Chaudhary v Yavuz

Under the Land Registration Act 2002, an equitable easement is not an overriding interest under Schedule 3 paragraph 3, which is confined to legal easements. It may bind a purchaser through actual occupation under Schedule 3 paragraph 2, but ordinary use of a way for passing and repassing is use, not actual occupation.

A constructive trust arises only where the purchaser’s conscience is affected and the purchaser has undertaken a new obligation to give effect to the prior right. General contractual wording covering incumbrances discoverable on inspection does not create that obligation. The appeal was therefore allowed.

The claimant owned 37 Balaam Street and claimed an easement over a metal staircase and landing situated within the title to neighbouring 35 Balaam Street. The structure had been installed informally for the benefit of both properties, without a deed or registration.

The Central London County Court held that an equitable easement by estoppel bound the defendant, who had purchased number 35, either as an overriding interest arising from actual occupation or through a constructive trust. The defendant appealed, raising the application of the Land Registration Act 2002 and the circumstances in which a purchaser’s conscience may be affected by an unregistered right.

The Court of Appeal allowed the appeal and set aside the declarations and injunctions relating to the claimed right of way. Lord Justice Lloyd gave the leading judgment, with Lord Justices Kitchin and Ward agreeing.

1. Registration and overriding interests. Section 116 of the Land Registration Act 2002 makes an equity by estoppel capable of binding successors, subject to the statutory priority rules. On a registered disposition for valuable consideration, however, section 29 postpones interests whose priority is not protected. Schedule 3 paragraph 3 concerns only specified legal easements and profits à prendre. The claimant’s equitable rights therefore could bind the purchaser as an overriding interest only if Schedule 3 paragraph 2 applied.
2. Actual occupation. The claimant was not in actual occupation of the staircase or landing. Their use by tenants and visitors to pass between the street and the flats was ordinary use of an access way, not occupation. The presence of a fixed structure paid for by the claimant’s representatives was not itself occupation. Actual occupation requires personal physical activity and cannot be supplied by a legal entitlement alone. The court left open issues concerning parking easements and the statutory relationship between occupation of one part of land and rights over another.
3. Constructive trust. There is no general rule that a purchaser who takes land subject to an incumbrance holds it on constructive trust. The purchaser’s conscience must be affected so that it would be inequitable to deny the claimant’s interest, and the purchaser must have undertaken a new obligation, not otherwise existing, to give effect to that interest. Certainty in registered titles requires caution before imposing such a trust on slender inferences.
4. Application. Standard Condition 3.1, including the provision for incumbrances discoverable by inspection, did not impose a new obligation on the purchaser. The visible staircase and landing could suggest access rights, but the asserted right was not specifically identified in the contract. The claimant could have protected it by a notice on the register. The exceptional reasoning in Lyus v Prowsa Developments Ltd did not apply. The purchaser’s conscience was therefore not bound.

• Court of Appeal (Civil Division), [2011] EWCA Civ 1314: appeal allowed and the declarations and injunctions relating to the claimed easement set aside.
• Central London County Court: His Honour Judge Cowell held that an equitable easement by estoppel bound the purchaser through actual occupation or, alternatively, a constructive trust.