Plaintiff lessee of part of building exercising option to purchase superior registered lease of entire building – Defendant purchaser of superior lease disputing overriding interest asserted by plaintiff – Whether part occupation sufficient for the purpose of section 70(1)(g) of the Land Registration Act 1925 – Plaintiff’s appeal allowed
The subject of the appeal was a detached single-storey building in London NW3, three-fifths of which was constructed as offices (the office part) and the remainder as a lock-up garage. In 1973 the land on which the building was to be constructed was demised for a term of 40 years to A, who thereupon granted an underlease for a slightly shorter term to B, who erected the building. On October 1 1984 a successor to B granted a four-year subunderlease of the office part to the plaintiff on terms that gave the plaintiff an option to acquire the underlease of the entire building for an amount not exceeding £28,000. On February 22 1988 the underlease was acquired by the defendant, who, in due course, became the registered proprietor of the underlease. No entry relating to the option appeared on the register of title.
On September 30 1988 the plaintiff exercised his option by serving the required notice, and, in July 1994, issued proceedings for specific performance of the contract alleged to have been created thereby. In answer to the plaintiff’s assertion that the option subsisted as an overriding interest at the time that the defendant acquired the underlease, the defendant contended that, because the plaintiff had not been in occupation of the entire property comprised in the registered title, it could not claim to have been a “person in actual occupation of the land”, within the meaning of section 70(1)(g) of the Land Registration Act 1925. The judge considered himself bound by the Court of Appeal decision in Ashburn Anstalt v Arnold (No 2) [1988] 1 EGLR 64 to find in favour of the defendant. The plaintiff appealed.
Held The appeal was allowed.
1. The judge had no choice but to follow Ashburn, notwithstanding its subsequent overruling by the House of Lords in Prudential Assurance Co Ltd v London Residuary Body [1992] 2 EGLR 56, as the ruling in Prudential was on a different point. However, it was plain that the court in Ashburn would have reached the opposite conclusion if it had been referred to the House of Lords’ decision in Williams & Glyn’s Bank Ltd v Boland [1981] AC 487 and the authorities there approved, notably Hodgson v Marks [1971] Ch 892 and the full judgment in Webb v Pollmount Ltd [1966] Ch 584. The principle to be derived from those cases and from National Provincial Bank Ltd v Ainsworth [1965] AC 1175 HL, was that the rights of an occupier of registered land were to be distinguished from the fact of his occupation, hence the capacity in which he occupied did not need to be indicative of the right that he claimed.
2. Occupation of part was accordingly sufficient for the purposes of section 70(1)(g) of the 1925 Act, notwithstanding that anomalies could arise – for example, where a purchaser of a block of flats might be unaware that a tenant of one of them had an option to buy the same block: see the Law Commission’s Third Report on Land Registration (HC 269) published in 1987. Thus, although the function of such an overriding interest in registered conveyancing was comparable to the doctrine of notice, the burden on a purchaser to make inquiries was heavier than under the unregistered system.
Alexander Hill-Smith (instructed by Jim McKenzie & Co Ltd) appeared for the appellant plaintiff; Paul Staddon (instructed by Walter Jennings & Co) appeared for the respondent defendant.
Alan Cooklin, barrister
