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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Abbey National Building Society v Cann [1990] UKHL 3 (29 March 1990)
URL: http://www.bailii.org/uk/cases/UKHL/1990/3.html
Cite as: [1991] 1 AC 56, [1991] AC 56, [1991] 1 AC 56 189, [1990] UKHL 3

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JISCBAILII_CASE_PROPERTY

    Parliamentary Archives,
    HL/PO/JU/18/250

    Abbey National Building Society (Respondents) v. Cann and

    others (A.P.) (Appellants)

    JUDGMENT

    Die Jovis 29° Martis 1990

    Upon Report from the Appellate Committee to whom was
    referred the Cause Abbey National Building Society against
    Cann and others (A.P.), That the Committee had heard Counsel
    on Wednesday the 31st day of January, as well as on Thursday
    the 1st, Monday the 5th, Tuesday the 6th and Wednesday the 7th
    days of February last, upon the Petition and Appeal of Daisy
    Winifred Cann and Abraham Samuel Cann of 7, Hill View, South
    Lodge Avenue, Mitcham, Surrey praying that the matter of the
    Order set forth in the Schedule thereto, namely an Order of
    Her Majesty's Court of Appeal of the 3rd day of March 1989,
    might be reviewed before Her Majesty the Queen in Her Court of
    Parliament and that the said Order might be reversed, varied
    or altered or that the Petitioners might have such other
    relief in the premises as to Her Majesty the Queen in Her
    Court of Parliament might seem meet; as upon the case of the
    Abbey National Building Society lodged in answer to the said
    Appeal; and due consideration had this day of what was offered
    on either side in this Cause:

    It is Ordered and Adjudged, by the Lords Spiritual and
    Temporal in the Court of Parliament of Her Majesty the Queen
    assembled, That the said Order of Her Majesty's Court of
    Appeal (Civil Division) of the 3rd day of March 1989
    complained of in the said Appeal be, and the same is hereby,
    Affirmed and that the said Petition and Appeal be, and the
    same is hereby, dismissed this House: And it is further
    Ordered, That the Costs of the said Respondents be paid out of
    the Legal Aid Fund pursuant to section 18 of the Legal Aid Act
    1988, such Order to be suspended for four weeks to allow the
    Legal Aid Board to object if they wish: And it is also
    further Ordered, That the Costs of the said Appellants be
    taxed in accordance with the Legal Aid Act 1988.

    Cler: Parliamentor:

    Judgment: 29.3.90

    HOUSE OF LORDS

    ABBEY NATIONAL BUILDING SOCIETY
    (RESPONDENTS)

    v.

    CANN AND OTHERS (A.P.)
    (APPELLANTS)

    Lord Bridge of Harwich
    Lord Griffiths
    Lord Ackner
    Lord Oliver of Aylmerton
    Lord Jauncey of Tullichettle


    LORD BRIDGE OF HARWICH

    My Lords,

    I have had the advantage of reading in draft the speeches
    of my noble and learned friends Lord Oliver of Aylmerton and
    Lord Jauncey of Tullichettle. I agree with them that the appeal
    should be dismissed and, subject to what follows, I agree entirely
    with their reasons for reaching that conclusion.

    The most important and most difficult question which arises
    for decision concerns the date at which to determine, in relation
    to the transfer or creation of a legal estate in registered land,
    what are the subsisting overriding interests in the land to which
    the estate transferred or created will be subject. One might be
    forgiven for starting from the a priori assumption that on its true
    construction the Land Registration Act 1925 must be capable of
    yielding a single answer to that question in the sense that the
    transferee or chargee either takes subject to overriding interests
    subsisting at the date of transfer or creation of the estate and
    free of overriding interests created between that date and the
    date of registration or that he takes subject to all overriding
    interests subsisting at the date of registration. But neither of
    these single answers will do. As my noble and learned friends
    cogently demonstate, to adopt either answer and apply it to all
    overriding interests across the board would produce at least one
    conveyancing absurdity. Thus it would be a conveyancing absurdity
    that the purchaser of a legal estate should take subject to the
    rights under section 70(1)(g) of any person who was not in
    occupation at the date of purchase so that the purchaser could
    know nothing of his existence. But it would equally be a
    conveyancing absurdity that the purchaser should not be subject,
    pursuant to section 70(1)(i), to rights under local land charges
    arising between the date of his purchase and the date of
    registration which, by virtue of the statutes creating them, bind
    all interests for the time being subsisting in the land.

    I am entirely satified that it must be right to avoid both
    these conveyancing absurdities. But I confess that I have

    difficulty in finding any wholly convincing and consistent
    construction of the statute which achieves this result. It seems to
    me that it makes better sense of the scheme of the Act in
    relation to overriding interests if one can regard the rule to be
    applied to an overriding interest under paragraph (g) of section
    70(1), i.e. that it will only affect the legal estate if it was
    subsisting as such at the date when the estate was tranferred or
    created, as an example of the general rule, and the contrary rule
    to be applied under paragraph (i) as the exception. This avoids
    other conveyancing absurdities which would arise if the transferor
    of the legal estate could, between the date of transfer and the
    date of registration, create new overriding interests, such as
    profits a prendre or easements under paragraph (a), rights of
    fishing or sporting under paragraph (j), or leases under paragraph
    (k), which would affect the estate in the hands of the transferee.
    One does not, of course, expect conveyancing absurdities from the
    pens of the skilled parliamentary draftsmen who implemented Lord
    Birkenhead's great scheme for the reform of English real property
    law embodied in the 1925 legislation, but even they may have
    occasionally expressed their complex interlocking concepts in forms
    of words which do not precisely fit every case. If the choice is
    between accepting a conveyancing absurdity on the one hand and
    straining or even modifying the draftsman's language to avoid it on
    the other hand, I have no doubt that the latter alternative is to
    be preferred. For the present, however, I need do no more than
    express my concurrence in the opinion that a person not in actual
    occupation of land at the date when a legal estate in the land is
    transferred or created cannot substantiate a claim to an overriding
    interest in the land under section 70(1)(g) against the transferee or
    chargee.

    LORD GRIFFITHS

    My Lords,

    I have had the advantage of reading in draft the speeches
    to be delivered by my noble and learned friends, Lord Oliver of
    Aylmerton and Lord Jauncey of Tullichettle. I agree with both of
    them, and I too would dismiss the appeal for the reasons which
    they have given.

    LORD ACKNER

    My Lords,

    I have had the advantage of reading in draft the speeches
    to be delivered by my noble and learned friends, Lord Oliver of
    Aylmerton and Lord Jauncey of Tullichettle. I agree with both of
    them, and I too would dismiss the appeal for the reasons which
    they have given.

    - 2 -

    LORD OLIVER OF AYLMERTON

    My Lords,

    This appeal raises yet again what has become a familiar
    hazard for banks and building societies advancing money on the
    security of real property. The respondent society is the proprietor
    of a registered charge on property at 7, Hillview, South Lodge
    Avenue, Mitcham, Greater London, securing a sum of £25,000
    together with interest. The property is leasehold and the title is
    registered at H.M. Land Registry under the provisions of the Land
    Registration Acts 1925-1986. The registered proprietor and the
    chargor under the society's charge is the son of the first appellant
    and the charge was given by him on the completion of his
    purchase of the property on 13 August 1984 in order to enable him
    to complete the purchase. The chargor was registered as
    proprietor of the property on 13 September 1984 simultaneously
    with the registration of the society as proprietors of the charge.
    The chargor having defaulted in payment of principal and interest,
    the society sought to enforce their security and on 5 August 1987
    commenced proceedings for possession of the property against the
    chargor in the Croydon County Court. In fact the chargor had
    never lived in the property which had been purchased by him for
    the occupation of the first appellant, his mother, and the second
    appellant, the gentleman whom she subsequently married. At all
    material times since the completion of the purchase they had
    occupied the property as their home and it was therefore
    necessary to join them as defendants to the proceedings. Their
    defence was that they had an equitable interest in the property
    which took priority over the interest of the society and was
    binding on the society as an overriding interest by virtue of their
    occupation of the property having regard to the provisions of
    sections 23(1) and 70(1)(g) of the Land Registration Act 1925.

    It will be necessary in stating the issues which arise for
    decision on the appeal to trace in a little detail the history of the
    relationship between the chargor and the first appellant and of the
    events immediately leading up to the acquisition of the property
    subject to the society' charge, but before I embark upon this, it
    will be convenient to refer to the relevant provisions of the Land
    Registration Act 1925 upon which the determination of the appeal
    depends.

    Since the appeal is concerned with land which was, at all
    material times, registered land, it is unnecessary to refer to those
    provisions which are concerned with the first registration of land
    not previously registered and one can go straight to the provisions
    relating to transfers of registered titles which are contained in
    Part III of the Act of 1925. Although, as was pointed out in City
    of London Building Society v. Flegg
    [1988] AC 54, 84, the
    provisions of the Land Registration Acts were designed to operate
    in parallel and consistently with the property legislation governing
    unregistered land, the powers of a registered proprietor to dispose
    of or create legal estates rests entirely upon statute. Section
    69(4) of the Act of 1925 provides: "The estate for the time being
    vested in the proprietor shall only be capable of being disposed of
    or dealt with by him in manner authorised by this Act." Section
    18 enables the registered proprietor of a freehold estate to
    transfer the registered estate "in the prescribed manner" (that is

    - 3 -

    to say, prescribed, in the event, by the Land Registration Rules
    1925 (S.R. & O. 1925 No. 1093 (L. 28)). Subsection (1) of section
    18 describes a number of specific transactions (such as, for
    instance, grants of leases or rentcharges) which may be effected
    by a registered proprietor and subsection (4) refers in terms to
    dispositions by way of charge. It provides:

    "The foregoing powers of disposition shall (subject to the
    express provisions of this Act and of the Law of Property
    Act, 1925, relating to mortgages) apply to dispositions by
    the registered proprietor by way of charge or mortgage; but
    no estate, other than a legal estate, shall be capable of
    being disposed of, or created under, this section."

    Subsection (5) provides that the term "transfer" or "disposition"
    includes "any disposition authorised as aforesaid."

    Registration of dispositions made by registered proprietors is
    provided for in section 19 (freeholds) and section 22 (leaseholds).
    So far as relevant, section 19 provides:

    "(1) The transfer of the registered estate in the land or part
    thereof shall be completed by the registrar entering on the
    register the transferee as the proprietor of the estate
    transferred, but until such entry is made the transferor shall
    be deemed to remain proprietor of the registered estate; . .

    Dispositions other than transfers are provided for in subsection (2)
    which similarly provides that they shall be completed by
    registration. Similar provisions relating to transfers of registered
    leasehold estates are contained in section 22.

    The governing principle of the Act of 1925 is that the title
    to land is to be regulated by and ascertainable from the register
    alone. It is recognised, however, that there may be subsisting
    rights of third parties affecting the land such as would not, in
    unregistered conveyancing, be deducible from the abstracted
    documents of title and which, though ascertainable by enquiry, may
    not have been protected by entry on the register. The Act of
    1925 therefore provides for a number of "overriding interests" to
    which the registered title is made subject. Such interests are
    defined in section 3(xvi) as:

    "all the incumbrances, interests, rights, and powers not
    entered on the register but subject to which registered
    dispositions are by this Act to take effect ..."

