, except subject to the obligation of giving to her a charge for the amount of the purchase-money which she so advanced."

In dismissing the appeal Sir Herbert Cozens-Hardy M.R. said, at p. 31:

"Did the company as between themselves and Mrs. O'Reilly ever become the absolute owners of the property? Or was not the bargain that Mrs. O'Reilly was to have a first charge, and the company was only to get the property subject thereto? In my opinion we should be shutting our eyes to the real transaction if we were to hold that the unencumbered fee simple in the property was ever in the company so that it became subject to the charge of the debenture holders."

In Coventry Permanent Economic Building Society v. Jones [1951] 1 All E.R. 901 the first defendant successfully bid for a house at auction. On the following day she agreed to let the ground floor to two tenants. Thereafter she borrowed a sum of money from the plaintiffs to enable her to complete the purchase. On the date of completion she granted a mortgage to the plaintiffs which excluded her right to grant leases. It was argued for the tenants that a tenancy by estoppel had been created before the completion of the conveyance to the first defendant and that there must be predicated a scintilla temporis between the conveyance to her and the mortgage by her into which the tenancy by estoppel could be inserted so as to precede the mortgage. In dismissing this argument Barman J. said, at p 903:

"The question is whether I must assume the scintilla temporis and assume that because of the obligations of the landlord she must be held to have defrauded her mortgagee by creating a tenancy which is good against the society

- 23 -

although it was not willing to lend the money except on the footing that she had no such right. I do not see why I need postulate this. The whole transaction was one transaction. The vendor would not sell without without receiving his purchase money, and the mortgagee would not provide the purchase money without receiving the term of years. The money, in fact, went straight - as is the universal practice - from the mortgagee to the vendor, and not until it was in the vendor's hands would a legal state be created either in favour of the landlord or of the mortgagee. It seems to me that the whole thing is one transaction in substance, and I am not constrained to introduce an artificiality so as to affect the rights of the building society. Consequently, I reject the argument that the doctrine of estoppel must have created in the tenants an estate in priority to that of the building society. The grantor of the so-called tenancy would never have acquired the estate which she did acquire but for that mortgage money, and it would not be right, therefore, to introduce a fiction in the manner suggested."

In re Connolly was followed by the Privy Council in Security Trust Co. v. Royal Bank of Canada

[1976] AC 503

. In that case the contract of sale provided for payment of part of the price in cash and the balance by a mortgage granted in favour of the vendor. After the contract but before completion the purchaser granted a debenture charging all his property present and future and providing for a fixed first charge on all his present freehold property. In a competition between the mortgagee and the debenture holder it was held that the mortgagee had priority. Delivering the advice of the Board Lord Cross of Chelsea said, at p. 518:

Their Lordships turn now to consider what were the relative priorities of this charge and the appellant's mortgage apart from any question of registration under the Registration of Records Act. As they see it the mortgage was entitled to priority. The respondent's charge was a charge on Fisher's interest under the contract and could give the respondent no greater interest than Fisher had. Fisher could not obtain a conveyance of the lands free from the obligation to grant back the mortgage to the appellant. He had no right to obtain an unencumbered fee simple and the charge on his interest which he created in favour of the respondent only gave the respondent rights which were subject to the prior rights of the appellant. The case is exactly parallel to In re Connolly Brothers Ltd. (No. 2)

[1912] 2 Ch 25

Although in that case the contract of sale required that a mortgage be granted in favour of the vendor Lord Cross obviously considered that this in no way distinguished it from In re Connolly where the obligation to grant the mortgage was not a term of the contract of sale. These three cases ail support the contentions of the society.

Mr. Aylen however relied strongly on Church of England Building Society v. Piskor

[1954] Ch. 553

where the Court of Appeal declined to treat as one individual transaction the purchase

- 24 -

of leasehold premises and the granting of a mortgage to a lender who had provided a substantial part of the purchase price. The relevant facts may be summarised as follows:

In September 1946 the defendants agreed to purchase leasehold premises having in August 1946 made application for an advance on mortgage. Having paid part of the purchase price the purchasers were allowed by the vendors to take possession. In early November they granted weekly tenancies of part of the premises. At the end of November the purchase was completed by an assignment of the lease to the purchasers and at the same time they granted a mortgage to secure the sum which had been paid by the plaintiffs direct to the vendor. The mortgage contained a recital that the borrower was the estate owner. There was evidence that if the money had not been advanced for the plaintiffs the vendors would not have delivered the assignment.

