JUDGMENT
LORD BRIDGE OF HARWICH. My Lords, I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Templeman and Lord Oliver of Aylmerton. I agree with them and for the reasons they give I would allow the appeal and restore the order of Judge Thomas.
LORD TEMPLEMAN.
My Lords, the appellants, City of London Building Society, are the mortgagees under a charge by way of legal mortgage of registered land held at the date of the charge by two trustees upon trust for sale and to stand possessed of the net proceeds of sale and rents and profits until sale upon trust for four tenants in common including the respondents, Mr. and Mrs. Flegg. The legal charge was entered into by the trustees in breach of trust, although the appellants were unaware of this. The respondents who were in actual occupation of the mortgaged land claim that the appellants' legal charge is subject to the respondents' overriding interest. The Court of Appeal declined to order the respondents to deliver up possession of the land to the appellants; hence this appeal.
By a conveyance dated 18 October 1977 the land appropriately named Bleak House was conveyed to Mr. and Mrs. Maxwell-Brown in fee simple upon trust for sale and to stand possessed of the net proceeds of sale and rents and profits until sale upon trust for the Maxwell-Browns as joint tenants. In fact, the purchase price paid by the Maxwell-Browns for Bleak House, amounting to £34000, had been provided as to £18000 or more by the respondents who were the parents of Mrs. Maxwell-Brown. In consequence and notwithstanding the express trusts set out in the conveyance, Bleak House was held by the Maxwell-Browns on trust for sale and to stand possessed of the net proceeds of sale and rents and profits until sale upon trust for the Maxwell-Browns and the respondents as tenants in common in the proportions in which they had respectively contributed to the purchase price. The respondents were entitled to occupy Bleak House together with the Maxwell-Browns as tenants in common under the trust for sale and all four beneficiaries duly went into occupation.
By a legal charge by way of mortgage dated 8 January 1982 the Maxwell-Browns charged Bleak House to secure £37500 advanced by the appellants to the Maxwell-Browns. The respondents knew nothing of the legal charge which was granted by the Maxwell-Browns for their own purposes and in breach of trust. The appellants knew nothing of the respondents.
By section 27 of the Law of Property Act 1925 (as amended by the Law of Property (Amendment) Act 1926, Schedule):
"(1) A purchaser of a legal estate from trustees for sale shall not be concerned with the trusts affecting the proceeds of sale of land subject to a trust for sale... or affecting the rents and profits of the land until sale... (2) Notwithstanding anything to the contrary in the instrument (if any) creating a trust for sale of land or in the settlement of the net proceeds, the proceeds of sale or other capital money shall not be paid to or applied by the direction of fewer than two persons as trustees for sale, except where the trustee is a trust corporation..."
By section 205 of the Act of 1925 the expression "purchaser" as used in sections 27 and 28 includes a chargee by way of legal mortgage andthe sum of £37500 advanced by the appellants to the Maxwell-Browns was capital money within the meaning of section 27(2) and was duly paid to two persons as trustees for sale. By section 28(1) of the Law of Property Act 1925, read in conjunction with section 71 of the Settled Land Act 1925, trustees for sale of land have powers to mortgage the land and:
"all capital money arising under the said powers shall, unless paid or applied for any purpose authorised by the Settled Land Act 1925, be applicable in the same manner as if the money represented proceeds of sale arising under the trust for sale."
Section 17 of the Trustee Act 1925 provides:
"No purchaser or mortgagee, paying or advancing money on a sale or mortgage purporting to be made under any trust or power vested in trustees, shall be concerned to see that such money is wanted, or that no more than is wanted is raised, or otherwise as to the application thereof."
Thus the appellants advancing money in good faith to two trustees for sale on the security of a charge by way of legal mortgage of Bleak House were not concerned with the trusts affecting the proceeds of sale of Bleak House or with the propriety of the trustees entering into the legal charge. As a result of the legal charge the interests of the beneficiaries in Bleak House pending sale were transferred to the equity of redemption vested in the Maxwell-Browns and to the sum of £37500 received by the Maxwell-Browns from the appellants in consideration for the grant of the legal charge. The Maxwell-Browns did not account to the respondents for any part of the sum of £37500 and defaulted in the performance of their obligations to the appellants under the legal charge. The appellants seek possession of Bleak House with a view to enforcing its security.
The respondents resist the claim of the appellants to possession of Bleak House and rely on section 14 of the Law of Property Act 1925. Sections 27 and 28 of that Act which overreach the interests of the respondents under the trust for sale of Bleak House are to be found in Part I of the Act. Section 14 provides:
"This Part of this Act shall not prejudicially affect the interest of any person in possession or in actual occupation of land to which he may be entitled in right of such possession or occupation."
The respondents were in actual occupation of Bleak House at the date of the legal charge. It is argued that their beneficial interests under the trust for sale were not overreached by the legal charge or that the respondents were entitled to remain in occupation after the legal charge and against the appellants despite the overreaching of their interests.
My Lords, the respondents were entitled to occupy Bleak House by virtue of their beneficial interests in Bleak House and its rents and profits pending the execution of the trust for sale. Their beneficial interests were overreached by the legal charge and were transferred to the equity of redemption held by the Maxwell-Browns and to the sum advanced by the appellants in consideration of the grant of the legal charge and received by the Maxwell-Browns. After the legal charge the respondents were only entitled to continue in occupation of Bleak House by virtue of their beneficial interests in the equity of redemption of Bleak House and that equity of redemption is subject to the right of the appellants as mortgagee to take possession. Sections 27 and 28 did not "prejudicially" affect the interests of the respondents who were indeed prejudiced but by the subsequent failure of the trustees for sale to account to their beneficiaries for capital money received by the trustees. A beneficiary who is entitled to share in the proceeds of sale of land held on trust for sale relies on the trustees. Section 26(3) of the Act (as amended) requires trustees for sale to consult their beneficiaries and to give effect to the wishes of the majority of the beneficiaries "but a purchaser shall not be concerned to see that the provisions of this subsection have been complied with." If the argument for the respondents is correct, a purchaser from trustees for sale must ensure that a beneficiary in actual occupation is not only consulted but consents to the sale. Section 14 of the Law of Property Act 1925 is not apt to confer on a tenant in common of land held on trust for sale, who happens to be in occupation, rights which are different from and superior to the rights of tenants in common, who are not in occupation on the date when the interests of all tenants in common are overreached by a sale or mortgage by trustees for sale.
The Maxwell-Browns registered their title to Bleak House under the Land Registration Act 1925 with title absolute for a legal estate in fee simple in possession. They continued to hold Bleak House on trust for sale and to stand possessed of the net proceeds of sale and rents and profits until sale upon trust for the Maxwell-Browns and the respondents as tenants in common. By section 74:
"neither the registrar nor any person dealing with a registered estate or charge shall be affected with notice of a trust express implied or constructive, and references to trusts shall, so far as possible, be excluded from the register."
