MIDLAND BANK TRUST COMPANY LIMITED AND ANOTHER
(RESPONDENTS)
v.
GREEN AND ANOTHER
(APPELLANTS)
Lord Wilberforce
Lord Edmund-Davies
Lord Fraser of Tullybelton
Lord Russell of Killowen
Lord Wilberforce
my lords,
This appeal relates to a 300-acre farm in Lincolnshire called ” Gravel
Hill Farm “. It was owned by Walter Stanley Green (” Walter “) and since
1954, let to his son Thomas Geoffrey Green (” Geoffrey “) who farmed it
as tenant. Walter owned another larger farm which he farmed jointly
with another son Robert Derek Green (” Robert “), the appellant. In 1960
Walter sold this other farm to Robert at £75 per acre.
On 24th March 1961 Walter granted to Geoffrey an option to purchase
Gravel Hill Farm, also at £75 per acre. The option was granted for the
consideration of £1, and so was contractually binding upon Walter. It was
to remain open for ten years. It seems that the reason why this transaction
was entered into, rather than one of sale to Geoffrey, was to save estate
duty on Walter’s death.
This option was, in legal terms, an estate contract and so a legal charge,
class C, within the meaning of the Land Charges Act 1925. The correct
and statutory method for protection of such an option is by means of
entering it in the Register of Land Charges maintained under the Act. If
so registered, the option would have been enforceable, not only (contrac-
tually) against Walter, but against any purchaser of the farm.
The option was not registered, a failure which inevitably called in
question the responsibility of Geoffrey’s solicitor. To anticipate, Geoffrey
in fact brought proceedings against his solicitor which have been settled
for a considerable sum, payable if the present appeal succeeds.
In 1967 there appears to have been some family disagreement. We do
not know the nature of it, nor the merits. I am not prepared to assume,
in the absence of any evidence, that either side was in the wrong. All
we know is that Walter formed the intention, contrary to what he had
planned in 1961, to defeat Geoffrey’s option and to make Gravel Hill
Farm available for the family. He instructed solicitors to prepare a
conveyance of it to his wife Evelyne: this the solicitors did after verifying
that the option was not registered as a Land Charge.
On or about 17th August 1967 Walter executed a conveyance of Gravel
Hill Farm to Evelyne for a consideration of £500. The judge found that
this sum was paid by Evelyne to Walter. It was of course far less than
the value of the farm, which was then worth about £40,000. The conveyance
was also a breach of contract by Walter for which Walter or his estate
was liable to Geoffrey in damages.
Later, Evelyne made a will in which she left the farm, subject to Walter’s
life interest, to her five children—including Geoffrey. On 5th September
1967 Geoffrey, who had learnt of the conveyance, caused the option to be
registered as an estate contract, and on 6th October 1967 gave notice
exercising the option. Finally, on 27th January 1970, Geoffrey issued a
writ against Walter and Evelyne’s executors (she had died in 1968) claiming
that the option was still binding, specific performance of the contract
arising from its exercise and damages. This was later amended so as to
claim damages for conspiracy by Walter and Evelyne.
2
Most of the principals involved in the above transactions are dead. The
place of Geoffrey is taken by the present respondents as his executors; that
of Evelyne by the appellant, as her sole surviving executor; the place of
Walter was taken by Beryl Rosalie Kemp as his executrix, but her defence
was struck out by order dated 7th October 1975. The issue therefore
effectively is between the appellant, as representing the estate of Evelyne,
and the respondents as representing the estate of Geoffrey.
The trial took place before Oliver J. in 1977. A number of issues arose
which are no longer relevant. The learned Judge, in an admirable judg-
ment with which I wholly agree, decided:
(i) That the sale and conveyance to Evelyne was not a sham
and was a genuine sale by the vendor to a ” purchaser”, as
defined by the Land Charges Act 1925 for money or money’s
worth, and accordingly that the option was not specifically
enforceable.
(ii) That Walter’s estate had no answer to a claim for damages,
and that an enquiry as to damages must be made.
(iii) That any claim for damages against the estate of Evelyne was
statute-barred by virtue of the Law Reform (Miscellaneous
Provisions) Act 1934.
An appeal was brought to the Court of Appeal which, by a majority,
reversed the judge’s decision on point (i), and declared the option specifically
enforceable. The ground of this decision appears to have been that the
sale in 1967 was not for ” money or money’s worth “, within the meaning
of section 13 of the Land Charges Act 1925. In addition the Master of
the Rolls was prepared to hold that the protection of the Act was not
available in a case of fraud meaning thereby ” any dishonest dealing done
so as to deprive unwary innocents of their rightful dues” The respondents,
however, did not seek to support this except to the extent that they relied
upon lack of good faith on the part of Evelyne.
