The Gazette 1985

GAZETTE

APRIL 1985

the

Boland

decision in support of the argument that the

Bank's claim was postponed to that of the wife. In holding

that at the date of the equitable mortgage the wife had in

fact no interest in the lease and that the Bank's claim

therefore had priority, Barrington J. opined that

the Boland

decision turned on the fact that the property in dispute

was the matrimonial home. He, however, was dealing

with a commercial property and with the wife in her

capacity as a trader. In his view the social considerations

stressed in

Boland

had no application, and it was in the

interests of traders in general and of the wife herself that

she be treated like any other trader in the market.

These remarks — strictly

obiter

— are, with respect,

erroneous. The

Boland

decision was not so limited. Lord

Wilberforce and Ormrod L.J. were at pains to make it

clear that the law involved was property law and not

matrimonial law. Moreover, Lord Denning pointed out

that two partners in a business can be in actual

occupation. The better view would seem to be that no

distinction can be drawn between matrimonial property

and commercial property in this context.

Unregistered Land

The question whether a purchaser or mortgagee of

unregistered land will take subject to beneficial interests

under undisclosed trusts depends on whether he has

notice (actual, imputed or constructive) of such interests.

Section 3(1) of the Conveyancing Act, 1882 provides that

a purchaser (which includes a mortgagee) is affected by

notice of matters which he would have discovered by

reasonable inquiries and inspections or which his solicitor

would have discovered in the same way.

What are reasonable inquiries and inspections must

depend on the circumstances of the individual case.

However, it is clear, as Wylie points out, that they

encompass two matters: inspection of the property and an

investigation of the title. As a purchaser has always been

under a duty to inspect the property, he will be put on

notice of an occupier's rights by the latter's occupation. If

he does not inspect the property, he will be deemed to

have constructive notice of such rights as he would have

discovered if he had done so. This occupational aspect of

the doctrine of constructive notice is the rule in

Hunt

-v-

Luck

The question is whether that rule operates to give

notice of an occupier's rights when the vendor is also in

occupation.

Dicta in the older cases seemed to indicate that it did

not. More recently in

Caunce

-v-

Caunce

it was held that

a wife's occupation of the matrimonial home was

insufficient to put a mortgagee bank on notice of her

equitable interest. "She was there," said Stamp J.,

"ostensibly because she was the husband's wife and her

presence there was wholly consistent with the title offered

by the husband to the Bank." He went on to lay down the

proposition that "where the vendor or mortgagor is

himself in possession and occupation of the property, the

purchaser or mortgagee is not affected with notice of the

equitable interests of any other person who may be

resident there, and whose presence is wholly consistent

with the title offered . . . The reason is that the vendor

being in possession, the presence of his wife or guest or

lodger implies nothing to negative the title offered."

Since

Boland.

it is extremely doubtful whether this

represents the correct view of the law. In

Hodgson

-v-

Marks

Russell L.J. found the proposition unacceptable.

Boland,

Lord Wilberforce agreed and stated that the

occupation of the vendor did not exclude the possibility of

occupation by others. Lord Scarman doubted whether

Caunce

was correctly decided. The clear implication of

Boland

is that, even if the vendor is in occupation of the

unregistered land, the rights of other occupiers must be

considered. The decision is "of general importance as

showing clearly that in the context of investigation of title,

more than one person can be in occupation of land at any

given time and a prospective purchaser or mortgagee

must act accordingly."

This is also the position in Ireland since

Northern Bank

-v-

Henry.

In that case the Bank was fixed with

constructive notice of a wife's claim to an interest in the

family home. The Bank had taken a second charge on the

property from the husband (the legal owner) to secure

overdraft indebtedness. Although it knew that the

property was a family home and that the husband no

longer resided there, the Bank made only a negative

search in the Registry of Deeds against him. As it trans-

pired, the husband did not have title to the property. If the

Bank had raised proper requisitions when taking its

security, it would have discovered not only that the wife

was in occupation, but that a claim by her to the

ownership of the house was imminent. Not surprisingly,

the Supreme Court held that the Bank had notice of her

claim and was therefore postponed to it.

The Supreme Court emphasised that the test of what

inquiries and inspections ought reasonably to be made

was to be judged from the standpoint of the reasonable

purchaser — by what an ordinary purchaser, given

competent legal advice, would reasonably inquire about

or inspect in order to get a good title. Henchy J. defined

the reasonable purchaser as "one who not only consults

his own needs or preferences but has regard to whether

the purchase may prejudicially and unfairly affect the

rights of their parties in the property". He is expected to

make such inquiries and inspections as will "normally

disclose whether the purchase will fraudulently or

unconsionably trench on the rights of such third parties."

The

Henry

case sounds a clear warning to purchasers,

mortgagees and their solicitors that they cannot simply

accept the vendor's title deeds at face value but must

advert to and investigate the possibility of rights existing in

others. If they do not, they cannot claim the immunity

which the statute affords the reasonable purchaser.

Suggested Precautions

So what is the conscientious purchaser or lender to do

in order to get a good title or an indefeasible security?

It is clear that there must be a reassessment of

traditional practices and procedures. For registered land,

the usual practice in the past has been to obtain at closing

a statutory declaration sworn by the vendor as to the

existence or non-existence of s.72 burdens.

This can no

longer be considered adequate to obviate possible

equitable interests supported by actual occupation.

Inquiry of the vendor is not enough. If a purchaser makes

inquiries only of the legal owner and is incorrectly

informed that no one else is in occupation or has rights,

the purchaser will nevertheless be bound by the occupier's

rights because he has not addressed his inquries to the

occupier as required by the proviso to s.72(l)(j).

The main difficulty for purchasers and lenders is how to

discover who actually is in occupation of a particular

property. An inspection of the property would seem to be

called for. In the

Henry

case, Kenny J. stated that a

mortgagee was not bound to inspect the property over