Skelwith Leisure Ltd v Armstrong (2015)
The court examined the meaning of "owner's powers in relation to a registered estate or charge" in the Land Registration Act 2002 s.23 ands.24. Although "owner's powers" in s.24 extended to a power of sale of charged land by an equitable assignee of the charge, the section did not mean that an equitable assignee's powers were automatically the same as those of the registered proprietor. The distinction between legal and beneficial ownership continued to matter, and somebody lacking legal ownership could only exercise the powers conferred on a registered owner if the statute or instrument conferring it expressly permitted it.
The seventh defendant, a buyer who had contracted to purchase land, and the claimant, the registered owner of the land, each applied for the summary disposal of aspects of the litigation.
The claimant had acquired the land from a family partnership. The partnership took a charge pending payment of the purchase price by instalments. A few years later the partnership called in its security. At the same time it assigned the charge to another company (the assignee). The assignee entered into the contract of sale with the seventh defendant. The claimant's case was that the sale agreement was invalid because the assignee was not the registered proprietor of the charge and therefore not entitled to exercise a statutory power of sale. It also relied on deficiencies in service of the notice of assignment, and alleged breach of duty against the partnership. It asked the court to enter summary judgment in its favour. The seventh defendant applied for the case against it to be struck out. Alternatively it applied for summary judgment on the ground that the claimant's allegations were not adequate to impugn the sale agreement and that, as equitable mortgagee, the assignee had been entitled to enter into the agreement. The main issue was whether the assignee, as beneficial owner of the partnership's registered charge, was entitled to exercise the same rights over the property as the partnership.
(1) An assignee of a registered charge had to be registered as the proprietor of the charge before the assignment was effective at law. However, under the Land Registration Act 2002 s.24, an assignee could exercise "owner's powers" after execution of the assignment, and before it was registered. That being so, the assignee must have had power, in accordance with s.23(2)(a), "to make a disposition of any kind permitted by the general law in relation to an interest of that description, other than a legal sub-mortgage". The issue was whether "owner's powers" were restricted to powers over the charge, or whether they extended to powers over the charged property. The answer, for a variety of reasons outlined by the court at para.47 of its judgment, was that "owner's powers" in s.23(2) of the Act were quite extensive and encompassed powers exercisable in relation to the charged land. The power of sale could be an aspect of a chargee's "owner's powers". The starting point for determining precisely what "owner's powers" comprised was s.51of the Act, the wording of which confirmed that the registered proprietor's powers included the power of sale conferred by the Law of Property Act 1925 s.101 on a mortgagee in the case of a mortgage by deed. However, under the doctrine that a person could not grant a greater interest than they themselves possessed, the extent of the "owner's powers" of "a person entitled to be registered as the proprietor" of a charge depended on whether the person had acquired ownership of the charge at law; an equitable assignee did not automatically acquire legal title because an equitable owner of land could not grant a legal interest, North East Property Buyers Litigation, Re  EWCA Civ 17,  1 W.L.R. 1521 applied and Bank of Scotland Plc vKing  EWHC 2747 (Ch),  1 E.G.L.R. 65 considered. It followed that s.24 of the 2002 Act could not mean that the powers of a person entitled to be registered as a proprietor were automatically the same as those of a registered proprietor: the former had to demonstrate not only that he could have exercised the power had he been the registered proprietor, but also that the power was exercisable by an equitable owner under "the general law". The distinction between legal and beneficial ownership therefore continued to matter. Somebody lacking legal ownership could only exercise the powers conferred on a registered owner if the statute or other instrument conferring it expressly permitted it. That meant, in the instant case, that the assignee, as equitable owner of the charge, would only have a power of sale if that power was granted by s.106 of the Law of Property Act 1925 and/or by the powers of attorney conferred by the charge (see paras 37-38, 41-59 of judgment). (2) Under s.106, a power of sale was exercisable by a person entitled to receive and give discharge for the mortgage money. Under s.136(1) of the same Act, the assignment of a debt would not take effect at law unless the debtor was given notice of it. In modern times, however, equitable assignees were considered to have the "substantive legal right to sue for the assigned debt", National Westminster Bank Plc v Kapoor  EWCA Civ 1083,  1 All E.R. 1201 applied. The assignee had therefore been entitled to "receive and give discharge for the mortgage money" by the date of the sale agreement with the buyer, regardless of whether the notice of assignment satisfied the requirements of s.136 or had been properly served. The assignee had therefore had power under s.101 to sell because it was entitled to receive and give good discharge for the mortgage money under s.106 (paras 60-67 of judgment). (3) The power of attorney granted by the charge could not validate the sale agreement but, given the conclusion on s.106, that did not affect the outcome of the case (para.75).
Claimant's application refused; seventh defendant's application granted
LTL 14/10/2015 :  2 WLR 144 :  Ch 345