Halifax Plc & Anor v Curry Popeck (A Firm) & Anor

Under Land Registration Act 2002, competing equitable interests generally rank in order of creation. Section 28 preserves that rule, while section 29 may postpone an earlier unprotected interest where a registered disposition is made for valuable consideration. The party relying on section 29 bears the burden of proving its conditions.

Where the transaction is part of a fraudulent enterprise and the stated consideration is unreliable or meaningless, the burden is not discharged. On the alternative assumption that section 29 applies, registration may remove an equitable interest as an interest in land even where the disponee helped create it, although the personal obligation may remain enforceable.

The claim arose from mortgage frauds involving the transfer and charging of a bungalow and parts of its garden. Halifax believed it had obtained a legal charge over the bungalow but obtained a charge over a strip of land and a garage. Bank of Scotland likewise obtained a defective charge, but later secured a charging order over the bungalow and sold it.

The proceeds were insufficient to satisfy both interests. The court was asked to determine the priority between Halifax’s proprietary estoppel interest and Bank of Scotland’s equitable charge, principally by deciding whether the transfer of the bungalow to John Whale was a registrable disposition made for valuable consideration within section 29 of the Land Registration Act 2002.

1. Priority. The general rule under section 28 of the Land Registration Act 2002 is that competing equitable interests rank according to the order in which they were created. Section 28 removes the former qualification that fault by the holder of the earlier equity might alter priority.
2. Proprietary estoppel. An equity by estoppel is, by section 116 of the Act, an interest capable of binding successors in title from the time when the equity arises. The parties accepted that Halifax had such an interest. The bankruptcy of John Whale did not prevent the estoppel binding the legal estate, since his legal estate as trustee had not vested in the trustee in bankruptcy.
3. Section 29. The Bank of Scotland bore the legal and evidential burden of showing that the transfer to John was made for valuable consideration. Section 29 operates by reference to registration, but its conditions had to be established before it could postpone Halifax’s prior interest.
4. Finding on the facts. The conveyancing documents were contradictory and unreliable. The stated consideration of £200,000 had not been paid and did not correspond to any genuine transaction. The evidence was at least equally consistent with a fraudulent reshuffling of legal title in which the concept of consideration was meaningless. The Bank of Scotland therefore failed to bring itself within section 29, and Halifax’s earlier interest had priority.
5. Alternative construction. Had valuable consideration been proved, the court would have accepted the interpretation supported by Midland Bank v Green [1981] AC 513. Equitable interests binding the disponer would then cease to bind the disponee as interests in land, even where the disponee participated in creating them. The personal obligation could nevertheless remain enforceable. The court also recognised a possible fraud-based estoppel against reliance on section 29, referring to Rochefoucauld v Boustead [1897] 1 Ch 196.
6. The court accordingly found in favour of Halifax on the facts and held that its interest ranked ahead of Bank of Scotland’s charging-order interest.