Informal Transactions in Land, Estoppel and Registration

DOIhttp://doi.org/10.1111/j.1468-2230.1995.tb02039.x
AuthorGraham Battersby
Publication Date01 Sep 1995
Informal Transactions in Land, Estoppel and
Registration
Graham Battersby
*
Introduction
The principal purpose of this article is to consider how well, or badly, the English
system of land law and conveyancing handles the exceptional, but nonetheless
important, cases of informal transactions in land. The article is in six parts. Part
1
points to the high degree of formality normally required for transactions in land
and discusses the exceptional cases where informal transactions are permitted.
Some criticisms and suggestions for reform are made. One of the exceptional cases
where interests in land can arise informally is under the doctrine of proprietary
estoppel, and part
2
considers whether interests so arising can be fitted
satisfactorily into a conveyancing system which increasingly, because of the
spread of the title registration system, requires interests in land to be registered in
order to bind subsequent purchasers. The conclusion reached is that both the
registered and the unregistered land systems cope satisfactorily with such interests.
In part
3,
attention is turned to a well-known but difficult case,
E
R
Zves
Investment
Ltd
v
High,'
which is treated in many of the books as a case on
proprietary estoppel. The Court of Appeal had great difficulty in deciding the case
on its merits without doing violence to the registration requirement. It is argued
that none of the judgments gives a satisfactory explanation, but that using a
different form of estoppel, a better explanation is possible which is consistent with
both the registered and unregistered land systems. In part
4
it is argued that
Ives
v
High
is but one example of a wider category of cases where the courts show
themselves to be unhappy with the proposition that an unregistered interest can be
defeated by a purchaser who has actual knowledge of that interest. This point is
illustrated in part
5
by a brief examination of the Green family saga,2 and it is
argued that the principal decision in favour of Mrs Green causes concern. Part
6
concludes the article with an argument for abolishing the protection given to a
purchaser with actual knowledge, and some other proposals for reform.
Formal and informal transactions in land
Our system of land law and conveyancing is characterised by a high degree of
formality. Transactions in land are effected by documents in writing and,
increasingly, the land registration system requires transactions to be registered in
order to ensure their enforceability against subsequent purchasers of the land.
There appear to be two principal reasons for this insistence on formality. The first
*Professor of Law, University
of
Sheffield.
1 [1967]
2
QB
379.
2
The various reported decisions in this litigation are as follows:
Midland Bank
Trust
Co
Lrd
v
Hett,
Stubbs
&
Kemp
[1979]
Ch
384;
Midlund Bank
Trust
Co
Lrd
v
Green
(No
2)
[1979] 1
WLR
460;
Midland
Bank
Trust
Co
Ltd
v
Green
(No
3)
[
19791
Ch
496;
Midland Bank
Trust
Co
Ltd
v
Green
[
19801
Ch
590
(Ch
D
and CA);
Midland Bunk
Trust
Co
Lrd
v
Green
[1981]
AC
513
(HL);
Midland Bunk
Trust
Co
Lrd
v
Green
(No
3)
[1982]
Ch
529
(CA).
0
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1995
(MLR
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and
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58
is for the protection of the original parties, especially the party making the
disposition: land is a unique and expensive commodity, and a transaction in land is
likely to be one
of
the most important transactions that any of
us
makes; the law,
paternalistically, by insisting on written documents, does its best to protect
us
from
entering into unconsidered transactions and
from
the dangers of fraud.3 The
second reason for formality is to protect third parties: there needs to be an efficient
conveyancing system whereby a purchaser of land can by reasonable diligence
check the vendor’s title, a task which would be considerably more difficult if
transactions in land could be made orally and without a requirement of
registration.
Of course, the law is not, and cannot be, absolutely rigid in its insistence on
formality. The Law of Property Act 1925 provides for two exceptions, one
narrow, the other wider. The narrow exception is contained in section
54(2),
which allows for certain short leases (granted for not more than
three
years in the
first instance, at a full commercial rent and no premium, and taking effect
immediately in possession) to be created orally. This provision is complemented
by section 2(5)(a) of the Law of Property (Miscellaneous Provisions) Act 1989,
which provides that a contract to create such a lease is exempt from the general
requirement of a written contract. However, these provisions are not wholly
satisfactory. In the first place, how do they square with registration requirements?
It makes little sense to allow these transactions to be created informally but then
provide for their defeat if unregistered. A lease falling within section 54(2) does
not require registration. If the land has unregistered title, the lease, as a legal
estate, binds the whole world; if the title to the estate out of which the lease is
derived is registered, the lease is an overriding interest within section 70( l)(k) of
the Land Registration Act 1925.
So
far,
so
good; but what about an informal
contract to create such a lease? In unregistered land, such a contract is registrable
as an estate contract under the Land Charges Act 1972, since it is a ‘contract by an
estate owner
.
.
.
to create a legal e~tate’~; non-registration will render the
contract void against a purchaser of a legal estate for money or money’s
even if such a purchaser has actual knowledge of the contract.6 It cannot be
rational to expect such contracts to be registered. In the case of registered land, the
position is slightly more satisfactory: such a contract is a minor interest requiring
protection on the register, and failure to protect it will render it void against a
purchaser acquiring title under a registered disposition in good faith and for
valuable consideration7; however, if the contract is coupled with actual
occupation it becomes an overriding interest, defeasible only if the occupant fails
to disclose it in response to an enquiry.8 It would be better still if such a contract
were not registrable at all.
The second unsatisfactory feature flows from the decision of the
Court
of Appeal
in
Crugo
v
JuZiung
that section 54(2) applies to the creation of a lease, not its
assignment; we now have the wholly indefensible position that the assignment of
3
See
the report
of
the
Law
Commission,
Formalities for Contracts for Sale etc of
Land
(Law
Corn
No
164) paras 2.6
et seq;
Briggs, ‘Licences and Land
Law:
Legal Principles and Public Policies’ (1984)
100
LQR 376, 398
et seq.
4 Land Charges Act 1972,
s
2(4)(iv).
5
s
4(6).
6
Midland
Bank
Trust
Co
Ltd
v
Green
[1981] AC 513.
7 Land Registration Act 1925,
ss
3(xxi), 59(6).
9 [1992]
1
WLR 372.
8
s
7O(l)(g).
638
0
The
Modern
Law
Review
Limited
1995

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