Highways — Land registration — Whether rights created by an agreement under section 38 of the Highways Act 1980 were ‘public rights’ within meaning of section 70(1)(a) of the Land Registration Act 1925
On June 23
1984 Swansea City Council, as agents for the local highway authority, R&K,
as owners of front land providing access to an area of development land to the
rear and, F, a joint venture development company, entered into an agreement
pursuant to section 38 of the Highways Act 1980. The agreement provided that: F
was to carry out certain highway works; the council’s surveyor would procure
the adoption of the roads by the local highway authority as highways
maintainable at public expense; and R&K would, on the issue of the
surveyor’s final certificate of his satisfaction with the works, dedicate the
land to the public as a public highway. In December 1986 the rear land was sold
to the first defendant. F failed to carry out the highway works; R&K went
into receivorship and F obtained an order vesting the front land in itself as
beneficial owner. F then sold the front land to the plaintiff, OIS, who was
aware of the section 38 agreement and on January 4 1988 was registered as
proprietor. The works were then completed and in June 1988 Swansea’s surveyor
issued a certificate that the access road would now be formally adopted as a
public highway. In the consolidated proceedings between the parties, in which
OIS asserted that it was entitled to prevent persons using the access road, the
judge held that the rights created by the agreement were ‘public rights’ within
the meaning of section 70(1)(a) of the Land Registration Act 1925 and,
accordingly, were overriding interests which bound OIS on its purchase of the
front land. OIS appealed contending that it was not bound by the agreement.
whether such rights were exercisable by anyone merely by virtue of being a
member of the public and under the general law. On that test the rights under
the agreement were not public rights: no member of the public could exercise
any right over the front land, there being no public highway at the relevant
time, nor did any member of the public have any right to require that the
council should procure a highway to come into existence on the front land.
Accordingly, the agreement was not an overriding interest and not binding on
OIS.
No cases are
referred to in this report.
This was an
appeal by Overseas Investment Services Ltd from the decision of Judge Coyler QC
who had held in proceedings against the first and second respondents,
Simcobuild Construction Ltd and Swansea City Council, that an agreement under
section 38 of the Highways Act 1980 was an overriding interest binding the
appellant.
Nigel Davis QC
and Tom Bannister (instructed by Morgan Bruce, of Swansea) appeared for
appellant; Elizabeth Appleby QC and Robin Campbell (instructed by the solicitor
to Swansea City Council) represented the second respondents; the first
respondent, Simcobuild Construction Ltd, did not appear and was not
represented.
Giving the
first judgment at the invitation of Staughton LJ, Peter Gibson LJ
said: The short issue raised on this appeal is whether the rights created by an
agreement under section 38(3) of the Highways Act 1980 relating to a future
highway over registered land were ‘public rights’ within the meaning of section
70(1)(a) of the Land Registration Act 1925. If they were, they were
overriding rights and, as such, binding on a subsequent purchaser of the land.
If they were not, in the absence of any steps taken by the local highway
authority to protect the rights by registration they were not binding on the
purchaser, notwithstanding that when it acquired the land it was aware of the
agreement. Judge Colyer QC, sitting as a judge of the Chancery Division, held
that the rights created by an agreement dated June 23 1983 and made pursuant to
section 38(3) by the second defendants, Swansea City Council (‘Swansea’), and
others were overriding rights and so binding on the plaintiff, Overseas
Investment Services Ltd (‘OIS’), a subsequent purchaser. OIS now appeals.
The
circumstances giving rise to the dispute between the parties are unusual.
Before 1980 there was a substantial property with an extensive frontage to Mayals
Road, Swansea, that property consisting of a house, Whitegates, in the western
part of the property and a parcel of land (‘the front land’) to the east of
Whitegates. Behind Whitegates and the front land lay a larger parcel of land
(‘the rear land’) in separate ownership. Both the front land and the rear land
were ripe for development, but the rear land could not be developed without
access to it being made available and the obvious access to the rear land lay
through the front land. On September 23 1980 Whitegates and the front land were
transferred on sale to Rees & Kirby Ltd (‘R&K’), a building and civil
engineering contractor. R&K intended to develop the front land and, if it
could be acquired, the rear land by means of a joint venture with another building
company. For the purpose of the joint venture, Firthpalm Ltd (‘Firthpalm’) was
incorporated by the two partners in the joint venture. On September 24 1980
Whitegates was sold. On November 27 1980 Firthpalm obtained outline planning
permission for the erection of four houses on the front land and for the
construction of a road to lie between Whitegates and the remainder of the front
land and to give access to the rear land. In 1982 and 1983 the four houses were
built and long leases granted of them. There were protracted negotiations
between the owners of the rear land and R&K and Firthpalm for the sale of
the rear land.