My Lords, section 13(2) of the Land Charges Act 1925 reads as follows:
” (2) A land charge of class B, class C or class D, created or arising
” after the commencement of this Act, shall (except as hereinafter
” provided be void as against a purchaser of the land charged therewith
“… unless the land charge is registered in the appropriate register
” before the completion of the purchase:
” Provided that, as respects a land charge of class D and an estate
” contract created or entered into after the commencement of this act,
” this subsection only applies in favour of a purchaser of a legal estate
” for money or money’s worth “.
As regards the word ” purchaser ” section 20(8) of the same Act reads:
” ‘ Purchaser ‘ means any person . . . who, for valuable considera-
” tion, takes any interest in land …”
Thus the case appears to be a plain one. The ” estate contract”, which
by definition (section 11) includes an option of purchase, was entered into
after 1st January 1926; Evelyne took an interest (in fee simple) in the land
” for valuable consideration “—so was a “purchaser “: she was a purchaser
for money—namely £500: the option was not registered before the
completion of the purchase. It is therefore void as against her.
In my opinion this appearance is also the reality. The case is plain: the
Act is clear and definite. Intended as it was to provide a simple and
understandable system for the protection of title to land, it should not be
read down or glossed: to do so would destroy the usefulness of the Act.
Any temptation to remould the Act to meet the facts of the present case,
on the supposition that it is a hard one and that justice requires it, is,
for me at least, removed by the consideration that the Act itself provides
a simple and effective protection for persons hi Geoffrey’s position—viz.—
by registration.
3
The respondents submitted two arguments as to the interpretation of
section 13(2): the one sought to introduce into it a requirement that the
purchaser should be ” in good faith “; the other related to the words ” in
” money or money’s worth “.
The argument as to good faith fell into three parts: first, that “good
” faith ” was something required of a ” purchaser ” before 1926; secondly,
that this requirement was preserved by the 1925 legislation and in particular
by section 13(2) of the Land Charges Act 1925. If these points could be
made good, it would then have to be decided whether the purchaser
(Evelyne) was in ” good faith ” on the facts of the case.
My Lords, the character in the law known as the bona fide (good faith)
purchaser for value without notice was the creation of equity. In order to
affect a purchaser for value of a legal estate with some equity or equitable
interest, equity fastened upon his conscience and the composite expression
was used to epitomise the circumstances in which equity would or rather
would not do so. I think that it would generally be true to say that the
words ” in good faith ” related to the existence of notice. Equity, in other
words, required not only absence of notice, but genuine and honest absence
of notice. As the law developed, this requirement became crystallised in
the doctrine of constructive notice which assumed a statutory form in the
Conveyancing Act 1882, section 3. But, and so far I would be willing to
accompany the respondents, it would be a mistake to suppose that the
requirement of good faith extended only to the matter of notice, or that
when notice came to be regulated by statute, the requirement of good faith
became obsolete. Equity still retained its interest in and power over the
purchaser’s conscience. The classic judgment of James L.J. in Pilcher v.
Rawlins (1872) L.R. 7 Ch. 259, 269 is clear authority that it did not: good
faith there is stated as a separate test which may have to be passed even
though absence of notice is proved. And there are references in cases
subsequent to 1882 which confirm the proposition that honesty or bona
fides remained something which might be enquired into (see Berwick & Co.
v. Price [1905] 1 Ch. 632, 639; Taylor v. London and County Banking Co.
[1901] 2 Ch. 231, 256; Oliver v. Hinton [1899] 2 Ch. 264, 273).
But did this requirement, or test, pass into the property legislation of
1925?
My Lords, I do not think it safe to seek the answer to this question by
means of a general assertion that the property legislation of 1922-25 was
not intended to alter the law, or not intended to alter it in a particular
field, such as that relating to purchases of legal estates. All the Acts of
1925, and their precursors, were drafted with the utmost care, and their
wording, certainly where this is apparently clear, has to be accorded firm
respect. As was pointed out in Grey v. Inland Revenue Commissioners
[1960] AC 1, the Acts of 1922-4 effected massive changes in the law
affecting property and the House, in consequence, was persuaded to give
to a plain word (” disposition “) its plain meaning, and not to narrow it
by reference to its antecedents. Certainly that case should firmly discourage
us from muddying clear waters. I accept that there is merit in looking at
the corpus as a whole in order to produce if possible a consistent scheme.
But there are limits to the possibilities of this process: for example it
cannot eliminate the difference between registered and unregistered land,
or the respective charges on them.
As to the requirement of ” good faith ” we are faced with a situation of
some perplexity.
