City of London BS v Flegg [1988] AC 54

Key point

  • A disposition by two or more trustees or a trust corporation overreaches any beneficial interest in the land under s2(2) LPA 1925

Facts

  • An elderly couple (Ds) lived together with their daughter and son-in-law
  • The house was registered in the joint names of the daughter and son-in-law, but all 4 had beneficial interest in the property
  • The daughter and son-in-law remortgaged the house without the couple knowing to City of London BS (C)
  • C sought possession against Ds; Ds were in actual occupation and sought to claim an overriding interest

Held (House of Lords)

  • Possession granted to C; Ds’ beneficial interest in the property was overreached

Lord Templeman

The right of occupation ceased when Ds’ interests were overreached by legal charge

  • The fact that Ds were in actual occupation on date of legal charge did not create a new right or transfer an old right to make the right enforceable against Cs
  • S14 LPA 1925 and s70 LRA 1925 (now replaced by s29 LRA 2002) cannot have been intended to frustrate the compromise between securing freely marketable land and interests of beneficiaries under trusts

Distinguishing Boland

  • The interest of the wife was not overreached because the mortgagee advanced capital moneys to a sole trustee, if there had been 2 trutees there would have been nothing to justify the wife remaining in occupation as against the mortgagee
  • Overriding interest = interest + actual occupation, actual occupation is not an interest in itself

Lord Oliver

  • S14 LPA 1925 cannot preserve equitable interests in land which are overreached by exercise of the trustees’ powers
  • S70(1)(g) LRA protects only the rights in reference to the land of the occupier at the material time. Once the beneficiary’s rights have shifted from land to money, there is no longer an interest in land to which the occupation can be referred or which it can protect: [91]