On June 23
1983 a written agreement was entered into between Swansea (as agents of the
local highway authority, West Glamorgan County Council), R&K and Firthpalm.
The agreement was expressed to be made pursuant to section 38 of the Highways
Act 1980 and it is
of that section:
(3) … a local
highway authority may agree with any person to undertake the maintenance of —
(a) a
private carriage or occupation road which that person is willing, and has the
necessary power, to dedicate as a highway; or
(b) a
way which is to be constructed by the person, or by a highway authority on his
behalf, and which he proposes to dedicate as a highway;
and where an
agreement is made under this subsection the road or way to which the agreement
relates shall, on such date as may be specified in the agreement, become for
the purposes of this Act a highway maintainable at the public expense.
At the date of
the agreement there was no existing road over the front land; para (b)
was plainly the paragraph which the parties contemplated as the applicable
provision. The effect of the subsection is to cause a way to become a highway
maintainable at the public expense automatically on the specified date, thereby
dispensing with the common law requirement that in addition to dedication there
should be public acceptance for a way to become a highway.
In the
agreement it was recited that Firthpalm intended to carry out what were called
‘the works’ on the land of R&K in accordance with a plan and specification.
The works were the construction of roads (including carriageways, footpaths,
road islands and road verges) with landscape features, surface water drains and
sewers, all shown on the plan. It was further recited that: Firthpalm desired
the roads on completion to become highways maintainable at the public expense;
Swansea had agreed with Firthpalm that subject to the payment of certain costs
and the maintenance of the works Swansea would ‘do and procure Acts and things
necessary for the taking over and adoption of the roads as highways
maintainable at the public expense’; and R&K had agreed to join in the
agreement for the purpose of dedicating the land on which the works were to be
constructed as thereinafter provided.
The operative
part of the agreement contained the following provisions which are material.
By clause (3),
Firthpalm was to construct the works in accordance with the plan and
specification to the satisfaction of the surveyor (Swansea’s engineer), subject
to the proviso that ‘any amendment to the plan … should be previously approved
… by [Swansea]’. Thus, the agreement expressly contemplated the possibility
that the details shown on the plan might be changed if Swansea consented.
By clause (5),
the surveyor was to issue an interim certificate when the works had been
completed to his satisfaction and Firthpalm was to repair any defects for a
period of 12 months thereafter.
By clause (6),
if at the expiration of that period the surveyor was satisfied that the works
had been duly repaired and were free of defects, he was to issue a certificate
stating that the works were suitable for adoption and thereupon he was to
procure the adoption of the roads by West Glamorgan County Council as highways
maintainable at the public expense.
By clause
(10), if Firthpalm should default in its obligations in any of a number of
specified ways or if it should be wound up, suffer distress or execution or go
into receivership, Swansea on giving notice were to have the right to carry out
the works or to remedy any defect before the adoption of the roads as highways
maintainable at the public expense; and they were to have the further right, by
giving notice, to determine the agreement.
By clause
(15):
Upon the
issue of the final certificate or certificates as herein provided [R&K]
hereby give up and dedicate to the public land on which the works are intended
to be constructed or such part of such land as shall be covered by the final
certificate or certificates to the
intent that the said land shall become a public highway up to and
including the boundary of the said land with other land as indicated on the
plan.
This clause is
an unhappy mixture of present and future events. It purports to be a present
dedication (‘hereby … dedicate’), yet it is qualified by the words ‘Upon the
issue of the final certificate or certificates as herein provided’, plainly a
future and (in view of the provisions for termination of the agreement)
contingent event. Further, the land to be dedicated as a highway would not be
finally identified until the issue of the final certificate or certificates. To
my mind, what was intended by the clause was that R&K would make a
dedication in such form as would obviate the necessity of any further act of
dedication on its part. To that extent it was a present dedication, but could
not be effective until the issue of the final certificate, which was the date
specified in the agreement for the purposes of section 38(3) for the way to
become a highway maintainable at the public expense.
By clause
(16), Swansea were given an option to acquire for one penny the fee simple in
‘the land hereby dedicated’.
By clause
(17), the agreement was terminable upon Swansea giving Firthpalm notice in the
event of failure by Firthpalm to secure that certain drains and sewers to be
constructed in the roads should become public sewers vested in Welsh Water
Authority.
