Baker and Another v Craggs
| Jurisdiction | England & Wales |
| Judge | Patten LJ,Flaux LJ,Lord Justice Henderson |
| Judgment Date | 16 May 2018 |
| Neutral Citation | [2018] EWCA Civ 1126 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 May 2018 |
| Docket Number | Case No: A3/2017/0140 |
[2018] EWCA Civ 1126
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE CHANCERY DIVISION BRISTOL DISTRICT REGISTRY
MR JUSTICE NEWEY
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Patten
Lord Justice Henderson
and
Lord Justice Flaux
Case No: A3/2017/0140
Mr Ewan Paton (instructed by John Hodge Solicitors) for the Appellant
Mr Thomas Talbot-Ponsonby (instructed by DWF LLP) for the Respondents
Hearing date: 14 February 2018
Introduction
The novel issue raised by this appeal is whether the doctrine of overreaching in section 2(1) of the Law of Property Act 1925 (“ LPA 1925”) is capable of operating in circumstances where the conveyance to a purchaser which is alleged to have the overreaching effect is the grant of an easement over land, and the equitable interest which is said to be overreached is not an interest in the easement itself, or even in the land conveyed to the purchaser with the benefit of the easement, but an interest in the servient tenement which the common vendor has previously contracted to sell to a third party, and which (following completion of that sale) the vendor holds as a bare trustee for the third party pending registration of his title with HM Land Registry.
The land in question is registered land in England and Wales. In a little more detail, the salient features of the case may be simplified as followed:
a) V is the common vendor of two adjoining properties, Blackacre and Whiteacre;
b) V contracts to sell Blackacre to A, but omits to reserve a right of way over part of Blackacre in favour of part of Whiteacre;
c) the sale of Blackacre by V to A is duly completed, and A (having gone into actual occupation of the relevant part of Blackacre) applies for registration of his title;
d) due to problems with the registration of A's title, A loses the benefit of the priority period applicable to his application for registration;
e) meanwhile, V contracts to sell Whiteacre to B, and on completion of that sale purports to grant B the easement over Blackacre which V failed to reserve on the sale to A;
f) B then applies to be registered as the proprietor of Whiteacre, and his title is registered with the benefit of the easement over Blackacre; and
g) subsequently, when the problems with the registration of A's title have been sorted out, A is registered as the proprietor of Blackacre, but subject to the easement in favour of Whiteacre.
The instinctive reaction of most property lawyers to this sequence of events would probably be that it has nothing to do with overreaching, which is a process whereby a purchaser of land takes the land free of any equitable interests which affect it, and those interests are instead transferred to the proceeds of sale. Rather, the problem appears to be one of priorities, to be answered in accordance with the detailed rules contained in the Land Registration Act 2002 (“ LRA 2002”). Applying those rules, the purported grant of the easement over Blackacre by V to B could not prevail over A's right to be registered as the proprietor of Blackacre free from the easement, because A's equitable interest in Blackacre under the bare trust arising on completion of his purchase was protected by his actual occupation of Blackacre, and was therefore an overriding interest under section 29 of, and paragraph 2 of schedule 3 to, LRA 2002, which V therefore could not defeat by the subsequent grant of the easement to B.
As I shall explain, that is indeed in my judgment the correct analysis, and the doctrine of overreaching in section 2(1) of LPA 1925 has no part to play in resolution of the problem. The judge below was however persuaded that the grant of the easement by V to B was in itself a conveyance to a purchaser of a legal estate, which overreached the equitable interest of A in the servient tenement (Blackacre) and somehow transferred it into a corresponding interest in the proceeds of the sale of Whiteacre by V to B, even though A was not a party to that sale, A never had an equitable interest in Whiteacre, and no part of the proceeds of sale of Whiteacre was specifically attributed to the grant of the easement.
Since the judge below was a very experienced Chancery judge (Newey J, now Newey LJ), the argument clearly merits careful consideration, although it was only one of several issues of fact and law which he had to determine (and no appeal is brought by either side in relation to any of those other issues). Nevertheless, with the greatest respect to the judge I have to say that his conclusion on this one point was in my view unsustainable. That is so for a number of reasons, of which the simplest is that section 2(1) of LPA 1925 applies only upon a conveyance to a purchaser “of a legal estate in land”, and although an easement is capable of being a “legal estate” in the nomenclature of LPA 1925, it is not “a legal estate in land”. By virtue of section 1(1) of LPA 1925, indeed the opening subsection of the entire Act:
“The only estates in land which are capable of subsisting or of being conveyed or created at law are –
(a) An estate in fee simple absolute in possession;
(b) A term of years absolute.”
