Lloyds Bank Plc v Carrick & Anor

An unregistered estate contract must be registered to bind a later purchaser of a legal estate for value. Payment of the price and possession may make the contract specifically enforceable and cause the vendor to hold the legal estate on a bare trust, but that trust remains the equitable consequence of the contract. It does not become a separate, non-registrable interest. A constructive trust or proprietary estoppel cannot be superimposed to evade the statutory effect of non-registration or confer a greater interest than the vendor encouraged. Proprietary estoppel is assessed through a broad unconscionability inquiry, not a rigid checklist. The position can differ for registered land where an occupier's interest may override registration.

Mr Carrick held an unregistered lease of a maisonette. Mrs Carrick paid him approximately £19,000, moved into the property and paid its outgoings and improvements. A later legal charge was granted to Lloyds Bank. Mrs Carrick claimed that Mr Carrick held the lease for her under a bare trust, constructive trust or proprietary estoppel. The Recorder dismissed the Bank's possession claim and declared that her interest bound the Bank, despite the absence of registration.

The Bank appealed. The central issue was whether Mrs Carrick had an interest separate from, and capable of surviving against the Bank independently of, the unregistered estate contract.

The appeal was allowed unanimously. Morritt LJ gave the leading judgment, with Sir Ralph Gibson and Beldam LJ agreeing.

1. An open contract for the sale of land, initially unenforceable for want of writing, became specifically enforceable when Mrs Carrick paid the purchase price and entered possession. Mr Carrick therefore held the legal estate on trust for her. Because the whole price had been paid, he was a bare trustee, consistently with Bridges v Mees (1957) Ch 475.
2. The bare trust existed only as the equitable consequence of the contract. Payment of the price did not create a separate interest. Under section 4(6) of the Land Charges Act 1972, the unregistered estate contract was void against the Bank as purchaser of a legal estate for value. The Bank's notice of Mrs Carrick's occupation and interest could not overcome that statutory consequence.
3. No additional constructive trust could be superimposed on the contractual trust. Lloyds Bank PLC v Rosset (1991) AC 107 was read by reference to its facts, where no contract conferred an interest on the claimant. Austin v Keele (1987) 61 A.L.J.R. 605 did not assist where an enforceable contract and resulting trust already existed.
4. Morritt LJ approved the broader approach to proprietary estoppel stated in Taylor Fashions Ltd v Liverpool Trustees Co. (1982) 1 QB 133. It was unnecessary to establish all five Willmott v Barber (1880) 15 Ch D 96 probanda. The relevant inquiry was whether it would be unconscionable, in the individual circumstances, to permit denial of an assumption allowed or encouraged to the claimant's detriment. The claim nevertheless failed because the expenditure occurred under an existing contractual trust, there was no relevant resiling by Mr Carrick, and estoppel could not confer legal ownership or circumvent section 4(6).
5. The wider question whether proprietary estoppel can bind successors in title was left undecided. The court observed obiter that registered land might produce a different result under section 70(1)(g) of the Land Registration Act 1925, whereas section 14 of the Law of Property Act 1925 did not provide an equivalent protection for unregistered land.

The Recorder's order was set aside. The Bank was granted possession, the counterclaim and declarations were dismissed, and costs orders were made in the Bank's favour.

1. Court of Appeal (Civil Division) [1996] EWCA Civ 1303: allowed the Bank's appeal, set aside the Recorder's order, dismissed the counterclaim and declarations, and ordered possession.
2. Cambridge County Court: on 5 July 1994, Mr Recorder Holmes dismissed the Bank's possession claim and declared that Mr Carrick held the lease on trust for Mrs Carrick, so that her interest was not subject to the Bank's charge.