United Kingdom House of Lords Decisions

Parliamentary Archives,
HL/PO/JU/18/247

City of London Building Society (Appellants)

v.
Flegg (A.P.) and others (A.P.) (Respondents)

JUDGMENT

Die Jovis 14° Maii 1987

Upon Report from the Appellate Committee to whom was
referred the Cause City of London Building Society against
Flegg (A.P.) and others (A.P.), That the Committee had heard
Counsel on Monday the 9th, Tuesday the 10th, Wednesday the
11th and Thursday the 12th days of March last upon the
Petition and Appeal of The City of London Building Society, of
34 London Wall, London, EC2Y 5JD, praying that the matter of
the Order set forth in the Schedule thereto, namely an Order
of Her Majesty's Court of Appeal of 4 December 1985, might be
reviewed before Her Majesty the Queen in Her Court of
Parliament and that the said Order might be reversed, varied
or altered or that the Petitioners might have such other
relief in the premises as to Her Majesty the Queen in Her
Court of Parliament might seem meet; as upon the Case of Edgar
Edward Flegg and Joan Eileen Flegg lodged in answer to the
said Appeal; and due consideration had this day of what was
offered on either side in this Cause:

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 of the 4th day of December 1985 complained of in the
said Appeal be, and the same is hereby, Reversed, save as to
Legal Aid Taxation, and that the Order of His Honour Judge
Thomas of the 31st day of July 1985 be, and the same is hereby
Restored: And it is further Ordered, That the First and Second
Respondents do pay to the Appellants their costs in this House
and in the Court of Appeal without prejudice to the
Appellants' right to add their costs to the security; that the
Order for costs against the First and Second Respondents be
not enforced without leave of the Court; and that the costs
of the First and Second Respondents be taxed in accordance
with Schedule 2 to the Legal Aid Act 1974; And it is also
further Ordered, That the Cause be, and the same is hereby,
remitted back to the Chancery Division of the High Court of
Justice to do therein as shall be just and consistent with
this Judgment.

Cler: Parliamentor

Judgment: l4.5.87

HOUSE OF LORDS

CITY OF LONDON BUILDING SOCIETY
(APPELLANTS)

v.

FLEGG AND OTHERS
(RESPONDENTS)

Lord Bridge of Harwich
Lord Templeman
Lord Mackay of Clashfern
Lord Oliver of Aylmerton
Lord Goff of Chieveley

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
mortgagee 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 £34,000, had been provided as to £18,000 or more by
the respondents who were the parents of Mrs. Maxwell-Brown. In
consequence and notwithstanding the express trusts set out in the



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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 £37,500
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 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 and the sum of £37,500 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 that:

"No purchaser or mortgagee paying or advancing money on
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



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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
£37,500 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 £37,500 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 appellant 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 that:

"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



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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 as follows:

"(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 2 (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



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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 includes

"(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."

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 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



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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 monies to a sole trustee. If the wife's interest
had been overreached by the mortgagee advancing capital monies
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 £37,500. 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
£34,000 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



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house in which it was the intention that all four of them should
live. The respondents provided the deposit of £3,400 and paid a
further sum of £14,600 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 £37,500. Some
£26,199 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
U 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



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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 & Glyns Bank 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 monies 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 (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



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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 Act 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 ail 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 taken 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.

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. . 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 confers on trustees for sale the powers of
the tenant 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 monies 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 Q.B. 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 L.J., gave the
leading judgment in which he quoted, at p. 237, the following
passage from the judgment of Maugham J. in In re Warren [1932]
1 Ch. 42, at p. 47:

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"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 Q.B. 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 L.J. 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 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.SB.

"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 L.J.
followed and adopted this passage and held that, quite apart from
the provisions of the Land Registration Act, the respondents had



- 11 -

an equitable interest in the property protected by occupation which
took priority over the appellants' mortgage by virtue of section U
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 Act
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 my 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 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 enquiry 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 appellant has
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 enquiry only if the statutory requirements respecting the
payment of capital money arising under a disposition upon trust for
sale are complied with (sections 2(l)(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



- 12 -

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 case of Boland [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 Q.B. 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 L.J.
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 entitled her to remain
in the house as tenant in common with him until the house is
sold." Waller v. Waller [1967] 1 W.L.R. 451 and Barclay v.
Barclay [1970] 2 Q.B. 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 LJJ. in the Court of



- 13 -

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 enquiry, 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 L.J. at pp. 79-80 of the
report:

"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 Q.B. 677, Lord Denning M.R.,
at p. 684, does refer to the interests that 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 L.J. 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 interest 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 had 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(l)(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



- 14 -

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 L.J. 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?

- 15 -

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, 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 interest and charges
in or over land subsisting or creating 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

- 16 -

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

- 17 -

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, that

"(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
encumbrances 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 enquiry 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 enquiry 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 monies
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 L.J. 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

- 18 -

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 overridden 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 is fails to analyse the incidents of and limitations upon the
interest which the court held to override the interest of the
appellant. 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,
1260G-1261A,

"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. 1261D)

"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



- 19 -

[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
overridden 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 [1979] Ch. 312 330B-
E per Denning L.J.; p. 334B-D and 337G per Ormerod L.J. and p.
340A-B and p. 341B C per Browne L.J. Dillon L.J. 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 at pp. 498D-E
and pp. 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



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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(l)(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 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 have
satisfied 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(l)(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



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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-à-vis the appellants, where, 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 the minor interest and so liable to
be overridden 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(l)(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 monies 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-à-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. 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 proprietor of the legal charge in the charges
registered. 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



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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.

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