To sum up the
contractual rights acquired by Swansea under the agreement, Swansea had the
right to bring about the coming into existence, at some future time, of a
highway maintainable at the public expense over part of the front land, either
by requiring Firthpalm to perform its obligations to carry out the works or, if
Firthpalm defaulted, by carrying out the works themselves and they had an
option to acquire the freehold of the dedicated land; but on any of the events
of default specified in clauses (10) and (17) they had the right to terminate
the agreement.
Swansea did
not seek to protect by registration any right which they obtained under the
agreement. The judge held, and it is common ground, that the option under clause
(16) is void against OIS.
No doubt
R&K and Firthpalm, if not Swansea as well, contemplated at the time of the
agreement that R&K and Firthpalm would purchase the rear land so that
against the burden undertaken by Firthpalm by the agreement would offset the
benefit of the development of the rear land. But the rear land was sold in
December 1986 to another developer, the first defendant, Simcobuild
Construction Ltd (‘Simcobuild’). Firthpalm failed to carry out the works.
R&K went into receivership. In April 1987 Firthpalm commenced proceedings
against R&K, claiming to be the beneficial owner of the front land and on
November 17 1987 it obtained a vesting order.
In the
meantime on May 6 1987 Swansea issued a default notice under clause (10) of the
agreement so that they could carry out the works. On December 2 1987 Firthpalm
transferred the front land to OIS which paid £500 and assumed liability under a
charge in excess of £25,000 on the front land. OIS was registered as proprietor
of the front land on January 4 1988. At the time of the transfer OIS knew of
the agreement. The works had substantially been completed, but it was not until
June 1988 that the surveyor issued a final certificate, saying that the access
road ‘will now be formally adopted as part of the public highway in accordance
with the terms of the section 38 road agreement’. Swansea pleaded in their
defence that it was from that date that there was a highway over the front
land. In the light of that averment it is immaterial whether there was a
present or future dedication made by R&K by the agreement. It is clear that
no member of the public had any right of passage over the access road before
June 13 1988.
Each of
Simcobuild and OIS commenced proceedings against the other. Simcobuild obtained
an injunction restraining OIS from preventing access to the rear land, but OIS
asserted against Simcobuild that it was entitled to exclude persons from the
access road as it was not bound by the section 38 agreement. The proceedings
were consolidated. In November 1988 Swansea were added as defendants. As
Simcobuild took no part in the trial, the contest has been fought between OIS
and Swansea.
Although there
was oral evidence at the trial, the issue between the parties was simply a
point of law turning on the meaning to be given to ‘public rights’ in section
70(1)(a) Land Registration Act 1925, as the judge in his full and
careful judgment recognised. It was the judge’s
or today, but was, rather, an indefinite phrase. He was not prepared to essay a
definition, but thought that one might get nearer the meaning intended in the
statute by calling it a right ‘existing for the benefit of the public’. He
referred to highways law as primarily a matter of public law and pointed out
that in making the section 38 agreement the highway authority was fulfilling a
statutory function, arranging, in their capacity as custodians for the public
of rights and liabilities in relation to highways, for the construction and
dedication of a highway. He also said that the law recognised a myriad of
rights which are vested and in existence, but not yet exercisable. He concluded
that the discernible and vested and existing legal rights created by the agreement
as at December 1987 or January 1988 amounted to public rights.
Mr Nigel Davis
QC, for OIS, submitted that the judge erred in law in his interpretation as
departing from the well-understood meaning to conveyancers of ‘public rights’
and as inconsistent with views expressed in the leading text-book on land
registration. Miss Elizabeth Appleby QC, for Swansea, argued that the judge was
correct in his conclusion for the reasons which he gave.
I start with
the Land Registration Act 1925. As is notorious, by reason of overriding
interests not being registered, the register of title is not a perfect mirror
of the title to a registered property. It is not possible to rely only on
entries in the register as the complete record of everything that affects the
title. From the inception of the system of land registration an exception has
been made for a number of rights, called overriding interests, subject to which
a purchaser will take, whether or not he is aware of their existence, when he
purchases the land. This exception has been much criticised and suggestions
have from time to time been made for the reduction of the number of overriding
interests (see, for example, the Law Commission’s Third Report on Land
Registration (1987) Law Com No 158) or their abolition. As they constitute
an exception the court should, in my opinion, not be astute to give a wide
meaning to any item constituting an overriding interest.
