Chaudhary v Yavuz [2012] 2 All ER 418

Key points

  • Registrable interests are unlikely to be protected by constructive trusts
  • Easements are not capable of becoming overriding interests by way of actual occupation

Facts

  • D bought a property that was adjacent to property owned by C
  • The standard form contract of sale stated that the property sold was subject to “incumbrances” discoverable by inspection
  • C sought to prove a right of way over a metal staircase between the properties that was part of D’s property
  • Judge held that there was an equitable easement over the staircase created by proprietary estoppel which was enforceable on either of two grounds:
    1. As an overriding interest protected by actual occupation pursuant to s29 and sch 3 LRA 2002
    2. As a constructive trust imposed by the terms of the contract pursuant to Lyus v Prowsa

Held (Court of Appeal)

  • The equitable easement is not binding upon D
  • It was neither protected as an overriding interest nor a constructive trust

Lloyd LJ

On actual occupation

  • Mere use by C and his tenants of the staircase for passing did not amount to ‘actual occupation’

On constructive trust

  • Absent any express reference in the contract of sale to the rights asserted by the claimant and any express provision requiring the defendant to take the property subject to those rights, the fact that it was obvious on inspection of the land that the staircase existed and served as an access for the upper floor of the C’s property did not render it unconscionable for D to obstruct its use by C
  • Accordingly, C’s right of way was not binding on the defendant by way of constructive trust
  • The test is whether the purchaser “has undertaken a new obligation, not otherwise existing, to give effect to the relevant incumbrance or prior interest.”

Lyus v Prowsa distinguished

  • Lyus was an exceptional case that relied on the buyer to expressly agree to an earlier obligation not binding on the seller, and thus the reference to it in the contract with buyer could not have been to protect the seller (from claims by the licensee for breach of contract)
  • In this case, there was a standard condition referring to encumbrances in general terms
  • In Lyus, the right protected by constructive trust was not capable of protection by registration, but here the purported easement is protectable by registration
  • Where rights can be protected via registration and are not expressly referred to in a contract, it should not be binding via constructive trust as the purchaser may be entitled to rely on third parties protecting themselves via registration
  • *The contract provision will be more readily interpreted as intended to protect the vendor from a claim from the purchaser than imposing a new personal obligation

Comments

  • Easements are registrable interests, meaning that if registered, they are binding on registered disponees of land
  • The case also suggests that equitable rights of way cannot be protected by actual occupation, since passing on an right of way does not amount to actual occupation