Contract for sale of land — Unregistered and void against chargee — Whether chargee bound by interest of purchaser under bare trust, constructive trust or proprietary estoppel
In February
1982 the first defendant acquired by assignment a lease for 99 years of a
maisonette; at all material times the title was unregistered. Following the
death of his brother, the first defendant allowed the second defendant, his
sister-in-law, to move into the maisonette following the payment to him of
£19,000, the first defendant saying that the maisonette would be hers. In 1983
the second defendant carried out improvement works to the maisonette. On
November 25 1986 the first defendant executed a charge over the property in
favour of the plaintiff bank to secure a loan. The first defendant failed to
repay the loan, and the bank brought proceedings for an order for possession.
The recorder found that there was an uncompleted contract for the sale of the
maisonette to the second defendant; the contract had not been protected by
registration. He dismissed the claim and made a declaration that the first
defendant held the lease on trust for the second defendant, so that her
interest was not subject to the legal charge. On the bank’s appeal, the parties
agreed that the bank was not bound by the unregistered, and uncompleted,
contract, but that the bank would be bound by any interest the second defendant
might have which was separate and distinct from the unregistered contract. The
second defendant contended she had such an interest under a bare trust, a
constructive trust and/or by virtue of proprietary estoppel.
under a bare trust for the trust had no existence except as the equitable
consequence of the contract, and the contract was avoided by section 4(6) of
the Land Charges Act 1925. (2) There is no room for the implication for any
further trust, such as a constructive trust, where a bare trust already existed
by virtue of the contract. (3) There is no room for the application of the
principles of proprietary estoppel when, at the time of the relevant
expenditure, there was already a bare trust arising in consequence of an
enforceable contract to the same effect as the interest sought pursuant to the
proprietary estoppel. It would not be right to confer on the second defendant
by means of proprietary estoppel binding on the bank that which the 1925 Act
prevented her from obtaining by the contract the Act has declared void.
The following
cases are referred to in this report.
Austin v Keele (1987) 61 ALJR 605
Bridges v Mees [1957] Ch 475; [1957] 3 WLR 215; [1957] 2 All ER 577
Inwards v Baker [1965] 2 QB 29
Ives (ER)
Investment Ltd v High [1967] 2 QB 379;
[1967] 2 WLR 789; [1967] 1 All ER 504, CA
Lloyds
Bank plc v Rosset [1991] 1 AC 107; [1990] 2 WLR
867; [1990] 1 All ER 1111; (1990) 60 P&CR 311; 22 HLR 349, HL
Shiloh
Spinners Ltd v Harding [1973] AC 691; [1973] 2 WLR
28; [1973] 1 All ER 90; (1973) 25 P&CR 48, HL
Taylors
Fashions Ltd v Liverpool Victoria Trustees Co Ltd
[1982] QB 133; [1981] 2 WLR 576; [1981] 1 All ER 897; [1979] 2 EGLR 54; (1979)
251 EG 159
Western
Fish Products Ltd v Penwith District Council [1981]
2 All ER 204; (1978) 77 LGR 185; 38 P&CR 7; [1978] JPL 623, CA
Willmott
v Barber (1880) 15 ChD 96; 49 LJ Ch 792; 43 LT 95;
28 WR 911
This was an
appeal by the plaintiff, Lloyds Bank plc, against the decision of Mr Recorder
Holmes in Cambridge County Court, who on July 5 1994 dismissed their claim for
possession of premises against the first defendant, Michael Carrick, and the
second defendant, Mrs Margaret Carrick, his sister-in-law.
Josephine
Hayes (instructed by Taylor Vintners, of Cambridge) appeared for the appellant;
Neil Vickery (instructed by Quirke & Co, of Croydon) represented the
respondents.
Giving
judgment at the invitation of Beldam LJ, Morritt
LJ said: This is an appeal of Lloyds Bank plc, to which I shall refer as
the bank, from the order of Mr Recorder Holmes made in Cambridge County Court
on July 5 1994. By that order he dismissed the bank’s claim as mortgagee for
possession of leasehold property known as 7 Derby Way, Newmarket, Suffolk, and
made a declaration that the mortgagor, the first defendant Mr Carrick, held the
lease of that property in trust for the second defendant, Mrs Carrick, so that
her interests in and rights over that property were not subject to the bank’s
charge dated November 25 1986.