Sir Raymond Evershed M.R. said, at p. 558:

"From what I have said, it is clear that as between the mortgagors and Captain Hamilton (and I will henceforth speak of Captain Hamilton, treating him and Miss Hunnex as equivalent) there was created a tenancy by estoppel. So much is not contested, although the facts about the creation of that tenancy are somewhat vague. If, then, the mortgagors acquired a legal estate before the legal charge took effect, for however short a time, then the estoppel would, as it is said, be fed and the plaintiffs' claim must necessarily be defeated."

After commenting that the conclusion of Harman J. in Coventry Permanent Economic Building Society v. Jones "that the whole thing LwasJ one transaction in substance" might be justified on its facts he stated, at p. 561:

"at any rate in a case such as the present, the transaction, although it may fairly be said to be one in substance, still cannot be said in the eyes of the law to be one and indivisible. The claim of the plaintiffs to a title paramount rests essentially upon their having obtained a legal estate, and this they can only have done by virtue of the legal charge on which they sue; and if for some moment of time the legal estate was vested in the mortgagors and was therefore capable of being subjected by them to the charge upon which the mortgagees rely - if that is right, then it seems inevitable that the estoppel, which was involved in the tenancy created in favour of Captain Hamilton, necessarily is fed by the legal estate in the hands of the mortgagors; in other words, I am not satisfied, with all respect to Harman J., that if the language which I have read was meant to lay down a general proposition covering all cases of this kind, it was correct. It is no doubt true to say that in one sense the transaction was one transaction; but it is equally true to say that it consists necessarily of certain defined steps which must take place in a certain defined order, if the result intended is eventually to be achieved. That seems to me not an artificiality, but a necessary result of the law and of the conveyancing practice which was involved."

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Later the Master of the Rolls referred to the facts of In re Connolly and after opining that the question between Mrs. O'Reilly and the debenture holders was a question of equitable priorities said, at p. 563:

"It is true that Sir H. Cozens-Hardy M.R. in his judgment said:

'In my opinion we should be shutting our eyes to the real transaction if we were to hold that the unencumbered fee simple in the property was ever in the company so that it became subject to the charge of the debenture holders.'

But I do not think that that language, appropriate to a case of competing equities, can be used to justify the view that there is one transaction - one, that is, not only in substance but in law one and indivisible - in a case such as the present."

Romer L.J. said, at pp. 564-565:

"The mortgage of the purchased property cannot have any operation in law (whatever rights it may give rise to in equity or by estoppel) unless and until the purchaser is in a position to vest a legal term in the property, as security, in the mortgagee, and he is not and cannot be in a position to do this until he himself has acquired from the vendor the legal estate out of which the mortgage term is capable of being created. From this it follows that the execution and delivery of the conveyance (if the property is freehold) or of the assignment (in the case of a leasehold) by the vendor to the purchaser must of necessity constitute an essential preliminary to the vesting in the mortgagee of a subsidiary interest in the property. . . the fact remains that the purchasers could not have given the society the legal charge which the society required unless, at the time when the charge was executed, the purchasers were the owners of the legal interest in the property charged. That this was recognised by the society itself is sufficiently shown by the fact that there appears in the schedule to the charge the statement that the premises were then (that is to say, at the moment of the delivery of the charge) vested in the mortgagors - a circumstance of evidence upon which Danckwerts J. relied in Woolwich Equitable Building Society v. Marshall [1952] Ch. 1. I agree with Danckwerts J. that the plaintiffs, having inserted that statement in the charge, cannot very well complain if the statement is regarded as true. Even without this element, however, I should still regard the legal interest in the purchased premises as having become vested in the purchasers prior to the execution of the charge for, as I say, unless this sequence of interests is observed, the charge would have been wholly ineffective in law to achieve its immediate purpose. I agree with Mr. Alcock's submission that a composite transaction cannot be regarded as being one transaction, unless it is not only one but one and indivisible; and that two transactions, each possessing a legal individuality of its own, do not coalesce into one merely because they are dependent on each other."