By sections 2 and 18 proprietors of registered land may dispose of the land by transfer or by the creation of a legal estate including the grant of a legal charge by way of mortgage. Section 20(1) provides:
"(1) 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... 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... and the disposition shall operate in like manner as if the registered transferor or grantor were (subject to any entry to the contrary in the register) entitled to the registered land in fee simple in possession for his own benefit."
Amongst the "other estates and interests" which do not affect the legal estate transferred or created are "minor interests" defined by section 3 (xv) as:
"the interests not capable of being disposed of or created by registered dispositions and capable of being overridden (whether or not a purchaser has notice thereof) by the proprietors unless protected as provided by this Act, and all rights and interests which are not registered or protected on the register and are not overriding interests, and include - (a) in the case of land held on trust for sale, all interests and powers which are under the Law of Property Act 1925 capable of being overridden by the trustees for sale, whether or not such interests and powers are so protected;..."
It follows that when the legal charge in the present case is registered, the appellants will take free from all the interests of the beneficiaries interested under the trust for sale in the proceeds of sale and rents and profits until sale of Bleak House but subject to any overriding interest.
Section 70(1) of the Land Registration Act 1925 defines overriding interests which include:
"(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;..."
In my view the object of section 70 was to reproduce for registered land the same limitations as section 14 of the Law of Property Act 1925 produced for land whether registered or unregistered. The respondents claim to be entitled to overriding interests because they were in actual occupation of Bleak House on the date of the legal charge. But the interests of the respondents cannot at one and the same time be overreached and overridden and at the same time be overriding interests. The appellants cannot at one and the same time take free from all the interests of the respondents yet at the same time be subject to some of those interests. The right of the respondents to be and remain in actual occupation of Bleak House ceased when the respondents' interests were overreached by the legal charge save in so far as their rights were transferred to the equity of redemption. As persons interested under the trust for sale the respondents had no right to possession as against the appellants and the fact that the respondents were in actual occupation at the date of the legal charge did not create a new right or transfer an old right so as to make the right enforceable against the appellants.
One of the main objects of the legislation of 1925 was to effect a compromise between on the one hand the interests of the public in securing that land held in trust is freely marketable and, on the other hand, the interests of the beneficiaries in preserving their rights under the trusts. By the Settled Land Act 1925 a tenant for life may convey the settled land discharged from all the trusts powers and provisions of the settlement. By the Law of Property Act 1925 trustees for sale may convey land held on trust for sale discharged from the trusts affecting the proceeds of sale and rents and profits until sale. Under both forms of trust the protection and the only protection of the beneficiaries is that capital money must be paid to at least two trustees or a trust corporation. Section 14 of the Law of Property Act 1925 and section 70 of the Land Registration Act 1925 cannot have been intended to frustrate this compromise and to subject the purchaser to some beneficial interests but not others depending on the waywardness of actual occupation. The Court of Appeal took a different view, largely in reliance on the decision of this House in Williams & Glyn's Bank Ltd. v. Boland [1981] AC 487. In that case the sole proprietor of registered land held the land as sole trustee upon trust for sale and to stand possessed of the net proceeds of sale and rents and profits until sale upon trust for himself and his wife as tenants in common. This House held that the wife's beneficial interest coupled with actual possession by her constituted an overriding interest and that a mortgagee from the husband, despite the concluding words of section 20(1), took subject to the wife's overriding interest. But in that case the interest of the wife was not overreached or overridden because the mortgagee advanced capital moneys to a sole trustee. If the wife's interest had been overreached by the mortgagee advancing capital moneys to two trustees there would have been nothing to justify the wife in remaining in occupation as against the mortgagee. There must be a combination of an interest which justifies continuing occupation plus actual occupation to constitute an overriding interest. Actual occupation is not an interest in itself.
For these reasons and for the reasons to be given by my noble and learned friend, Lord Oliver of Aylmerton, I would allow this appeal and restore the order of Judge Thomas who ordered the respondents to deliver up Bleak House to the appellants.
LORD MACKAY OF CLASHFERN.
My Lords, I have had the privilege of reading in draft the speeches prepared by my noble and learned friends Lord Templeman and Lord Oliver of Aylmerton, I agree with them that the appeal should be allowed for the reasons that they have given.
LORD OLIVER OF AYLMERTON.
My Lords, on 12 January 1982 the appellant society, in the ordinary course of its business, lent to Mr. and Mrs. Maxwell-Brown a sum of £37500. The Maxwell-Browns were the registered proprietors with title absolute of a freehold property known as Bleak House, Grange Road, Gillingham, Kent, registered at H.M. Land Registry under title number K467866. That property had been acquired by them by a conveyance dated 18 October 1977 at a price of £34000 and the conveyance expressly provided that they were to hold the property on trust for sale for themselves as joint tenants beneficially and that, during the period of 21 years from the death of the survivor of them, the trustees should have all the powers of an absolute owner. There was no subsisting restriction entered on the proprietorship register at the date of the appellants' loan to the Maxwell-Browns and nothing on the registered title to suggest to the appellants that they were anything other than what they appeared to be, that is to say, joint tenants absolutely and beneficially entitled. In fact they were not. They were respectively the son-in-law and the daughter of the respondents, Mr. and Mrs. Flegg, and, as between the four of them, it is beyond dispute that Mr. and Mrs. Flegg had an equitable interest in the proceeds of the property which was, to a substantial extent, purchased with the proceeds of a bungalow at Rainham which they sold in 1977 and which, for some 28 years before that, had been their home. In the summer of 1977 they decided in conjunction with their daughter and son-in-law, to buy Bleak House, a larger house in which it was the intention that all four of them should live. The respondents provided the deposit of £3400 and paid a further sum of £14600 out of the proceeds of their bungalow towards the purchase price of the property. At the trial of the action giving rise to this appeal, the judge, Judge Thomas, found as a fact that it was always the intention of the respondents and of Mr. and Mrs. Maxwell-Brown that the balance of the purchase price should be raised by means of a mortgage and this was in fact done, the money being raised by Mr. and Mrs. Maxwell-Brown alone on the security of a legal charge on the property in favour of the Hastings and Thanet Building Society. The respondents were professionally advised in connection with this transaction and the judge found as a fact that their solicitor had advised them that the conveyance of the property should be taken in the names of all four of them. They were, however, unwilling personally to assume any liability for repayment of the mortgage and the property was in fact conveyed to Mr. and Mrs. Maxwell-Brown alone and charged by them to the building society. The conveyance contains no reference whatever to any interest of the respondents. It was, as already mentioned, a simple conveyance to Mr. and Mrs. Maxwell-Brown as joint tenants beneficially and they were subsequently registered as proprietors with title absolute at H.M. Land Registry without any restriction being entered on the register.
