UCB Group Ltd v Hedworth
| Jurisdiction | England & Wales |
| Judge | Lord Justice Jonathan Parker,Sir Christopher Slade |
| Judgment Date | 24 May 2002 |
| Neutral Citation | [2002] EWCA Civ 708 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 May 2002 |
| Docket Number | Case No: A3 2001 2764 |
[2002] EWCA Civ 708
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION (Mr Michel Kallipetis QC Sitting as a Deputy Judge)
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Jonathan Parker
Sir Christopher Slade
Case No: A3 2001 2764
Mr Mark Wonnacott (instructed by Halliwell Landau) for the Appellant
Mr Geoffrey Zelin (instructed by Wholley Goodings) for the Respondent
This appeal raises a question as to the meaning of paragraph (g) of section 70(1) of the Land Registration Act 1925 ("the Act"), which is concerned with overriding interests. The specific issue on the appeal is whether a beneficiary under a bare trust of registered land who is in receipt of periodical payments made by the registered proprietor under a tenancy by estoppel of the land granted by the beneficiary is in receipt of "rents" of the land within the meaning of paragraph (g), and thus entitled to an overriding interest.
The issue arises in the context of a claim by the appellant, UCB Group Ltd ("UCB"), as chargee, for the vacation of a caution registered against the title to the charged property on the application of Mrs Gillian Hedworth, the respondent to the appeal, who maintains that she is entitled to an overriding interest taking priority over its charge. UCB sought summary judgment on the claim under Part 24 of the Civil Procedure Rules. On 2 November 2001 Mr Michel Kallipetis QC (sitting as a Deputy Judge of the High Court, in the Chancery Division) dismissed the application. He granted UCB permission to appeal, and UCB now appeals.
The relevant facts, which are agreed for the purposes of this appeal, are as follows.
Mrs Hedworth's husband, Mr Peter Hedworth, is and has at all material times been the registered proprietor with title absolute of the freehold estate in a property known as Albion House, 2 Winchester Street, South Shields, Tyne and Wear ("the Property").
The Property consists of a building comprising a ground floor and three upper floors. On a date prior to December 1990 Mr Hedworth let part of the ground floor to G. Bovill for a term of 25 years from 16 December 1988. In 1991, the passing rent under that tenancy was £4,500 per annum. On 27 July 1990 Mr Hedworth let a further part of the ground floor to Baker Street Audios Ltd for a term of 25 years from 10 July 1989 at a rent of £6,500 per annum (subject to periodic review). At all material times Mr Hedworth has occupied the remainder of the Property, using it as an office.
By a Legal Charge dated 20 December 1990 ("the UCB Charge") Mr Hedworth granted to UCB Bank plc a first charge over the Property to secure repayment of all moneys from time to time owing by him to UCB Bank plc. The UCB Charge was registered at HM Land Registry on 31 January 1991. UCB is the successor to UCB Bank plc as chargee under the UCB Charge.
On 25 March 1997, on the application of Mrs Hedworth, a caution was entered on the title to the Property. In her application for the entry of the caution Mrs Hedworth said:
"a. In about 1990 I allowed my husband, Peter John Alan Hedworth, to sell my antique furniture and works of art and to keep the proceeds of sale in consideration for him transferring to me all his real property interests including [the Property].
b. By a deed dated in about January 1990 (which deed is now lost) Peter John Alan Hedworth purported to transfer all his real property interests to me. The said transfers were not registered but were effective to transfer to, or vest in, me the beneficial interest in all his property interests including [the Property].
c. Alternatively, by the said deed Peter John Alan Hedworth declared himself trustee of all his real property interests (including [the Property]) to be held on trust for me.
d. Alternatively, by reason of the agreement stated in paragraph 'a' above and my reliance thereon, from about January 1990 Peter John Alan Hedworth has held [the Property] on constructive trust for me.
e. At the time of the grant and registration of [the UCB Charge] I was in receipt of rents and profits of [the Property]. In the premises, my beneficial interest in [the Property] is an overriding interest within the meaning of section 70(1)(g) of [the Act] to which the charge is subject."
UCB accepts, for present purposes, (a) that as at the date of the UCB Charge Mr Hedworth held the Property on a bare trust for Mrs Hedworth, and (b) that as at that date she was in receipt of weekly payments of £50 made by Mr Hedworth to her under a tenancy of the Property granted previously by her to Mr Hedworth in her capacity as beneficial owner. It is not asserted by Mrs Hedworth that she has at any time been in receipt of the rents reserved by the two leases granted by Mr Hedworth.
I can now turn to the relevant provisions of the Act.
Section 20(1) of the Act provides that in the case of a freehold estate registered with absolute title, a disposition of a legal estate in the registered land for valuable consideration takes effect subject (unless the contrary is expressed on the register) to the overriding interests affecting the estate created.
Prior to the enactment of the Trusts of Land and Appointment of Trustees Act 1996 ("the 1996 Act") "land" was defined in section 3(viii) of the Act as including land of any tenure "but not an undivided share in land". These last words were repealed by the 1996 Act. The expression "registered land" is defined in section 3(xxiv) of the Act as meaning "land or any estate or interest in land the title to which is registered under [the Act]". The expression "overriding interest" is defined in section 3(xvi) of the Act as meaning (so far as material) "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".
Section 70(1) of the Act provides as follows:
"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 then follows a list of categories of overriding interests. The only relevant category for present purposes is that which is contained in paragraph (g). Paragraph (g) is in the following terms:
"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."
The expression "such person" in paragraph (g) must refer to the person in actual occupation of the land or, where reliance is placed on the receipt of rents and profits of the land, to the person in receipt of such rents and profits.
The word "rent" is defined in section 3(xxv) of the Act in the following terms:
"'Rent' includes a rent service or a rentcharge, or other rent, toll, duty, royalty, or annual or periodical payment, in money or money's worth, issuing out of or charged upon land, but does not include mortgage interest."
As a matter of syntax, the adjectival clause "issuing out of or charged upon land" must qualify the words "or other rent [etc]", since in relation to a rent service or a rentcharge such a qualification would be tautologous.
It should be noted that on the coming into force of the Land Registration Act 2002 (which received the Royal assent on 26 February 2002) the reference to receipt of rents and profits will be effectively deleted from paragraph (g). The Third Schedule to that Act sets out the various categories of overriding interests. Paragraph 2 (which is headed "Interests of persons in actual occupation", and which is the successor to section 70(1)(g)) reads as follows (so far as material):
"An interest belonging at the time of disposition...
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...Parker LJ’s judgment (with which both Kennedy and Longmore LJJ agreed) in the English Court of Appeal case of UCB Group Ltd v Hedworth [2003] 3 FCR 739, paras 137-148. In para 147, the learned judge said, after reviewing the authorities, that he was “unable to see any conceptual difficulty ......