An occupier was not in a position to claim an overriding interest as against a lender because he had invested a business partner with all the indicia of title to the land

The Land Registration Act 2002 protects the interests of persons in actual occupation of registered land. If there is actual occupation, which must be evident upon reasonably careful inspection, the purchaser will take subject to the occupier’s rights, unless it knew about them or the occupier was asked about them beforehand and failed to disclose them. Wishart v Credit & Mercantile plc [2015] EWCA Civ 655; [2015] PLSCS 207 reminds us that, while actual occupation is important, occupiers must first be able to establish that they have rights that are capable of binding a purchaser of the legal title in equity. Without such rights, claims to overriding interests are doomed to fail, even though the party claiming the interest was in actual occupation at all relevant times. The claimant had entrusted the acquisition of a residence to his business partner. He gave him authority to make whatever arrangements he saw fit to acquire the property, without supervising the transaction at all, on the understanding that he would become the beneficial owner of it, free of any mortgage. The transaction was effected with his money. However, he did not inspect or countersign the paperwork and his complete lack of involvement with the transaction set the scene for what was to follow. The claimant’s partner caused the company that became registered as the proprietor of the property to charge it as security for a loan, and then disappeared with the cash. The company defaulted on the loan and the lender was forced to realise its security. Did the fact that the claimant had been in actual occupation at all relevant times mean that he had an overriding interest in the property as against the lender? The court accepted that the claimant was the beneficial owner of the property and that he had been in actual occupation of it, but ruled that his interest did not qualify as an overriding interest as a result of the operation of the principle in Brocklesby v Temperance Permanent Building Society [1895] AC 173. The principle applies where the owner of an asset authorises a third party to deal with it for him and furnishes him with the means of holding himself out to a purchaser or lender as its owner, or as having the full authority of the owner to deal with it. If the owner omits to put those dealing with the agent on notice of any limitations on the agent’s authority, it is fair, as between the owner of the asset and the innocent purchaser or lender, that the owner should bear the risk of fraud on the part of the agent.   The claimant had given his business partner free rein, which enabled him to represent himself as the beneficial owner of the house, through the medium of a corporate nominee, and, although his partner had exceeded the limits of his authority by arranging the mortgage, the lender had not been put on notice of any restrictions on his authority. Therefore, the claimant did not have an overriding interest as against the lender.   Allyson Colby is a property law consultant