From a date shortly after the completion of the purchase the respondents occupied the property in common with their daughter and son-in-law and they spent considerable further sums on improving the property. By the end of 1981, however, Mr. and Mrs. Maxwell-Brown were in financial difficulties and have since been adjudicated bankrupt. They had already, without the knowledge or consent of the respondents, borrowed further sums on the security of charges on the property and on 8 January 1982 they executed yet another charge by way of legal mortgage in favour of the appellants to secure a sum of £37500. Some £26199 of this was applied to discharging the mortgage in favour of the Hastings and Thanet Building Society and the balance for other purposes including the discharge of the further charges on the property which they had executed. Before advancing the money the appellants caused a search to be made at the Land Registry and an official certificate of search, giving priority until 14 January 1982, was issued on 30 November 1981. The legal charge was duly executed and the money advanced on 12 January 1982, but the deed was not in fact lodged for registration until 26 January 1982, by which time the priority period had expired. Although the judge found as a fact that the respondents knew nothing of this charge and would not have consented to it if they had known, it seems clear that they must at least have entertained a suspicion that their daughter and son-in-law were contemplating some sort of dealing with the land, because on 7 December 1981, they applied for the entry of a caution on the register. In the result the appellants' charge has not yet been registered.
Inevitably Mr. and Mrs. Maxwell-Brown defaulted in paying the instalments of principal and interest due under the legal charge and the appellants commenced proceedings to have the caution removed and for possession. Those proceedings were defended by the respondents on the ground that, as persons beneficially entitled under a resulting trust in their favour to a share in the property or its proceeds of sale and as persons in actual occupation of the property at the date of the execution of the legal charge, they had an overriding interest which took priority to the interest of the appellants under the charge. The judge accepted that, following the decision of this House in Williams & Glyn's Bank Ltd. v. Boland [1981] AC 487, the respondents had, immediately prior to the advance by the appellants, an overriding interest pursuant to section 70(1)(g) of the Land Registration Act 1925 by virtue of their occupation of the property in common with the respondents, but he held that the charge by Mr. and Mrs. Maxwell-Brown, as the only two trustees of the property, had, under the provisions of the Law of Property Act 1925, the effect of overreaching any interest conferred on or preserved for the respondents by their occupation and that the overreaching of that interest was not affected by section 14 of that Act. From this decision the respondents appealed to the Court of Appeal which, on 4 December 1985, unanimously allowed the appeal, holding that the case was substantially indistinguishable from Boland's case and that, in any event, section 14 of the Law of Property Act 1925 had the effect of preventing the interest of the tenant in common in actual occupation of the land from being overreached without his consent.
My Lords, ever since Boland's case [1981] AC 487 it has been widely assumed by those called upon to advise banks and building societies that, so long as capital moneys arising from an exercise of their powers by trustees for sale holding on the statutory trusts have been paid in accordance with the statutory provisions to not less than two trustees or a trust corporation pursuant to the provisions of section 27 of the Law of Property Act 1925, a purchaser need not concern himself with the beneficial interest in the property even where one or more of the beneficiaries is or are in actual occupation of the property at the time of the transaction. That assumption was shared by the Law Commission in their report upon the implications of Boland's case presented to Parliament in August 1982, Property Law, The Implications of Williams & Glyn's Bank Ltd. v. Boland (Cmnd. 8636), para. 42. This appeal is, therefore, of very considerable importance not only to conveyancers but to anyone proposing to lend upon the security of property in respect of which there is any possibility of the existence of beneficial interests which have not been disclosed by the apparent absolute owner. If it be the case, as the Court of Appeal held, that the payment by the appellants in the instant case to two properly constituted trustees for sale, holding upon the statutory trusts, provides no sensible distinction from the ratio of the decision of this House in Boland's case, the legislative policy of the 1925 legislation of keeping the interests of beneficiaries behind the curtain and confining the investigation of title to the devolution of the legal estate will have been substantially reversed by judicial decision and financial institutions advancing money on the security of land will face hitherto unsuspected hazards, whether they are dealing with registered or unregistered land.
My Lords, I propose to approach the problems raised by this appeal in four stages; first, by considering briefly the position of tenants in common of real estate prior to 1926 and, in particular, their rights in relation to occupation; secondly, by considering the effect which the 1925 property legislation had upon that position and the policy behind such legislation; thirdly, by considering what would have been the result on the facts of the instant case, if the land concerned had, throughout, been unregistered land; and finally, by considering the impact upon that result of the provisions of the Land Registration Act 1925.
Prior to 1926 the interest of a tenant in common, unless taking effect under a trust, was a legal estate and devolved as such. The one essential feature which tenants in common shared with joint tenants was unity of possession. Thus each co-owner was as much entitled to every part of the land as were his co-tenants and he had the right to occupy the land concurrently with them. If they were unable to agree, their remedy lay in partition under the Partition Acts 1539 (31 Hen. 8, c.1), 1540 (32 Hen. 8, c. 32), 1697 (8 & 9 Will. 3, c. 31) or, after the Partition Act 1868 (31 & 32 Vict. c. 40), in obtaining from the court an order for sale of the property. The inconvenience of this is manifest. If the land was partitioned, the result was the fragmentation of estates into small holdings. If it was sold without partitioning, the purchasers were compelled to investigate the title of each co-owner. The 1925 legislation achieved a measure of simplification by providing (in section 1(6) of the Law of Property Act 1925) that a legal estate should no longer be capable of subsisting or being created in an undivided share in land and by imposing in all cases in which undivided shares existed or were created the statutory trusts set out in section 35 of that Act. The whole philosophy of the Act in relation to undivided shares was that a purchaser of the legal estate (which, by section 205(1)(xxi) includes a mortgagee) should not be concerned with the beneficial interests of the tenants in common which were shifted to the proceeds of sale. This is familiar material for conveyancers and it is unnecessary to do more than cite a few of the sections of the Act which have an immediate bearing on the problem raised by this appeal. Sections 34 and 36 deal with express limitations in undivided shares or to persons as joint tenants respectively but there is no section dealing specifically with the case where, as here, land becomes held beneficially for tenants in common by means of a resulting trust. Nevertheless, section 34(1) provides that an undivided share shall not be capable of being created except as provided by the Settled Land Act 1925 or as thereinafter mentioned and section 36(4) of the Settled Land Act 1925 provides in terms that an undivided share in land shall not be capable of being created except under a trust instrument or under the Law of Property Act 1925, and shall then only take effect behind a trust for sale. Having thus established the trust for sale as the conveyancing machinery through which effect is given to the interests of owners in undivided shares, those interests are, by virtue of the equitable doctrine of conversion, transferred to the proceeds of sale and the net rents and profits pending sale although, pending the exercise of the trustees' powers, they retain, by judicial construction, some of the incidents of the legal interests which they replaced. The Act, however, contains elaborate provisions for overreaching equitable interests and for exonerating purchasers from being concerned with them. Section 2(1) provides that a conveyance to a purchaser of a legal estate in land shall overreach any equitable interest or power affecting that estate, whether or not he has notice of it, if (inter alia):
"(ii) the conveyance is made by trustees for sale and the equitable interest or power is at the date of the conveyance capable of being overreached by such trustees... and the statutory requirements respecting the payment of capital money arising under a disposition upon trust for sale are complied with;..."
