Abbey National Building Society v Cann

The House of Lords dismissed the appellants' appeal. The court held that, for registered dispositions, the appropriate date for determining which overriding interests "affect the estate transferred or created" (sections 20(1)(b) and 23(1)(c) of the Land Registration Act 1925) is the date of registration; but for the specific head of "the rights of every person in actual occupation" in section 70(1)(g) the question whether a claimant is in actual occupation is to be judged at the date of completion of the transfer or creation of the interest (the moment when the purchaser or chargee becomes irrevocably committed). The court further held that mere preparatory acts (moving furniture etc.) before completion do not amount to actual occupation and that, on the facts, Mrs Cann was not in actual occupation at the relevant time. The court also rejected the appellants' reliance on a notional moment creating an unencumbered legal estate capable of feeding an estoppel against the lender, adopting instead the view that where acquisition of the estate and the borrower's grant of security are contractually linked they should be treated as one transaction so that the lender's equitable interest (and ultimately legal charge on registration) takes priority.

This appeal concerned competing proprietary interests in registered leasehold premises at 7 Hillview, Mitcham. The Abbey National Building Society, as registered chargee, sought possession after the chargor defaulted. The occupiers (the appellants, Mr and Mrs Cann) defended possession by claiming an equitable interest which, by virtue of their actual occupation, was an overriding interest under section 70(1)(g) of the Land Registration Act 1925 and so took priority over the society's charge.

Background and procedural posture:

• George Cann purchased the property and contemporaneously executed a charge in favour of the society to raise funds for the purchase; registration of title and the society's charge occurred on 13 September 1984. Completion occurred on 13 August 1984.
• The occupiers had lived at the property as their home but Mrs Cann was on holiday abroad on the completion date; furniture had been brought in shortly before completion by others.
• At first instance (Croydon County Court) the occupiers' claim was rejected. The Court of Appeal allowed aspects of the defence and concluded that the occupiers could in principle rely on occupation at completion; the society appealed to the House of Lords.

Nature of the claim:

• The occupiers sought to resist the society's possession claim on the basis of an overriding equitable interest arising from occupation (section 70(1)(g)) and equitable rights asserted against the purchaser.

Issues framed by the court:

1. What is the correct date for determining which overriding interests affect a transferred or created registered estate — the date of completion or the date of registration?
2. For the head in section 70(1)(g), at which date is ‘‘actual occupation" to be assessed?
3. Did Mrs Cann's factual position satisfy the legal test of actual occupation at the relevant date?
4. Could Mrs Cann obtain priority by virtue of an estoppel or a notional momentary vesting of an unencumbered legal estate prior to creation of the charge?

Court’s reasoning and conclusion:

• The court analysed the statutory scheme of the Land Registration Act 1925 (sections 3(xvi), 20, 23, 69 and 70) and identified potential "conveyancing absurdities" arising from rigidly adopting either completion or registration as the sole relevant date for all overriding interests. It concluded that, for the purposes of identifying which overriding interests "affect the estate transferred or created," the relevant date is registration; but that, for the special protection afforded by section 70(1)(g), actual occupation must be judged at the date of completion of the purchase or creation of the charge so that enquiries made before completion remain meaningful.
• The court accepted the Court of Appeal's approach in Rosset that actual occupation must exist at completion; it rejected the appellants' contention that preparatory acts shortly before completion qualified as actual occupation. On the facts the trial judge's finding that the pre-completion acts were merely preparatory was upheld.
• On the priority point the court adopted the analysis in In re Connolly and Security Trust Co. which treats the acquisition and the contemporaneous securing of funds as a single practical transaction (the purchaser rarely acquires an unencumbered beneficial estate independent of the advancing lender). Consequently the appellants could not show an equitable interest free of the society's prior equity and the attempted argument that an estoppel was "fed" by a momentary vesting of an unencumbered legal estate was rejected.

Wider implications:

• The Lords emphasised the need to avoid anomalous commercial results and to interpret the 1925 Act consistently with ordinary conveyancing practice. They noted the rarity of the circumstances where a post-completion occupier would prevail and the importance of registration and pre-completion enquiries for purchasers and chargees.

Appeal dismissed. The House of Lords affirmed the Court of Appeal. The court held that (1) for determining which overriding interests affect a registered disposition the relevant date is registration, though for the operation of section 70(1)(g) "actual occupation" is to be judged at the date of completion; (2) preparatory acts before completion did not constitute actual occupation on the facts; and (3) where acquisition of the estate and the lender's security are effectively one transaction the lender's prior equitable interest prevailed.

Appeal to the House of Lords from the Court of Appeal (Civil Division) (order of 3 March 1989); underlying possession proceedings were commenced in the Croydon County Court. The Court of Appeal decision is reported [1989] 2 F.L.R. 265. The House of Lords affirmed the Court of Appeal.