The facts are
simple and may be shortly stated: 7 Derby Way, Newmarket, is a maisonette the
title to which is unregistered. By a lease dated August 4 1971 it was demised
for a term of 99 years from March 25 1971 in consideration of a premium and a
relatively nominal rent. There were no restrictions on the lessee’s ability to
assign the term, which, on February 2 1982, was assigned to the first defendant
Mr Carrick, who then lived in the maisonette.
Mr Jeffrey
Carrick was the brother of Mr Carrick and the husband of the second defendant.
Mr Jeffrey Carrick and Mrs Carrick, together with their two small boys, lived
in Edinburgh Road, Newmarket. Mr Jeffrey Carrick died in March 1982. After his
death, but before November 1982, there were discussions between Mr Carrick and
Mrs Carrick as to where she should live. Those discussions and their aftermath
were described by the recorder in the following terms:
the first
defendant says that he told Mrs Carrick that, effectively, ‘If you like, you
can come and live in this property [ie 7 Derby Way, Newmarket]’. She was
concerned whether she could afford to do so and whether she could sell her
house and what would happen. Suffice it to say that Mr Michael Carrick, the
first defendant, said to his sister-in-law: ‘Put the property on the market and
what you get from the net proceeds of sale you can pay to this property, which
will become yours.
Effectively,
that is what happened. Mrs Carrick, the second defendant, put her property on
the market. She realised a figure, which after deductions of repayment of
mortgage (no doubt estate agent’s commission and legal expenses and the usual
outgoings that one incurs on a sale), amounted to around £19,000. As a result
of completing, the £19,000 was paid over to the first defendant. The first
defendant, being a building contractor, had a number of other properties at the
material time and, in fact, went to live at another property, taking his then
wife and child with him, leaving Mrs Carrick to come and live in the property.
Mrs Carrick and her two children moved into the maisonette in about November
1982.
In the course
of his judgment the recorder referred to the existence of a charge over the
maisonette in favour of the bank existing at that time, but that seems to be an
error for the original document is dated November 10 1983. At all events Mrs
Carrick became aware of it and raised the matter with Mr Carrick on a number of
occasions when he told her not to worry as he would sort it out. In the event
it was redeemed on November 11 1986 some two weeks before the execution of the
charge with which this appeal is concerned. At some time before it was redeemed
works were carried out in the maisonette consisting of a kitchen extension,
central heating and damp proofing. They were effected by Mr Carrick at a cost
of about £5,000, but paid for by Mrs Carrick’s father.
The legal
charge on which the bank relies is dated November 25 1986 and was made between
Mr Carrick and the bank to secure all moneys due on any account by the former
to the latter. Mr Carrick as beneficial owner charged the lease of the
maisonette as security for those moneys. The charge was preceded by a
questionnaire signed by Mr Carrick to the effect that, to the best of his
knowledge, there were no persons other than the mortgagor who would then or
thereafter occupy the maisonette.
On January 16
1991 and again on August 9 1991 the bank demanded from Mr Carrick the
substantial sums then due from him to the bank. They were not paid and the bank
commenced these proceedings in Cambridge County Court by a summons issued on
February 27 1992 seeking against Mr Carrick a judgment for £89,010.95 and
interest thereon accruing at the rate of £53.18 per day and an order for
possession of the maisonette.
By his answer
dated March 8 1992 Mr Carrick admitted the money claim but, in respect of the
possession claim, he alleged that he was and had been since a time before the
execution of the legal charge relied on by the bank a bare trustee of the
maisonette for his sister-in-law. Accordingly, Mrs Carrick was joined as the
second defendant and ordered to serve a defence. By her defence and
counterclaim served on April 27 1992 Mrs Carrick claimed that Mr Carrick had
been a bare trustee for her of the long leasehold interest in the maisonette.