Under section 205(1)(ii) "Conveyance" includes a mortgage. Section 26(3), whilst obliging trustees for sale so far as practicable to consult the persons for the time being interested in possession in the rents and profits, specifically exonerates a purchaser from being concerned to see that the provisions of the subsection have been complied with. Similarly, section 27(1) provides that a purchaser is not to be concerned with the trusts affecting the proceeds of sale or the rents and profits until sale. Subsection (2) of the same section contains a mandatory requirement that (subject to an exception in the case of the sole personal representative) the proceeds of sale or other capital money shall not be paid to or applied by the direction of fewer than two persons as trustees for sale, except where the trustee is a trust corporation. Section 28(1) confers on trustees for sale the powers of the tenant for life under the Settled Land Act 1925 and goes on to provide that those powers when exercised
"shall operate to overreach any equitable interests or powers which are by virtue of this Act or otherwise made to attach to the net
proceeds of sale as if created by a trust affecting those proceeds."
Thus the trustees for sale are empowered to exercise the powers of a tenant for life to mortgage the land, which are contained in section 71 of the Settled Land Act 1925. At the same time section 17 of the Trustee Act 1925 provides that
"No purchaser or mortgagee, paying or advancing money on a sale or mortgage purporting to be made under any trust or power vested in trustees, shall be concerned to see that such money is wanted, or that no more than is wanted is raised, or otherwise as to the application thereof."
Thus far it is tolerably clear that the scheme of the Act is to enable a purchaser or mortgagee, so long as he pays the proceeds of sale or other capital moneys to not less than two trustees or to a trust corporation, to accept a conveyance or mortgage without reference at all to the beneficial interests of co-owners interested only in the proceeds of sale and rents and profits until sale, which are kept behind the curtain and do not require to be investigated. There are, however, a number of cases in which the question has arisen between beneficiary and trustee as to the rights of the beneficiary in occupation, either alone or in common with his or her co-beneficiary, of the trust property pending sale, particularly where the property has been purchased with a view to its being occupied, for instance, as the matrimonial home of the parties. In Bull v. Bull [1955] 1 QB 234, where a mother and son had together purchased as their residence a house which had been conveyed into the son's name alone, the Court of Appeal upheld the decision of a county court judge who had dismissed the son's claim for possession. Denning LJ gave the leading judgment in which he quoted, at pp. 237-238, the following passage from the judgment of Maugham J. in In re Warren [1932] 1 Ch 42, 47:
"'There is no doubt that, since the coming into force of the Law of Property Act 1925, the position of undivided owners is different from what it was before. That Act, for the purpose of simplifying the law, has introduced provisions for undivided shares, and has made partition actions unnecessary and obsolete. But in substance the beneficial interests of the undivided owners in regard to enjoyment so long as the land remains unsold have not been altered, and it is true to say that the ordinary layman possessed of an undivided share in land would be quite unaware of any alteration in his rights as the result of the Act.'"
Denning LJ [1955] 1 QB 234, 238 continued:
"My conclusion, therefore, is that, when there are two equitable tenants in common, then, until the place is sold, each of them is entitled concurrently with the other to the possession of the land and to the use and enjoyment of it in a proper manner; and that neither of them is entitled to turn out the other."
That, of course, was sufficient to dispose of the case, which was a simple action for possession, and it was on that ground that the appeal was dismissed. Denning LJ however went on to consider the way in which the mother was entitled to exercise her equitable interest in the following passage:
"The mother is entitled to rely on her equitable interest as tenant in common, which is preserved by two sections of the Law of Property Act 1925. The first is section 14 which provides that the Act 'shall not prejudicially affect the interest of any person in possession or in actual occupation of land to which he may be entitled in right of such possession or occupation.' The second is section 35 which says that the trust for sale is subject to such provisions as may be requisite for giving effect to the rights of the persons interested in the land. The mother here is in possession and in actual occupation as equitable co-owner and by virtue of that interest she could not be turned out by the trustees except with her consent. In this situation if the trustees wish to sell with vacant possession the only thing they could do would be to apply to the court under section 30 of the Law of Property Act 1925, on the ground that the mother's consent could not be obtained. The court could then make such order as it thought fit and this would include, I think, an order to turn the mother out if it was right and proper for such an order to be made: compare In re Buchanan-Wollaston's Conveyance [1939] Ch 738 and In re Hyde's Conveyance (1952) L.J.N. 58. My conclusion is, therefore, that the son, although he is the legal owner of the house, has no right to turn his mother out. She has an equitable interest which entitles her to remain in the house as tenant in common with him until the house is sold."
