The decision
of the House of Lords in Williams & Glyn’s Bank Ltd v Boland
[1981] AC 487 had a considerable impact on conveyancing practice in this
country. In that case their Lordships made a number of important rulings.
First, that a wife’s occupation of the matrimonial home is in her own right and
not, as had previously been thought, as a mere ‘shadow of her husband’. Second,
that the rights of an equitable co-owner under a trust for sale are rights
‘subsisting in reference’ to land for the purposes of section 70 of the Land
Registration Act 1925 (which defines overriding interests). Third, that
although such rights fall within the definition of minor interests under the
same Act, this does not mean that they cannot also constitute overriding
interests, if accompanied by actual occupation. As a result the plaintiffs were
refused possession of a house registered in the sole name of Mr Boland, on
which was secured their loan of £40,000
Mrs Boland,
although not appearing on the title, was an equitable co-owner of the property,
since she had made a financial contribution to its original purchase; her
actual occupation rendered those rights overriding and therefore binding on the
bank, which had made no inquiries of her and had not joined her in the
mortgage.
Although
hailed by the popular press as a major milestone in the protection of wives’
rights, it is important to appreciate that it is only in one limited respect
that Boland fulfils this role, namely in holding that a wife is not
precluded by her status from being in actual occupation. The case’s major
impact has been to afford much better protection to anybody in occupation of
property who has contributed to its purchase but whose name does not appear on
the legal title. It is clear that, as a result of this decision, banks and
building societies (in practice mortgagees are more at risk than purchasers)
now take infinitely more care to ascertain whether or not there is anyone other
than the legal title holder in occupation. If there is, they will either try to
ensure the occupier’s participation in the mortgage or will insist that a
document is signed under which any rights of co-ownership are postponed to
those of the mortgagee. The practical significance of Boland is not,
therefore, that occupying co-owners can normally expect to take priority over
mortgagees but rather that someone who appears to be a sole owner will be
unable to obtain a mortgage without the knowledge of someone whom equity
regards as a co-owner.
land
The actual
decision in Boland related to land where the title was registered. In
that context the legal position is quite straightforward. Where someone is in
actual occupation of land any proprietary rights which they enjoy in respect of
that land will automatically bind any purchaser (including a mortgagee) ‘save
where inquiry is made of such person and the rights are not disclosed’. Where
title to the land is not registered there are some significant
differences. Here the rights of a co-owner whose name is not on the title deeds
will only bind a purchaser/mortgagee if the latter has notice. There is no
problem where the purchaser/mortgagee actually knows of the co-owner’s
rights; the problems stem from the doctrine of constructive notice, under which
a purchaser/mortgagee is deemed to know of any rights which would have been
discovered by reasonable inquiries. In particular, he is deemed to have notice
of the rights of any person in occupation of the land. Unfortunately this does
not mean that the rights of occupying co-owners are protected in much the same
way under both systems. This is because where title is registered the crucial
point is the fact of occupation; in the unregistered system it is, in
essence, the purchaser/mortgagee’s knowledge of the occupation which is
all-important, even where that knowledge is deemed rather than actual.
That said, it
is necessary to ask whether this difference is purely legalistic or whether it
has any practical consequences.
In the light
of the recent decision in Kingsnorth Trust Ltd v Tizard [1986] 2
All ER 54, it would appear that there are indeed practical differences between
the two systems and of a type of particular relevance to the surveyor. However,
before examining this decision, a brief word is necessary about the case-law on
constructive notice in this context. Theoretically the leading case is Caunce
v Caunce [1969] 1 All ER 722. There the issue was whether or not a
mortgagee had constructive notice of the equitable co-ownership rights of a
wife residing in the matrimonial home. Stamp J held that he did not for two
reasons: first because a wife could not be said to be in occupation and second
because, where a vendor (or mortgagor) is himself in occupation, no one else’s
occupation can form a basis for constructive notice, at least where such
occupation is apparently consistent with the vendor’s title. Both these reasons
have been severely doubted in subsequent decisions relating to registered land
(notably in Boland itself). However, the case has never been overruled
and the position in relation to unregistered land has remained uncertain.
v Tizard
Here the
defendant was the equitable co-owner of a house which had been conveyed into
the sole name of her husband. Following the breakdown of the marriage she
stayed away from the house whenever her husband was there but slept at home, in
the spare bedroom, in his absence. In any event, she visited the house daily to
prepare meals for their two teenage children and kept virtually all her
personal belongings there. Totally unknown to her, Mr Tizard negotiated a
£66,000 mortgage on the unencumbered property from the plaintiffs. In his
application the husband described himself as ‘single’. Prior to the grant of
the loan the property was inspected by a surveyor acting on behalf of the
mortgagees, the visit being arranged by Mr Tizard for a Sunday afternoon when
only he was there. In the course of conversation Mr Tizard revealed that he was
married but said that he was separated from his wife who ‘lived elsewhere in
the locality’. During his inspection the surveyor saw signs of the children’s
occupation but not of the wife’s and consequently, in response to a question on
the valuation form, answered that the occupiers of the property were the
applicant and his two teenage children. The mortgage was duly entered into and
on receipt of the money the husband promptly emigrated with the teenage sons;
it was only then that the wife discovered what had happened. The plaintiffs
commenced proceedings for possession, which the wife resisted, claiming that
they had constructive notice of her rights because of her occupation.
The judge
found that the wife was in occupation; it was not necessary for her physical
presence to be continuous and uninterrupted. (Had title been registered the
matter would have ended there, since her occupation would have rendered her
rights overriding and therefore binding on the plaintiffs.) Given that title was not registered it
remained to be decided whether or not the plaintiffs had constructive notice.
The judge decided, quite rightly, that it is not the fact of occupation which
constitutes notice but that a purchaser/mortgagee knows someone is in
occupation. He went on to say that this is subject to the important
qualification that ‘such inspections as ought reasonably to be made’ have been
carried out; again, an unobjectionable view. Unfortunately, while accepting
that in order to inspect the inside of a property it is necessary to make a
pre-arranged visit, he then held that in the circumstances of this case a
pre-arranged visit on a Sunday afternoon was not an adequate inspection.
It is difficult to predict any more suitable time for revealing occupiers, and
certainly the judge could offer no positive suggestions!
The judge’s
alternative basis for his decision is not much comfort either. He held that the
plaintiffs themselves knew that Mr Tizard had described himself in his
application as ‘single’. The surveyor acting on their behalf had discovered
that Mr Tizard was married and, although he had not passed on that information,
his knowledge was imputed to them. That discrepancy should have warned them to
make further inquiries, which they had not done. Thus they were deemed to have
notice, irrespective of Mrs Tizard’s undiscovered occupation.
It is clear
that the surveyor was a key figure in this unfortunate tale. This judge was
satisfied that he should have passed on to the mortgagee that Mr Tizard was
married, despite the absence of any evidence to suggest that the surveyor knew
that the man had described himself as single. Second and even more questionable
was the ruling that the surveyor’s pre-arranged visit on a Sunday was not
sufficient to discharge the burden on a purchaser/mortgagee of unregistered
land to make reasonable inspections. It is hard to resist the thought that this
decision seems to demand that surveyors acting for mortgagees must acquire the
skills of an inquiry agent.
It confirms
the worst fears of those who criticised Boland for imposing too heavy a burden
on mortgagees and purchasers. The only crumb of comfort is that cases which
pose unanswerable problems, like Kingsnorth, are, in practice, rare.
