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Sainsbury’s Supermarkets Ltd v Olympia Homes Ltd & Ors (2005)

Summary

Where an application for first registration of title to a plot of land had been cancelled the subsequent transactions had only transferred an equitable title. Where the ultimate purchaser of the land had at all material times believed that another party was entitled to an option over the land it was unjust not to rectify the register under the Land Registration Act 2002 Sch.4 para.3(2)(b) so as to register the option as an enforceable estate contract.

Facts

The claimant supermarket (S) sought rectification of the land register to delete the title of the first defendant (O) to a plot of land or to ensure that the land was subject to an option in favour of S. Alternatively, S applied under CPR r.40.9 for the setting aside of an order that had vested a term of years in the third defendant (W) for the purposes of its sale of the land to O or for a variation of that order to make it subject to the option in favour of S. The second defendant (B) had sold the unregistered land to the fifth defendant (H) who then entered into a deed of novation with S to convey or make available part of the land, as required by S, for the construction of a roundabout. H applied for compulsory registration of the land. However, the registration was cancelled because he failed to respond to certain requisitions. Just over a year later W obtained a charging order over H's interest in the land. W sold the land under the charging order to O. S had attempted to protect its interests under the deed of novation by caution, and then caution against first registration but not by registration under the Land Charges Act 1972. The Land Registry invited S to justify its claim that its option under the deed of novation bound O. However, S failed to respond to the time limit for providing a response and O was registered as the proprietor of the freehold title to the land free from S's interest under the option. The issues to be determined were (i) whether S's rights under the deed of novation were capable of giving rise to an equitable interest in the land; (ii) whether the title acquired by H from B was only an equitable interest as a result of the cancellation of H's application to register; (iii) the nature of the interest caught by W's charging order; (iv) whether W had a power to sell the legal estate if H only had an equitable interest (v) if W could only convey an equitable interest whether O had been registered as the legal estate owner by mistake; (vi) whether O substantially contributed to that mistake; (vii) whether it would be unjust for other reasons for the rectification sought not to be made.

Held

(1) On the facts, the option provision in the deed of novation gave rise to an equitable interest. It was intended to bind the land and was not personal to H. (2) By virtue of the cancellation of the application for first registration the legal estate reverted to B, which held it on trust for H who thereafter only had an equitable interest. (3) W's charging order could only charge H's interest in the land. As such, the charging order was an equitable charge over an equitable interest. (4) As the charge was only over an equitable interest, it could not carry a power to sell the legal estate. (5) W could not sell and O could not acquire the legal estate in the land as all that could pass was the equitable interest. As the option agreement created a prior equity, that prior equity prevailed and was not defeated by the sale, because a legal estate was not transferred. The Land Registry had mistakenly registered O as the owner of the legal estate. (6) On the facts, O had not contributed to the mistake by lack of due care. (7) However, O had at all material times believed that S was entitled to some of the land and under the Land Registration Act 2002 Sch.4 para.3(2)(b) it was unjust not to rectify the register so as to register the option. O's legal interest would remain intact. (8) The claim under CPR r.40.9 failed. Variation or setting aside was not necessary because the correct question was whether proprietary rights had survived and that question had been decided. Variation or setting aside would be ineffective because it would not undo the conveyancing that had taken place after the order was made.

Judgment accordingly.

Chancery Division
Mann J
Judgment date
17 June 2005
References

LTL 24/6/2005: (2005) NPC 79

Practice areas