Statutory construction — Mortgage — Charge over registered land — Whether charge which was first in time had priority — Whether charge, notice of which had been registered, had priority — Application of equitable principles to issue of priority — High Court deciding that first in time had priority — Court of Appeal upholding decision
The property over which a question of priority arose was 1 Park Gate, Blackheath, London SE3, the registered proprietors of which were Mr and Mrs L. At the beginning of July 1989 there were three registered charges over the property, viz in favour of: (1) MT Ltd; (2) NW bank; and (3) AH Ltd, in order of priority. L negotiated an advance from the plaintiffs of £367,500, which was the plaintiffs’ charge. That charge was not registered. The money owing to the bank and AH Ltd was paid off and all but £5,000 of the money owed to MT Ltd was also paid. L then executed a charge in the defendants’ favour to secure an advance of £60,000 and a notice was entered in the register under section 49 of the Land Registration Act 1925 by the defendants. They were not able to register it, however, without MT’s consent, which was not given. The plaintiffs obtained an order for possession and thereafter sold the property. The proceeds were not enough to pay both plaintiffs and, at first instance, the judge held that the plaintiffs’ charge had priority: see [1992] EGCS 99. The defendants appealed.
Held The appeal was dismissed.
1. Section 20 of the Land Registration Act 1925 provided that a disposition of registered land for valuable consideration should, when registered, confer on the transferee or grantee an estate in fee simple with the appropriate rights “subject … to the incumbrances and other entries (if any), appearing on the register”. That would include all matters protected by notices in the charges register and prima facie the effect would be that if the plaintiffs had sold the land without having effected any registration on notice in the register in respect of their charge, their purchaser would have taken the land subject to the defendant’s charge protected by the notice registered in August 1989.
2. Section 52 was enacted to prescribe the effect of a notice entered on the register under section 49 so as to cut down any apparently wider effect that the general wording in other sections would otherwise have had. The particular qualifications imposed by the proviso in section 52(1) were: (i) that the interest protected by the notice must be valid apart from the notice; and (ii) that the interest protected by the notice could not independently of the Act be overridden by the rival disposition.
3. Notice did not give validity if validity was not otherwise there and it did not give priority which would not, apart from the Act, have been there. Therefore, the plaintiffs’ charge had priority to the defendant’s charge.
David Hodge (instructed by Reynolds Porter Chamberlain) appeared for the plaintiff; Thomas Dumont (instructed by Brand Montague, of Harrow) appeared for the defendant.