The material paragraphs are paras 5, 6, 9, 10 and 11 which are in the following
terms:
5. Pursuant
to a suggestion made by the First Defendant to the Second Defendant, the Second
Defendant in or about October 1982 sold her former matrimonial home and took up
occupation at 7 Derby Way, Newmarket which she has occupied at all material
times since that date.
6. On the
direction of the Second Defendant the Solicitors who acted on the sale of the
said matrimonial home paid the resulting proceeds of around £19,000 to the
order of the First Defendant. The said sum was for the acquisition of 7 Derby
Way, Newmarket by the Second Defendant
…
9. After the
said acquisition of 7 Derby Way Newmarket the second defendant was responsible
for and paid all outgoings relating to 7 Derby Way.
10. The
second defendant in or about 1983 had an extension built to 7 Derby Way at a
cost of about £5,000 which the second defendant paid.
11. It was
the common intention of both the first and second defendants that 7 Derby Way,
Newmarket should become the property of the second defendant free of all
incumbrances.
The bank
replied to the effect that the interest of Mrs Carrick was registrable as a
land charge of class C(iv), namely an estate contract, and was void against the
bank for want of registration. The bank sought particulars of the defence so as
to require Mrs Carrick to spell out the origin of the interest she claimed. The
particulars served by Mrs Carrick on September 17 1993 contended:
1. that no
contract of sale was concluded between the First and Second Defendant in
respect of the First Defendant’s interest in 7 Derby Way;
2. that upon
the Second Defendant entering into occupation of 7 Derby Way and paying to the
First Defendant the sum of about £19,000 as pleaded in paragraph 6 of the Defence
and Counterclaim, the First Defendant held his interest in 7 Derby Way upon
bare trust for the Second Defendant;
3. that
further and alternatively, the Second Defendant paid the said sum and entered
into occupation of 7 Derby Way and acted as pleaded in paragraphs 9 and 10 of
the Defence and Counterclaim, with the intention, which was a common intention
of the First and Second Defendants, that 7 Derby Way was to be the Second
Defendant’s permanent home and that she was to be absolutely entitled to the
beneficial interest in it;
Yet further
particulars were sought from Mrs Carrick and given by her on December 20 1993.
These included the following passage:
It was agreed
that the Second Defendant would buy 7 Derby Way for whatever she received upon
the sale of 93 Edinburgh Road (in the event about £19,000). The First Defendant
told the Second Defendant not to worry about the matter further and that he
would sort things out. The Second Defendant thereafter left it up to the First
Defendant to sort out the legal formalities of the sale. The Second Defendant
moved in to 7 Derby Way on 19th November 1982. She paid the First Defendant the
proceeds of sale from 93 Edinburgh Road on about that date. Since then the
Second Defendant has lived at 7 Derby Way and paid all the outgoings on it. The
agreement between the Defendants is not recorded in writing.
The action was
heard by the recorder on July 4 1994. He heard evidence from two bank officials
and from Mr Carrick and Mrs Carrick. He gave judgment on July 5 1994. The
recorder set out the history of the case, the state of the pleadings and the
documents of title relating to the maisonette. He expressed the view, at p12 of
the transcript of his judgment, that the case turned on the law so far as it
relates to registrable interests and later, at p13 of the transcript, whether
there was a contract between Mr Carrick and Mrs Carrick. In respect of these
issues his conclusions set out on p15 of the transcript were:
In my view,
there was a contract that upon payment of the £19,000 by the second defendant
there arose, in my view, a bare trust. In other words, there was nothing left
vested in Mr Carrick (the first defendant) other than the legal title. Mr
Carrick had no right to the property. He simply held the legal title upon
trust. Mrs Carrick could have called for the legal title to be conveyed to her
by the first defendant as bare trustee. If, as I do, I follow that through the
interest behind the bare trust is not registrable.
On the basis
that there was no registrable interest the recorder then went on to consider
whether the bank had notice of the interest of Mrs Carrick so that the legal
charge took effect subject to it. He concluded on all the evidence that the
bank was not entitled to rely simply on the answer to the questionnaire for one
or more of its officers knew that Mrs Carrick was resident in the maisonette
and had constructive notice of her beneficial interest for any inquiry of her
would have revealed it. The recorder declined to deal with a submission based
on proprietary estoppel as, in his view, it had not been pleaded and did not
arise.
