Contractual Interpretation, Registered Documents and Third Party Effects

AuthorRod Thomas,Matthew Barber
Publication Date01 Jul 2014
DOIhttp://doi.org/10.1111/1468-2230.12080
Contractual Interpretation, Registered Documents and
Third Party Effects
Matthew Barber and Rod Thomas*
This article considers whether extrinsic material should be available in interpreting registered
documents when these may be contractual in nature or relate to contractual agreements. Many
registers, for example the current scheme for recording land title, are intended to facilitate the
reliance of third parties on their content, an objective that suggests that extrinsic material should
be excluded. Such an approach, however, could itself cause unfairness and conflicts with the way
that contractual documents are normally interpreted. Exploring this question leads us to consider
the contextual approach to contractual interpretation generally and whether it should take
account of the contemplated effects of contractual language on third parties. After concluding in
the affirmative, we then ask whether this is sufficient as an approach to interpreting contractual
documents entered into a register.
The facts in Cherry Tree Investments Ltd vLandmain Ltd1(Cherry Tree) required the
Court of Appeal to decide whether, in interpreting a registered mortgage, it
could have regard to the underlying (and unregistered) loan agreement. On
more general terms this meant asking whether evidence of material not recorded
in the register is admissible to aid in the interpretation of registered documents.
This issue is an important one for land registry systems as it affects the extent
to which third parties such as prospective purchasers can rely upon the wording
in a register. At first glance it may seem that such material should be excluded,
since this would mean upholding its content and protecting a purchaser who has
relied upon it. The force of this outcome is undermined in a number of
circumstances, however, such as where the parties to a dispute both knew of the
extrinsic material in question and where the material suggests an interpretation
that favours the third party. The most difficult problem with an exclusion of
extrinsic material is that the documents registered against land title are often
contractual in nature or are related to contractual agreements, and the normal
approach to contractual interpretation allows evidence of material that is known
or reasonably available to the contracting parties.2This area of overlap between
contractual and registered documents is problematic if the approaches to inter-
preting each are different.
Third party reliance is also a problem in the contractual sphere. An assignee,
for example, who relies upon the apparent meaning of a contractual document
*School of Law, Auckland University of Technology, New Zealand. We are grateful to Ian Eagles,
Julie Cassidy and to the anonymous referees for their comments.
2Investors Compensation Scheme Ltd vWest Bromwich Building Society [1997] UKHL 28, [1998] 1 WLR
896 (ICS), 912–913.
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© 2014 The Authors. The Modern Law Review © 2014 The Modern Law Review Limited. (2014) 77(4) MLR 597–618
Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
only to find this meaning altered by information that he or she did not have
and that may not have even been available is disadvantaged by the use of
that information, and seemingly unfairly so. Although the current approach to
interpreting contracts is essentially contextual this problem has been considered
in a number of cases, most notably by Lord Hoffmann in Homburg Houtimport BV
vAgrosin Private Ltd (The Starsin),3Attorney General of Belize vBelize Telecom Ltd4
(Belize) and Chartbrook Ltd vPersimmon Homes Ltd5(Chartbrook). This attention
has not, however, resulted in a generally accepted rule that applies in such
circumstances.
This article asks whether extrinsic material should be permitted to interpret
contractual documents recorded in public registers. We consider first the land
aspect of the issue, drawing on decisions from Australia and New Zealand, both
of which operate Torrens systems of registration. We then examine the English
position as expressed by the Court of Appeal in Cherry Tree, which leads us to
question the contractual approach to the third party problem set out by Lord
Hoffmann. The latter is problematic, and we suggest a modified and limited
approach to taking account of third parties who rely on contractual documents.
Finally, we consider whether such an approach suffices to deal with registered
contractual documents.
INTERPRETING REGISTERED DOCUMENTS
The situations that arise under this heading typically concern land registers. The
documents being interpreted in such cases include easements, leases, mortgages
and restrictive covenants. The focus of this section is limited to those documents
that would, apart from registration, be interpreted according to the normal
contractual approach.6This issue has been the subject of recent case law in
Australia and New Zealand. Both countries operate Torrens systems of title
registration that have similarities to the scheme now in place under the Land
Registration Act 2002,7and cases from both were cited by the Court of Appeal
in Cherry Tree.8
The leading case in Australia is the 2007 High Court decision in Westfield
Management Ltd vPerpetual Trustee Co Ltd9(Westfield). Prior to this, extrinsic
material was often held to be available for the interpretation of registered interests
3 [2003] UKHL 12; [2004] AC 59 at [73].
5 [2009] UKHL 38; [2009] AC 1101 at [40].
6 The ICS principles have been applied to documents that relate to contracts, such as contractual
notice, see Mannai Investments Ltd vEagle Star Assurance Co Ltd [1997] AC 749. In terms of land
registers, registered documents may contain contractual provisions or documents or may refer to
them.
7 Like the Torrens system, the Act was intended to replace registration of title with title by
registration. Compare M. Dixon, ‘What sort of land registration system?’ [2012] 5 Conv 349, 349
with the classic statement of the Torrens approach by Barwick CJ in Breskvar vWall (1971) 126
CLR 376, 381.
8 [2012] EWCA Civ 736; [2013] Ch 305 at [50], [53], [124] and [126].
Contractual Interpretation, Registered Documents and Third Party Effects
© 2014 The Authors. The Modern Law Review © 2014 The Modern Law Review Limited.
598 (2014) 77(4) MLR 597–618

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