Sainsbury's Supermarkets Ltd v Olympia Homes Ltd & Ors

An agreement giving a party the right to call for the transfer of land may create an equitable interest even though the precise part of an identified larger area is to be selected later. A charging order and an order for sale cannot transfer more than the debtor’s interest in the land. Where the debtor has only an equitable interest, a purchaser does not acquire the legal estate merely because the sale uses the statutory machinery for creating a term of years. The register may be rectified where registration resulted from mistake and it would otherwise be unjust to leave the registered proprietor with an unbargained-for windfall.

Sainsbury’s sought rectification of the register concerning land in Matlock. The land had been acquired by Alan Hughes subject to an agreement requiring him to make land available for infrastructure works, including a roundabout serving a nearby development. Hughes’s first-registration application was cancelled. Westpac later obtained a charging order and an order for sale, and sold the land to Olympia Homes, which was registered as proprietor.

The central issues were whether the agreement created an equitable interest, whether Hughes retained a legal estate after cancellation of his registration application, whether Westpac could convey the legal estate, and whether rectification or equitable relief was available.

1. Equitable interest. The covenant was an option, or analogous to an option, because Sainsbury’s could call for the transfer or provision of land when required. The absence of an identified precise area did not prevent an equitable interest arising over capable parts of the identified site. The agreement was not merely personal and was intended to bind the land. However, an obligation to provide only a licence did not itself create an equitable interest in land.
2. Effect of registration failure. Under the Land Registration Act 1925 and rule 317 of the Land Registration Rules 1925, cancellation of Hughes’s application meant that it was treated, for these purposes, as never having been made. The legal estate therefore reverted to BG, which held it on trust for Hughes. Hughes thereafter had only an equitable interest.
3. Charging order and sale. The charging order under section 3(4) of the Charging Order Act 1979 charged only Hughes’s equitable interest. Section 90 of the Law of Property Act 1925 supplied machinery for selling the mortgaged property, but could not enlarge the interest charged. Westpac could therefore sell, and Olympia could acquire, only the equitable interest. Sainsbury’s prior equity survived the sale.
4. Rectification. Registration of Olympia as freehold proprietor and free from Sainsbury’s rights involved mistakes. Olympia’s solicitors had not substantially contributed to those mistakes by lack of proper care. Nevertheless, under Schedule 4 paragraph 3(2)(b) of the Land Registration Act 2002, it would be unjust not to rectify the register. Olympia had purchased on the basis that land would be made available for the roundabout and had paid a price reflecting that burden. Leaving it free to demand a substantial ransom payment would confer an unbargained-for windfall.
5. The application to vary the earlier orders under CPR 40.9 was refused because variation would neither be necessary nor effective. The Pallant v Morgan equity and estoppel arguments failed. The register was ordered to be rectified to record Sainsbury’s enforceable estate-contract rights, with the precise form of order left for further argument.