The bank
appeals with the leave of Neill LJ and Cazalet J granted on March 31 1995. It
contends that the recorder should have found that the only interest of Mrs
Carrick in the maisonette was an estate contract within Land Charges Act 1972
and accordingly was void for want of registration as against the bank as the
purchaser of a legal estate for valuable consideration.
By a
respondent’s notice served on May 1 1995 Mrs Carrick contends that the decision
of the recorder should be upheld on the additional ground that her expenditure
on the improvements to the maisonette prior to the legal charge was incurred in
the belief encouraged by Mr Carrick that she was the owner of the property and
thus gave rise to an equity in her favour. She submits that the bank had notice
of it and that such equity should be satisfied by the affirmation of the
recorder’s order. It was accepted by counsel on her behalf that she could not
go outside the facts pleaded in her defence of which I have quoted the relevant
paragraphs. The other points referred to in the respondent’s notice were
abandoned at the hearing.
It is
convenient to consider first the relevant statutory provisions. Land Charges
Act 1972 replaced Land Charges Act 1925. So far as relevant it provides:
The
register of land charges
2. — (1) If a charge on or obligation affecting land falls into
one of the classes described in this section, it may be registered in the
register of land charges as a land charge of that class.
…
(4) A Class C
land charge is any of the following [not being a local land charge], namely —
…
(iv) an estate
contract;
and for this
purpose —
(iv) an estate
contract is a contract by an estate owner or by a person entitled at the date
of the contract to have a legal estate conveyed to him to convey or create a
legal estate, including a contract conferring either expressly or by statutory
implication a valid option to purchase, a right of pre-emption or any other
like right.
…
4. — (6) An estate contract and a land charge of Class D created
or entered into on or after 1st January 1926 shall be void as against a
purchaser for money or money’s worth [or, in the case of an Inland Revenue
charge, a purchaser within the meaning of the Capital Transfer Tax Act 1984] of
a legal estate in the land charged with it, unless the land charge is
registered in the appropriate register before the completion of the purchase.
Section 17
incorporates the definitions contained in the Law of Property Act 1925 of legal
estate and purchaser, which, it is common ground, include a charge by way of
legal mortgage and a mortgagee such as the bank.
So far as
relevant section 199 of the Law of Property Act 1925 provides:
Restrictions
on constructive notice
199. — (1) A purchaser shall not be prejudicially affected by
notice of —
(i) any
instrument or matter capable of registration under the provisions of the Land
Charges Act 1925, or any enactment which it replaces, which is void or not
enforceable as against him under that Act or enactment, by reason of the
non-registration thereof;
In the light
of these provisions and, no doubt, the consideration by each party of the
written argument of the other the issues between them were narrowed
considerably. First, it is accepted by Mrs Carrick that if her only interest in
the maisonette was derived from the contract, which she accepts is void as
against the bank as an unregistered estate contract, then the appeal succeeds.
Second, Mrs Carrick accepts that the original contract between her and Mr
Carrick, as found by the recorder, was a valid open contract for the purchase
of the maisonette; that it became enforceable by her when she partly performed
it by entering into possession and paying the whole of the purchase price, but
that it remained executory, that is to say uncompleted, at the time of the
legal charge to the bank granted in November 1986. Third, the bank accepts that
if Mrs Carrick had an interest in the maisonette not arising but separate and
distinct from the unregistered contract it was and is binding on the bank for,
as found by the recorder, the bank had notice of it.
Thus the issue
argued on this appeal was whether Mrs Carrick had an interest in the maisonette
separate and distinct from that which arose under the unregistered estate
contract which was capable of binding the bank as successor in title to Mr
Carrick. For Mrs Carrick it was submitted that she did. It was contended that she
was entitled to such an interest under a bare trust, a constructive trust and
by virtue of a proprietory estoppel.