    Under section 69(1) the estate in registered land is deemed to
    have vested in the proprietor without any conveyance but subject

    "to the overriding interests, if any, including any mortgage
    term or charge by way of legal mortgage created by or
    under the Law of Property Act 1925, or this Act or
    otherwise which has priority to the registered estate."

    Section 70 contains a list of miscellaneous overriding interests to
    which registered land is subject. Subsection (1) provides:

    - 4 -

    "All registered land shall, unless under the provisions of this
    Act the contrary is expressed on the register, be deemed to
    be subject to such of the following overriding interests as
    may be for the time being subsisting in reference thereto,
    and such interests shall not be treated as incumbrances
    within the meaning of this Act, (that is to say): ..."

    There follows a list of diverse rights, easements and liabilities of
    which it is necessary to mention only three, viz.:

    "(g) The rights of every person in actual occupation of the
    land or in receipt of the rents and profits thereof, save
    where enquiry is made of such person and the rights are not
    disclosed; . . .

    "(i) Rights under local land charges unless and until
    registered or protected on the register in the prescribed
    manner; . . .

    "(k) Leases for any term or interest not exceeding twenty-
    one years, granted at a rent without taking a fine; ..."

    The effect of registration as regards dispositions of freehold and
    leasehold interests respectively is set out in sections 20 and 23.
    Section 20(1) provides:

    "In the case of a freehold estate registered with an absolute
    title, a disposition of the registered land or of a legal
    estate therein, including a lease thereof, for valuable
    consideration shall, when registered, confer on the transferee
    or grantee an estate in fee simple or the term of years
    absolute or other legal estate expressed to be created in the
    land dealt with, together with all rights, privileges, and
    appurtenances belonging or appurtenant thereto, including
    (subject to any entry to the contrary in the register) the
    appropriate rights and interests which would, under the Law
    of Property Act, 1925, have been transferred if the land had
    not been registered, subject -

    (a) to the incumbrances and other entries, if any,

    appearing on the register; and

    (b) unless the contrary is expressed on the register, to
    the overriding interests, if any, affecting the
    estate transferred or created,

    but free from all other estates and interests whatsoever . .
    . "

    The provisions of section 23(1) are, for material purposes, similar
    save that the disposition, when registered, is deemed to vest in
    the transferee or underlessee "the estate transferred or created to
    the extent of the registered estate, or for the term created by
    the subdemise ..."

    The provisions regulating the creation of charges on
    registered land and the powers of chargees are to be found in
    sections 25-35 inclusive. Section 25(1) specifically enables the
    registered proprietor to charge the registered land with payment of
    money and section 26(1) provides:

    - 5 -

    "The charge shall be completed by the registrar entering on
    the register the person in whose favour the charge is made
    as the proprietor of the charge, and the particulars of the
    charge."

    Under section 27 a registered charge, if not made by demise or
    sub-demise, takes effect as a charge by way of legal mortgage, an
    expression defined by reference to the Law of Property Act, 1925,
    so that the chargee is to be treated as if a mortgage term by
    demise or sub-demise were vested in him. Subsection (3) provides
    for the charge to take effect from the date of delivery of the
    deed, but subject to estates or interests registered or noted on the
    register before registration of the charge. Under section 25(2),
    the charge may be in any form which sufficiently identifies the
    land but there is an express prohibition against any reference to
    any unregistered interests affecting the land which are not
    overriding interests. Section 28 provides for the implication into
    charges of covenants for payment of principal and interest. At
    first sight its effect might seem curious, for it provides in
    subsection (1):

    "Where a registered charge is created on any land there
    shall be implied on the part of the person being proprietor
    of such land at the time of the creation of the charge . . .
    (a) a covenant with the proprietor for the time being of the
    charge to pay. ..."

    Since "proprietor" is defined in section 3(xx) as "the registered
    proprietor for the time being of an estate in land or of a charge"
    this might be thought to lead to the conclusion that "the time of
    the creation of the charge" must mean the time when the charge
    is registered, since otherwise, in the normal case of the purchaser
    of land charging the estate on completion of his purchase, the
    implied covenant would be imposed on the vendor, who remains the
    "proprietor" until registration. Section 29 of the Act of 1925,
    however, makes it entirely clear that the creation of a charge is
    not its registration and that it cannot refer to anything but
    execution of the charge. That section provides:

    "Subject to any entry to the contrary on the register,
    registered charges on the same land shall as between
    themselves rank according to the order in which they are
    entered on the register, and not according to the order in
    which they are created."

    In fact, when reference is made to section 37 of the Act of 1925
    it can be seen that section 28 operates perfectly sensibly in the
    case postulated of the purchaser wishing to charge the land on
    completion of his purchase and contemporaneously with the
    transfer to him by the registered proprietor. Section 37 provides,
    so far as material:

    "(1) Where a person on whom the right to be registered as
    proprietor of registered land or of a registered charge . . .
    has been conferred by a disposition or charge, in accordance
    with this Act, desires to dispose of or charge the land or to
    deal with the charge before he is himself registered as
    proprietor, he may do so in the prescribed manner, and
    subject to the prescribed conditions.

    - 6 -

    "(2) Subject to the provisions of this Act with regard to
    registered dealings for valuable consideration, a disposition
    or charge so made shall have the same effect as if the
    person making it were registered as proprietor."

    So much for the statutory provisions. I turn now to the
    factual background of the appeal. The first appellant, to whom it
    will be convenient to refer as "Mrs. Cann," lived with her first
    husband in a house at 48, Warren Road, Mitcham, of which her
    husband was the tenant. They had two sons, George and Alan.
    Mrs. Cann's husband died in 1962 and she succeeded to the
    tenancy as his widow and was entitled to the protection afforded
    by the Rent Acts. In about 1970, her first husband's brother, the
    second appellant, Mr. Abraham Cann, came to live with her and
    they have been together ever since. Mrs. Cann married Mr.
    Abraham Cann in 1987. In 1977 the landlord's agents approached
    Mrs. Cann as the sitting tenant with an offer to sell the freehold
    of 48, Warren Road, for a sum of £5,000, a price which was much
    below the vacant possession value of the property having regard to
    her protected tenancy. Neither she nor Mr. Abraham Cann had
    the resources which would have enabled them to purchase the
    property, but George Cann offered to raise a mortgage and
    purchase it and on 3 May 1977 it was conveyed into the joint
    names of Mrs. Cann and George with the aid of an endowment
    mortgage covering the whole of the price. George Cann assured
    his mother that she would not need to pay any rent any more and
    that she would always have a roof over her head. It seems that
    Abraham Cann contributed a sum of £500 towards the completion
    of the transaction, which sum was expended in defraying the legal
    costs. Thereafter, Mr. and Mrs. Cann lived in the property and
    paid the outgoings until April 1979. For part of that time George
    Cann lived with them. In 1979, however, they came across a
    more attractive house, 30, Island Road, Mitcham. 48, Warren
    Road was accordingly sold for a sum of £20,500. 30, Island Road,
    was purchased in the name of George Cann alone for a sum of
    £26,500 of which £15,000 was, with Mrs. Cann's knowledge and
    acquiescence, raised on mortgage from the Nationwide Building
    Society. Her agreement to the house standing in the sole name of
    George was obtained and she signed a document dated 9 March
    1979 by which she directed that course to be taken. She and Mr.
    Abraham Cann moved into the property and lived there until
    August 1984. George Cann also lived with them until 1982 when
    he moved out to live with a lady whom he subsequently married.
    Mr. and Mrs. Cann made no contribution to the mortgage but were
    responsible for other outgoings and some repairs. According to
    Mrs. Cann's evidence, George told her: "I have bought you a nice
    house. This is always what you wanted."

    In the summer of 1984, George Cann was in financial
    difficulties and told his mother that he could no longer afford to
    pay for two homes. He accordingly arranged to sell 30, Island
    Road, and to purchase instead a smaller leasehold property at 7,
    Hillview, Mitcham, at a price of £34,000. 30, Island Road, was
    sold for £45,000. Both transactions were completed on 13 August
    1984. It is necessary to set out the sequence of the transaction
    in a little detail. In May 1984, George applied to the society for
    a loan of £25,000 to be secured on a mortgage of 7, Hillview,
    stating that that property was being purchased for his own sole

    - 7 -

    occupation. The society, having inspected and approved the
    property on 15 May, made a formal offer of an advance of the
    amount sought on 18 May and that was accepted. Contracts for
    the sale of 30, Island Road, and the purchase of 7, Hillview, were
    exchanged on 19 July 1984 with the completion date for both
    transactions fixed for 13 August. On 2 August 1984, Messrs. H.
    C. L. Hanne & Co., George Cann's solicitors, wrote to the society
    asking for a cheque for the mortgage advance to be provided
    before 8 August and that was duly dispatched to them on 6
    August. Prior to 13 August George Cann duly executed a legal
    charge on the property in favour of the society to secure the sum
    advanced. Thus the solicitors were in a position to complete the
    purchase on the completion date subject only to completion of the
    sale of 30, Island Road, from which, presumably, the balance of
    the purchase price was to come.

    It is Mrs. Cann's case that by reason of her contribution to
    the purchase of 48, Warren Road, represented by her status as
    sitting tenant and, more particularly, by reason of the assurance
    given to her by George that she would always have a roof over
    her head, she had, on or immediately prior to completion, an
    equitable interest in 7, Hillview which takes priority to the
    society's charge as an overriding interest. She was, she claims, in
    "actual occupation" of the property and so had her rights secured
    against the society by virtue of section 70(1)(g) of the Act of
    1925. It is not disputed that she was certainly in actual
    occupation of the property on 13 September when both George's
    title to the property and the society's charge on it were
    registered, but the society relies on the decision of the Court of
    Appeal in Lloyds Bank Plc. v. Rosset [1989] Ch 350 as establishing
    that the relevant date for ascertaining the existence of an
    overriding interest is not the date of registration but the date of
    completion of the purchase. Even on that footing, however, Mrs.
    Cann claims a priority because, so she claims, she was in actual
    occupation of the property prior to actual completion of the
    purchase. That claim was rejected by the trial judge, who
    inferred that the purchase and the charge were completed by 9.00
    a.m. on 13 August by which time it is common ground that
    nothing had occurred which could possibly support a claim that she
    was in actual occupation. The Court of Appeal [1989] 2 F.L.R.
    265, however, held that the inference drawn by the judge was not
    one which, having regard to the time taken to effect telegraphic
    transfers of money and to the normal hours of banking business,
    could legitimately be drawn and the leading judgment, delivered by
    Dillon L.J., contains a careful analysis of the available evidence
    and of the practical probabilities which is, I think, very difficult
    to fault and which has not been challenged by the society. The
    result of that analysis, which it is unnecessary to consider in any
    detail, is that actual completion of the purchase of 7, Hillview and
    the contemporaneous charge to the society took place at or shortly
    after 12.20 p.m. on 13 August. At that time the situation on the
    ground was this: Mrs. Cann herself was not in Mitcham, having
    gone on 11 August to the Netherlands on a holiday from which she
    did not return until 18 August. Mr. Abraham Cann and George
    Cann, however, had prepared to move into the property and they
    arrived there with a van containing Mrs. Cann's furniture and
    carpets at about 10.00 a.m. At that time the vendor, Mr. Watson,
    was still there loading a van with his belongings, but he vacated
    the house at about 11.45 a.m. at which time carpet-layers went in

    - 8 -

    to lay Mrs. Cann's carpets and her furniture began to be unloaded
    and brought in. Thus there was a period of about 35 minutes
    prior to actual completion during which there were on the
    premises chattels belonging to Mrs. Cann and persons unloading and
    arranging them on her behalf.