Romer L.J. concluded his judgment, at p. 566, by hypothesising that after the creation of the tenancies but prior to completion of the sale the purchasers had bound themselves to give to the

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plaintiffs a charge upon the property when assigned to secure the advance in which event he considered that:

"the legal estate which passed to the purchasers, subject to the equity in favour of the plaintiffs arising from the agreement, would have sufficed to feed the estoppel in favour of the tenants. As, however, there is no evidence of such an agreement having been entered into, whether before or after the tenancies were granted, the point does not arise, and I express no concluded opinion upon it."

It must be noted that Romer L.J. expressed no views as to what would have been the position if the undertaking to the plaintiffs had preceded the grant of the tenancies. In any event feeding the estoppel in favour of the tenants would merely confer on them as against the purchasers such rights as they, the purchasers, were in a position to confer.

In Security Trust Company v. Royal Bank of Canada [1976] A.C. 503 Lord Cross sought to reconcile the decisions in In re Connolly Brothers Ltd. (No. 2)

[1912] 2 Ch 25

and Church of England Building Society v. Piskor

[1954] Ch. 553

in the following passage, at pp. 519-520:

"But Romer L.J. in distinguishing In re Connolly Brothers Ltd. (No. 2) was careful to point out (see [1954] Ch. 553, 566) that there was no evidence to show that the purchasers had prior to granting the tenancy entered into any binding contract with the plaintiff building society to grant it a morgage on completion in consideration of its advancing some of the purchase price. If there had been such an agreement then the rights of the parties might well have been different, although as the tenancy was undoubtedly subsequently clothed with the legal estate an agreement to grant a mortgage, even though made before the grant of the equitable tenancy to him, would presumably not have bound the tenant unless he had notice of it. Furthermore, the fact that the plaintiff building society had not inspected the property or inquired as to the rights of any person in occupation might also have been relevant. But the basic difference between the two lines of cases is that in cases such as In re Connolly Brothers Ltd. (No. 2) and this case the charge under the debenture only bites on property which is already fettered by the agreement to give the other charge, whereas on the facts of Church of England Building Society v. Piskor the tenancy was created out of an interest which was then unfettered by any such agreement."

I have difficulty in understanding the second sentence in the foregoing passage because just as the tenancy was subsequently clothed with the legal estate or, as Romer L.J. put it, the legal estate passing to the purchaser would have fed the estoppel in favour of the tenants, so would the mortgage in favour of the plaintiffs have been clothed with the legal estate. If the agreement to grant the mortgage preceded the granting of the tenancy then I should have thought that when both equitable interests were clothed with the legal estate the prior equitable interest would prevail.

- 27 -

Both Sir Raymond Evershed M.R. and Romer L.J. treated Piskor as a case involving legal interests alone and on this basis the Master of the Rolls was able to distinguish In re Connolly. Furthermore the court appeared to proceed upon the basis that the only interest of the mortgagees which required to be considered was that which they acquired by virtue of the execution of the charge in their favour after the legal estate had vested in the purchaser. This, in my view was to ignore the interest which they must have acquired when they handed over the purchase price to enable completion to take place. It would be quite unrealistic to assume that the money was made available unconditionally and that only at or immediately after the moment of completion did the question of the execution of a charge in their favour arise.

In Lloyds Bank Plc v. Rosset

[1989] Ch 350

, 389 Mustill L.J. carefully analysed the three decisions in In re Connolly, Piskor and the Security Trust Co. case and confessed to finding it hard to see how they could stand together. I share his difficulty. It would have been possible for the Privy Council in the Security Trust Co. case to have distinguished that case from In re Connolly on the basis that in terms of the contract of sale the purchaser could never acquire from the vendor more than the equity of redemption. In the event Lord Cross drew no distinction between the two case and sought instead to distinguish Piskor. In each of the three cases the purchaser was dependent upon the loan.