I shall
consider each of these points in due course. But before doing so it is
necessary to consider the position of Mr Carrick and Mrs Carrick before the
charge to the bank was executed. At the time it was made the contract was valid
but, as provided by section 40 Law of Property Act 1925, unenforceable for want
of a memorandum in writing or part performance. It became enforceable when in or
about November 1982 Mrs Carrick paid the purchase price to Mr Carrick and went
into possession. One consequence of the contract becoming enforceable was that
it was specifically enforceable at the suit of Mrs Carrick. Accordingly, Mr
Carrick became a trustee of the maisonette for Mrs Carrick. Normally such
trusteeship is of a peculiar kind because the vendor himself has a beneficial
interest in the property as explained in Megarry & Wade on The Law of
Real Property 5th ed, p602. But in this case as Mrs Carrick had paid the
whole of the purchase price at the time the contract became enforceable Mr
Carrick as the vendor had no beneficial interest. Thus he may properly be
described as a bare trustee cf Bridges v Mees [1957] Ch 475, at
p485. It follows that at all times after November 1982 Mrs Carrick was the
absolute beneficial owner of the maisonette and Mr Carrick was a trustee of it
without any beneficial interest in it.
The argument
for Mrs Carrick relied on the relative position at law and in equity as I have
described it to found the argument that such an absolute equitable interest was
not itself registrable but bound the bank
such interest came or started from the contract but, he contended, it matured
into an interest separate and distinct from the contract as soon as the
purchase price was paid in full.
For my part, I
am unable to accept this analysis. The payment of £19,000 by Mrs Carrick to Mr
Carrick did not as such and without more give her any interest in the
maisonette. Nor, prior to the conclusion of the contract, were the
circumstances such that Mrs Carrick could assert that her brother-in-law held
the maisonette on any trust for her benefit. The source and origin of the trust
was the contract; the payment of the price by Mrs Carrick served only to make
it a bare trust by removing any beneficial interest of Mr Carrick. Section 4(6)
Land Charges Act 1972 avoids that contract as against the bank. The result, in
my judgment, must be that Mrs Carrick is unable to establish the bare trust as
against the bank for it has no existence except as the equitable consequence of
the contract. Accordingly, I reject the contention founded on the bare trust.
The second
contention for Mrs Carrick was to the effect that she was entitled to the whole
beneficial interest in the maisonette arising under a constructive trust and
that that interest was not registrable so that the bank having had constructive
notice of it took subject to it. For this proposition her counsel relied on the
speech of Lord Bridge of Harwich in Lloyds Bank plc v Rosset
[1991] 1 AC 107. That case was concerned with the question of what must be
established to entitle a wife to an equitable interest in registered land the
title to which is registered in the sole name of her husband. At p132E Lord
Bridge of Harwich said:
The first and
fundamental question which must always be resolved is whether, independently of
any inference to be drawn from the conduct of the parties in the course of
sharing the house as their home and managing their joint affairs, there has at
any time prior to acquisition, or exceptionally at some later date, been any
agreement, arrangement or understanding reached between them that the property
is to be shared beneficially. The finding of an agreement or arrangement to
share in this sense can only, I think, be based on evidence of express
discussions between the partners, however imperfectly remembered and however
imprecise their terms may have been. Once a finding to this effect is made it
will only be necessary for the partner asserting a claim to a beneficial
interest against the partner entitled to the legal estate to show that he or
she has acted to his or her detriment or significantly altered his or her
position in reliance on the agreement in order to give rise to a constructive
trust or a proprietary estoppel.
Counsel
recognised that in this case the contract between Mr Carrick and Mrs Carrick
was entered into after Mr Carrick had taken an assignment of the lease into his
own name. But he submitted that the same principle applied and for that purpose
relied on the statement of Lord Oliver of Aylmerton in giving the opinion of
the Privy Council in Austin v Keele (1987) 61 ALJR 605, at p609,
where he said
Although Lord
Diplock [Gissing v Gissing [1971] AC 886 at p905] referred to the
formation of a common intention ‘at the time of acquisition’, the Court of
Appeal expressed the view, with which their Lordships agree, that although it
may be more difficult to prove the requisite intention in relation to property
already held beneficially by the trustee, there is no reason in principle why
the doctrine should be limited to an intention formed at the time of the first
acquisition of the property — an opinion echoed by Mustill LJ in his judgment
in Grant v Edwards [1986] Ch 638 at 651. In essence the doctrine
is an application of proprietary estoppel and there is no reason in principle
why it should be confined to the single event of acquisition of the property by
the owner of the legal estate.