    In the Court of Appeal Mrs. Cann's claim failed because, in
    the view of all members of the court, she was aware that the
    balance of the purchase price of 7, Hill View, over and above the
    net amount to be produced by the sale of 30, Island Road, was
    going to be raised by George Cann by mortgage of the premises.
    Having thus impliedly authorised him to raise this amount on
    mortgage she must necessarily have authorised him to that extent
    to create a charge to the society having priority to her interest
    and could not, as against the society, complain that George had
    exceeded a limitation on his authority of which the society was
    unaware. Dillon L.J., however, took the view that the events
    which took place between 11.45 a.m. and 12.20 p.m. on 13 August
    did constitute actual occupation of the property by Mrs. Cann
    sufficient to enable her to claim an overriding interest, a
    proposition which was doubted by Ralph Gibson and Woolf L.JJ.

    If, of course, the ground upon which the Court of Appeal
    rejected Mr. and Mrs. Cann's claim to resist an order for
    possession in the society's favour is correct, it is strictly
    unnecessary to determine any of the other points which arise, but
    since they have been fully argued and having regard to the pending
    appeal in Lloyds Bank Plc. v. Rosset which immediately follows
    this appeal, it is desirable that they should be decided.

    First in logical order is the question of the appropriate date
    for ascertaining the existence of overriding interests under the
    Land Registration Acts. Curiously enough the point appears never
    to have arisen directly for decision in any reported case prior to
    Rosset, save in one case in 1985 in the Bristol County Court
    which was decided on appeal on a different point (Paddington
    Building Society v. Mendelsohn
    (1985) 50 P. & C.R. 244). In In re
    Boyle's Claim
    [1961] 1 W.L.R. 339, 344, Wilberforce J. expressed
    the view that the relevant date was the date of acquisition of the
    registered title, but the issue in that case was quite a different
    one and the point does not appear to have been argued. That
    case has, however, been used as the basis for statements in a
    number of leading conveyancing textbooks that that is the date at
    which occupation for the purposes of section 70(1)(g) has to be
    ascertained (see, e.g., Wolstenholme and Cherry's Conveyancing
    Statutes,
    13th ed. (1972), vol. 6, p. 65; Emmet on Title, 19th "ed.
    (1986), para. 5-197). The question arose directly in Rosset in
    which the Court of Appeal decided unanimously that the relevant
    date was the date of completion of the purchase and not that of
    registration. Your Lordships are now invited to overrule that
    decision.

    My Lords, the conclusion at which the Court of Appeal
    arrived makes good conveyancing sense and, speaking for myself, I
    should be extremely reluctant to overrule it unless compulsively
    driven to do so, the more so because it produces a result which is
    just, convenient and certain, as opposed to one which is capable of
    leading to manifest injustice and absurdity. It has, I think, to be
    acknowledged that the interrelation between the provisions of

    - 9 -

    sections 3(xvi), 20 and 23, 37, 69 and 70(1) is not altogether easy
    to understand, particularly in relation to the position of a chargee
    whose charge is created by a purchaser of land who is not yet
    himself the registered proprietor. The solution propounded by the
    trial judge and by counsel for the bank in Rosset depends upon the
    words "affecting the estate transferred or created" in sections
    20(l)(b) and 23(l)(c) and construes them as if there were added the
    words "at the time at which it was transferred or created," thus
    excluding from the category of interests affecting the estate the
    rights of a person entering into occupation after the transfer or
    creation of the estate effected by completion of the transaction.
    It will be convenient to refer to this as "the judge's construction."

    This is an attractive solution because it is, as Nicholls L.J.
    observed in the course of his judgment in Rosset, at p. 373, a
    conveyancing absurdity that, for instance, a mortgagee should,
    after completion and after having made all possible inquiries and
    parted with his money, be bound by the interest asserted by a
    newly-arrived occupant coming in between completion and the
    registration of his charge. So far as registered interests are
    concerned the chargee can protect himself by an official search
    which will preserve his priority over any further registered entries
    during a priority period well sufficient to enable him to have his
    charge stamped and lodged for registration: see rules 3 and 5 of
    the Land Registration (Official Searches) Rules 1981 (S.I. 1981 No.
    1135). There is, however, no similar protection against overriding
    interests which are not recorded on the register and whose
    existence can be ascertained only by inquiry and there is,
    accordingly, good sense in so construing sections 20(1) and 23(1) as
    to preserve the priority of the purchaser or chargee as from the
    date of completion when both are irrevocably committed to the
    transaction, which only awaits the formal step of registration in
    order to vest the legal estate.

    In Rosset, however, the Court of Appeal found some
    difficulty in accepting that the solution could be found simply in
    construing sections 20(1) and 23(1) in the manner suggested.
    Nicholls L.J. pointed out, at p. 371, that it was common ground
    that paragraph (a) of section 20(1) (paragraph (b) of section 23(1)),
    which subjects the land transferred to entries appearing on the
    register, undoubtedly refers to entries so appearing at the date of
    registration. This appears to me to be beyond doubt. One would,
    therefore, expect that the paragraph subjecting the land to
    overriding interests would be related to the same date. Nicholls
    L.J. reached, in relation to overriding interests within section
    70(1)(g), the same result as that produced by the judge's
    construction but by reference to the words "for the time being
    subsisting" in section 70(1) and by holding that, in relation to
    paragraph (g) specifically, an interest was not a subsisting interest
    except in a case in which the claimant was in occupation of the
    land prior to and at the date of completion of the purchase.

    I share the difficulty that Nicholls L.J. felt in accepting the
    attractive solution of the judge's construction and I agree with him
    that the key to the problem lies in the words of section 70(1)
    rather than in the reference to the interests affecting the estate
    transferred or created in sections 20(1) and 23(1). The Act of
    1925 displays a degree of circularity in its general definition of
    what an overriding interest is. Section 3(xvi) defines it as an

    - 10 -

    unregistered encumbrance "subject to which registered dispositions
    take effect," but when one turns to inquire to what unregistered
    encumbrances a disposition is subject, sections 20(1) and 23(1)
    merely specify that they are "overriding interests if any, affecting
    the estate transferred or created." As a definition, therefore, this
    is a little less than satisfactory, for it simply means "overriding
    interests" are "overriding interests." It does, however, involve this
    consequence, that if the judge's construction is correct, no interest
    which does not affect the estate or interest at the time when a
    relevant disposition is effected by transfer, grant or charge can be
    an overriding interest. That, of course, does not demonstrate that
    the judge's construction is erroneous, but it might be thought to
    be a surprising result when consideration is given to the remaining
    words in sections 20 and 23 and to the terms of sections 69 and
    70.

    I turn to those sections, because the circularity of the
    definition so far compels a reference to other provisions of the
    Act of 1925 in order to ascertain the nature of the interests
    which are to override. They are, to begin with, not "minor
    interests" (section 3(xv)), that is to say, interests not capable of
    being disposed of or created by registered dispositions and interests
    created by unregistered dealings and subsisting only in equity.
    Unless protected by notice, caution, inhibition or restriction
    entered on the register, these will be overridden by registered
    dispositions for valuable consideration. Specifying what overriding
    interests are not does not, however, assist in determining what
    they are and, moreover, it is clear from Williams & Glyn's Bank
    Ltd. v. Boland
    [1981] AC 487 that a minor interest may become
    an overriding interest if the claimant is in actual occupation.
    Section 69 is of some assistance in that it demonstrates that the
    list of miscellaneous overriding interests contained in section 70(1)
    is not exhaustive, since the legal estate is vested in the registered
    proprietor under this section subject to

    "the overriding interests . . . including any . . . charge by
    way of legal mortgage created . . . under . . . this Act or
    otherwise which has priority to the registered estate"
    (subsection (1)).

    Section 70(1) contains no reference to a mortgage or charge as an
    overriding interest, but section 69(1) necessarily implies that it is
    one so long as it has priority to the registered estate.

    When regard is had to the list of overriding interests in
    section 70(1) it is apparent that all of them are interests which
    can come into being at any time, and some of them may arise
    without any volition on the part of the registered proprietor or
    anyone else seized of an estate in the land. A right of way or a
    profit a prendre may be acquired by a neighbouring landowner by
    prescription. A third party may acquire title to the land by
    adverse possession. A local land charge may be imposed on the
    land at any time under a variety of different statutes. A lease at
    a rent for a term not exceeding 21 years may be granted at any
    time. Yet on the judge's construction, a purchaser would, on
    registration, take free from any such interests arising after
    completion of his purchase (in the sense of payment of the price
    against delivery of the executed transfer) even though, if the land
    were unregistered land, he would clearly be subjected to them.

    - 11 -

    This necessarily follows, if the judge's construction is right, from
    the words which immediately follow paragraph (b) of section 20(1)
    (paragraph (c) of section 23(1)) - "but free from all other estates
    and interests" whatsoever . . ." It also involves, I think, a conflict
    between sections 20(1) and 23(1) on the one hand, and sections
    69(1) and 70(1) on the other. Section 69, as it seems to me, is
    looking at the continuous position of the registered proprietor and
    providing that the legal estate is deemed to be vested in him
    subject to such overriding interests as shall from time to time
    subsist during his proprietorship, whereas, if the judge's
    construction is correct, it is indeed subject to all such interests
    but with the exception of those which come into being between
    the date when he took his transfer and the date when he became
    registered. Moreover it would also follow that the effect of
    registration of the transferee would be to free him even from
    overriding interests which he himself had created in the interval
    between completion and registration.