In the Court of Appeal in the instant case Dillon LJ followed and adopted this passage and held that, quite apart from the provisions of the Land Registration Act 1925, the respondents had an equitable interest in the property protected by occupation which took priority over the appellants' mortgage by virtue of section 14 of the Law of Property Act 1925. My Lords, the ambit of section 14 is a matter which has puzzled conveyancers ever since the Law of Property Act was enacted. It has been suggested that its purpose was to make it clear that the provisions of Part I were not prejudicially to affect the rights of occupiers of the land who either had or, by virtue of their occupation, were in the process of acquiring title by adverse possession. If so, the section seems unnecessary. Another suggestion canvassed during the course of the argument was that it might have been intended to preserve the right of, for instance, a statutory tenant under the Rent Acts whose status could quite properly be said to arise "in right of" his occupation. For my part, I think that it is unnecessary for present purposes to seek to resolve the conundrum. What section 14 does not do, on any analysis, is to enlarge or add to whatever interest it is that the occupant has "in right of his occupation" and in m{ judgment the argument that places reliance upon it in the instant case founds itself upon an assumption about the nature of the occupying co-owners' interest that cannot in fact be substantiated. The section cannot of itself create an interest which survives the execution of the trust under which it arises or answer the logically anterior question of what, if any, interest in the land is conferred by the possession or occupation. It is suggested in Wolstenholme and Cherry's Conveyancing Statutes, 13th ed. (1972), vol. 1, p. 69, that section 14 was designed to preserve the principle, exemplified by Hunt v. Luck [1902] 1 Ch 428, that a purchaser will have constructive notice of any rights reasonably discoverable from inspection of the property and, in particular, from inquiry of any occupier as to his interest and the terms on which he holds it. With that I respectfully agree. Leaving aside, however, the question whether the words "in right of such possession or occupation" have, as the judge thought and as the appellants have argued before your Lordships, the effect of limiting the interests to which the section applies to those which are conferred by the preceding fact of possession or occupation or whether, as the Court of Appeal held in effect, they mean merely "in respect of" or "associated with" possession or occupation, the section cannot, in my judgment, have the effect of preserving, as equitable interests in the land, interests which are overreached by the exercise of the trustees' powers or of bringing on to the title which the purchaser from trustees for sale is required to investigate the equitable interest of every beneficiary who happens to be in occupation of the land. That would be to defeat the manifest purpose of the legislature in enacting the sections to which reference has already been made. Looking at the interest of the tenant in common in actual occupation and considering for the moment only the position in relation to unregistered land, one has, as it seems to me, to bear in mind always the distinction between his rights as against his co-beneficiaries or against the trustee or trustees in whom the legal estate is vested and his rights against a purchaser of the legal estate from the trustees for sale. His interest is overreached and the purchaser is absolved from inquiry only if the statutory requirements respecting the payment of capital money arising under a disposition upon trust for sale are complied with: sections 2(1)(ii) and 27. Until that occurs, he remains entitled to assert against the trustees and, indeed, against any purchaser from the trustees who has not complied with the statutory requirements all the incidents of his beneficial interest in the proceeds of sale of the property and in the net rents and profits until the sale. One of the incidents of that beneficial interest is, or may be according to the agreement between the beneficiaries or to the purpose for which the trust was originally created, the enjoyment of the property in specie either alone or concurrently with other beneficiaries. But the enjoyment in specie, whilst it may serve to give notice to third parties of the occupier's interest under the trust, is not a separate and severable right which can be regarded as, as it were, free standing. It is and has to be referable to the trust from which, and from which alone, it arises. It is the beneficial interest in the rents and profits pending sale that is the foundation of that enjoyment and there is nothing in the statute or in the cases - leaving aside, for the moment, the Boland case [1981] AC 487 which I shall have to come to a little later - to suggest that the enjoyment of the property in specie of itself confers some independent right which will survive the operation of the overreaching provisions of the Law of Property Act 1925. Indeed, the framers of that legislation would, I think, have been shocked and surprised to hear it asserted that a purchaser in proper form from the trustees of the statutory trusts was required to investigate the purposes for which the trust property had been acquired by the trustees or the terms of some private and unwritten agreement or understanding between the beneficiaries inter se or between one or more of the beneficiaries and the trustees. Bull v. Bull [1955] 1 QB 234 was, of course, a case where the only question was whether a sole trustee was entitled to an order for possession against a beneficiary with a subsisting interest in the trust property who had been permitted to occupy it. In dealing with the occupying beneficiary's rights Denning LJ was at pains to say that the entitlement to retain possession which he held to exist was "until the place is sold." The mother had, he said at p. 239, "an equitable interest which entitles her to remain in the house as tenant in common with him until the house is sold." Waller v. Waller [1967] 1 WLR 451 and Barclay v. Barclay [1970] 2 QB 677 were again cases where the question arose prior to sale between the sole trustee and an occupying beneficial tenant in common. Clearly when the question is whether the trustee or trustees shall execute the trust by selling or exercising their power to postpone as, for instance, in In re Buchanan-Wollaston's Conveyance [1939] Ch 738, a court called upon to adjudicate at the instance of an opposing beneficiary or trustee is concerned to investigate all the circumstances with a view to considering whether a party opposing sale has some equity which renders an immediate execution of the trust unfair or unjust. But that is not because such a person has, by virtue of his occupation, some interest in the land which is incapable of being overreached but precisely because, in the absence of some intervention of the court, the effect of a sale in accordance with the statutory provisions will be to overreach it, the whole question being whether that would be an equitable result. The position of the occupying tenant in common of unregistered land is, in my judgment, lucidly and accurately summarised in Irani Finance Ltd. v. Singh [1971] Ch 59 - a decision which was treated by the Court of Appeal in Boland's case [1979] Ch 312 with perhaps rather less respect than it deserved having regard to the fact that it was both binding upon them and was a decision of four judges of unrivalled experience in the law of real property (Buckley J. at first instance and Russell, Cross and Widgery L.JJ. in the Court of Appeal). The question at issue was whether the interest of an occupying tenant in common (the joint tenancy having been severed), was an "interest in land" which could be made the subject matter of a charging order under section 35(1) of the Administration of Justice Act 1956. Although the actual decision was confined to the meaning of the words "interest in land" in the particular context of the Act of 1956 and is therefore less than helpful in the context of the present inquiry, the case contains a useful general analysis of the rights of a beneficiary under the statutory trusts and I do not think that I can do better than to quote verbatim the following passage from the judgment of the Court of Appeal delivered by Cross LJ [1971] Ch 59, 79-80:
"The words 'interest in land' are no doubt capable in an appropriate context of including interests under trusts for sale of land, and though there is no need for us to express a concluded opinion on the point we certainly do not wish to be taken to be casting any doubt on the correctness of the dicta in Cooper v. Critchley [1955] Ch 431, but for 100 years before 1956 the words, or equivalent words, have been held in this field not to include interests arising under trusts for sale.... To turn finally to Bull v. Bull and Barclay v. Barclay: in the judgments in Bull v. Bull and Cook v. Cook [1962] P. 235, in which the principle laid down in Bull v. Bull was applied, the beneficiaries are in places described as 'equitable tenants in common' of the house in question. But the use of these words - which are apt enough to describe the physical situation - does not, we think, necessarily imply that the court considered that the interests of the beneficiaries were interests in realty and not interests in personalty. It is true that in his judgment in Barclay v. Barclay [1970] 2 QB 677, Lord Denning M.R., at p. 684, does refer to the interests of the beneficiaries in Bull v. Bull as equitable interests in land, but that expression of opinion was not necessary to the decision in any of the cases and, with respect, we cannot agree with it. No doubt such tenants in common are interested in the land in a general sense as was remarked by Russell LJ in In re Kempthorne [1930] 1 Ch 268, 292.
But that is not the same thing as their being owners of equitable interests in the realty. The whole purpose of the trust for sale is to make sure, by shifting the equitable interests away from the land and into the proceeds of sale, that a purchaser of the land takes free from the equitable interests. To hold these to be equitable interests in the land itself would be to frustrate this purpose. Even to hold that they have equitable interests in the land for a limited period, namely, until the land is sold, would, we think, be inconsistent with the trust for sale being an 'immediate' trust for sale working an immediate conversion, which is what the Law of Property Act, 1925, envisages (see section 205(1)(xxix)), though, of course, it is not in fact only such a limited interest that the plaintiffs are seeking to charge."
