Baker & Anor v Craggs (Rev 1)

Overreaching under section 2(1) of the Law of Property Act 1925 requires a conveyance to a purchaser of a legal estate in land. Section 1(1) confines legal estates in land to a fee simple absolute in possession and a term of years absolute. An easement may be a legal interest over land, but it is not an estate in land for this purpose. Its grant therefore cannot overreach an equitable interest in the servient tenement, particularly where that interest did not affect the easement and no identifiable sale proceeds can be attributed to it. The issue is instead governed by priority under the Land Registration Act 2002.

The claimants purchased a barn from common vendors after the vendors had transferred adjoining farm land to the defendant. During the registration gap, the vendors granted the claimants an easement over the farm. The defendant was in actual occupation and had an equitable interest pending registration of his title.

Newey J held that the easement overreached the defendant’s equitable interest and declared that the farm was bound by the right of way, also awarding damages. The appeal concerned whether section 2(1) of the Law of Property Act 1925 could overreach an equitable interest in the servient land where the conveyance was the grant of an easement benefiting different land.

The Court of Appeal unanimously allowed the appeal. Henderson LJ gave the leading judgment, with Flaux LJ and Patten LJ agreeing. The declaration that the farm was bound by the easement and the award of damages were reversed.

1. Statutory threshold. Sections 1(1) to 1(4) of the Law of Property Act 1925 distinguish estates in land from interests or charges over land. The only estates in land capable of being conveyed at law are a fee simple absolute in possession and a term of years absolute. An easement may be a legal estate in the wider statutory classification of interests over land, but it is not a legal estate in land for section 2(1). The grant of the easement therefore did not engage the overreaching provisions.
2. Conceptual difficulties. The defendant’s equitable interest was in the servient tenement under the bare trust arising on completion of his purchase, not in the easement granted to the claimants. He was not a party to the sale of the dominant land, and no part of its purchase price was attributable to his interest. There was consequently no identifiable capital money to which that interest could be transferred.
3. Registration priority. Completion gave the defendant beneficial ownership, while legal ownership remained with the registered proprietor pending registration. Under section 29 and paragraph 2 of Schedule 3 to the Land Registration Act 2002, his interest was protected by actual occupation. The statutory exceptions, including paragraph 2(c), did not apply because the claimants had knowledge of the earlier transfer. The easement could not therefore prevail over his protected interest.
4. Mortgage distinction. The overreaching effect recognised for a charge by way of legal mortgage is explained by section 87 of the Law of Property Act 1925, which treats the mortgagee as protected as if a mortgage term or sub-term had been created. That reasoning does not extend section 2(1) to easements.
5. The court expressed no view on whether an estate contract survived completion for the purposes of section 2(3)(iv), since that issue was not challenged on appeal. Necessary alterations to the registered titles were directed under Schedule 4 to the Land Registration Act 2002.

• Court of Appeal (Civil Division): In [2018] EWCA Civ 1126, the appeal was allowed. The declaration and damages order made below were reversed, and consequential alterations to the registered titles were directed.
• High Court of Justice, Chancery Division: Newey J, in [2016] EWHC 3250 (Ch.), held that the easement overreached the defendant’s equitable interest and declared that the farm was bound by the right of way.