‘Overriding
interests’ are defined in section 3(xv) as meaning (so far as material) ‘all
the incumbrances, rights and powers not entered on the register but subject to
which registered dispositions are by this Act to take effect …’. By section 20
a disposition of a registered freehold for valuable consideration shall, when
registered, confer on the transferee an estate subject to the incumbrances and
other entries on the register and to overriding interests affecting the estate,
but free from all other estates and interests whatsoever.
By section
70(1):
All registered
land shall … 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 interest shall not be treated as incumbrances within the meaning of this
Act, (that is to say) —
(a)
Rights of common, drainage rights, customary rights (until extinguished),
public rights, profits à prendre, rights of sheepwalk, rights of way,
watercourses, rights of water, and other easements not being equitable
easements required to be protected by notice on the register; …
It is readily
apparent that para (a) comprises a miscellaneous assortment of rights
several of which appear to overlap. But they appear to me to have at least two
common characteristics. The first is that the terms so comprised are all terms
familiar to conveyancers. As Mr Davis said, the subsection is replete with
conveyancing language. None of the terms has been thought to need statutory
definition and it is inherently improbable that any of the terms was intended
to have some popular meaning outside that which one would find in, for example,
a text-book on the law of property. The second is that there is no indication
in the statutory language that the rights are not present rights. One notes by
contrast section 70(1)(f) which provides for rights in course of being
acquired under the Limitation Acts. Prima facie therefore the rights in
para (a) are present rights, presently exercisable and do not include
potential rights.
I cannot agree
with the judge’s view that the term ‘public rights’ is not a recognisable legal
term. I fully accept that in particular cases there may be difficulty in
determining whether a particular right qualifies as a public right, whether
because of its nature or the attendant circumstances, but then similar problems
may arise in respect of other terms such as easements. For my part I regard
what is said in Megarry & Wade, The Law of Real Property, 5th ed
(1984) at p844 as accurately expressing the meaning understood by property
lawyers:
A public
right … is a right exercisable by anyone, whether he owns land or not, merely
by virtue of the general law.
To the like
effect is Gray, Elements of Land Law, 2nd ed (1993) at p1048. There can
be no dispute that certain rights are public rights, such as rights of passage
along the highway, rights of passage in navigable waters, rights of fishing and
rights to discharge into a public sewer. Each such right is exercisable by
anyone merely by virtue of being a member of the public and under the general
law. On that test the rights under the agreement were not public rights: no
member of the public could exercise any right of way over the front land, there
being no highway at the relevant time. Nor did any member of the public have
any right to require that Swansea should procure a highway to come into
existence on the front land.
In Ruoff &
Roper on The Law and Practice of Registered Conveyancing, prior to the
text being changed in 1994 to accommodate the decision under appeal, there
appeared the following passage (at para 6–09):
Public rights:
their probable nature
Public
rights’ appear amongst the assortment of easements and other interests and, no
doubt, they include such obvious and well-established rights as that of the
public to enjoy highways or to discharge effluent into a public sewer … It is
uncertain whether the term may have a wider meaning so as to also include the
potential liabilities arising under statute to which all land may be subject
and the corresponding rights and powers exercisable by central and local
government on behalf of the public. However, once such a liability has become a
practical reality through the exercise of these powers, it appears to be
stretching the ordinary meaning of words too far to include as ‘public rights’
those acquired by a public body in the performance of its statutory functions
in regard to a particular property … It may be … that ‘public rights’
incorporate the rights inherent in the general liability that all land is
subject to the possibility that it will be compulsorily acquired or may be made
subject to compulsory orders relating to pipelines. Nevertheless, once steps
have been taken to exercise those rights in respect of a particular property,
the ensuing rights and liabilities cannot be regarded as overriding in the
context of public rights and, indeed, they may require protection by
registration.
The judge
commented on the passage:
I find the
text extremely tentative, and the possibility of matters dodging in and out of
the category of public rights without, at the end of the day, anyone knowing
whether the result is registerable or not, a wholly unsatisfactory state of the
law.
I accept that
uncertainty in this area is undesirable. But that part of the text which can
aptly be described as tentative is where the authors discuss the possibility
that ‘public rights’ may go beyond rights exercisable by any member of the
public like public rights of way. To my mind, the authors give little support
to that possibility and they cannot fairly be described as tentative when they
insist that once a public body in the performance of their statutory functions
acquire rights in regard to any particular property, those rights are not
‘public rights’. That is the part of the text that is of particular relevance
to the present case and, in my judgment, on that point the authors’ views are
correct.