The expression ” good faith “, appears in the Law of Property Act 1925
definition of “purchaser” [‘a purchaser in good faith for valuable con-
sideration’]—section 205(l)(xxi); in the Settled Land Act 1925—section
117(l)(xxi) [ditto]; in the Administration of Estates Act 1925 section
55(l)(xviii) [” ‘ purchaser ‘ means a lessee, mortgagee or other person who in
” good faith acquires an interest in property for valuable consideration “]
and in the Land Registration Act 1925, section 3 (xxi) which does not
however, as the other Acts do, include a reference to nominal consideration.
4
So there is certainly some indication of an intention to carry the concept
of “good faith ” into much of the 1925 code. What then do we find in
the Land Charges Act 1925? We were taken along a scholarly peregrina-
tion through the numerous Acts antecedent to the final codification and
consolidation in 1925—the Land Charges Registration and Searches Act,
1888, the Law of Property Act 1922, particularly Schedule 7, the Law of
Property (Amendment) Act 1924 as well as the Yorkshire and Middlesex
Deeds Registration Acts. But I think, with genuine respect for an interesting
argument, that such solution as there is of the problem under consideration
must be sought in the terms of the various Acts of 1925 themselves. So
far as concerns the Land Charges Act 1925, the definition of ” purchaser ”
quoted above does not mention ” good faith ” at all. ” Good faith ” did
not appear in the original Act of 1888, nor in the extension made to that
Act by the Act of 1922 Schedule 7, nor in the Act of 1924 Schedule 6.
It should be a secure assumption that the definition of ” purchaser for
” value ” which is found in section 4 of the Act of 1888 (. . . ” person
” who for valuable consideration takes any interest in land”) together
with the limitation which is now the proviso to section 13(2) of the Act
of 1925, introduced in 1922, was intended to be carried forward into the
Act of 1925. The expression ” good faith ” appears nowhere in the antece-
dents. To write the word in, from the examples of contemporaneous Acts,
would be bold. It becomes impossible when it is seen that the words
appear in section 3(1) and in section 7(1), in each case in a proviso very
similar, in structure, to the relevant proviso in section 13(2). If canons
of constructions have any validity at all, they must lead to the conclusion
that the omission in section 13(2) was deliberate.
My Lords, I recognise that the enquiring mind may put the question:
why should there be an omission of the requirement of good faith in this
particular context? I do not think there should be much doubt about the
answer. Addition of a requirement that the purchaser should be in good
faith would bring with it the necessity of enquiring into the purchaser’s
motives and state of mind. The present case is a good example of the
difficulties which would exist. If the position was simply that the purchaser
had notice of the option, and decided nevertheless to buy the land, relying
on the absence of notification, nobody could contend that she would be
lacking in good faith. She would merely be taking advantage of a situation,
which the law has provided, and the addition of a profit motive could not
create an absence of good faith. But suppose, and this is the respondents’
argument, the purchaser’s motive is to defeat the option, does this make
any difference? Any advantage to oneself seems necessarily to involve
a disadvantage for another: to make the validity of the purchase depend
upon which aspect of the transaction was prevalent in the purchaser’s
mind seems to create distinctions equally difficult to analyse in law as to
establish in fact: avarice and malice may be distinct sins, but in human
conduct they are liable to be intertwined. The problem becomes even
more acute if one supposes a mixture of motives. Suppose—and this may
not be far from the truth—that the purchaser’s motives were in part to take
the farm from Geoffrey, and in part to distribute it between Geoffrey and
his brothers and sisters, but not at all to obtain any benefit for herself, is
this acting in “good faith” or not? Should family feeling be denied a
protection afforded to simple greed? To eliminate the necessity for
enquiries of this kind may well have been part of the legislative intention.
Certainly there is here no argument for departing—violently—from the
wording of the Act.
Before leaving this part of the case, I must comment on the case of
In re Monolithic Building Co. [1915] 1 Ch. 643, which was discussed in
the Court of Appeal. That was a case arising under section 93 of the
Companies (Consolidation) Act 1908 which made an unregistered mortgage
void against any creditor of the company. The defendant Jenkins was a
managing director of the company, and clearly had notice of the first
unregistered mortgage: he himself subsequently took and registered a
mortgage debenture and claimed priority over the unregistered mortgage.
5
It was held by the Court of Appeal, first that this was not a case of fraud:
” it is not fraud to take advantage of legal rights, the existence of which
” may be taken to be known to both parties” (per Lord Cozens-Hardy
M.R. p.663). Secondly that section 93 of the Act was clear in its terms,
should be applied according to its plain meaning, and should not be
weakened by infusion of equitable doctrines applied by the courts during
the 19th century. The judgment of the Master of the Rolls contains a
valuable critique of the well known cases of Le Neve v. Le Neve 3 Atk. 646
and Greaves v. Tofield 14 Ch. D.563 which arising under the Middlesex
Registry Act and other enactments, had led the judges to import equitable
doctrines into cases of priority arising under those Acts, and establishes
that the principles of those cases should not be applied to modern Acts of
Parliament.