Counsel for
Mrs Carrick submitted that if there had been no contract then on the proper
application of these principles there would have been a constructive trust in
favour of Mrs Carrick. From this he argued that Mrs Carrick should not be in
any worse position just because there was a contract.
In this case
there was a trust of the maisonette for the benefit of Mrs Carrick precisely
because there had been an agreement between her and Mr Carrick which, for her
part, she had substantially if not wholly performed. As between her and Mr
Carrick such trust subsisted at all times after November 1982. I agree with
counsel for the bank that there is no room in those circumstances for the
implication or imposition of any further trust of the maisonette for the
benefit of Mrs Carrick In Lloyds Bank plc v Rosset there was no
contract which conferred any interest in the house on the wife. As with all
such statements of principle the speech of Lord Bridge of Harwich must be read
by reference to the facts of the case. So read there is nothing in it to
suggest that where there is a specifically enforceable contract the court is
entitled to superimpose a further constructive trust on the vendor in favour of
the purchaser over that which already exists in consequence of the contractual
relationship.
It is true
that on this footing the ultimate position of Mrs Carrick with the benefit of a
specifically enforceable contract may be worse than it would have been if there
had been no contract. But that is because she failed to do that which
parliament has ordained must be done if her interest is to prevail over that of
the bank, namely register the estate contract. Her failure in that respect
cannot, in my view, justify the implication or imposition of a trust after the
execution of the charge when the dealings between Mr Carrick and Mrs Carrick
before such execution did not. For these reasons I would reject the second
point on which Mrs Carrick relied.
The third
contention was that Mrs Carrick is entitled to the benefit of a proprietary
estoppel. Counsel on her behalf submitted by reference to the principles set
out in Snell’s Equity 29th ed pp 574 to 576, that such an estoppel arose
in her favour by virtue of the facts pleaded in her defence. He submitted that
Mrs Carrick had paid the purchase price and carried out the improvements to the
maisonette in the belief common to both her and Mr Carrick and to that extent
encouraged by him that she either did or would own it. Reliance was placed on the
decisions of this court in Inwards v Baker [1965] 2 QB 29 and Ives
(ER) Investment Ltd v High [1967] 2 QB 379 as establishing that such
an estoppel gives rise to an interest in land capable of binding a successor in
title with notice.
This was
disputed by counsel for the bank. She submitted that such principles could not
be applied to cases in which there was no belief or expectation of having or
acquiring an interest in someone else’s land. In this context she relied on Western
Fish Products Ltd v Penwith District Council [1981] 2 All ER 204.
Further she submitted that the facts did not warrant such an estoppel as they
did not cover all the elements referred to as ‘probanda’ in Willmott v Barber
(1880) 15 ChD 96 and were otherwise insufficient. In addition she submitted
that such an estoppel cannot give rise to an interest in land capable of
binding successors in title with notice.
I would
observe at the outset that it is a matter of some doubt whether the principles
of proprietary estoppel differ from those of that species of constructive trust
which was referred to by Lord Bridge of Harwich in Lloyds Bank v Rosset.
In the passage from his speech which I have already quoted he treated the two
labels as interchangeable. To the like effect is the passage in the advice of
the Privy Council in Austin v Keele given by Lord Oliver of
Aylmerton which I have also quoted. However that may be the case under this
head was put somewhat differently and should be considered on its own merits.
