Essay: Overriding interests and the definition of actual occupation

The Land Registration Act 2002 provided a specific rule that certain interest are capable of overriding a registered disposition . The purchaser of the land for value is bound by these interest, even if he does not know of the existence, so long as the claimant has rights to the interest.
Overriding interest occurs when it is not capable of registration either because it have not been previously included in land deeds, the beneficiary of the interest is ignorant of them, or are impossible for the LRA to register every single one. For this reason it has been said overriding interest are a crack in the mirror principle of the Land Registry.
For a beneficiary to have overriding status, his interest must be proprietary , in Caswell it was held that it cannot be a mere personal right, such as a licence. From the case of Flegg the court clarified that a right could not be overriding if it has been overreached. The claimant of the overriding interest must be in actual occupation of the property.
Denning MR in Caswell held that the objective of protecting overriding interest by actual occupation is protection on a person from having his rights lost in the depth of registration. Although the occupation is mentioned in the 2002 Act, the meaning has not been statutorily defined. The Law Commission labelled actual occupation as notorious and much litigated. But the definition of actual occupation are best looked from case law, as Riddall quote that it is important when examining land law and how it looked in the past contrasting with the law in present state. Mummery LJ in Bustard, proposes there is no definitive test for actual occupation and he is probably correct to assume that courts have been reluctant to lay down either for a clear judicial test for actual occupation.
Denning MR in Boland suggest that actual occupation is a matter of fact and Lord Wilberforce concurs this that it needs interpreting using it’s the ordinary plain English meaning. Further this was expanded by Russell LJ from judgement in Hodgson, that the definition of actual occupation by expanding “apparent occupation” to its meaning.
This loosely ‘literal approach’ to statutory interpretation can, perhaps, be viewed as a policy decision. Denning MR, speaking in 1980, made no secret that his interpretation of actual occupation in the Court of Appeal “did a lot for the deserved wife.” Similarly, 36 Hodgson’s case involved dishonesty, and the tactics of the bank in Boland were far 37 38 from honourable. It is submitted that this ‘absolutist’ approach, in which it does not matter if it is “unreasonably difficult to ascertain the actual occupier,” provided a Denning-esque 39 equitable solution for the facts before the court. 40 The absolutist test for actual occupation is particularly important when decisions such, as Bird, are considered. In this judgment, Templeman J (as he then was) followed 41 the reasoning in the 1969 judgment of Caunce, in which Stamp J (as he then was) drew 42 the ratio that wives were a mere shadow of the husband’s occupation, so could not claim actual occupation, notwithstanding occupying the property. By the 1970s such “disturbing” beliefs became both politically, and judicially, unacceptable. Interestingly, 43 44 by Robinson it is still said that a minor child cannot be in actual occupation. However, the 45 reasoning for this appears to be the inability to make an effective enquiry into their potential rights or interests, at least in the case of “very young children.”
Historically, women could be left “very financially vulnerable” with regards to 47 property interests by the rule in Caunce. Women’s liberation led to a “rapid 48 development” of the constructive trust in relation to land, and this was reflected in the 49 judicial interpretation of actual occupation. It is submitted that women relied on an absolutist approach to actual occupation, advocated by Lord Wilberforce and Denning MR, to remedy such vulnerabilities. Both academics, and later iterations of the House of Lords, however, acknowledged that the absolutist approach was “simplistic” and “uncompromising.” In Cann, Lord 50 51 52 Oliver criticised the ‘ordinary meaning’ test, pointing out that even plain English contained “a variety of shade of meaning.” It is submitted that––notwithstanding the House of Lords 53 absolutist position––by the 1980s and, early 1990s, the Court of Appeal was advocating, what Hayton would term, a “constitutionalist view” of actual occupation
This is best illustrated in Rosset. In this authority, Purchas LJ qualifies the “was 55 she in actual occupation” test with a limiting condition: “would appropriate inquiries made 56 by the bank have elicited the fact of her interest?” However, this case aptly illustrates the 57 differing position of the Court of Appeal and the House of Lords as it was held on appeal 58 that Mrs Rosset did not have an overriding interest in the property, making the actual occupation element “academic.” 59 Writing in 1989, Sparkes suggested that the rule in Rosset, created a “notice 60 test.” He goes on to state this is reconcilable to Boland’s “plain English” test, in that 61 62 63 they were intended to be applied in differing circumstances, although he gives no further details.
