Banwaitt v Dewji & Anor

Overreaching requires a conveyance of the legal estate to a purchaser, made by the trustees of land, with the purchase money paid to or applied at the direction of the required trustees. A transfer of one co-owner’s beneficial interest to the other, followed by a gratuitous transfer of the legal title, does not overreach a charging order affecting that beneficial interest. Nor does it reverse priority under the Land Registration Act 2002 where there is no disposition of a registered estate for valuable consideration. The court must first identify the rights and obligations the parties intended to create and then characterise the transaction as a matter of law.

The claimant held an unsatisfied judgment debt against the first defendant, secured by a charging order over a jointly owned family property. The first defendant and his wife, the second defendant, executed a TR1 transferring the property into the second defendant’s sole name for approximately £13,750. The claimant contended that the transaction was merely a transfer of the first defendant’s beneficial interest, so that the charging order remained attached to it. The second defendant argued that the whole legal and beneficial interest had been transferred and that the claimant’s interest had been overreached. The preliminary issue was whether the charging order remained effective against the property or the first defendant’s interest.

1. Preliminary issue determined for the claimant. The transaction was characterised as a purchase by the second defendant of the first defendant’s equitable or beneficial interest, followed by a transfer of the legal title to her. It was not a sale of the whole legal and beneficial estate by both defendants.
2. The court adopted a two-stage approach. It first examined the nature of the rights and obligations which the parties intended to create, as a question of fact. It then categorised the transaction as a matter of law. Public policy could be relevant, but the broad policy behind overreaching legislation could not determine the detailed issue.
3. Under section 2 of the Law of Property Act 1925, overreaching requires a conveyance of a legal estate to a purchaser, by trustees of land, with the statutory payment requirements satisfied. A chargee’s interest under a charging order was capable of being overreached, but a transfer of a beneficial interest alone was insufficient. The subsequent transfer of the legal estate was gratuitous and involved no purchase of the legal estate for money or money’s worth.
4. Accordingly, there was no overreaching under the 1925 Act and no reversal of priority under section 29 of the Land Registration Act 2002, because there was no disposition of a registered estate for valuable consideration.
5. Alternatively, even if the transaction had been a sale of the whole property, section 27 of the 1925 Act required payment to, or application at the direction of, both trustees. The evidence showed that the solicitors receiving and transmitting the money acted for the second defendant alone. That requirement was therefore not met.

The court left unresolved questions concerning the need for a written contract, compliance with the Form K restriction, any transaction at an undervalue or fraud on creditors, and good faith. The hearing was adjourned for consideration of further orders and directions.

The judgment records that earlier appeals against the making of the charging orders were dismissed. No citation for those decisions is stated. This was a first-instance determination of the preliminary issue in the Chancery Division.