Dunning (A.J.) & Sons (Shopfitters) Ltd v Sykes & Son (Poole) Ltd

This is an appeal by the plaintiffs in the action against a decision given on the 12th July, 1985 by Mr. Donald Rattee, Q.C., sitting as a deputy High Court judge in the Chancery Division. There is also a respondents' notice given by the defendants, respondents to the plaintiffs' appeal, whereby they challenge the deputy judge's conclusions on a number of points which he decided in favour of the plaintiffs. The case is concerned with the implication of the traditional "beneficial owner" covenants for title in a transfer of registered land.

The defendants were registered in April 1933 as the proprietors at H.M. Land Registry with absolute title under Title No. P 7608 of an area of land at Poole in Dorset. Over the years prior to 1978 the defendants from time to time sold off parts of that land to various purchasers. When each sale was completed, the relevant purchaser was registered as the proprietor, under a fresh title number, of the land comprised in the transfer to that purchaser, and the Land Registry removed that land from the title No. P 7608. The defendants continued to be the proprietors, under that title number, merely of the remainder of the land which they had not sold off.

One of the pre-1978 sales, and the only one relevant to the issues in these proceedings, was a sale in 1969 of an area of land to a company called Elkins & Larby Ltd. That was duly completed and at the Land Registry the whole of the land comprised in the sale to Elkins & Larby was removed from the defendants' title No. P 7608 and was registered in the name of Elkins & Larby under a new title number. The filed plan of title No. P 7608 which provides the only description on the register of the land comprised in that title was amended accordingly. Unfortunately, when the land sold to Elkins & Larby came to be fenced off, on the ground, from the land still retained by the defendants, someone made a mistake and the fence was put in the wrong place. A small area of land sold to Elkins & Larby was cut off, by the fence as actually erected, from the rest of the land sold to Elkins & Larby, and was left apparently part of the defendants' retained land. That small area of land is shown coloured yellow on the plan annexed to the statement of claim, and has been referred to throughout the proceedings as "the yellow land"; it is very small, only about 10 ft. x 10 ft. in area, but unfortunately it has been crucial for the plaintiffs' purposes.

In early 1978 a company called F.W. Cook (Mechanical Services) Ltd. entered into negotiations with the defendants to buy part of the defendants' land, for development with industrial premises. The judge found that all concerned with those negotiations, including those acting for the defendants, proceeded on the footing that what the defendants had to sell included the yellow land, as appeared to be the case from the line of the fence on the ground.

The outcome of those negotiations was a contract for sale between the defendants and Cooks dated the 10th July, 1978. Whatever the intention of the parties, it is common ground that the parcels in that contract as drawn up do not include the yellow land. The solicitors who prepared the contract did not use any fresh plan to describe the land which was to be sold to Cooks. They described the land being sold as being the whole of the property registered at H.M. Land Registry under the title No. P 7608 other than that part of the property which was comprised in a particular lease in favour of a named third party. That did not include the yellow land because the yellow land was no longer by then registered under title No. P 7608.

However, Cooks assigned the benefit of that contract to an associated company, Donron (Alberice Meters) Ltd. and Donron sub-sold part of what it thought it was acquiring to the plaintiffs. Accordingly, when the time came for completion of the sale and sub-sale, it was necessary to distinguish between the land sub-sold to the plaintiffs, the land to be sold to Donron as successors to Cooks and not sub-sold and—because of covenants and exceptions and reservations not otherwise material to these proceedings—the land still retained by the defendants, being the land comprised in the lease in favour of a third party mentioned above.

The sale and sub-sale were accordingly completed by a transfer in Land Registry form dated the 7th September, 1978.

This transfer is headed:

"H.M. Land Registry

Transfer of Part of land

comprised in Title

County and District

Title Number

Property

Dorset—Poole

P 7608

Industrial Site at

Creekmoor, Poole,

Dorset."

The transfer has attached to it a plan which shows an area of land edged in green, another area of land edged in red and another area of land edged in blue. The area of land edged in red has been referred to throughout these proceedings as "the red land." On the plan on the transfer part of the red land is shown hatched blue and another part is shown coloured brown; those markings are irrelevant to these proceedings. What is fundamental, however, is that the plan on the transfer was prepared to show what all the parties thought they were dealing with, as it appeared on the ground, and therefore on the plan the red land included the yellow land, although in truth the defendants had no title to the yellow land. The solicitors concerned did not notice the discrepancy—admittedly small in area—between the plan of the red land on the transfer and the filed plan on the register of title No. P 7608, and everyone supposed that the whole of the red land, including the yellow land, was comprised in that title.

By clause 1 of the operative part of the transfer the defendants as beneficial owner transferred to Donron

"ALL THAT freehold property situate at Creekmoor in the County of Dorset and shown edged with green on the plan annexed hereto…and being part of the property registered at H M Land Registry under Title Number P. 7608."

By clause 2, the operative clause for present purposes, the defendants as beneficial owner transferred to the plaintiffs

"ALL THAT freehold property edged with red on the plan annexed hereto being another part of the property registered at H M Land Registry under Title Number P. 7608."

Clauses 3 and 4 contain exceptions and reservations and covenants for the benefit of "the residue of the land comprised in such title and retained by the Transferor showned edged blue on such plan." The three areas are respectively referred to in the transfer as "the green land", "the red land" and "the blue land."

The plaintiffs bought with a view to putting up an industrial building on what they thought they were buying, and having obtained planning permission they proceeded to do that. But the building in question was designed to have one corner built on the yellow land. When they came to register their title under the transfer, they discovered that they had no title to the yellow land because, whatever the transfer had purported to achieve, the defendants had had no title to the yellow land. They therefore bought in the yellow land from a successor in title of Elkins & Larby and by these proceedings they claim damages against the defendants for breach of the covenants for title which they say are to be implied in the transfer because the defendants were expressed to transfer to them "as beneficial owner."

With unregistered conveyancing, it is provided by section 76 of the Law of Property Act 1925 that in a conveyance there are to be implied, from the use of certain conventional phrases such as "beneficial owner", certain covenants for title which are set out in the various parts of the Second Schedule to that Act. These replaced with amendments certain provisions in the Conveyancing Act 1881. In effect the conventional phrases were a form of statutory shorthand to avoid the need to set out at length in every conveyance the covenants for title which for over a hundred years before 1881 had traditionally been set out in every conveyance.

The covenant to be implied, under section 76 and the Second Schedule, in a conveyance for valuable consideration by a person who conveys and is expressed to convey as beneficial owner is, so far as material, a covenant:

"That, notwithstanding anything by the person who so conveys or any one through whom he derives title otherwise than by purchase for value, made, done, executed, or omitted,…the person who so conveys, has,…full power to convey the subject-matter expressed to be conveyed, subject as, if so expressed, and in the manner in which, it is expressed to be conveyed…"

The covenant is thus not an absolute covenant of good title. But since it was by the defendants' own act in transferring the yellow land to Elkins & Larby that the defendants lost their title to the yellow land, it is not in doubt that, under the system of unregistered conveyancing, if the defendants had on the 7th September, 1978 purported to convey the yellow land as beneficial owner to the plaintiffs in fee simple, the...