Abbey National Building Society v Cann

Under the Land Registration Act 1925, overriding interests affecting a transferred or created estate are generally ascertained at registration. For section 70(1)(g), however, the claimant’s right must be supported by actual occupation when the purchase or charge is completed. Later occupation before registration cannot gain priority.

A purchase financed by a contemporaneous mortgage is one indivisible transaction. The purchaser acquires only an equity of redemption and has no unencumbered estate, even for a moment, from which an earlier equitable interest or estoppel can obtain priority over the lender.

Actual occupation is a fact-sensitive concept requiring sufficient permanence and continuity. Personal presence is not invariably necessary, but merely preparatory activity before completion does not qualify.

The respondent building society advanced £25,000 to finance George Cann’s purchase of a registered leasehold house and received a contemporaneous charge. The house was intended for his mother, Mrs Cann, and her partner. Mrs Cann claimed an equitable interest arising from her former home and her son’s assurance that she would always have a roof over her head.

The Croydon County Court granted possession to the society. The Court of Appeal, in Abbey National Building Society v Cann [1989] 2 F.L.R. 265, upheld that result. It found that completion occurred after furniture and carpet-layers had entered the house, but held that Mrs Cann had authorised her son to raise the necessary balance by mortgage. Dillon L.J. regarded the preparatory activity as actual occupation; Ralph Gibson and Woolf L.JJ. doubted that conclusion.

The principal questions before the House were when occupation must exist for section 70(1)(g) of the Land Registration Act 1925, whether the purchase and purchase-money mortgage formed one indivisible transaction, and whether the activity before completion amounted to actual occupation.

1. Disposition. The House unanimously dismissed the appeal and affirmed the Court of Appeal’s order. Lord Oliver of Aylmerton and Lord Jauncey of Tullichettle delivered the substantive speeches. Lord Bridge of Harwich, Lord Griffiths and Lord Ackner agreed with them.

2. Timing of overriding interests. Per Lord Oliver and Lord Jauncey, the existence of overriding interests affecting a transferred or created estate is generally determined at registration. Section 70(1)(g) nevertheless requires the occupation supporting the claimant’s right to exist when the purchase or charge is completed. That is the time at which the purchaser or mortgagee can inspect and make the enquiry contemplated by the provision. Entry into occupation after completion but before registration cannot create an overriding interest against that disposition. Lord Bridge expressly concurred in that conclusion.

3. Purchase-money mortgage. Per Lord Oliver and Lord Jauncey, a purchase dependent upon an advance made in return for a contemporaneous charge is one indivisible transaction. The purchaser never acquires an unencumbered legal estate, even for a scintilla temporis. The purchaser acquires only the equity of redemption, so any derivative equitable interest is subject to the lender’s interest. The reasoning in In re Connolly Brothers Ltd (No. 2) [1912] 2 Ch 25, Coventry Permanent Economic Building Society v Jones [1951] 1 All E.R. 901 and Security Trust Co v Royal Bank of Canada [1976] AC 503 was adopted. Church of England Building Society v Piskor [1954] Ch 553 was wrongly decided insofar as it recognised an intervening unencumbered estate capable of feeding an estoppel.

4. Actual occupation. Per Lord Oliver, actual occupation is an ordinary, fact-sensitive expression. It need not invariably involve the claimant’s personal presence, but it requires a sufficient degree of permanence and continuity. The brief delivery of furniture and laying of carpets, performed before completion by the vendor’s permission and while Mrs Cann was abroad, were merely preparatory steps. They did not constitute actual occupation.

5. Authority to mortgage. Per Lord Oliver, Mrs Cann knew that her son lacked sufficient resources and left him to raise the purchase balance. Having authorised him to mortgage the property without communicating any limitation to the society, she could not assert priority over its charge. This supplied a further ground for dismissing the appeal.

1. House of Lords: The appeal was dismissed unanimously and the Court of Appeal’s order was affirmed: [1991] 1 AC 56.
2. Court of Appeal: The society’s priority and possession order were upheld: [1989] 2 F.L.R. 265. The court held that Mrs Cann had authorised her son to raise the necessary purchase money by mortgage. Dillon L.J. considered the pre-completion activity sufficient for actual occupation, while Ralph Gibson and Woolf L.JJ. expressed doubts.
3. Croydon County Court: The society obtained possession. The judge found that the activity before completion was merely preparatory and did not establish actual occupation.