With regard to
the second submission of counsel for the bank I think that it is now clear that
to constitute the requisite estoppel it is not necessary to establish all of
the five elements or ‘probanda’ referred to by Fry J in Willmott v Barber
(1880) 15 ChD 96 at pp 105–106. In his judgment in Taylors Fashions Ltd
v Liverpool Victoria Trustees Co Ltd [1982] QB 133* Oliver J traced
through the subsequent cases in which this question had been considered. I do
not propose to repeat the process but would respectfully agree with the
conclusion of Oliver J that proof of all those elements or ‘probanda’ is not
necessary to found an estoppel. For my part, I agree with the proposition
stated by Oliver J at p151–152 that:
*Editor’s
note: Also reported at [1979] 2 EGLR 54
… the more
recent cases indicate, in my judgment, that the application of the Ramsden
v Dyson, LR 1 HL 129 principle — whether you call it proprietary
estoppel, estoppel by acquiescence or estoppel by encouragement is really
immaterial — requires a very much broader approach which is directed rather at
ascertaining whether, in particular individual circumstances, it would be
unconscionable for a party to be permitted to deny that which, knowingly or
unknowingly, he has allowed or encouraged another to assume to his detriment
than to inquiring whether the circumstances can be fitted within the confines
of some preconceived formula serving as a universal yardstick for every form of
unconscionable behaviour.
So regarded,
knowledge of the true position by the party alleged to be estopped, becomes
merely one of the relevant factors it may even be a determining factor in
certain cases — in the overall inquiry.
In Western
Fish Products Ltd v Penwith District Council [1981] 2 All ER 204 the
plaintiff carried out works on its own land in reliance on statements made by
an officer of the local planning authority that permission would be granted for
its development. Planning permission was in due course refused and enforcement
notices were served. The plaintiff then instituted proceedings for a
declaration that it was entitled to the permissions the officer had represented
that it would obtain in reliance on which the paintiff had carried out the
works on its own land. The claim failed on a number of grounds. In relation to
the claim to a proprietory estoppel Megaw LJ giving the judgment of the court
said at p218h
We know of no
case, and none has been cited to us, in which the principle set out in Ramsden
v Dyson and Crabb v Arun District Council has been applied
otherwise than to rights and interests created in and over land. It may extend
to other forms of property: see per Lord Denning MR in Moorgate Mercantile
Co Ltd v Twichings [1975] 3 All ER 314 at 323–324, [1976] QB 225 at
242. In our judgment there is no good reason for extending the principle
further. As Harman LJ pointed out in Campbell Discount Co Ltd v Bridge
[1961] 2 All ER 97 at 103, [1961] 1 QB 445 at 459, the system of equity has
become a very precise one. The creation of new rights and remedies is a matter
for Parliament, not the judges.
In his reply
counsel for the plaintiffs seemed to recognise that the reported cases did put
limits to the application of the so-called concept of proprietary estoppel. He
submitted that the plaintiffs’ case was within that concept because what the
defendant council, by their officers, had represented had, to their knowledge,
caused the plaintiffs to spend money on or in connection with their own land
which they would not otherwise have spent. On their own case they have spent
money in order to take advantage of existing rights over their own land which
the defendant council by their officers had confirmed they possessed. There was
no question of their acquiring any rights in relation to any other person’s
land, which is what proprietary estoppel is concerned with.
In my
judgment, the claim of Mrs Carrick fails on a number of grounds. First, as in
the case of the constructive trust, I do not see how there is any room for the
application of the principles of proprietary estoppel when at the time of the
relevant expenditure there was already a bare trust arising in consequence of
an enforceable contract to the same effect as the interest sought pursuant to
the proprietary estoppel. As the evidence showed Mrs Carrick knew of the need
for a conveyance and was content that it should be deferred. Thus at the time
that she paid the price and committed herself to the expenditure on the
subsequent improvements she believed, rightly, that she was spending the money
in respect of her own property albeit under an uncompleted contract. In this
respect I see no relevant distinction between this case and that of Western
Fish Products Ltd v Penwith District Council.
Second, this
is not a case in which the expectations of Mrs Carrick have been defeated by Mr
Carrick seeking to resile from the position he had encouraged her to expect. As
far as he is concerned he has always accepted that she had contracted to buy
the maisonette and had paid the price in full. As against him the contract is
still binding and enforceable, although as he is unable to redeem the mortgage
he is in breach of contract for having charged the maisonette and in breach of
trust for failing to account to Mrs Carrick for the money raised on the
security of the maisonette. Mrs Carrick’s expectations have been defeated
because the contract was not registered at any time before the charge was
granted and parliament has decreed that in those circumstances the contract is
void against the bank.
