Williams & Glyn's Bank Ltd v Boland

Critical Assessment of Williams & Glyn’s Bank Ltd v Boland

Question

Critically assess whether the views of Lord Wilberforce in Williams & Glyn’s Bank Ltd v Boland 1981 A.C. at pages 504-505 are an accurate reflection of the current law relating to actual occupation for the purposes of the Land Registration Act 2002.

Introduction

In Williams & Glyn’s Bank Ltd v Boland,¹ the House of Lords upheld the Court of Appeal’s decision that Mrs. Boland, the respondent, whose husband was the legal owner of their marital home, had a property right by virtue of her physical occupation and rejected the Glyn’s Bank Ltd’s application to possess the property which arose from its mortgage interest. In his judgement, Lord Wilberforce stated that the wording of section 70(1)(g) of the Land Registration Act 1925 (‘LRA 1925’) should be given its literal meaning and ‘actual occupation’ should not require anything more than physical presence on the property.² The decision in Boland was important because it determined that an owner of an equitable interest (arising in this case under a trust of sale) would constitute an overriding interest and would bind a future purchaser of the property, provided the equitable interest owner was physically present on the property. The decision in Boland attracted controversy, with some critics³ arguing that such beneficial interests that arise under a trust of sale were not intended to be overriding interests for the purposes of section 70(1)(g) of the LRA 1925 and point to a number of occasions this has not been the case.⁴

This essay will critically assess whether Lord Wilberforce’s views on the meaning of ‘actual occupation’ in Boland remains an accurate reflection of the current law in the Land Registration Act 2002 (‘LRA 2002′). This essay will conduct a brief examination of the principles that founded the prior governing legislation, the LRA 1925 and how they were applied to the House of Lords’ reasoning in Boland. The essay will turn to look in greater detail at the meaning given to ‘actual occupation’ by the House of Lords in Boland before examining whether that interpretation is reflected in the current law which is found in schedules 1 and 3 of the LRA 2002.

Background to Boland; The Land Registration Act 1925, the curtain principle and overreaching

It is true to say that the LRA 1925 was drafted in a period of time that could not have envisaged the full extent of modern day land transactions. Nowadays, there are frequently situations where persons, who are not legal owners of the property, contribute financially to the maintenance and improvements of that property. Such cases frequently involved married couples who live in the marital home but the husband is the legal owner and the wife remains off of the title register. To ensure fairness, such situations give rise to an equitable interest in favour of such persons who are not the legal owners of the property but make personal or financial contributions to it.⁵ Such equitable interests protect the non-legal owner of the property from future dispositions of the property and ensure that they are compensated by the disponee under a trust of sale.

The LRA 1925 was largely based on the ‘curtain principle’ which also can be seen to influence its successor, the LRA 2002. The curtain principle provides that if a purchaser wishes to buy a piece of registered land, he need only be concerned with the legal owners of the estate, whose title is registered in the title register. As such, the curtain principle operates to free purchasers of land from the burden of having to inspect the property itself to determine if the property is encumbered by any equitable interests, a process that was described as a “wearisome and intricate task”.⁶ In this way, the curtain principle affords certain equitable interests to remain off of the register, for example, equitable interests that arise under a trust of land, as was the case in Boland.

In any case, as a result of overreaching, such equitable interests would not bind a prospective purchaser as long as any purchase money is paid to a minimum of two trustees.⁷ In this situation, purchasers could take title to land without being encumbered by any beneficial interests regardless as to whether the purchaser has notice of them or not. Any beneficial interests are shifted from burdening the land to be enforceable solely against the proceeds of the sale. The potential buyer can rely on the principle of overreaching to ensure that any equitable interest does not burden the land transaction. The equitable interests survive however, and merely convert into the purchase money paid by the legal owners and which is then held in a trust by those legal owners.

However, and as was seen in Boland, in the situation where there is only one trustee and consequently the statutory conditions for overreaching are not satisfied, a purchaser will have to ‘to look behind the curtain’ and negotiate with an owner of an equitable interest.⁸ As noted above, in Boland, the House of Lords determined that Mrs. Boland’s equitable interest was overriding and overrode the bank’s mortgage interest in the property. The decision in Boland meant that such equitable interests could and would effectively bind a purchaser if the beneficiary under the trust could show that he or she is in ‘actual occupation’ of the property.

The meaning of ‘actual occupation’ in Boland

The meaning of ‘actual occupation’ has been dealt with by a long line of statutes that relate to registration. In Boland, the House of Lords referred to the then governing provisions contained in section 70(1)(g) Land Registration Act 1925. Lord Denning stated that the meaning that should be afforded to ‘actual occupation’ for the purposes of the Act, is one of ‘physical fact’.⁹ In a similar vein, Lord Wilberforce stated that it should be interpreted using “ordinary words of plain English… given occupation, that is presence on the land, I do not think that the word actual was intended to produce any additional qualification, certainly not to suggest that possession must be adverse: it merely emphasises that what is required is physical presence, not entitlement in law”.¹⁰

The literal approach given to the meaning of actual occupation effectively dealt with the issues that arose regarding the uncertainties that often surrounded the determination of actual or constructive notice of certain interests in land. This type of approach was applied in Hodgson v Marks where the court held that ‘actual occupation’ did not infer apparent or obvious occupation of the land, merely that the land was possessed by someone else apart from the person attempting to transfer the land.¹¹ In light of the literal meaning afforded to the words ‘actual occupation’ by the House of Lords in Boland, it is now necessary to determine how far that meaning is reflected in the current provisions relating to actual occupation under the LRA 2002.

