Steven John Williams v Alter Domus Trustees (UK) Limited

A purchaser’s equitable lien for payments made under a contract to acquire an estate in land arises by operation of law where there is an enforceable contract. It may be excluded or postponed only by clear contractual wording or by a necessary and irresistible implication from the transaction. Deposit insurance does not ordinarily displace the lien.

Where a contract concerns a defined part of a larger property, the lien is generally co-extensive with that subject matter, including the relevant land from which a derivative estate is to be created. A notice protecting the contract protects the resulting lien, but only to the extent of the land identified in the notice.

The joint administrators of Signature Living Residential Limited sought directions under paragraph 71 of Schedule B1 to the Insolvency Act 1986 concerning distribution of sale proceeds from Ralli House, Liverpool.

The dispute principally concerned deposits paid by purchasers under agreements for lease. The court had to determine whether binding contracts existed, whether the purchasers’ equitable liens had been excluded or postponed, the geographical extent of those liens, the effect of notices registered at HM Land Registry, and whether one purchaser group should be treated as having priority protection despite an error in the register.

1. Binding contracts. The agreements for lease satisfied section 2(3) of the Law of Property (Miscellaneous Provisions) Act 1989. Manuscript wording inserted by the buyer’s solicitor amounted to a signature because it was used with authenticating intent. On the evidence, two further agreements had probably been signed although their signature pages were missing.
2. Exclusion or postponement. A purchaser’s lien arises by operation of law and is shaped by, but is not an implied term of, the contract. Exclusion or postponement requires a clear and manifest intention, or a necessary and irresistible inference from the transaction. Holding deposits through a stakeholder and providing deposit insurance did not satisfy that test. The insurance supplied additional protection and did not conflict with the liens.
3. Geographical extent. Following Chattey and Eason, the lien was co-extensive with the subject matter of the contract. It extended to the relevant apartment or, where a derivative estate was to be created, the land from which that estate was to derive. The fact that some apartments had not been physically constructed, or that the liens might have limited practical value, did not justify extending them over the vendor’s entire property.
4. Registration. Under sections 29 and 30 of the Land Registration Act 2002, and rule 84 of the Land Registration Rules 2003, the notices protected the purchasers’ liens, but only over the parts of the registered estate identified in the notices. Bank of Scotland v Joseph was materially different because the notice there covered the whole registered estate.
5. Registering error. Mr Waller and Ms Thorpe were to be treated as Category A purchasers for apartment 104. The register contained an error which would inevitably have been rectified, and the earlier order preserved their entitlement to argue for distribution of the sale proceeds.
6. The answers to the agreed issues were: (a) yes; (b) no; (c) sense (ii); (d) yes, in sense (ii); (e) yes; and (f) determined by those conclusions.

Not stated in the judgment. This was a first-instance application concerning distribution of sale proceeds in an administration.