My Lords, I fail to see how this authority can be invoked in support of
the respondents’ argument, or of the judgments of the majority of the
Court of Appeal. So far from supporting them, it is strongly the other
way. It disposes, for the future, of the old arguments based, ultimately,
upon Le Neve v. Le Neve for reading equitable doctrines (as to notice, etc.)
into modern Acts of Parliament: it makes it clear that it is not ” fraud ”
to rely on legal rights conferred by Act of Parliament: it confirms the
validity of interpreting clear enactments as to registration and priority
according to their tenor.
The judgment of Phillimore LJ. does indeed contain a passage which
appears to favour application of the principle of Le Neve v. Le Neve, and
to make a distinction between a transaction designed to obtain an
advantage, and one designed to defeat a prior (unregistered) interest. But,
as I have explained, this distinction is unreal and unworkable, this whole
passage is impossible to reconcile with the views of the other members of
the Court of Appeal in the case and I respectfully consider that it is not
good law.
My Lords, I can deal more shortly with the respondents’ second
argument. It relates to the consideration for the purchase. The argument
is that the protection of section 13(2) of the Land Charges Act 1925 does
not extend to a purchaser who has provided only a nominal consideration
and that £500 is nominal. A variation of this was the argument accepted
by the Court of Appeal that the consideration must be ” adequate “—an
expression of transparent difficulty. The answer to both contentions lies
in the language of the subsection. The word ” purchaser “, by definition
(section 20(8)), means one who provides valuable consideration—a term
of art which precludes any enquiry as to adequacy. This definition is, of
course, subject to the context. Section 13(2), proviso, requires money or
money’s worth to be provided: the purpose of this being to exclude the
consideration of marriage. There is nothing here which suggests, or admits
of, the introduction of a further requirement that the money must not be
nominal.
The argument for this requirement is based upon the Law of Property
Act 1925 which, in section 205(l)(xxi) defining “purchaser” provides that
” valuable consideration” includes marriage but does not include a
” nominal consideration in money “. The Land Charges Act 1925 contains
no definition of ” valuable consideration “, so it is said to be necessary to
have resort to the Law of Property Act definition: thus ” nominal
consideration in money ” is excluded. An indication that this is intended
is said to be provided by section 199(l)(i). I cannot accept this. The
fallacy lies in supposing that the Acts—either of them—set out to define
” valuable consideration “; they do not: they define ” purchaser “, and
they define the word differently (see the first part of the argument).
” Valuable consideration” requires no definition: it is an expression
denoting an advantage conferred or detriment suffered. What each Act
does is, for its own purposes, to exclude some things from this general
expression: the Law of Property Act includes marriage but not a nominal
sum in money; the Land Charges Act excludes marriage but allows ” money
” or money’s worth “. There is no coincidence between these two; no link
6
by reference or necessary logic between them. Section 199(l)(i) by
referring to the Land Charges Act 1925, necessarily incorporates—for the
purposes of this provision—the definition of ” purchaser ” in the latter
Act—for it is only against such a ” purchaser ” that an instrument is void
under that Act. It cannot be read as incorporating the Law of Property
Act definition into the Land Charges Act. As I have pointed out the
Land Charges legislation has contained its own definition since 1888,
carried through, with the addition of the reference to ” money or money’s
” worth ” into 1925. To exclude a nominal sum of money from section
13(2) of the Land Charges Act would be to rewrite the section.
This conclusion makes it unnecessary to determine whether £500 is a
nominal sum of money or not. But I must say that for my part I should
have great difficulty in so holding. ” Nominal consideration” and a
” nominal sum ” in the law appear to me, as terms of art, to refer to a
sum or consideration which can be mentioned as consideration but is not
necessarily paid. To equate ” nominal ” with ” inadequate ” or even
” grossly inadequate” would embark the law upon enquiries which I
cannot think were contemplated by Parliament.
I would allow the appeal.
Lord Edmund-Davies
my lords,
For the reasons indicated in the speech of my noble and learned friend.
Lord Wilberforce, which I have had the advantage of reading in draft, I
would allow this appeal.
Lord Fraser of Tullybelton
my lords,
I have had the advantage of reading in draft the speech of my noble
and learned friend, Lord Wilberforce. I agree with it, and for the reasons
that he gives, I too would allow this appeal.
Lord Russell of Killowen
my lords,
I entirely concur in the reasoning of my noble and learned friend, Lord
Wilberforce, and cannot usefully add to it. Accordingly I agree that this
appeal must be allowed.
Lord Bridge of Harwich
my lords,
I have had the advantage of reading in draft the speech of my noble
and learned friend, Lord Wilberforce. I agree with it and for the reasons
he gives I too would allow the appeal.
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