    That cannot, I think, have been the intention of the
    legislature and the difficulty can be illustrated by a number of
    examples. Section 70(1)(i) specifies as overriding interests "rights
    under local land charges unless and until registered . . . ," etc.
    This was cited by Nicholls L.J. in the course of his judgment and
    it is a useful example. I pause to remark that the reference to
    "registration" here is clearly a reference to registration under the
    Act of 1925, a necessary step before realisation of the charge.
    Under the Land Charges Act 1925, and until the Local Land
    Charges Act 1975, local land charges required to be registered in
    the register of local land charges if they were not to be void
    against a purchaser for money or money's worth of the legal
    estate pursuant to section 15 of that Act. That applied equally
    whether the land affected by the charge was registered or
    unregistered. Now if we suppose a simple purchase of the
    freehold without the added complication of an advance on
    mortgage, the purchaser would take free from any local land
    charge which had arisen but had not been registered under the
    Land Charges Act prior to his acquisition of the legal estate, and
    that would be the case whether the land was registered or
    unregistered. Assuming a local land charge arising prior to that
    date but not then registered, there is nothing in section 70(1)(i)
    which would or could have the effect of reviving the charge
    against the land if it were subsequently to be registered in the
    register of land charges for there could be no "right under" the
    charge once it had been avoided. But suppose that the charge did
    not even arise until the day after the completion of the purchase
    by delivery of the transfer or conveyance and that it was then
    immediately registered under the Land Charges Act 1925. In the
    case of unregistered land there is no difficulty. The charge
    attached to the land in the hands of the purchaser as the estate
    owner for the time being pursuant to the statute imposing it. I
    can see no reason why the purchaser of registered land should be
    in any different position simply because his transfer had not yet
    been registered. Thus, for instance, the local authority was
    enabled under section 144 of the Highways Act 1959, to take steps
    to alleviate a danger on land adjoining the highway and to recover
    the expenses of so doing from the owner of the land for the time
    being. Under section 264(1) such expenses were a charge on the
    premises "as from the date of the completion of the works" and
    such charges were registrable under section 15(1) of the Land

    - 12 -

    Charges Act 1925. Let it be assumed for the purposes of the
    example that the work of the appropriate character had been
    undertaken by the authority on land which was the subject matter
    of a pending sale and that it was completed after completion of
    the sale but before the purchaser was registered as proprietor.
    Let it also be assumed that the local authority's charge was duly
    registered immediately under the Land Charges Act 1925. In the
    case of unregistered land there would be no question but that the
    charge attached to the land in the hands of the purchaser as the
    owner for the time being and I cannot accept that the legislature
    could have intended that the purchaser of registered land should
    take free from it as a result of the accidental circumstance that
    the work came to be completed and the charge arose on a date
    between completion of the purchase and that of registration of the
    purchaser as proprietor.

    It is not difficult to think of other examples of local land
    charges coming into being after the date of completion but before
    registration of the purchaser as proprietor, for instance, the
    designation of the property purchased as a listed building under
    section 54(1) of the Town and Country Planning Act 1971. That
    section requires the list to be deposited with the appropriate
    borough or district council and registered as a local land charge
    under the Land Charges Act 1925. Again, I cannot accept that
    the effect of section 20(1) was that the purchaser, prior to the
    Local Land Charges Act 1975, held free from the restriction which
    is the consequence of listing because of the circumstance that the
    list was deposited on a date falling between completion of the
    purchase and registration. Another example would be, for
    instance, the issue of a certificate by the Secretary of State under
    section 19 of the Leasehold Reform Act 1967, which happened to
    occur between completion of a purchase of the freehold reversion
    and the registration of the purchaser as its proprietor.

    Now I do not think that this difficulty can be overcome by
    reference to the fact that local land charges, being imposed by
    statute, are, as it were, free-standing and attach to the land by
    virtue of their own statutory force so that section 20(1) and 23(1)
    fall to be construed as if the words "free from all other estates
    and interests" were followed by the words "other than interests
    conferred by local land charges." There appear to me to be
    insuperable difficulties about this as a matter of construction.

    I conclude, therefore, like Nicholls L.J., that the relevant
    date for determining the existence of overriding interests which
    will "affect the estate transferred or created" is the date of
    registration. This does, of course, give rise to the theoretical
    difficulty that since a transferor remains the registered proprietor
    until registration of the transfer, it would be possible for him in
    breach of trust, to create overriding interests, for instance, by
    grant of an easement or of a lease, which would be binding on the
    transferee and against which the transferee would not be protected
    by an official search. That would, of course, equally be the case
    in a purchase of unregistered land where the purchaser pays the
    price in advance of receiving a conveyance. I cannot, however,
    find in the theoretical possibility of so improbable event a context
    for preferring the judge's construction.

    - 13 -

    The question remains, however, whether the date of
    registration is also the relevant date for determining whether a
    claimant to a right is in actual occupation. It is to be noted that
    it is not the actual occupation which gives rise to the right or
    determines its existence. Actual occupation merely operates as
    the trigger, as it were, for the treatment of the right, whatever it
    may be, as an overriding interest. Nor does the additional quality
    of the right as an overriding interest alter the nature or quality of
    the right itself. If it is an equitable right it remains an equitable
    right. As was observed in Williams & Glyn's Bank Ltd. v. Boland
    [1981] AC 487, 504, the purpose of section 70(1)(g) was to make
    applicable to registered land the same rule for the protection of
    persons in actual occupation as had been applied in the case of
    unregistered land in, for instance, Hunt v. Luck [1902] 1 Ch. 428.
    In relation to legal rights it does nothing, for it is not easy to
    conceive of a legal right in the land which would not already be
    an overriding interest under some other head, as, for instance,
    paragraphs (a) or (k). Again, as regards equitable rights in an
    occupier which arise before completion and are supported by
    occupation at that date there is no difficulty. A chargee who
    advances money and so acquires an equitable charge prior to the
    creation of the occupier's right does not lose his priority because
    the occupier's right becomes an overriding interest. That interest
    remains what it always was, an interest subject to the prior equity
    of the chargee which, on registration, is fortified by the legal
    estate. Equally, a chargee advancing his money after the creation
    of the occupier's equitable right is, as one would expect, subject
    to such right.

    The case which does give rise to difficulty if the date of
    registration is the relevant date for determining whether there is a
    claimant in actual occupation is one in which the sequence of
    events is that the right, unaccompanied by occupation, is created
    before completion and before the chargee has advanced his money
    and then subsequently the claimant enters into actual occupation
    after completion and remains in occupation up to the date when
    the registration of the charge is effected. The chargee in that
    event would have no possibility of discovering the existence of the
    claimant's interest before advancing his money and taking his
    charge, but would nevertheless be subject, on registration, to the
    claimant's prior equitable interest which, ex hypothesi, would not
    have been subject to the charge at its creation.

    This does indeed produce a conveyancing absurdity and there
    is, as Nicholls L.J. observed, an internal context for supposing that
    the legislature, in enacting paragraph (g), must have been
    contemplating an occupation which preceded and existed at
    completion of a transfer or disposition. Not only was the sub-
    paragraph clearly intended to reflect the rule discussed in Hunt v.
    Luck
    with regard to unregistered conveyancing, but the reference
    to enquiry and failure to disclose cannot make any sense unless it
    is related to a period in which such enquiry could be other than
    otiose. That absurdity can, I think, be avoided only by the route
    which the Court of Appeal adopted and by referring the "actual
    occupation" in paragraph (g) to the date of completion of the
    transaction by transfer and payment of the purchase money.
    Section 70(1) refers to such interests "as may be for the time
    being subsisting" and in order to affect "the estate transferred or
    created" on registration such interests would no doubt require to

    - 14 -

    be subsisting on that date. But I see no insuperable difficulty in
    holding that the actual occupation required to support such an
    interest as a subsisting interest must exist at the date of
    completion of the transaction giving rise to the right to be
    registered, for that is the only date at which the enquiry referred
    to in paragraph (g) could, in practice, be made and be relevant. I
    agree, therefore, with the conclusion of the Court of Appeal in
    Rosset that it is at that moment that it falls to be determined
    whether there is an actual occupation for the purposes of
    paragraph (g). I do not think that I can improve upon Nicholls
    L.J.'s analysis when he said, in the course of his judgment in
    Rosset, at p. 374:

    "If this is right, the pieces of the jigsaw fit together
    reasonably well. A purchaser or mortgagee inspects and
    inquires before completion, in the established fashion. Or
    he fails to do so, at his own risk. He then completes the
    transaction, taking an executed transfer or mortgage.
    Whether or not an overriding interest under paragraph (g)
    subsists so far as his freehold or mortgage is concerned falls
    to be determined at that moment. If an overriding interest
    does subsist, then his estate when registered takes subject
    to that interest. If it does not, then subsequent entry of a
    person into occupation before the transfer or mortgage has
    been registered, and 'completed' for the purposes of section
    19, does not have the consequence of creating an overriding
    interest under paragraph (g) in relation to that freehold or
    mortgage."

    If, then, the date at which it falls to be considered whether
    the claimant to an interest in the land is in actual occupation is
    the date of completion of the purchase, what has next to be
    determined is the nature, extent and effect of the interest claimed
    by him as an overriding interest. I defer for the moment the
    question whether the facts of the instant case disclose that Mrs.
    Cann was in actual occupation at the relevant time. Up to the
    moment of completion she had, of course, a beneficial interest
    under the trust for sale affecting 30, Island Road in the hands of
    her son, George. He was, I will assume, also estopped by his
    promise to keep a roof over her head from denying her right as
    against him to terminate her occupation of the property without
    her consent, although that estoppel clearly could not have bound
    the Nationwide Building Society, whose charge had been effected
    by George with her consent. But it is difficult to see how she
    could, at that stage, have acquired any interest in 7, Hillview.
    She was not a party to the contract for the purchase of that
    property which was entered into by George alone. She assumed
    and, indeed, may have been led to believe that she would have an
    interest in and the right to occupy that property when George
    acquired it, but at the stage prior to its acquisition she had no
    more than a personal right against him. As against this, the
    society, which had no notice, either actual or constructive, of any
    rights which Mrs. Cann might be minded to claim, had entered
    into an agreement to advance £25,000 on the security of the first
    legal charge on the property and that agreement had become
    binding and specifically enforceable against George on 6 August
    when the money was advanced at the request of his solicitors. In
    so far, therefore, as it is relevant to consider the priority of
    equities, the society, as an equitable chargee for money actually

    - 15 -

    advanced, had an interest ranking in priority to what, at that
    stage, was merely Mrs. Cann's expectation of an interest under a
    trust for sale to be created if and when the new property was
    acquired. One can, perhaps, test it in this way. If, prior to the
    acquisition of 7, Hillview, George Cann had been able to complete
    the sale of 30, Island Road, and had absconded with the proceeds,
    financing the purchase of 7, Hillview entirely by means of a
    mortgage advance, could his mother have claimed any interest in
    that property? I should have thought clearly not, save in so far
    as she might be entitled to a right of occupation by estoppel
    based on his promise to accommodate her and her having, in
    reliance on that promise, vacated 30, Island Road to enable that
    sale to be completed.

    It is argued, however, that because the creation of a charge
    on property in favour of the society necessarily posits that the
    chargor has acquired an interest out of which the charge can be
    created, there must notionally be a point of time at which the
    estate vested in him free from the charge and in which the
    estoppel affecting him could be "fed" by the acquisition of the
    legal estate so as to become binding on and take priority over the
    interest of the chargee. This is a puzzling problem upon which it
    is not easy to reconcile the authorities.