It is of course correct as a matter of strict legal analysis that a purchaser of property cannot grant a mortgage over it until the legal estate has vested in him. The question however is whether having borrowed money in order to complete the purchase against an undertaking to grant security for the loan over the property the purchaser is, for a moment of time, in a position to deal with the legal estate as though the mortgagee had no interest therein. In re Connolly, Coventry Permanent Economic Building Society v. Jones [19195] 1 All E.R. 901 and the Security Trust Co . case say that he is not in such a position recognising, in my view, the realities of the situation. Piskor say that he is, thereby ignoring any interest which the mortgagee may have prior to completion of the purchase. Nevertheless in each of the four cases the purchase was dependent upon the loan and I find it impossible to see any material distinction between the circumstances obtaining in the three former cases and those obtaining in Piskor. In my view a purchaser who can only complete the transaction by borrowing money for the security of which he is contractually bound to grant a mortgage to the lender eo instante with the execution of the conveyance in his favour cannot in reality ever be said to have acquired even for a scintilla temporis the unencumbered fee simple or leasehold interest in land whereby he could grant interests having priority over the mortgage or the estoppel in favour of prior grantees could be fed with similar results. Since no one can grant what he does not have it follows that such a purchaser could never grant an interest which was not subject to the limitations on his own interest. In so far as Piskor decided that such a purchaser could be vested for a moment of time in the unencumbered freehold or leasehold estate with the consequences to which I have just referred, I consider that it was wrongly decided. Conversely I consider that the decision of Harman J. in the Coventry Permanent Economic Building Society case was correct.

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I would only add a further word about Piskor in relation to the recital in the mortgage that the property "is now vested in the mortgagors free from incumbrances for the unexpired residue of the term". Romer L.J., at p. 565, considered this to be a matter of some importance and referred to a dictum of Danckwerts J. in Woolwich Equitable Building Society v. Marshall

[1952] Ch. 1

where

the judge said, at p. 9:

"It seems to me that a mortgagee, who has inserted in the deed under which he acquires title a statement that the mortgagor is 'the estate owner in respect of the property' which is being mortgaged or charged to the morgagee, cannot object if that statement is taken to be true. Therefore, it seems to me that the irresistible inference is that I must assume that to be the position, even if the transfer by the vendors to the purchaser bore the same date as the charge. In fact, the trasfer must have been executed at a time earlier than that at which the charge to the society was executed; so that there was a time in which it would be correct to say that the mortgagor had become the estate owner, i.e., the legal owner of the fee simple of the property subsequently charged by him to the society to secure the amount of his loan."

My Lords I think that Romer L.J. and Danckwerts J. read too much into these recitals. In my view they amount to no more than an acknowledgment by the mortgagor that he is the person who is able to grant a valid legal charge over the property in question.

In the present case George Cann borrowed money from society in order to complete the purchase of 7, Hillview and in return granted to them a mortgage. The mortgage was executed by George Cann prior to 13 August 1984 when the purchase was completed. It follows that as a matter of reality George Cann was never vested in the unencumbered leasehold and was therefore never in a position to grant to Mrs. Cann an interest in 7, Hillview which prevailed over that of the society. The interests that Mrs. Cann took in 7, Hillview could only be carved out of George Cann's equity of redemption. In reaching this conclusion it is unnecessary to consider whether or not Mrs. Cann was aware that George Cann would require to borrow money in order to finance the purchase of 7, Hillview.

That is sufficient for the disposal of this appeal but in deference to the able arguments addressed to your Lordships on the relevant date for the determination of the subsistence of an overriding interest for the purposes of section 23(1)( b ) and section 70(1)( g ) of the Act of 1925, and in view of the general importance of this question I propose to say a few words thereanent. I should at the outset explain that I am in entire agreement with the analysis and reasoning of my noble and learned friend Lord Oliver of Aylmerton on this matter and that anything that I may say must be treated as merely supplementary thereto.