Although Sparkes craved a resolving case on the matter, McFarlane points out 64 that no such “decision was forthcoming” before the 2002 Act introduced a statutory 65 “reasonable inspection” test. It is, tentatively, submitted that this gave judges some 66 “breathing space” to both expand and adjust the tests for actual occupation. It cannot be 67 said, however, that the new statute ‘reset’ the test for actual occupation, even though the 2002 Act removed certain interests which could be fixed by actual occupation. 68 However, notwithstanding McFarlane’s premise that the test for actual occupation was somehow ‘tied up’ between Rosset and the 2002 Act, it is submitted that this is a 69 rather simplistic approach. Judges during this time were willing to move away from the absolutist view in the interests of justice. It was said in Cann that the “nature and purpose” of the occupation 70 71 should be carefully examined. This was echoed five years later by Robert Walker J in Garden Holdings in which he suggested that actual occupation is a “matter of 72 perception.” Additionally, in the pre-2002 Act authority of Chhokar, the personal 73 74 circumstances of the parties were examined in depth by the court.
Chhokar’s case however, presents an interesting opinion. The court appears to 75 have interpolated a ‘reasonable expectation’ test as “intention to return to the property could be viewed as a virtual certainty.” Although this more liberalised judicial view came 76 to the fore, earlier, in Kling, it is submitted judges have been more willing to apply it 77 recently. Chhokar and Hoggett show the courts have been more inclined, not only to 78 79 look at the length of the absence but, as Grey puts it, “the reason for it.” 80 In Chhokar the presence of the claimant’s personal possessions combined with 81 her ever-present intention of returning was sufficient to prove actual occupation. This is a sea-change from the 1965 opinion of Russel LJ, who held that a claim for actual occupation could not be founded in the mere fact the claimant’s furniture was left in the property, or that he possessed a key. 82 The above, it is submitted, illustrates a “‘hybrid’ objective-subjective” test, perhaps 83 more suited to the modern world.
It is clear, however, that the courts have been keen to stem equity running wild in favour of the right holder claiming an overriding interest based on actual occupation. In Garden Holdings the court held a mere “fleeting presence” cannot be said to be actual 84 85 occupation. In 1999, the Chancery Division upheld this line of thought in Mahta. Similarly, 86 it was said in Celsteel, and by the Law Commission, that user of an easement cannot 87 88 claim the overriding interest by actual occupation, as such a presence is merely fleeting and an easement is of a “none possessory character,” at least based upon on the “cryptic 89 wording” of the 1925 Act. 90 Although restraining an alleged tax exile and a princess who has not “set foot” in 91 92 the property for over a year from claiming the protection of actual occupation can, perhaps, be seen as an equitable counterbalance to decisions such as Boland, rather than 93 protecting a lender’s rights. Garden Holdings (n 72). 84 Grey (n 23), 8.2.88.
85 Nightingale Mayfair Ltd v Mehta (unreported, Chancery Division, 21 December 1999).
86 Celsteel v Alton House Holdings Ltd [1985] 1 WLR 204, 219 A (Scott J), it was affirmed in Holaw
87 (470) Ltd v Stockton Estates Ltd (2001) 81 P & CR 404, 424 (Neuberger J). Law Commission Report No 158, Third Report on Land Registration (A) Overreaching Interests;
88 (B) Rectification and Indemnity; (C) Minor Interests (1987), 2.57. MP Thompson, ‘Equitable Easements in Registered Land’ [1986] Conv 31, 36 but cf the view in
89 Edward Hector Burn and John Cartwright, Cheshire and Burn’s Modern Law of Real Property (18th edn, OUP 2011), 619. MP Thompson, ‘Equitable Easements in Registered Land’ [1986] Conv 31, 31.
90 Mehta (n 86). 91 Grey (n 23), 8.2.88. 92 Boland (n 30). 939
By Cann however, Lord Oliver is keen to protect the acquisition mortgagor from 94 being ‘trumped’ by a right based on actual occupation. In this decision, it was said that moving in furniture into the property half an hour before completion could not supersede the acquisition mortgagor’s rights –– they were preparatory acts before taking up actual occupation. 95 Boland and Cann, perhaps, show most clearly the “battle” fought “at the heart of 96 97 English land law.” On the one hand, a protection of the vulnerable, and, on the other, the 98 principle that the lender expected to be repaid. Denning MR, speaking in the Court of 99 Appeal, claimed that money should not be given priority over “social justice.” In contrast, 100 Robert Raid, counsel for the bank in Boland, claimed the decision was “the furthest 101 extension […] of the Nanny State.” The judiciary did not share his view, Hailsham LC 102 pointing out the world “did not come to an end” because of Boland. Scott VC, in 103 104 Zaroovabli, was keen to highlight that “the Cassandra-like prophecies of disaster” 105 predicted by Reid and others were unfounded. 106 Cann (n 52).
94 ibid, 93 D (Lord Oliver).
95 Boland (n 30).
96 Cann (n 52).
97 Grey (n 23), 8.2.97.
98 ibid, 8.2.101.