    The appellants rely upon the decision of the Court of
    Appeal in Church of England Building Society v. Piskor [1954] Ch.
    553, a case concerned with unregistered conveyancing. The
    sequence of events in that case was that an agreement to
    purchase leasehold property was entered into in September 1946,
    the purchaser being let into possession in the following month on
    part payment of the price. He proceeded to grant a number of
    weekly tenancies under which the tenants took possession in
    November. At that stage the contract remained uncompleted and
    the tenancies were, therefore, necessarily equitable only. On 25
    November 1946, completion took place and the property was
    assigned to the purchaser, being simultaneously charged by him in
    favour of the building society whose moneys had enabled the
    purchase to be completed. The charge contained the usual
    provision against leasing by the chargor. Default having been
    made in payment of principal and interest, the society sought
    possession against the tenants who argued that they had acquired
    tenancies by estoppel which was "fed" by the acquisition of the
    legal estate, thus converting their tenancies into legal tenancies
    binding on the society. The argument of the society was that the
    conveyance and the charge were in reality one single transaction
    with the result that the legal estate vested in the purchaser was,
    from the outset, subject to the society's charge and so could not
    be available to feed the estoppel free from it. This argument was
    rejected by the Court of Appeal. It was held that, despite the
    fact that the two documents were executed contemporaneously, the
    transaction necessarily involved conveyancing steps which, in
    contemplation of law, must be regarded as taking place in a
    defined order, so that there was a "scintilla temporis" between the
    purchaser's acquisition of the legal estate and the creation of the
    society's charge during which the estoppel could be fed. Reliance
    was also placed on a recital in the charge that the legal estate
    was "now vested in the mortgagors" which precluded the society
    from denying that the estate had not already vested at the time
    when the charge was granted. This was, however, only a

    - 16 -

    subsidiary ground for the decision which rested squarely upon the
    acquisition of the estate out of which the charge was granted as
    an essential preliminary to the charge.

    On the other side of the line are In re Connolly Brothers
    Ltd. (No. 2)
    [1912] 2 Ch. 25 and Security Trust Co. v. Royal Bank
    of Canada [1976] AC 503. In the former, a company had granted
    debentures creating a first and floating charge on all the property
    present and future of the company and prohibiting the creation of
    any charges ranking in priority to or pari passu with the
    debentures. Subsequently, the company, being desirous of acquiring
    further freehold property, approached a Mrs. O'Reilly, who agreed
    to advance the price but on terms that the loan be secured by a
    charge on the property. The company then agreed to buy the
    property. The contract was completed on 31 March 1904 and Mrs.
    O'Reilly was present at completion. She drew a cheque in favour
    of the company, which was paid into its account, and, at the same
    time, it drew a cheque for the balance of the price in favour of
    the vendor, the same solicitor acting for all parties. The
    conveyance was executed but was retained, together with the other
    title deeds, by the solicitor on the vendor's behalf, and a few days
    later, the company executed a memorandum of deposit in her
    favour. Warrington J. held that her charge had priority over the
    charge created by the debentures and his decision was upheld by
    the Court of Appeal, Cozens-Hardy M.R. remarking, at p. 31:

    "we should be shutting our eyes to the real transaction if
    we were to hold that the unencumbered fee simple in the
    property was ever in the company so that it became subject
    to the charge of the debenture holders."

    The reasoning, both of the Master of the Rolls and of Buckley
    L.J., seems to have been that, since Mrs. O'Reilly had a
    contractual right to the security at the time when she advanced
    the money, she necessarily had priority over the debentures. But
    that is, of course, always the case when a lender advances money
    on the understanding that he will get a security.

    In re Connolly was cited in Piskor's but was distinguished by
    Sir Raymond Evershed M.R. on the ground that it involved a
    question of equitable priorities. So it did but I respectfully
    question whether this can be a valid ground of distinction. The
    debentures in In re Connolly's were duly registered and Mrs.
    O'Reilly clearly had constructive notice of their terms. The
    question was whether there was ever property upon which those
    terms could operate and the fact that both the charge in the
    debentures and Mrs. O'Reilly's charge under her contract and the
    memorandum of deposit were equitable only was entirely
    immaterial. The question in issue was whether the company's
    legal estate, without the existence of which her charge could
    never have taken effect, existed at any point of time free from
    her charge so that the prior interest of the debenture holders
    could attach. No other analysis of the decision is possible save
    that the court considered the transaction consisting of the
    conveyance, the advance and the memorandum of deposit as a
    single transaction.

    The more recent decision of the Privy Council in Security
    Trust Co. v. Royal Bank of Canada
    [1976] AC 503, is equally

    - 17 -

    capable of analysis only on the "single transaction" basis. The
    facts were complicated but reduced to their simplest terms
    involved a contract for the purchase by a company of certain real
    estate on terms that a certain proportion of the price should be
    paid by a fixed date and that the balance should be secured by
    mortgage to the vendor. A conveyance and mortgage were
    executed and were held in escrow pending payment of the agreed
    proportion of the price. Default was made in payment by the
    fixed date but there was no rescission. The purchaser then
    created a debenture, creating a fixed charge on its existing
    property and a floating charge on future property. Under that
    debenture a receiver was appointed. Whether the sale agreement
    was then still on foot is open to doubt but the date for
    completion was extended in January 1971 by agreement with the
    receiver to 30 April of that year. On 30 April the contract was
    completed. The question which arose in the subsequent liquidation
    of the purchaser was whether the charge in the debenture took
    priority over the vendor's mortgage. In delivering the judgment of
    the Board, Lord Cross of Chelsea contrasted Piskor and In re
    Connolly observing, at pp. 519-520:

    "But the basic difference between the two lines of cases is
    that in cases such as In re Connolly Brothers Ltd. (No. 2)
    and this case the charge under the debenture only bites on
    property which is already fettered by the agreement to give
    the other charge, whereas on the facts of Church of
    England Building Society v. Piskor
    the tenancy was created
    out of an interest which was then unfettered by any such
    agreement."

    Again, I respectfully question whether this, although it records
    accurately what the Court of Appeal held in Piskor, really affords
    a valid ground for distinction. However one looks at it, the
    interests of the tenant in that case had to be legal interests in
    order to gain any priority and they could only be so by separating
    the conveyance and the charge and treating them as separate
    transactions. Although Romer L.J., in the course of his judgment,
    touched on the question of what the position would have been had
    there been evidence of some prior agreement to create the charge,
    this was never fully considered and the court never grasped the
    nettle that the transaction necessarily involved an enforceable
    agreement for the grant of a charge at the stage when the money
    was advanced in order to enable the conveyance to take place.

    These three authorities were carefully reviewed by Mustill
    L.J. in the course of his judgment in Lloyds Bank Plc. v. Rosset
    [1989] Ch 350, at pp. 388-393. He concluded that it was difficult
    to see how they could live together. I agree. I do not, for my
    part, consider that they can be reconciled. In neither In re
    Connolly nor the Security Trust Co. case could the charge which
    was given priority have been created unless and until the legal
    estate had been obtained by the chargor. In both cases the
    chargee had notice of the existence of the charge which failed to
    achieve priority. Both necessarily rest therefore upon the
    proposition that, at least where there is a prior agreement to
    grant the charge on the legal estate when obtained, the
    transactions of acquiring the legal estate and granting the charge
    are, in law as in reality, one indivisible transaction. It may be
    possible to justify the actual decision in Piskor on the subsidiary

    - 18 -

    ground there advanced of an estoppel by deed, but I do not, for
    myself, see how it is possible to uphold the principal ground for
    the decision except by rejecting the ratio of In re Connolly, and
    the Security Trust Co. case.

    One is therefore presented with a stark choice between
    them. Of course, as a matter of legal theory, a person cannot
    charge a legal estate that he does not have, so that there is an
    attractive legal logic in the ratio in Piskor. Nevertheless, I
    cannot help feeling that it flies in the face of reality. The
    reality is that, in the vast majority of cases, the acquisition of
    the legal estate and the charge are not only precisely simultaneous
    but indissolubly bound together. The acquisition of the legal
    estate is entirely dependent upon the provision of funds which will
    have been provided before the conveyance can take effect and
    which are provided only against an agreement that the estate will
    be charged to secure them. Indeed, in many, if not most, cases
    of building society mortgages, there will have been, as there was
    in this case, a formal offer of acceptance of an advance which
    will ripen into a specifically enforceable agreement immediately
    the funds are advanced which will normally be a day or more
    before completion. In many, if not most, cases, the charge itself
    will have been executed before the execution, let alone the
    exchange, of the conveyance or transfer of the property. This is
    given particular point in the case of registered land where the
    vesting of the estate is made to depend upon registration, for it
    may well be that the transfer and the charge will be lodged for
    registration on different days so that the charge, when registered,
    may actually take effect from a date prior in time to the date
    from which the registration of the transfer takes effect (see
    section 27(3) of the Act of 1925 and the Land Registration Rules
    1925 (S.R. & O 1925 No. 1093), rule 83(2)). Indeed, under rule 81
    of the Rules of 1925, the registrar is entitled to register the
    charge even before registration of the transfer to the chargor if
    he is satisfied that both are entitled to be registered. The reality
    is that the purchaser of land who relies upon a building society or
    bank loan for the completion of his purchase never in fact
    acquires anything but an equity of redemption, for the land is,
    from the very inception, charged with the amount of the loan
    without which it could never have been transferred at all and it
    was never intended that it should be otherwise. The "scintilla
    temporis" is no more than a legal artifice and, for my part, I
    would adopt the reasoning of the Court of Appeal in In re
    Connolly Brothers Ltd (No. 2).
    [1912] 2 Ch. 25 and of Harman J.
    in Coventry Permanent Economic Building Society v. Jones [1951] 1
    All E.R. 901 and hold that Piskor's case was wrongly decided. It
    follows, in my judgment, that Mrs. Cann can derive no assistance
    from this line of argument.

    I have, up to this point, been content to assume that the
    facts of the instant case justify the proposition which found favour
    with Dillon L.J., that she was in actual occupation of the property
    at the material time. This is, of course, essentially a question of
    fact, but there is the serious question of what, in law, can amount
    to "actual occupation" for the purposes of section 70(1)(g). In
    Williams & Glyn's Bank Ltd. v. Boland [1981] AC 487, 504, Lord
    Wilberforce observed that these words should be interpreted for
    what they are, that is to say, ordinary words of plain English.
    But even plain English may contain a variety of shades of

    - 19 -

    meaning. At the date of completion Mrs. Cann was not personally
    even in England, leave alone in personal occupation of the
    property, and the trial judge held that the acts done by Mr.
    Abraham Cann and Mr. George Cann amounted to

    "no more than the taking of preparatory steps leading to the
    assumption of actual residential occupation on or after
    completion, whatever the moment of the day when
    completion took place ..."

    For my part, I am content to accept this as a finding of fact
    which was amply justified by the evidence before him, and I share
    the reservations expressed by Ralph Gibson and Woolf L.JJ. in the
    Court of Appeal. It is, perhaps, dangerous to suggest any test for
    what is essentially a question of fact, for "occupation" is a
    concept which may have different connotations according to the
    nature and purpose of the property which is claimed to be
    occupied. It does not necessarily, I think, involve the personal
    presence of the person claiming to occupy. A caretaker or the
    representative of a company can occupy, I should have thought, on
    behalf of his employer. On the other hand, it does, in my
    judgment, involve some degree of permanence and continuity which
    would rule out mere fleeting presence. A prospective tenant or
    purchaser who is allowed, as a matter of indulgence, to go into
    property in order to plan decorations or measure for furnishings
    would not, in ordinary parlance, be said to be occupying it, even
    though he might be there for hours at a time. Of course, in the
    instant case, there was, no doubt, on the part of the persons
    involved in moving Mrs. Cann's belongings, an intention that they
    would remain there and would render the premises suitable for her
    ultimate use as a residential occupier. Like the trial judge,
    however, I am unable to accept that acts of this preparatory
    character carried out by courtesy of the vendor prior to
    completion can constitute "actual occupation" for the purposes of
    section 70(1)(g). Accordingly, all other considerations apart, Mrs.
    Cann fails, in my judgment, to establish the necessary condition
    for the assertion of an overriding interest.