If this is right, as I believe that it is, the reason why a purchaser of the legal estate (whether by way of outright sale or by way or mortgage) from a single proprietor takes subject to the rights of the occupying beneficiary is not because section 14 of the Act confers upon the latter some interest in land which is incapable of being overreached but because, having constructive notice of the trust as a result of the beneficiary's occupation, he steps into the shoes of the vendor or mortgagor and takes the estate subject to the same equities as those to which it was subject in the latter's hands, those equities and their accompanying incidents not having been overreached by the sale under the provisions of section 2(1) and section 27 of the Act. Where the purchase has taken effect in accordance with those provisions, it is quite clear from the terms of the statute both that the purchaser, even with express notice, is not concerned with the beneficiary's interest in the proceeds of sale or the net rents and profits until sale and that that interest is overreached. The beneficiary's possession or occupation is no more than a method of enjoying in specie the rents and profits pending sale in which he is entitled to share. It derives from and is, as Mr. Lindsay has graphically put it, fathered by the interests under the trust for sale. Once that goes, as it does on the execution of the trust for sale, then the foundation of the occupation goes and the beneficiary has no longer any "interest... to which he may be entitled in right of such... occupation." We are, of course, concerned here not with the execution of the trust by a sale of the land by the trustees, but with the exercise by the trustees of their power to raise capital money by creating a charge on the land. But the same principle must, in my judgment, apply, the "overreaching" in this case consisting in the creation by the trustees of a legal estate and of powers incidental thereto (including the mortgagee's power of sale) which have an absolute priority over the beneficial interests, although, no doubt, those beneficial interests and their accompanying incidents continue as against the equity of redemption which remains vested in the trustees. If I may say so respectfully, the reasoning of the Court of Appeal in the instant case starts at the wrong end by assuming that there is an interest conferred by occupation which, were it not for section 14, would be in some way prejudiced by the provisions of Part I of the Act, whereas in fact the occupier's interest in this instance is one which stems from, depends upon and is co-terminous with the interest in the rents and profits arising under those very provisions and which is displaced by the execution of the trust or the exercise of the trustees' powers to the same extent as that interest. For my part, I have found myself unable to accept the reasoning in this part of the judgment of Dillon LJ If this were a case concerned solely with unregistered land, I am of opinion that the appellants' charge would take effect in priority to the respondents' interest which would be pro tanto overreached and which, so far as it can properly be considered as an equitable interest in land, would continue to subsist only in the equity of redemption.
So to conclude, however, resolves only part of the question, for the land concerned was at the material time registered land and there remain to be considered two questions, viz.: first, how do the provisions of the Land Registration Act 1925 fit with the provisions of the Law of Property Act 1925 and, secondly, does the decision of this House in Boland's case [1981] AC 487, which was concerned with a transaction between a mortgagee and a sole individual trustee, falsify or otherwise affect the conclusion just stated?
My Lords, the Land Registration Act 1925 was by no means the first attempt to introduce into English conveyancing a system of land registration. Previous attempts in the Land Registry Act 1862 (25 & 26 Vict. c. 53), the Land Transfer Act 1875 (38 & 39 Vict. c. 87) and the Land Transfer Act 1897 (60 & 61 Vict. c. 65), had not proved wholly popular or successful, although the Act of 1897 introduced for the first time the concept of compulsory registration and a system of registration had in fact been operative in the county of London from the turn of the century. The Act of 1925 was introduced as part and parcel of the overall property legislation enacted in that year and it introduced for the first time, in section 120, a power in the central government to designate areas in which registered conveyancing would be compulsory. Initially, however, there was built in a ten-year delay on the exercise of this power (section 120(2)) with the object of providing an experimental period during which it could be seen how a system of registered conveyancing operated alongside the amended system of unregistered conveyancing and which system it would be preferable to adopt over the country as a whole. Thus the philosophy behind both the Land Registration Act 1925 and the Law of Property Act 1925 was that they should operate in parallel and it would, therefore, be surprising if it were found that the two systems were not constructed so as to dovetail into one another. In fact they do. The Land Registration Act 1925 came into operation on 1 January 1926 but was (by section 148(2)) deemed to come into operation immediately after the remainder of the 1925 property legislation so that it operates against the background of the alterations effected by that legislation and, in particular those relating to interests in common. Section 3 incorporates many of the definitions from the Law of Property Act 1925 but the important definitions for present purposes are those contained in section 3(xi)(Legal estates); (xv)(Minor interests); (xvi)(Overriding interests). These are, so far as material, as follows:
"(xi) 'legal estates' mean the estates interests and charges in or over land subsisting or created at law which are by the Law of Property Act 1925 authorised to subsist or to be created at law; and 'Equitable interests' mean all the other interests and charges in or over land or in the proceeds of sale thereof;... (xv) 'Minor interests' mean the interests not capable of being disposed of or created by registered dispositions and capable of being overridden (whether or not a purchaser has notice thereof) by the proprietors unless protected as provided by this Act, and all rights and interests which are not registered or protected on the register and are not overriding interests, and include - (a) in the case of land held on trust for sale, all interests and powers which are under the Law of Property Act 1925 capable of being overridden by the trustees for sale, whether or not such interests and powers are so protected;..."
Plainly here 'overridden' is used as embracing interests which are overreached under the provisions of section 2 of the Law of Property Act 1925.
"(xvi) 'Overriding interests' mean 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..."
It should perhaps also be mentioned that a charge by way of legal mortgage, with which this appeal is concerned, is defined by reference to the Law of Property Act 1925. Section 2 delimits the estates which are capable of being registered and is, so far as material, in the following terms:
"(1) After the commencement of this Act, estates capable of subsisting as legal estates shall be the only interests in land in respect of which a proprietor can be registered and all other interests in registered land (except overriding interests and interests entered on the register at or before such commencement) shall take effect in equity as minor interests, but all interests (except undivided shares in land) entered on the register at such commencement which are not legal estates shall be capable of being dealt with under this Act:.. ."
There can be seen in the definition of minor interests the same philosophy as is apparent in the Law of Property Act of keeping behind the curtain those interests which are overreached by dispositions by the registered owner. This is again reflected in section 74 which is in the following terms:
"Subject to the provisions of this Act as to settled land, neither the registrar nor any person dealing with a registered estate or charge shall be affected with notice of a trust express implied or constructive, and references to trusts shall, so far as possible, be excluded from the register."
Again, section 103(1) contains provisions for compelling the registered proprietor to give effect to dispositions which create minor interests capable, if registered, of taking effect as legal estates but subject to the following proviso:
"(b) So long as the proprietor holds the land on trust for sale, no estate or charge shall be registered in respect of an interest which, under the Law of Property Act, 1925, or otherwise, ought to remain liable to be overridden on the execution of the trust for sale:..."