In granting permission to appeal on 17 May 2017, Lewison LJ commented that the grounds of appeal “raise an important question of interpretation of the LPA 1925 which has real prospects of success.”
Newey J handed down his reserved judgment on 15 December 2016, after a hearing in Bristol on 15 November 2016. The dispute concerned a property called Waterside Farm in Radstock, Somerset, all of which had been owned by Mr Michael Charlton and his wife Maureen (“the Charltons”, who are “V” in my simplified version of the facts). During 2011 and 2012 the Charltons sold most of the farm, although they retained some premises now called the Old Stables where Mrs Charlton still lives. Her husband has sadly died since the events with which we are concerned.
The present litigation arises from two of the sales that the Charltons entered into. The first in time of those sales was to the defendant Mr Martin Craggs (“A” in my simplified version) while the second was to the claimants, Mr Paul Baker and his wife Jodi (my “B”).
The basic facts
There is no dispute about the basic facts, which I gratefully take from the judge's judgment:
“5. The sale to Mr Craggs reached completion on 17 January 2012. A transfer of that date provided for parts of the farm to be transferred to Mr Craggs for £100,000. The land so transferred (“the Farm”) included some 18 acres of fields and barns with an adjacent yard. Mr Craggs was also granted, among other things, a right of way over a driveway leading from the yard. The transfer did not reserve any right of way over the yard in favour of the Charltons.
6. In accordance with normal practice, Mr Craggs' then solicitors had undertaken a search at the Land Registry which gave Mr Craggs the benefit of a priority period up to 28 February 2012. The transfer was first lodged for registration on 10 February, but on 22 March the Land Registry pointed out that the access route was not shown on the plan annexed to the transfer and asked for the plan to be amended and initialled by the Charltons. The Land Registry agreed to extend the time within which its requisition was to be dealt with to 9 May, but the Charltons' solicitors had still not returned the plan by that date. The application to register the transfer to Mr Craggs was therefore cancelled and a fresh application had to be submitted, with an amended plan, on 16 May. Mr Craggs was subsequently registered as the proprietor of the Farm with effect from 16 May.
7. In the meantime, however, the Charltons had transferred land to Mr and Mrs Baker. On 9 February 2012, the Charltons contracted to sell the Bakers both the farmhouse (for £625,000) and a barn (for £35,000). The sales proceeded to completion on 20 February, when two transfers were executed in favour of the Bakers. That relating to the barn (“the Baker Barn”) purported to grant the Bakers a right of way over the driveway in respect of which Mr Craggs had been granted a similar right and, further, across the yard that had been included in the transfer to Mr Craggs. Although the Bakers' then solicitor had had sight of the transfer to Mr Craggs, it seems clear that none of those involved with the transfer of the Baker Barn to the Bakers appreciated that it provided for the Bakers to be given a right of way over land that had already been the subject of the sale to Mr Craggs.
8. The transfer of the Baker Barn was duly lodged with the Land Registry and the Bakers were entered on the register as its proprietors with effect from 14 March 2012. The property was, moreover, recorded in the register as having the benefit of the rights granted to the Bakers by the 20 February transfer of the Baker Barn. The Land Registry also, when registering Mr Craggs as the proprietor of the Farm in May 2012, recorded the property as subject to the rights granted in the transfer to the Bakers of the Baker Barn.
9. The present proceedings were issued on 26 March 2015. They principally raise the question of whether the Bakers do indeed have the benefit of a right of way over the yard at the Farm.”
It can be seen, therefore, that the critical dates were:
a) 17 January 2012, when the transfer of the Farm to Mr Craggs was completed;
b) 9 February 2012, when the Charltons contracted to sell the Baker Barn to the Bakers;
c) 20 February 2012, when the sale of the Baker Barn to the Bakers was completed, and a transfer of it in their favour was executed;
d) 14 March 2012, when the Bakers applied to be registered as the proprietors of the Baker Barn with the benefit of the...
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