    The view that I have formed renders it strictly unnecessary
    to consider the ground upon which Mrs. Cann's claim failed in the
    Court of Appeal. What was said was that, despite her initial
    evidence (in her affidavit) that she did not know of her son's
    intention to raise any of the money required for the purchase on
    mortgage, nevertheless her oral evidence before the judge disclosed
    that she was well aware that there was a shortfall which would
    have to be met from somewhere. Her own account of the matter
    was that his reason for selling was that he was in financial
    difficulties, so that she must have known that he was not going to
    be able to meet it out of his own resources. Dillon L.J. (with
    whom on this point, the other two members of the court agreed)
    inferred that "she left it to George Cann to raise the balance,"
    from which he further inferred that George Cann had authority to
    raise that sum from the society. There was no finding to this
    effect by the judge, but I think, for my part, that it is a
    necessary conclusion once it is accepted, as it has to be, that she
    knew that there was a shortfall of some £4,000 apart from
    conveyancing costs, that George Cann was going to raise it, and
    that he was in financial difficulties. It is said that there was no
    evidence that he was going to raise it on the security of this

    - 20 -

    property. There might, for instance, be other property available
    to him. He might obtain an unsecured loan. In the circumstances
    of his known lack of resources, however, this is fanciful and in my
    judgment the court was entitled to draw the inference that it did
    draw. If that is right, it follows that George Cann was permitted
    by her to raise money on the security of the property without any
    limitation on his authority being communicated to the society.
    She is not, therefore, in a position to complain, as against the
    lender, that too much was raised and even if, contrary to the view
    which I have formed, she had been able to establish an interest in
    the property which would otherwise prevail against the society, the
    circumstances to which I have alluded would preclude her from
    relying upon it as prevailing over the society's interest for the
    reasons given in the judgment of Dillon L.J. in the Court of
    Appeal. For all these reasons, I would accordingly dismiss the
    appeal.

    LORD JAUNCEY OF TULLICHETTLE

    My Lords,

    The facts in this appeal and the relevant statutory
    provisions are set out in detail in the speech of my noble and
    learned friend Lord Oliver of Aylmerton. I gratefully adopt his
    narrative and as a result thereof I shall only require to refer to
    such facts and statutory provisions as are particularly relevant to
    what I have to say.

    The first appellant (Mrs. Cann) contends that she had an
    equitable interest in 7, Hillview which commenced on 20 July 1984
    when a specifically enforceable contract for the purchase of that
    house was entered into and which subsisted at the date of
    completion of the various transactions on 13 August 1984 and
    thereafter. That equitable interest, was, by virtue of her actual
    occupation, an overriding interest for the purposes of the Land
    Registration Act 1925, to which the mortgage in favour of the
    society, when registered, was subjected. Mr. Aylen for the
    appellants began his submissions with a detailed analysis of the
    relevant provisions of the Land Registration Act 1925 and placed
    reliance upon: (i) section 23(1) which so far as relevant is in the
    following terms:

    "In the case of a leasehold estate registered with an
    absolute title, a disposition (including a subdemise thereof)
    for valuable consideration shall, when registered, be deemed
    to vest in the transferee or underlessee the estate
    transferred or created to the extent of the registered estate
    . . . but subject as follows:

    . . .

    (c) Unless the contrary is expressed on the register, to
    the overriding interests, if any, affecting the estate
    transferred or created

    (ii) section 70(1) which provides, inter alia:

    - 21 -

    "All registered land shall, unless under the provisions of this Act
    the contrary is expressed on the register, be deemed to be subject
    to such of the following overriding interests as may be for the
    time being subsisting in reference thereto, and such interests shall
    not be treated as incumbrances within the meaning of this Act,
    (that is to say):

    . . .

    (g) The rights of every person in actual occupation of the
    land or in receipt of the rents and profits thereof,
    save where inquiry is made of such person and the
    rights are not disclosed;

    . . .

    (i) Rights under local land charges unless and until
    registered or protected on the register in the
    prescribed manner;

    (j) Rights of fishing and sporting, seignorial and manorial
    rights of all descriptions (until extinguished), and
    franchises;

    (k) Leases for any term or interest not exceeding twenty-
    one years, granted at a rent without taking a fine;. .

    . "

    It is to be noted that these provisions neither alter the scope or
    the character nor define the nature of the rights to which they
    apply. Rights of a limited nature remain so limited albeit a
    registered disposition may be subject thereto. In these
    circumstances I consider that the first matter to be examined in
    this appeal is the nature of the rights possessed by the parties.

    As a result of the various transactions to which my noble
    and learned friend has already referred Mrs. Cann had, prior to its
    sale in August 1984, an equitable interest in 30, Island Road. On
    its sale she ceased to have any further interest in that house but
    acquired rights against her son George Cann in relation to the
    proceeds of sale. On completion of the purchase of 7, Hillview
    she once again acquired an equitable interest in that house. Since
    that interest derived from George Cann it followed that she could
    acquire no equitable interest in the house prior to his acquisition
    of an equitable interest therein on completion, nor could she
    acquire an interest greater than he acquired. Mr. Aylen argued
    that the equitable interest which Mrs. Cann took on completion
    had priority over the equitable interest which the society took at
    that time. This argument necessarily presupposed that there was a
    moment of time when George Cann had a right to the
    unincumbered leasehold estate whereby he could grant to Mrs.
    Cann an interest which took priority over that of the society as
    mortgagees. Mr. Munby countered that argument by submitting
    that the two transactions of purchasing 7, Hillview and borrowing
    money from the society must be looked at as one and that in
    reality George Cann never acquired more than the equity of
    redemption in 7, Hillview from which it followed that any
    equitable interest acquired by Mrs. Cann could only be carved out
    of this limited interest.

    - 22 -

    In order to consider these arguments it is necessary to look
    at a number of authorities. In re Connolly Brothers Ltd. (No. 2)
    [1912] 2 Ch. 25. a company issued debentures creating a floating
    charge over all their property present and future and subject to a
    condition that it should not be in a position to create any other
    mortgage or charge in priority to the debenture. Thereafter the
    company bought a property after borrowing a sum of £1,000 for
    that purpose from a Mrs. O'Reilly. It was a condition of that
    loan that Mrs. O'Reilly should have a charge upon the property
    purchased. It was held that the company only acquired the equity
    of redemption in the property with the result that Mrs. O'Reilly
    was entitled to priority over the debenture holders. Warrington J.
    said, at pp. 28-29:

    'It must be borne in mind that these debentures and the
    trust deed, so far as this after-acquired property is
    concerned, amount to nothing more than a contract by the
    company to give to the debenture holders a security upon
    this particular item of property by its description as
    appearing in the conveyance, but only on such interest as
    the company may in fact acquire in that and their other
    after-acquired property. Now, in my judgment, the company
    on the facts of this case never acquired as against Mrs
    O'Reilly any interest in this property at all, except subject
    to the obligation of giving to her a charge for the amount
    of the purchase-money which she so advanced."

    In dismissing the appeal Sir Herbert Cozens-Hardy M.R. said, at p.
    31:

    "Did the company as between themselves and Mrs. O'Reilly
    ever become the absolute owners of the property? Or was
    not the bargain that Mrs. O'Reilly was to have a first
    charge, and the company was only to get the property
    subject thereto? In my opinion we should be shutting our
    eyes to the real transaction if we were to hold that the
    unencumbered fee simple in the property was ever in the
    company so that it became subject to the charge of the
    debenture holders."

    In Coventry Permanent Economic Building Society v. Jones
    [1951] 1 All E.R. 901 the first defendant successfully bid for a
    house at auction. On the following day she agreed to let the
    ground floor to two tenants. Thereafter she borrowed a sum of
    money from the plaintiffs to enable her to complete the purchase.
    On the date of completion she granted a mortgage to the
    plaintiffs which excluded her right to grant leases. It was argued
    for the tenants that a tenancy by estoppel had been created
    before the completion of the conveyance to the first defendant
    and that there must be predicated a scintilla temporis between the
    conveyance to her and the mortgage by her into which the tenancy
    by estoppel could be inserted so as to precede the mortgage. In
    dismissing this argument Barman J. said, at p 903:

    "The question is whether I must assume the scintilla
    temporis and assume that because of the obligations of the
    landlord she must be held to have defrauded her mortgagee
    by creating a tenancy which is good against the society

    - 23 -

    although it was not willing to lend the money except on the
    footing that she had no such right. I do not see why I need
    postulate this. The whole transaction was one transaction.
    The vendor would not sell without without receiving his
    purchase money, and the mortgagee would not provide the
    purchase money without receiving the term of years. The
    money, in fact, went straight - as is the universal practice
    - from the mortgagee to the vendor, and not until it was in
    the vendor's hands would a legal state be created either in
    favour of the landlord or of the mortgagee. It seems to me
    that the whole thing is one transaction in substance, and I
    am not constrained to introduce an artificiality so as to
    affect the rights of the building society. Consequently, I
    reject the argument that the doctrine of estoppel must have
    created in the tenants an estate in priority to that of the
    building society. The grantor of the so-called tenancy would
    never have acquired the estate which she did acquire but
    for that mortgage money, and it would not be right,
    therefore, to introduce a fiction in the manner suggested."

    In re Connolly was followed by the Privy Council in Security
    Trust Co. v. Royal Bank of Canada
    [1976] AC 503. In that case
    the contract of sale provided for payment of part of the price in
    cash and the balance by a mortgage granted in favour of the
    vendor. After the contract but before completion the purchaser
    granted a debenture charging all his property present and future
    and providing for a fixed first charge on all his present freehold
    property. In a competition between the mortgagee and the
    debenture holder it was held that the mortgagee had priority.
    Delivering the advice of the Board Lord Cross of Chelsea said, at
    p. 518:

    Their Lordships turn now to consider what were the
    relative priorities of this charge and the appellant's
    mortgage apart from any question of registration under the
    Registration of Records Act. As they see it the mortgage
    was entitled to priority. The respondent's charge was a
    charge on Fisher's interest under the contract and could
    give the respondent no greater interest than Fisher had.
    Fisher could not obtain a conveyance of the lands free from
    the obligation to grant back the mortgage to the appellant.
    He had no right to obtain an unencumbered fee simple and
    the charge on his interest which he created in favour of the
    respondent only gave the respondent rights which were
    subject to the prior rights of the appellant. The case is
    exactly parallel to In re Connolly Brothers Ltd. (No. 2)
    [1912] 2 Ch. 25."

    Although in that case the contract of sale required that a
    mortgage be granted in favour of the vendor Lord Cross obviously
    considered that this in no way distinguished it from In re Connolly
    where the obligation to grant the mortgage was not a term of the
    contract of sale. These three cases ail support the contentions of
    the society.