Section 25 of the Act confers on the registered proprietor the ability to charge the land by way of legal mortgage and the effect of a registered disposition is set out in section 20 which, so far as relevant, is in the following terms:
"(1) In the case of a freehold estate registered with an absolute title, a disposition of 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, including estates and interests of His Majesty, and the disposition shall operate in like manner as if the registered transferor or grantor were (subject to any entry to the contrary in the register) entitled to the registered land in fee simple in possession for his own benefit."
Finally, overriding interests are defined by section 70 which provides, for relevant purposes:
"(1) 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;..."
The respondents' submission, which succeeded in the Court of Appeal, is a very simple one. What is said is that the decision of this House is Boland's case [1981] AC 487 established the proposition that the interest of a tenant in common in occupation of registered land is, by reason of such occupation, an interest incapable of being overreached by a sale or other disposition of the land, save with the consent of the occupier; that section 70 makes that interest an overriding one; and that, accordingly, the disposition by the registered proprietors in favour of the appellants takes effect subject to the right of the respondents to remain in occupation of the house indefinitely notwithstanding that (a) the appellants were specifically exonerated from inquiry into the trusts affecting the rents and profits of land pending sale by section 27 of the Law of Property Act 1925, and (b) the capital moneys raised by the registered proprietors were paid to two trustees in accordance with section 27(2). My Lords, if the first step in this composite proposition be correct, then the remainder follows as a matter of unassailable logic. The Court of Appeal concluded that it was correct by reference to an analysis of the speech of Lord Wilberforce in Boland's case. Dillon LJ accepted that Lord Wilberforce's observations were made in the context of a case where the dealing which was claimed as being subject to an overriding interest in the occupying beneficiary was with a single trustee and would not therefore overreach the beneficiary's interest. But in his view the reasoning did not depend upon the fact that in Boland there was only one registered proprietor of the land and therefore only one trustee for sale. It concentrated simply on the distinction between a minor interest and an overriding interest, the mere fact of occupation converting what would otherwise be a minor interest into an overriding interest. Thus he found the instant case indistinguishable from Boland's case in any material respect. The proposition is encapsulated in the following short passage from his judgment [1986] Ch 605, 617:
"the reasoning of Lord Wilberforce concentrates on the distinction between the minor interest and the overriding interest. This necessarily covers the case where there are two registered proprietors and so two trustees for sale, because the wording in the definition of 'minor interests' in section 3(xv): 'in the case of land held on trust for sale, all interests and powers which are under the Law of Property Act 1925, capable of being overridden by the trustees for sale... ' must refer to the case where there are two trustees for sale; indeed, only where there are two (or three or four) trustees for sale would the interests of the beneficiaries be overriden under the Law of Property Act 1925. On a sale, what would otherwise have been a minor interest capable of being overridden under the Law of Property Act 1925 by two trustees for sale is, if protected by the fact of actual occupation of the land, elevated to the status of an overriding interest. In my judgment, therefore, the reasoning in Boland's case covers entirely the position of the parents in the present case. As no inquiry was made of the parents before the plaintiffs took their mortgage on the property, the parents have an overriding interest in the property which binds the plaintiffs."
The fundamental criticism of this advanced by the appellants is that it fails to analyse the incidents of and limitations upon the interest which the court held to override the interest of the appellants. What section 70(1)(g) does is to define as an overriding interest the rights (whatever they may be) of every person in actual occupation and to subject the registered land to such overriding interests "as may be for the time being subsisting in reference thereto." It does not create or enlarge rights but merely operates, to use the words of Lord Wilberforce in National Provincial Bank Ltd. v. Hastings Car Mart Ltd. [1965] AC 1175, 1260-1261:
"to adapt the system of registration, and the modified form of inquiry which is appropriate to that system, to the same kind of right as under the general law would affect a purchaser finding a person in occupation of his land."
One may, quoting again from the speech of Lord Wilberforce, in the same case, at p. 1261:
"have to accept that there is a difference between unregistered land and registered land as regards what kind of notice binds a purchaser, or what kind of inquiries a purchaser has to make. But there is no warrant in the terms of this paragraph or elsewhere in the Act for supposing that the nature of the rights which are to bind a purchaser is to be different, excluding personal rights in one case, including them in another. The whole frame of section 70, with the list that it gives of interests, or rights, which are overriding, shows that it is made against a background of interests or rights whose nature and whose transmissible character is known, or ascertainable, aliunde, i.e., under other statutes or under the common law."
With this preliminary caution in mind, therefore, I turn to consider whether, in fact, the decision of this House in Boland [1981] AC 487 does lead to the conclusion that the occupying co-owner's interest under the statutory trusts is, by reason of his occupation, one which is incapable of being overreached. It has, I think, to be borne in mind when reading both the judgments in the Court of Appeal in that case and the speeches in this House that they were prepared and delivered against a background of fact which precluded any argument that the interests of Mrs. Boland and Mrs. Brown had been overreached under the provisions of the Law of Property Act 1925. Equally, the holding, contrary to the argument of the mortgagees, that Mrs. Boland and Mrs. Brown were in actual occupation ruled out any question of the mortgagees having taken their interest without notice of the occupier's rights, whatever those rights were. The mortgagees in that case were, therefore, quite simply purchasers from the owner of the legal estate with notice of the existence of whatever equitable rights the occupier was entitled to claim. Their claim to take free from them accordingly rested simply and solely on the fact that the land charged happened to be registered land, a feature which enabled them to claim, if they could substantiate it, that the beneficiaries' interests were minor interests and so overriden by a disposition by the registered proprietor. Thus, in the argument for the mortgagees before the Court of Appeal, it was contended that the argument for the appellants involved the proposition that even if two trustees or a trust corporation received the purchase money there would still be an overriding interest [1979] Ch 312, 319: In the argument in reply this was countered by counsel for the appellants who pointed out that the rights of beneficiaries are not overreached by a sale by one trustee. In such a case, section 199 of the Law of Property Act 1925 (relating to notice) applies. Counsel emphasised in this context that there was no inconsistency between the Law of Property Act and the Land Registration Act and went on to point out that the powers of management in section 28 of the Law of Property Act (and, in particular, the power to mortgage contained in section 71 of the Settled Land Act 1925) do not apply to one trustee who would have no power to borrow money. It is in the light of these arguments that one finds in the judgments of the Court of Appeal specific references to the fact that the transactions there in question were transactions in which the capital money was received by one trustee only so that the beneficiaries' rights were not overreached: see 330B-E per Denning L.J.; pp. 334B-D, 337G per Ormerod LJ and pp. 340A-B, 341B-C per Browne L.J., Dillon LJ in the Court of Appeal regarded these references as merely part of the narrative but I am, for my part, unable to agree. They were, as it seems to me, an essential part of the reasoning upon which the judgments were based, for