Third, it was
common ground that the right arising from a proprietary estoppel cannot exceed
that which the party sought to be estopped encouraged the other to believe that
she had or would acquire. The party sought to be estopped is Mr Carrick. In so
far as he encouraged Mrs Carrick to believe that she was or would become the
beneficial owner of the maisonette there is no further right to be obtained for
she was, and, subject to the charge, still is. But counsel for Mrs Carrick
submits that Mr Carrick went further and encouraged her in the belief that she
was or would become the legal owner of the maisonette. Apart from the facts
that this was never alleged in the defence of Mrs Carrick nor explored in
evidence at the trial I do not think that it could avail Mrs Carrick. Section
4(6) of the Land Charges Act 1972 invalidates, as against the bank, any
unregistered contract by the estate owner for the conveyance of the legal
estate. It cannot be unconscionable for the bank to rely on the
non-registration of the contract. I do not see how it could be right to confer
on Mrs Carrick indirectly and by means of a proprietary estoppel binding on the
bank that which parliament prevented her from obtaining directly by the
contract it has declared to be void. To avoid any future misunderstanding I
would emphasise that there was and is a valid and enforceable contract as
against the vendor. Accordingly this case is quite unlike those which may
become more prevalent where there is no contract at all not because there was
no agreement but because the agreement was not in writing as now required by
section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.
In my
judgment, the claim based on proprietary estoppel fails. In the circumstances
it is unnecessary to consider further the submission of counsel for the bank to
the effect that a proprietary estoppel cannot give rise to an interest in land
capable of binding successors in title. This interesting argument will have to
await another day, though it is hard to see how in this court it can surmount
the hurdle constituted by the decision of this court in Ives (ER) Investment
Ltd v High [1967] 2 QB 379.
For all these
reasons I consider that the recorder was wrong to have held that Mrs Carrick
had any interest valid against the bank sufficient to constitute a defence to
the claim against her for possession of the maisonette. I would allow this
appeal.
This result
seems to me to be inevitable in the light of the provisions of the Land Charges
Act 1972 and of the Law of Property Act 1925 I quoted earlier. However it
should be noted that the result would have been different if the title to the
maisonette had been registered. In such a case the interest of Mrs Carrick, who
was in possession of the maisonette and of whom no inquiry had been made, would
have been an overriding interest under section 70(1)(g) of the Land
Registration Act 1925. As such it would have been binding on the bank.
As the authors
of Megarry & Wade on The Law of Real Property 5th ed point out at
pp186–187 the same position would have been achieved under the Law of Property
Act 1922 for what is now section 14 of the Law of Property Act 1925 was then in
a part which also contained the legislation which subsequently became the Land
Charges Act 1925.
In my view, it
is beyond doubt that section 14 Law of Property Act 1925 does not achieve for
unregistered land that which section 70(1)(g) of the Land Registration
Act 1925 achieves for registered land but whether that was originally intended
or is a quirk of the process of breaking up the Law of Property Act 1922 into,
among others, the Law of Property Act 1925 and Land Charges Act 1925 is
unclear. What is certain is that it must be for others to consider and for
parliament to decide whether this distinction between registered and
unregistered land should continue, particularly as the system for the
registration of incumbrances in the case of unregistered land is by no means
complete as shown by Inwards v Baker [1965] 2 QB 29; Ives (ER)
Investment Ltd v High [1967] 2 QB 379 and Shiloh Spinners Ltd
v Harding [1973] AC 691.
Sir Ralph
Gibson agreed and did not add anything.
Also agreeing,
Beldam LJ said: For the
reasons given by Morritt LJ, I agree that this appeal should be allowed.
The order
which we shall make is that the appellant bank have possession of the property;
the order of the recorder be set aside and
far as the recorder made an order for costs in favour of the respondent that
order is set aside; the appellants may have their costs before the recorder in
the county court, such order for costs not to be enforced without the leave of
the court. So far as the costs of the appeal are concerned the appellants are
entitled to their costs of and occasioned by the appeal, although we would hope
very much that before any such order was enforced against Mrs Carrick
consideration would be given to it at the highest level in the bank; and we
make an order for possession on May 28 1996. Leave to appeal is refused.
Appeal
allowed.
