Sale of land – Completion – Land registration – Claimant entering contract to purchase property from first defendant – Second defendant applying to enter restriction against registered title – Claimant seeking order that first defendant complete sale – Whether first defendant holding property on trust – Application granted
Prior to his death in 1996, D was the registered proprietor of 44-46 Victoria Road, New Barnet. Under the terms of his will, D left the property to his widow (E). Their son (S) obtained probate. In April 2002, he transferred the property to the first defendant. In July 2019, the first defendant agreed to sell the property to the claimant with full title guarantee, with vacant possession and free from incumbrances other than certain matters including unregistered interests which overrode registered dispositions under schedule 3 to the Land Registration Act 2002.
The second defendant, as the personal representative of E, who died intestate, claimed to have an interest in the property and applied to the Land Registry for the registration of a restriction against the registered title in Form A in schedule 4 to the Land Registration Rules 2003. The application for the registration of a restriction caused a difficulty between the first defendant and the claimant as to how to deal with the fact of the application for a restriction and achieve completion of the sale.
The claimant sought an order under section 49 of the Law of Property Act 1925 that the vendor complete the sale of the property and that the net proceeds of sale be paid into court or into an escrow account in accordance with specific arrangements that the proceeds of sale be held to the order of the first defendant and the second defendant on specified terms with the costs being borne by the first defendant.
The second defendant argued that S had acted in breach of his duty as an executor by failing to vest the property in E. Therefore, the first defendant held the property on trust for the estate of D and E, represented by the second defendant, was entitled to have the estate of D duly administered.
Held: The application was granted.
(1) Section 29(1) of the 2002 Act provided that if a registrable disposition of a registered estate was made for valuable consideration, completion of the disposition by registration postponed to the interest under the disposition any interest affecting the estate immediately before the disposition whose priority was not protected at the time of registration. In the present case, if the transfer to the claimant were registered, the interest acquired by the claimant would prevail over any interest asserted by the estates of D or E unless the priority of that interest was protected at the time of registration.
Section 29(2) provided that the priority of an interest was protected by registration if it was the subject of a notice in the register or fell within schedule 3 to the 2002 Act. The interest asserted by the second defendant was not protected by a notice in the register and it could not be so protected by reason of section 33(a). Further, that interest was not protected as an overriding interest under schedule 3 to the 2002 Act and, in particular, there was no relevant person in actual occupation of the property so as to protect that interest under paragraph 2. Therefore, the purchaser would take free of any interest asserted by the second defendant if the transfer to the claimant was registered.
(2) The 2002 Act operated against the background of the general law as to overreaching but if the parties complied with the 2002 Act and the claimant acquired a registered title, free from any interest asserted by the second defendant, it would not be open to anyone to say that the claimant had not acquired a registered title free from any such interest because of some alleged failure to comply with the general law as to overreaching. The second defendant made it clear that she did not oppose the sale of the property to the claimant. She was interested in the proceeds of sale. A restriction in Form A was not designed to prevent a sale but to assist in safeguarding the proceeds of sale. There did not appear to have been any basis for the claimant to suspect that the first defendant would dissipate the proceeds of sale to prevent the second defendant claiming them. The second defendant knew the details of the intended sale and could protect herself against any dissipation.
The parties had entered into an arms-length contract at a time when the claimant was unaware of any dispute with the second defendant. When the second defendant applied to register a restriction, she did not object to the claimant completing the purchase and paying the price to the first defendant. If she had a good claim, it would be exclusively against the first defendant. The statutory provisions for the protection of the claimant expressly provided that the claimant could complete the purchase and was not concerned with the trusts asserted by the second defendant nor with the application of the proceeds of sale.
(3) When the first defendant offered to complete the contract in accordance with a Land Registry form TR1 which stated that, for the purpose of giving a valid receipt for the purchase price, the first defendant, in exercise of its statutory powers appointed one of its directors to be a trustee of the property with the first defendant, it was complying with its obligations under the contract and offering a good title to the claimant which was obliged under the contract to complete in accordance with the executed TR1. The transfer to the claimant would not be a breach of trust by the first defendant. Nor was it a breach of trust for the first defendant to retain the proceeds of sale as trustee without putting them into an escrow account at its expense. Further, there was no arguable case of dishonesty in the claimant completing a contract of sale entered into in good faith when it was contractually obliged to do so under the terms of that contract. An undertaking by the trustees that they would hold the proceeds of sale for one year to allow the second defendant to bring an appropriate claim, resulted in there being no difficulty in completion.
Paul de la Piquerie (instructed by Freeths LLP) appeared for the claimant; Maurice Rifat (instructed by MHHP Law LLP) appeared for the first defendant; Samuel Laughton (instructed on the Bar Public Access Scheme) appeared for the second defendant.
Eileen O’Grady, barrister
Click here to read of transcript of N3 Living Ltd v Burgess Property Investments Ltd and others