Having regard
to the scheme of the Land Registration Act 1925, I can see no justification for
giving ‘public rights’ an extended meaning so as to embrace rights existing for
the benefit of the public when not exercisable by any member of the public. The
judge’s approach would involve consideration of whether the rights in question
were acquired by a body exercising a public law function. So to construe
section 70(1)(a) would be productive of the very uncertainty which the
judge rightly castigated. Further, it would have some very surprising
consequences. It would have been unnecessary for Parliament to have
enacted a separate category of overriding interests for the rights and title of
the Coal Commission in respect of coal and mines of coal (see section 41 of the
Coal Act 1938) and of the commission’s successors, National Coal Board and
British Coal Corporation. Further, highway authorities have various powers to
acquire land and when an authority in exercise of their powers enters into an
agreement for such acquisition they can be said to hold their contractual
rights for the benefit of the public in that the land is intended to become a
highway. Can it really have been intended that such rights need not be
registered because they were ‘overriding rights’? In the agreement with which
we are concerned clause (16) can be said to be an option existing for the
benefit of the public. Yet the judge held that it was void for want of
registration and that is not challenged. Miss Appleby’s response was to accept
that estate contracts did need registration; but that does not support the
wider construction of ‘public rights’ for which she was contending. Further,
why did the section 38 agreement not constitute an estate contract? By section
263 of the Highways Act 1980, a highway vests in the highway authority. The
property in the surface of the road and in so much of the soil below and in the
air above as is reasonably required for its control, protection and maintenance
as a highway is transferred to the authority. The interest in the property
vested in the authority is a legal estate in fee simple, determinable if the
highway ceases to be a highway: see Halsbury’s Laws , 4th ed, vol 21
para 105.
It is of
course important that a highway authority which enters into a section 38
agreement should be able to protect their interest so as to bind a subsequent
purchaser of the land over which the highway is to run. But it has to be said
that Swansea failed to take the protective steps which were available to them.
First, the agreement was not expressed to be made under section 33 of the Local
Government (Miscellaneous Provisions) Act 1982; if it had been (and it appears
to be common practice now to do so: see, for example, The Encyclopaedia of
forms and precedents, 5th ed, vol 18, forms 7, 8 and 10) the covenant to
carry out the works would have been binding on the successors in title to the
covenantor. Second, Swansea did not register any estate contract as a land
charge or lodge any caution under section 54 of the Land Registration Act 1925
or notice under section 49 ibid. I would also mention that as from July
14 1992, where a local highway authority are satisfied that a street is likely
to become a highway maintainable at the public expense, they may make a
declaration to that effect and register it as a local land charge: section 87
of the New Roads and Street Works Act 1991.
For these
reasons, which owe much to Mr Davis’ excellent argument, I would hold that the
rights created by the agreement were not public rights within the meaning of
section 70(1)(a) and in consequence do not bind OIS which took the front
land free from them. I would therefore allow this appeal.
For
completeness I would add that Mr Davis has assured us that OIS does not intend
to prevent access to the rear land, which has now been developed and a very
large number of houses have been built thereon.
Beldam LJ
agreed and did not add anything.
Also agreeing,
Staughton LJ said: I am
not sure that the plaintiff, Overseas Investments Services Ltd, comes to court
with altogether clean hands since it knew of the agreement when it acquired
title to the land in question. But the fate of this appeal depends on the
meaning of the words ‘public rights’ in section 70(1)(a) of the Land
Registration Act 1925.
Mr Davis
submits that they mean rights which can be exercised by any member of the
public. That view has the support of Megarry & Wade on The Law of Real
Property, 5th ed (1984) at p844 and Gray, Elements of Land Law, 2nd
ed (1993) at p1048.
Miss Appleby
in the opposite corner submits that there should be no further definition of
‘public rights’ beyond what the words themselves provide. She was, however,
prepared to accept a suggestion from the court that the words refer to rights
of a public nature. That would arguably include the rights of Swansea City
Council, a public body, although at the relevant time rights under the
agreement in question could be exercised only by the council and not by anybody
else. The council could in certain circumstances determine the agreement and
thus destroy the rights without the permission of members of the public.
In my
judgment, the meaning put forward by Mr Davis is to be preferred. It is
desirable that overriding interests should be in a narrow rather than a wide
class and should be clearly defined. The phrase ‘public rights’ has a clear and
limited meaning. It refers to rights exercisable by any member of the public.
Rights of a public nature, on the other hand, is or may be a vague test and may
be much wider.
I would allow
the appeal, give judgment for the plaintiff against the second respondents and
dismiss the second respondents’ counterclaim.
Appeal
allowed.