99 Boland (n 30), 333 (Denning MR).
100 Boland (n 30).
101 Williams & Glyn’s Bank Ltd, Williams & Glyn’s Bank Ltd v Boland –– A Report of a Conference
102 on the Problems of Conflict of Interest in the Matrimonial Home (1st edn, Grower 1981), 26. Parliamentary Debates, House of Lords Official Report, Vol 437 (Session 1982––1983) Col 662
103 (15 December 1982). Boland (n 30).
104 Barclays Bank plc v Zaroovabli [1997] Ch 321, 330 B (Scott VC).
105 Williams & Glyn’s Bank Ltd (n 102), see also The Times, 24 June 1980 (letter from Derek
106 Wheatley, Legal Advisor, Lloyds Bank).
However, between Boland and Cann there has, certainly, been a change in 107 108 societal and judicial attitudes to the position of lenders. The 1980s saw an almost “overwhelming commercialist ethos” prevailing, which, it is submitted, led to a period of 109 readjustment in judicial thinking. 110 The curtailment of Boland has not, as may first appear, been simply the exclusion 111 of acquisition mortgages and trusts involving a minor, from being overridden, 112 113 discussed above, but a prevalence for the lender to mount an attack on the beneficial interest protected by actual occupation itself. This type of assault was fatal to Rosset’s appeal, and, it seems to have gained judicial acceptance through a string of cases in the 114 1980s and 1990s, especially in insolvency law. 115 Boland (n 30).
107 Cann (n 52).
108 Grey (n 23), 8.2.104.
109 Kevin Grey and Susan Francis Grey, ‘The Rhetoric of Realty’ in J Getzler (ed) Rationalising
110 Property, Equity and Trusts: Essays in Honour of Edward Burn (1st edn, Butterworths 2003), 250–– 253. Boland (n 30).
111 Cann (n 52) see also Church of England Building Society v Piskor [1954] Ch 553, 564––565
112 (Evershead MR). Robinson (n 45).
113 Rosset (n 58), 134 A––B (Lord Bridge),
114 Knightley v Sun Life Assurance Society Ltd (1981) The Times, 23 July; Midland Bank plc v
115 Dobson [1986] 1 FLR 171, 174 D (Fox LJ); Buggs v Buggs [2003] EWHC 1538 (Ch), [19] (Nicholas Davison J).
With the requirement of express consent from putative beneficiaries, which neutralises potential future claims, generality enacted through the Law Society’s 116 proprietary information form, and the suggestion in Kemmis that an estoppel may be 117 118 claimed by an implied waiver of rights, suggests further erosion of Boland. 119 120 The question must now be posed: Has Boland been completely eroded in favour 121 of the lender? In the 2015 case of Genis it was said that not making an order for sale would 122 create a legal “unjustifiable anomaly,” notwithstanding facts similar to Boland, a ratio 123 124 criticised by Dixon, as the judgment effectively reversed the priority of rights in land. In 125 the “unhappy” result in Scott ––a decision in the wake of the notorious North East 126 127 Property Buyers scandal––the Supreme Court upheld Cann. As a result, it is clear that 128 Cann now applies to the 2002 Act. 129 130 Grey (n 23), 8.2.106.
116 UBC Bank plc v Beasley and France [1995] NCP 144, (Morritt LJ).
117 Kemmis v Kemmis [1988] 1 WLR 1307.
118 ibid, 1335 A––B (Nourse LJ).
119 Boland (n 30).
120 ibid.
121 Fred Perry (Holdings) Ltd v Genis [2015] 1 P&CR DG5.
122 Genis (n 122), DG12 (Price J).
123 Boland (n 30).
124 J M Dixon ‘Trusts of Land and Orders for Sale’ 73 SLR [2014], 46, 46.
125 J M Dixon ‘A Pair of Turtle Doves in the Supreme Court’ 74 SLR [2015], 44, 44.
126 Scott v Southern Pacific Mortgages plc [2014] UKSC 52.
127 Cann (n 52).
128 ibid.
129 Dixon (n 126), 44.
130 Given the judicial battle concerning actual occupation, Mummery LJ is, perhaps, correct in saying no clear judicial test exists. It is submitted that, notwithstanding the judgment in Scott, there appears to be an equitable vane still running through the
131 judicial interpretation of overriding interests evidenced by actual occupation. It is submitted that, in Bustard, Mummery LJ is exercising an quasi-equitable
132 jurisdiction to help a right holder who “would have had no clue as to what is going on.” It 133 is submitted, therefore, that the lack of a defined judicial test is a blessing. The varied decisions, analysed above, create an equitable skeleton upon which to hang facts of every hue. It is clear that the thinking of Lord Denning is not dead. Scott (n 127).
131 Bustard (n 28).
132 Email from Dr Sean David Henderson MB ChB to author (27 October 2015).
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It 133 is submitted, therefore, that the lack of a defined judicial test is a blessing. The varied decisions, analysed above, create an equitable skeleton upon which to hang facts of every hue. It is clear that the thinking of Lord Denning is not dead.