it was a critical feature of the appellants' argument that their interests were not overreached but were kept alive as against the purchaser, by notice in the case of unregistered land or by being overriding interests in the case of registered land. In the argument before your Lordships' House, one finds the same underlying thesis [1981] AC 487, 498D-E, 499C-D in the respondents' argument and at p. 501D-E in the appellants' argument in reply. It was, indeed, this feature, namely that in each case the mortgage was effected by a single registered proprietor, which compelled the mortgagees to argue that the beneficiaries' interests in that case fell within the definition of minor interests, that "minor interests" and "overriding interests" were mutually exclusive categories and that an interest under a trust for sale was incapable of constituting an overriding interest. They could not deny that they had constructive notice, so that if they were to succeed at all it could only be because the land was registered land and the provisions of section 20(1) of the Act enabled them to take free from minor interests. It is this argument to which the relevant part of Lord Wilberforce's speech was directed and he pointed out at the inception, in considering whether the provisions of section 70(1)(g) could afford protection to the interests of the tenant in common in equity, that the effect of a disposition by two trustees or a trust corporation would be to overreach the trusts with the result that a purchaser would take free from them, whether or not he had notice: see p. 503D-E. Thus, the only question, it being common ground that there had not, in fact, been any overreaching, was whether the respondents' interests, although capable of being overreached by appropriate machinery and so within the definition of minor interests, could also be overriding interests by reason of the beneficiaries' occupation of the land. That question is answered by Lord Wilberforce in the following passage in his speech, at p. 507:
"How then are these various rights to be fitted into the scheme of the Land Registration Act 1925? It is clear, at least, that the interests of the co-owners under the 'statutory trusts' are minor interests - this fits with the definition in section 3(xv). But I can see no reason why, if these interests, or that of any one of them, are or is protected by 'actual occupation' they should remain merely as 'minor interests.' On the contrary, I see every reason why, in that event, they should acquire the status of overriding interests. And, moreover, I find it easy to accept that they satisfy the opening, and governing, words of section 70, namely, interests subsisting in reference to the land."
My Lords, if I may respectfully say so, this is plainly right, but it has to be read in the context of the facts in Boland's case. Quite clearly the interests of the respondents in that case were subsisting. Nothing had occurred which had the effect of overreaching them. I cannot, however, for my part, read Lord Wilberforce's words as applying to a case which was not before the House where the effect of the transaction in question was precisely that to which he himself had alluded in his outline of the legal framework within which the appeals before the House fell to be decided, that is to say a conveyance by two trustees involving the consequence that the purchaser took free from the trusts regardless of notice.
Considered in the context of a transaction complying with the statutory requirements of the Law of Property Act 1925 the question of the effect of section 70(1)(g) of the Land Registration Act 1925 must, in my judgment, be approached by asking first what are the "rights" of the person in occupation and whether they are, at the material time, subsisting in reference to the land. In the instant case the exercise by the registered proprietors of the powers conferred on trustees for sale by section 28(1) of the Law of Property Act 1925 had the effect of overreaching the interests of the respondents under the statutory trusts upon which depended their right to continue in occupation of the land. The appellants took free from those trusts (section 27) and were not, in any event, concerned to see that the respondents' consent to the transaction was obtained (section 26). If, then, one asks what were the subsisting rights of the respondents referable to their occupation the answer must, in my judgment, be that they were rights which, vis-a-vis the appellants, were, eo instante with the creation of the charge, overreached and therefore subsisted only in relation to the equity of redemption. I do not, for my part, find in Boland's case [1981] AC 487 anything which compels a contrary conclusion. Granted that the interest of a co-owner pending the execution of the statutory trust for sale is, despite the equitable doctrine of conversion, an interest subsisting in reference to the land the subject matter of the trust and granted also that Boland's case establishes that such an interest, although falling within the definition of minor interest and so liable to be overriden by a registered disposition, will, so long as it subsists, be elevated to the status of an overriding interest if there exists also the additional element of occupation by the co-owner, I cannot for my part accept that, once what I may call the parent interest, by which alone the occupation can be justified, has been overreached and thus subordinated to a legal estate properly created by the trustees under their statutory powers, it can, in relation to the proprietor of the legal estate so created, be any longer said to be a right "for the time being subsisting." Section 70(1)(g) protects only the rights in reference to the land of the occupier whatever they are at the material time - in the instant case the right to enjoy in specie the rents and profits of the land held in trust for him. Once the beneficiary's rights have been shifted from the land to capital moneys in the hands of the trustees, there is no longer an interest in the land to which the occupation can be referred or which it can protect. If the trustees sell in accordance with the statutory provisions and so overreach the beneficial interests in reference to the land, nothing remains to which a right of occupation can attach and the same result must, in my judgment, follow vis-a-vis a chargee by way of legal mortgage so long as the transaction is carried out in the manner prescribed by the Law of Property Act 1925, overreaching the beneficial interests by subordinating them to the estate of the chargee which is no longer "affected" by them so as to become subject to them on registration pursuant to section 20(1) of the Land Registration Act 1925. In the instant case, therefore, I would, for my part, hold that the charge created in favour of the appellants overreached the beneficial interests of the respondents and that there is nothing in section 70(1)(g) of the Land Registration Act 1925 or in Boland's case which has the effect of preserving against the appellants any rights of the respondents to occupy the land by virtue of their beneficial interests in the equity of redemption which remains vested in the trustees.
There is a further point which was argued before your Lordships. As already mentioned, the appellants' charge, although executed within the protected period provided by the official search, was not in fact lodged for registration until 26 January 1982, by which time the respondents' caution had been entered on the register. As a result, the appellants have still not been registered as the proprietors of the legal charge in the charges register. It is submitted on behalf of the respondents that since, under section 20(1) of the Land Registration Act 1925, the legal estate is conferred on a purchaser only when registered, the present position is that there is a contest between two competing equities in which the respondents, as the first in time, are entitled to prevail. I am not persuaded by this argument. The fact is that, whether or not the respondents had an overriding interest, the appellants were and are entitled to be registered. The trustees' power to mortgage the land was exercised when the charge was executed and the money was advanced and it was, under section 28 of the Law of Property Act 1925, at this point that the interests of the appellants was overreached.
I would therefore allow the appeal and restore the order for possession in favour of the appellants made by Judge Thomas in the Chancery Division.
LORD GOFF OF CHIEVELEY.
My Lords, I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Templeman and Lord Oliver of Aylmerton. I agree with them and for the reasons they give I too would allow the appeal and restore the order of Judge Thomas.
ORDER
Appeal allowed.
Crown Copyright acknowledged
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