Mrs. Cann claimed to have an overriding interest in 7, Hillview by virtue of(1) her notional contribution to the purchase of 48, Warren Road,

(2) George Cann's undertaking that she would always have a roof over her head and

(3) her occupation of the

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premises on the date of the conveyance to George or in any event on the date of registration of George Cann's title to the premises. Mrs. Cann's primary submission was that the tempus inspiciendum for the ascertainment of her overriding interest was the date of registration whereas the society submitted that it was the date of completion of the relevant transaction. The point is almost devoid of authority and until the recent case of Lloyds Bank Plc v. Rosset

[1989] Ch 350

had been considered only once in the county court case of Paddington Building Society v. Mendelsohn, 50 P & C.R. 244 in which Judge McCarraher in the Bristol county court held that actual occupation at the date of the mortgage was necessary to found an overriding interest. On appeal to a court of two judges the decision of the trial judge was upheld on another ground, Browne-Wilkinson L.J. observing that it was undesirable for a two-judge court to adjudicate upon so important a point if the appeal could be otherwise disposed of. It is true that in In re Boyle's Claim [1961] 1 W.L.R. 339 Wilberforce J . expressed the view that the relevant date was that of registration. However the issue in that case was whether a claimant was entitled to compensation for rectification of the register by the removal from his title of land belonging to a neighbour, the land being subject to overriding interests. The issue was thus far removed from that which is raised in this appeal and the present point does not appear to have been argued.

In Rosset the trial judge faced with the obvious conveyancing absurdity of construing section 70(1)( g ) in a way which could give to someone moving into occupation after completion of a transfer or mortgage an interest taking effect in priority to the completed transaction essayed a construction of section 20(l)( b ) which avoided this. He concluded (see

[1989] Ch. 350

, 371) that section 20(1)( b ) fell to be construed as though it read "subject . . . ( b ) . . ." to the overriding interests, if any, affecting the estate transferred or created at the time it is transferred or created." Thus only those overriding interests which subsisted at the date of completion would be effective against the transferee or mortgagee, any interests coming into existence between completion and registration being ineffective. The Court of Appeal saw difficulties in the judge's construction of section 20(l)( b ) and approached the problem in a rather different way. Nicholls L.J., considered at p. 372, that the natural construction of section 20(1) was that both paragraphs ( a ) and ( b ) focused on the position at the time of registration, although He recognised the conveyancing absurdity to which I have already referred. However he felt unable to accept the conclusion of the trial judge because that would result in the transferee or mortgagee taking "free from all overriding interests, whatever their nature, which came into being after the execution of the transfer or mortgage ..." (p. 373). He went on to say

"I am not persuaded that section 20(1)( b ) was intended to have the effect that a purchaser or a mortgagee should take free from local land charges coming into being after execution of the transfer or mortgage."

He said, at p. 374:

"Consistently with conveyancing sense and the underlying conveyancing principle which is being carried forward into

- 30 -

paragraph ( g ), it seems to me that paragraph ( g ) is concerned with persons who are in actual occupation of the land at the time when the estate or interest which is said to be subject to the rights of the occupant was created. For example, on completion of a purchase or a mortgage in the usual way. This is so despite the need for a further step to be taken (registration) before the legal estate will be acquired by the purchaser or mortgagee. In line with this is the exception provided for in paragraph ( g ). Explicitly, the rights of an occupant are not protected if enquiry is made of him and the rights are not disclosed. That exception, implicitly, contemplates an inquiry by or on behalf of the person whose estate or interest is said to be subject to the rights of the occupant and, again implicitly, an inquiry made before he acquired his estate or interest. Otherwise the provision makes no sort of sense. If this is right, the pieces of the jigsaw fit together reasonably well. A purchaser or mortgagee inspects and inquires before completion, in the established fashion. Or he fails to do so, at his own risk. He then completes the transaction, taking an executed transfer or mortgage. Whether or not an overriding interest under paragraph ( g ) subsists so far as his freehold or mortgage is concerned falls to be determined at that moment. If an overriding interest does subsist, then his estate when registered takes subject to that interest. If it does not, then subsequent entry of a person into occupation before the transfer or mortgage has been registered, and "completed" for the purposes of section 19, does not have the consequence of creating an overriding interest under paragraph ( g ) in relation to that freehold or mortgage."