    Mr. Aylen however relied strongly on Church of England
    Building Society v. Piskor
    [1954] Ch. 553 where the Court of
    Appeal declined to treat as one individual transaction the purchase

    - 24 -

    of leasehold premises and the granting of a mortgage to a lender
    who had provided a substantial part of the purchase price. The
    relevant facts may be summarised as follows:

    In September 1946 the defendants agreed to purchase
    leasehold premises having in August 1946 made application for an
    advance on mortgage. Having paid part of the purchase price the
    purchasers were allowed by the vendors to take possession. In
    early November they granted weekly tenancies of part of the
    premises. At the end of November the purchase was completed by
    an assignment of the lease to the purchasers and at the same time
    they granted a mortgage to secure the sum which had been paid
    by the plaintiffs direct to the vendor. The mortgage contained a
    recital that the borrower was the estate owner. There was
    evidence that if the money had not been advanced for the
    plaintiffs the vendors would not have delivered the assignment.

    Sir Raymond Evershed M.R. said, at p. 558:

    "From what I have said, it is clear that as between the
    mortgagors and Captain Hamilton (and I will henceforth
    speak of Captain Hamilton, treating him and Miss Hunnex as
    equivalent) there was created a tenancy by estoppel. So
    much is not contested, although the facts about the creation
    of that tenancy are somewhat vague. If, then, the
    mortgagors acquired a legal estate before the legal charge
    took effect, for however short a time, then the estoppel
    would, as it is said, be fed and the plaintiffs' claim must
    necessarily be defeated."

    After commenting that the conclusion of Harman J. in
    Coventry Permanent Economic Building Society v. Jones "that the
    whole thing LwasJ one transaction in substance" might be justified
    on its facts he stated, at p. 561:

    "at any rate in a case such as the present, the transaction,
    although it may fairly be said to be one in substance, still
    cannot be said in the eyes of the law to be one and
    indivisible. The claim of the plaintiffs to a title paramount
    rests essentially upon their having obtained a legal estate,
    and this they can only have done by virtue of the legal
    charge on which they sue; and if for some moment of time
    the legal estate was vested in the mortgagors and was
    therefore capable of being subjected by them to the charge
    upon which the mortgagees rely - if that is right, then it
    seems inevitable that the estoppel, which was involved in
    the tenancy created in favour of Captain Hamilton,
    necessarily is fed by the legal estate in the hands of the
    mortgagors; in other words, I am not satisfied, with all
    respect to Harman J., that if the language which I have
    read was meant to lay down a general proposition covering
    all cases of this kind, it was correct. It is no doubt true
    to say that in one sense the transaction was one
    transaction; but it is equally true to say that it consists
    necessarily of certain defined steps which must take place
    in a certain defined order, if the result intended is
    eventually to be achieved. That seems to me not an
    artificiality, but a necessary result of the law and of the
    conveyancing practice which was involved."

    - 25 -

    Later the Master of the Rolls referred to the facts of In re
    Connolly
    and after opining that the question between Mrs. O'Reilly
    and the debenture holders was a question of equitable priorities
    said, at p. 563:

    "It is true that Sir H. Cozens-Hardy M.R. in his judgment
    said: 'In my opinion we should be shutting our eyes to the
    real transaction if we were to hold that the unencumbered
    fee simple in the property was ever in the company so that
    it became subject to the charge of the debenture holders.'
    But I do not think that that language, appropriate to a case
    of competing equities, can be used to justify the view that
    there is one transaction - one, that is, not only in substance
    but in law one and indivisible - in a case such as the
    present."

    Romer L.J. said, at pp. 564-565:

    "The mortgage of the purchased property cannot have any
    operation in law (whatever rights it may give rise to in
    equity or by estoppel) unless and until the purchaser is in a
    position to vest a legal term in the property, as security, in
    the mortgagee, and he is not and cannot be in a position to
    do this until he himself has acquired from the vendor the
    legal estate out of which the mortgage term is capable of
    being created. From this it follows that the execution and
    delivery of the conveyance (if the property is freehold) or
    of the assignment (in the case of a leasehold) by the vendor
    to the purchaser must of necessity constitute an essential
    preliminary to the vesting in the mortgagee of a subsidiary
    interest in the property. . . the fact remains that the
    purchasers could not have given the society the legal charge
    which the society required unless, at the time when the
    charge was executed, the purchasers were the owners of the
    legal interest in the property charged. That this was
    recognised by the society itself is sufficiently shown by the
    fact that there appears in the schedule to the charge the
    statement that the premises were then (that is to say, at
    the moment of the delivery of the charge) vested in the
    mortgagors - a circumstance of evidence upon which
    Danckwerts J. relied in Woolwich Equitable Building Society
    v. Marshall
    [1952] Ch. 1. I agree with Danckwerts J. that
    the plaintiffs, having inserted that statement in the charge,
    cannot very well complain if the statement is regarded as
    true. Even without this element, however, I should still
    regard the legal interest in the purchased premises as having
    become vested in the purchasers prior to the execution of
    the charge for, as I say, unless this sequence of interests is
    observed, the charge would have been wholly ineffective in
    law to achieve its immediate purpose. I agree with Mr.
    Alcock's submission that a composite transaction cannot be
    regarded as being one transaction, unless it is not only one
    but one and indivisible; and that two transactions, each
    possessing a legal individuality of its own, do not coalesce
    into one merely because they are dependent on each other."

    Romer L.J. concluded his judgment, at p. 566, by hypothesising
    that after the creation of the tenancies but prior to completion of
    the sale the purchasers had bound themselves to give to the

    - 26 -

    plaintiffs a charge upon the property when assigned to secure the
    advance in which event he considered that:

    "the legal estate which passed to the purchasers, subject to
    the equity in favour of the plaintiffs arising from the
    agreement, would have sufficed to feed the estoppel in
    favour of the tenants. As, however, there is no evidence of
    such an agreement having been entered into, whether before
    or after the tenancies were granted, the point does not
    arise, and I express no concluded opinion upon it."

    It must be noted that Romer L.J. expressed no views as to what
    would have been the position if the undertaking to the plaintiffs
    had preceded the grant of the tenancies. In any event feeding the
    estoppel in favour of the tenants would merely confer on them as
    against the purchasers such rights as they, the purchasers, were in
    a position to confer.

    In Security Trust Company v. Royal Bank of Canada [1976]
    A.C. 503 Lord Cross sought to reconcile the decisions in In re
    Connolly Brothers Ltd. (No. 2)
    [1912] 2 Ch. 25 and Church of
    England Building Society v. Piskor
    [1954] Ch. 553 in the following
    passage, at pp. 519-520:

    "But Romer L.J. in distinguishing In re Connolly Brothers
    Ltd. (No. 2)
    was careful to point out (see [1954] Ch. 553,
    566) that there was no evidence to show that the purchasers
    had prior to granting the tenancy entered into any binding
    contract with the plaintiff building society to grant it a
    morgage on completion in consideration of its advancing
    some of the purchase price. If there had been such an
    agreement then the rights of the parties might well have
    been different, although as the tenancy was undoubtedly
    subsequently clothed with the legal estate an agreement to
    grant a mortgage, even though made before the grant of the
    equitable tenancy to him, would presumably not have bound
    the tenant unless he had notice of it. Furthermore, the
    fact that the plaintiff building society had not inspected the
    property or inquired as to the rights of any person in
    occupation might also have been relevant. But the basic
    difference between the two lines of cases is that in cases
    such as In re Connolly Brothers Ltd. (No. 2) and this case
    the charge under the debenture only bites on property which
    is already fettered by the agreement to give the other
    charge, whereas on the facts of Church of England Building
    Society v. Piskor
    the tenancy was created out of an interest
    which was then unfettered by any such agreement."

    I have difficulty in understanding the second sentence in the
    foregoing passage because just as the tenancy was subsequently
    clothed with the legal estate or, as Romer L.J. put it, the legal
    estate passing to the purchaser would have fed the estoppel in
    favour of the tenants, so would the mortgage in favour of the
    plaintiffs have been clothed with the legal estate. If the
    agreement to grant the mortgage preceded the granting of the
    tenancy then I should have thought that when both equitable
    interests were clothed with the legal estate the prior equitable
    interest would prevail.

    - 27 -

    Both Sir Raymond Evershed M.R. and Romer L.J. treated
    Piskor as a case involving legal interests alone and on this basis
    the Master of the Rolls was able to distinguish In re Connolly.
    Furthermore the court appeared to proceed upon the basis that the
    only interest of the mortgagees which required to be considered
    was that which they acquired by virtue of the execution of the
    charge in their favour after the legal estate had vested in the
    purchaser. This, in my view was to ignore the interest which they
    must have acquired when they handed over the purchase price to
    enable completion to take place. It would be quite unrealistic to
    assume that the money was made available unconditionally and
    that only at or immediately after the moment of completion did
    the question of the execution of a charge in their favour arise.

    In Lloyds Bank Plc v. Rosset [1989] Ch 350, 389 Mustill
    L.J. carefully analysed the three decisions in In re Connolly,
    Piskor
    and the Security Trust Co. case and confessed to finding it
    hard to see how they could stand together. I share his difficulty.
    It would have been possible for the Privy Council in the Security
    Trust Co.
    case to have distinguished that case from In re Connolly
    on the basis that in terms of the contract of sale the purchaser
    could never acquire from the vendor more than the equity of
    redemption. In the event Lord Cross drew no distinction between
    the two case and sought instead to distinguish Piskor. In each of
    the three cases the purchaser was dependent upon the loan.

    It is of course correct as a matter of strict legal analysis
    that a purchaser of property cannot grant a mortgage over it until
    the legal estate has vested in him. The question however is
    whether having borrowed money in order to complete the purchase
    against an undertaking to grant security for the loan over the
    property the purchaser is, for a moment of time, in a position to
    deal with the legal estate as though the mortgagee had no interest
    therein. In re Connolly, Coventry Permanent Economic Building
    Society v. Jones
    [19195] 1 All E.R. 901 and the Security Trust
    Co
    . case say that he is not in such a position recognising, in my
    view, the realities of the situation. Piskor say that he is, thereby
    ignoring any interest which the mortgagee may have prior to
    completion of the purchase. Nevertheless in each of the four
    cases the purchase was dependent upon the loan and I find it
    impossible to see any material distinction between the
    circumstances obtaining in the three former cases and those
    obtaining in Piskor. In my view a purchaser who can only
    complete the transaction by borrowing money for the security of
    which he is contractually bound to grant a mortgage to the lender
    eo instante with the execution of the conveyance in his favour
    cannot in reality ever be said to have acquired even for a scintilla
    temporis the unencumbered fee simple or leasehold interest in land
    whereby he could grant interests having priority over the mortgage
    or the estoppel in favour of prior grantees could be fed with
    similar results. Since no one can grant what he does not have it
    follows that such a purchaser could never grant an interest which
    was not subject to the limitations on his own interest. In so far
    as Piskor decided that such a purchaser could be vested for a
    moment of time in the unencumbered freehold or leasehold estate
    with the consequences to which I have just referred, I consider
    that it was wrongly decided. Conversely I consider that the
    decision of Harman J. in the Coventry Permanent Economic
    Building Society
    case was correct.