‘Actual occupation’ in the Land Registration Act 2002

Persons in actual occupation is listed as one of the most important overriding interests mentioned in the LRA 2002 and in this way reflects the previous provision in section 70(1)(g) LRA 1925.¹² The definition of ‘actual occupation’ remains largely unchanged by the LRA 2002 but the Act does impact several aspects of the law in this area. Under the Act, a person who is not in actual occupation but is receiving rents from the property is no longer protected. In addition, the owner of the equitable interest is limited in enforcing it only to the specific piece of property that is physically occupied.

As noted above the actual occupation will only extend to the land actually occupied by the owner of the equitable interest. As Schedule 1 specifies ‘the interest overrides only as far as relating to the land of which his is in actual occupation’.¹³ However, the nature of the actual occupation will be determined on a case-by-case basis determined by a straight forward factual analysis. Importance will be placed upon the equitable interest owner’s physical presence on the land, but the mere fact that the occupant leaves the property will not mean that he loses the occupation. It can therefore be inferred that the occupation need not be apparent to qualify as an overriding interest.

Schedule 3

As a result of the difficulties regarding the nature and scope of overriding interests, the Law Commission recommended that they be reduced in effect.¹⁴ This reduction in effect has now been implemented by Schedule 3 of the LRA 2002 which has counteracted the problematic nature of undiscoverable rights in land and in many ways marks a major departure from the ambit of the LRA 1925. As such, Schedule 3 has introduced a more purposive approach and restricts claimant’s ability to satisfy the conditions for ‘actual occupation’. In short, Schedule 3 attempts to ensure that a purchaser who pays valuable consideration for a property is not bound by an interest that he has no possibility of discovering.

Under Schedule 3, the actual occupation must be ‘obvious on a reasonably careful inspection of the land at the time of the disposition’ or that it must be within the actual knowledge of the purchaser at the time of the transfer.¹⁵ As such, a person in actual occupation cannot assert that his interest overrides in all circumstances and a purchaser cannot be bound by actual occupation that is either impossible to discover or unknown. In such cases, the effect of the actual occupation does not amount to that of an overriding interest. Conversely, if a person is in discoverable occupation of the property at the time of the sale to a purchaser,¹⁶ or the purchaser otherwise knows of her interest, that person will have an overriding interest.

Schedule 3 also added further protection to purchasers of land providing that in order to qualify as an overriding interest, any actual occupation must exist before and on the date of the disposition.¹⁷ The extent to which these provisions should apply have been discussed by the courts as to whether such actual occupation should extend further to the date of registration.¹⁸

Conclusion

It is fair to say that the newer provisions replace the older more definite conceptions of ‘actual possession’ with a more ‘fluid, concept’.¹⁹ The newer provisions more adequately deal with cases that assume facts similar to Boland which concern married couples that occupy a marital home and where any such actual occupation should logically be discoverable for the purposes of Schedule 3. The enactment of the LRA 2002 has meant that purchasers are afforded much more protection as regards persons in actual occupation that the mere qualification of physical presence required by Lord Wilberforce’s reasoning in Boland is not the only requirement an equitable interest owner must satisfy in order to bind future purchasers.

As we have seen, a purchaser will not be bound by a person’s actual occupation, if that actual occupation is impossible to discover or is factually unknown to the purchaser. Under the LRA, actual occupation must also stretch in time from before and on the date of the disposition which provides purchasers with much more opportunity to discover a discoverable occupation. In addition, the actual occupier will be restricted to the land that he or she actually occupies, and not necessarily the entire property. However, as to the meaning of ‘actual occupation’ itself, it should be noted that this the interpretation employed by the LRA 2002 is not a far cry from the literal meaning of ‘actual occupation’ as employed by the House of Lords in Boland. A literal interpretation of the ‘actual occupation’ in a physical sense is not dissimilar from circumstances in which a person’s presence is discoverable. In this way, the LRA it does not depart wholly from the reasoning employed by Lord Wilberforce in his judgment in Boland but does introduce some necessary qualifications to reduce the effect of such overriding interests and protect land purchasers in light of the nature of modern day land transactions.

Footnotes

¹[1981] A.C. 487

²ibid at 504-505

³Jackson, N., “Overreaching in Registered Land Law” 69 Mod. L. Rev. 214 2006

⁴See London & Cheshire Insurance Co. Ltd v. Laplagrene Property Ltd [1971] Ch 499

⁵Dyer v Dyer (1788) 30 ER 42

⁶Lord Scarman in Williams & Glyn’s Bank Ltd v Boland [1981] A.C. 487

⁷Section 2 Law of Property Act 1925

⁸Bull v Bull (1955) 1 QB 234

⁹Williams & Glyn’s Bank Ltd v Boland [1981] A.C. 487

¹⁰ibid at p. 504 – 505

¹¹[1971] Ch 892

¹²see paragraph 2, Schedule 1, Land Registration Act 2002

¹³ibid

¹⁴See Law Commission Report No.271

¹⁵see paragraph 2(c)(i) and (ii), Schedule 3, Land Registration Act 2002

¹⁶Abbey National BS v Cann [1991] 1 AC 56

¹⁷Land Registration Act 2002, s29(1)-(2), Sch 3, para 2

¹⁸Thompson v Foy [2009] EWHC 1076 (Ch) per Lewison J

¹⁹Dixon, M. Modern Land Law 8th ed. (Routledge, 2012) at p.74