If I understand Nicholls L.J. correctly he is there saying that one must look at the date of execution of the mortgage to see whether an overriding interest of the type described in section 70(1)(g) subsists and is protected by occupation and that if such interest still subsists at the date of registration it will fall within the ambit of section 20(l)( b ). By this line of reasoning he was able to avoid the conveyancing absurdity to which he earlier referred and also the problem of post-completion land charges.

My Lords I have sympathy with the courts below in their quest for the true meaning of section 20(1)( b ). I agree with Nicholls L.J. that it is implicit in section 70(l)( g ) that the inquiry as to actual occupation is one which is capable of being made before completion of the mortgage or other transfer. Inquiry about occupation which commenced after completion would be futile because by then the transferee or mortgagee would be committed and the die cast. However whichever of the two constructions of section 20(1)( b ) referred to in Rosset is correct there will be anomalies. Nicholls L.J.'s approach to section 70(1)( g ) does not avoid the problem of the transferor of land creating overriding interests under section 70(1)( j ) and ( k ) between the date of completion of a mortgage and the registration thereof by granting sporting rights or leases for less than 21 years. Conversely it would be an odd result if a land charge resulting from the listing of a building of special architectural interest or from the incurring of expense of a highway authority should not bind the transferee or mortgagee.

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During the course of argument I was attracted by Mr. Munby's submissions that section 15(1) of the Land Charges Act 1925 provided an answer to Nicholls L.J's difficulty. The whole of that Act was repealed by the Local Land Charges Act 1975 but that does not affect the matter as Nicholls L.J. was considering the position as at the time when the Land Registration Act 1925 was enacted. In terms of that subsection a local land charge is

"void as against a purchaser for money or money's worth of a legal estate in the land affected thereby, unless registered in a appropriate register before the completion of the purchase."

"Purchaser" is defined to include a mortgagee or lessee. Thus, it was argued, a local land charge created prior to the execution of a mortgage but not registered in the appropriate register until a later date would have been void as against a mortgagee. That being the position it might be thought to follow that a local land charge arising between the creation and registration of a mortgage would also have been void under section 15(1) against the mortgagee and could not therefore be an overriding interest within the meaning of section 70(1)(i). Thus the problem which concerned Nicholls L.5. could never arise. However on further consideration I have come to the conclusion that the submission is unsound.

Under the 1925 legislation a local land charge was capable of registration in two different registers, namely, the appropriate local register under the Land Charges Act 1925 and the Land Registry under the Land Registration Act 1925. Registration in the local register was required for the purposes of section 15 and such registration by virtue of section 198 of the Law of Property Act 1925 constituted actual notice of the charge to all persons for all relevant purposes. Registration in the Land Registry was required before a local land charge affecting registered land could be realised. Subject to the foregoing provisions a local land charge was good against the owner of land for the time being. Section 15 was dealing with a situation where the local land charge had been created prior to the completion of sale or mortgage. In the case of registered land completion of the purchase or mortgage of the legal estate could only take place on registration of the relevant disposition (section 20(1) of the Land Registration Act 1925). Accordingly a local land charge created before or after execution of a disposition of registered land but registered in the local register before registration of the disposition in the Land Registry would not have been void under section 15 and could thus constitute an overriding interest under section 70(1)( i ) of the Land Registration Act 1925 if registration under that act were the relevant date.

It therefore follows that section 15(1) of the Land Charges Act 1925 does not resolve the problems which concerned Nicholls L.J. and I am satisfied that it cannot have been the intention of the legislature that local land charges imposed on registered land between the execution and registration of a disposition should be ineffective against the disponee. It may well be that charges of a non-financial nature such as listing of a building could be reimposed on the land after registration of the disposition but this could not happen in the case of a financial charge which had once arisen. I therefore conclude that Nicholls L.J. was correct (1) in

- 32 -

taking the date of registration as the relevant date for determining the existence of overriding interests which will effect the estate transferred or created for the purposes of sections 20(1)( b ) and 23(1)( c ) and (2) in his approach to the construction of section 70(1)( g ). "I do not feel that I can usefully add anything further to what has already been said on this matter by my noble and learned friend Lord Oliver of Aylmerton.

For the foregoing reasons I would dismiss the appeal.

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Cited in 1 later judgment

Pezaro & Anor v Bourne & Anor 2019