    - 28 -

    I would only add a further word about Piskor in relation to
    the recital in the mortgage that the property "is now vested in
    the mortgagors free from incumbrances for the unexpired residue
    of the term". Romer L.J., at p. 565, considered this to be a
    matter of some importance and referred to a dictum of
    Danckwerts J. in Woolwich Equitable Building Society v. Marshall
    [1952] Ch. 1 where the judge said, at p. 9:

    "It seems to me that a mortgagee, who has inserted in the
    deed under which he acquires title a statement that the
    mortgagor is 'the estate owner in respect of the property'
    which is being mortgaged or charged to the morgagee,
    cannot object if that statement is taken to be true.
    Therefore, it seems to me that the irresistible inference is
    that I must assume that to be the position, even if the
    transfer by the vendors to the purchaser bore the same date
    as the charge. In fact, the trasfer must have been
    executed at a time earlier than that at which the charge to
    the society was executed; so that there was a time in which
    it would be correct to say that the mortgagor had become
    the estate owner, i.e., the legal owner of the fee simple of
    the property subsequently charged by him to the society to
    secure the amount of his loan."

    My Lords I think that Romer L.J. and Danckwerts J. read too
    much into these recitals. In my view they amount to no more
    than an acknowledgment by the mortgagor that he is the person
    who is able to grant a valid legal charge over the property in
    question.

    In the present case George Cann borrowed money from
    society in order to complete the purchase of 7, Hillview and in
    return granted to them a mortgage. The mortgage was executed
    by George Cann prior to 13 August 1984 when the purchase was
    completed. It follows that as a matter of reality George Cann
    was never vested in the unencumbered leasehold and was therefore
    never in a position to grant to Mrs. Cann an interest in 7,
    Hillview which prevailed over that of the society. The interests
    that Mrs. Cann took in 7, Hillview could only be carved out of
    George Cann's equity of redemption. In reaching this conclusion it
    is unnecessary to consider whether or not Mrs. Cann was aware
    that George Cann would require to borrow money in order to
    finance the purchase of 7, Hillview.

    That is sufficient for the disposal of this appeal but in
    deference to the able arguments addressed to your Lordships on
    the relevant date for the determination of the subsistence of an
    overriding interest for the purposes of section 23(1)(b) and section
    70(1)(g) of the Act of 1925, and in view of the general importance
    of this question I propose to say a few words thereanent. I should
    at the outset explain that I am in entire agreement with the
    analysis and reasoning of my noble and learned friend Lord Oliver
    of Aylmerton on this matter and that anything that I may say
    must be treated as merely supplementary thereto.

    Mrs. Cann claimed to have an overriding interest in 7,
    Hillview by virtue of (1) her notional contribution to the purchase
    of 48, Warren Road, (2) George Cann's undertaking that she would
    always have a roof over her head and (3) her occupation of the

    - 29 -

    premises on the date of the conveyance to George or in any event
    on the date of registration of George Cann's title to the premises.
    Mrs. Cann's primary submission was that the tempus inspiciendum
    for the ascertainment of her overriding interest was the date of
    registration whereas the society submitted that it was the date of
    completion of the relevant transaction. The point is almost devoid
    of authority and until the recent case of Lloyds Bank Plc v.
    Rosset
    [1989] Ch 350 had been considered only once in the county
    court case of Paddington Building Society v. Mendelsohn, 50 P &
    C.R. 244 in which Judge McCarraher in the Bristol county court
    held that actual occupation at the date of the mortgage was
    necessary to found an overriding interest. On appeal to a court of
    two judges the decision of the trial judge was upheld on another
    ground, Browne-Wilkinson L.J. observing that it was undesirable for
    a two-judge court to adjudicate upon so important a point if the
    appeal could be otherwise disposed of. It is true that in In re
    Boyle's Claim
    [1961] 1 W.L.R. 339 Wilberforce J. expressed the
    view that the relevant date was that of registration. However the
    issue in that case was whether a claimant was entitled to
    compensation for rectification of the register by the removal from
    his title of land belonging to a neighbour, the land being subject
    to overriding interests. The issue was thus far removed from that
    which is raised in this appeal and the present point does not
    appear to have been argued.

    In Rosset the trial judge faced with the obvious
    conveyancing absurdity of construing section 70(1)(g) in a way
    which could give to someone moving into occupation after
    completion of a transfer or mortgage an interest taking effect in
    priority to the completed transaction essayed a construction of
    section 20(l)(b) which avoided this. He concluded (see [1989] Ch.
    350, 371) that section 20(1)(b) fell to be construed as though it
    read "subject . . . (b) . . ." to the overriding interests, if any,
    affecting the estate transferred or created at the time it is
    transferred or created."
    Thus only those overriding interests which
    subsisted at the date of completion would be effective against the
    transferee or mortgagee, any interests coming into existence
    between completion and registration being ineffective. The Court
    of Appeal saw difficulties in the judge's construction of section
    20(l)(b) and approached the problem in a rather different way.
    Nicholls L.J., considered at p. 372, that the natural construction of
    section 20(1) was that both paragraphs (a) and (b) focused on the
    position at the time of registration, although He recognised the
    conveyancing absurdity to which I have already referred. However
    he felt unable to accept the conclusion of the trial judge because
    that would result in the transferee or mortgagee taking "free from
    all overriding interests, whatever their nature, which came into
    being after the execution of the transfer or mortgage ..." (p.
    373). He went on to say

    "I am not persuaded that section 20(1)(b) was intended to
    have the effect that a purchaser or a mortgagee should take
    free from local land charges coming into being after
    execution of the transfer or mortgage."

    He said, at p. 374:

    "Consistently with conveyancing sense and the underlying
    conveyancing principle which is being carried forward into

    - 30 -

    paragraph (g), it seems to me that paragraph (g) is
    concerned with persons who are in actual occupation of the
    land at the time when the estate or interest which is said
    to be subject to the rights of the occupant was created.
    For example, on completion of a purchase or a mortgage in
    the usual way. This is so despite the need for a further
    step to be taken (registration) before the legal estate will
    be acquired by the purchaser or mortgagee. In line with
    this is the exception provided for in paragraph (g).
    Explicitly, the rights of an occupant are not protected if
    enquiry is made of him and the rights are not disclosed.
    That exception, implicitly, contemplates an inquiry by or on
    behalf of the person whose estate or interest is said to be
    subject to the rights of the occupant and, again implicitly,
    an inquiry made before he acquired his estate or interest.
    Otherwise the provision makes no sort of sense. If this is
    right, the pieces of the jigsaw fit together reasonably well.
    A purchaser or mortgagee inspects and inquires before
    completion, in the established fashion. Or he fails to do so,
    at his own risk. He then completes the transaction, taking
    an executed transfer or mortgage. Whether or not an
    overriding interest under paragraph (g) subsists so far as his
    freehold or mortgage is concerned falls to be determined at
    that moment. If an overriding interest does subsist, then
    his estate when registered takes subject to that interest. If
    it does not, then subsequent entry of a person into
    occupation before the transfer or mortgage has been
    registered, and "completed" for the purposes of section 19,
    does not have the consequence of creating an overriding
    interest under paragraph (g) in relation to that freehold or
    mortgage."

    If I understand Nicholls L.J. correctly he is there saying
    that one must look at the date of execution of the mortgage to
    see whether an overriding interest of the type described in section
    70(1)(g) subsists and is protected by occupation and that if such
    interest still subsists at the date of registration it will fall within
    the ambit of section 20(l)(b). By this line of reasoning he was
    able to avoid the conveyancing absurdity to which he earlier
    referred and also the problem of post-completion land charges.

    My Lords I have sympathy with the courts below in their
    quest for the true meaning of section 20(1)(b). I agree with
    Nicholls L.J. that it is implicit in section 70(l)(g) that the inquiry
    as to actual occupation is one which is capable of being made
    before completion of the mortgage or other transfer. Inquiry
    about occupation which commenced after completion would be
    futile because by then the transferee or mortgagee would be
    committed and the die cast. However whichever of the two
    constructions of section 20(1)(b) referred to in Rosset is correct
    there will be anomalies. Nicholls L.J.'s approach to section
    70(1)(g) does not avoid the problem of the transferor of land
    creating overriding interests under section 70(1)(j) and (k) between
    the date of completion of a mortgage and the registration thereof
    by granting sporting rights or leases for less than 21 years.
    Conversely it would be an odd result if a land charge resulting
    from the listing of a building of special architectural interest or
    from the incurring of expense of a highway authority should not
    bind the transferee or mortgagee.

    - 31 -

    During the course of argument I was attracted by Mr.
    Munby's submissions that section 15(1) of the Land Charges Act
    1925 provided an answer to Nicholls L.J's difficulty. The whole of
    that Act was repealed by the Local Land Charges Act 1975 but
    that does not affect the matter as Nicholls L.J. was considering
    the position as at the time when the Land Registration Act 1925
    was enacted. In terms of that subsection a local land charge is

    "void as against a purchaser for money or money's worth of
    a legal estate in the land affected thereby, unless registered
    in a appropriate register before the completion of the
    purchase."

    "Purchaser" is defined to include a mortgagee or lessee. Thus, it
    was argued, a local land charge created prior to the execution of
    a mortgage but not registered in the appropriate register until a
    later date would have been void as against a mortgagee. That
    being the position it might be thought to follow that a local land
    charge arising between the creation and registration of a mortgage
    would also have been void under section 15(1) against the
    mortgagee and could not therefore be an overriding interest within
    the meaning of section 70(1)(i). Thus the problem which concerned
    Nicholls L.5. could never arise. However on further consideration
    I have come to the conclusion that the submission is unsound.

    Under the 1925 legislation a local land charge was capable
    of registration in two different registers, namely, the appropriate
    local register under the Land Charges Act 1925 and the Land
    Registry under the Land Registration Act 1925. Registration in
    the local register was required for the purposes of section 15 and
    such registration by virtue of section 198 of the Law of Property
    Act 1925 constituted actual notice of the charge to all persons for
    all relevant purposes. Registration in the Land Registry was
    required before a local land charge affecting registered land could
    be realised. Subject to the foregoing provisions a local land
    charge was good against the owner of land for the time being.
    Section 15 was dealing with a situation where the local land
    charge had been created prior to the completion of sale or
    mortgage. In the case of registered land completion of the
    purchase or mortgage of the legal estate could only take place on
    registration of the relevant disposition (section 20(1) of the Land
    Registration Act 1925). Accordingly a local land charge created
    before or after execution of a disposition of registered land but
    registered in the local register before registration of the
    disposition in the Land Registry would not have been void under
    section 15 and could thus constitute an overriding interest under
    section 70(1)(i) of the Land Registration Act 1925 if registration
    under that act were the relevant date.

    It therefore follows that section 15(1) of the Land Charges
    Act 1925 does not resolve the problems which concerned Nicholls
    L.J. and I am satisfied that it cannot have been the intention of
    the legislature that local land charges imposed on registered land
    between the execution and registration of a disposition should be
    ineffective against the disponee. It may well be that charges of a
    non-financial nature such as listing of a building could be
    reimposed on the land after registration of the disposition but this
    could not happen in the case of a financial charge which had once
    arisen. I therefore conclude that Nicholls L.J. was correct (1) in

    - 32 -

    taking the date of registration as the relevant date for
    determining the existence of overriding interests which will effect
    the estate transferred or created for the purposes of sections
    20(1)(b) and 23(1)(c) and (2) in his approach to the construction of
    section 70(1)(g). "I do not feel that I can usefully add anything
    further to what has already been said on this matter by my noble
    and learned friend Lord Oliver of Aylmerton.

    For the foregoing reasons I would dismiss the appeal.

    - 33 -


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