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First National Bank plc v Thompson

[1996] Ch 231, [1996] 1 All ER 140, [1996] 2 WLR 293, 72 P & CR 118, [1995] 32 LS Gaz R 30, 139 Sol Jo LB 189

Court: CA

Judgment Date: 12/07/1995

Cases considered by this case
Annotations: All CasesCourt: ALL COURTS

ESTOPPEL - ESTOPPEL BY DEED - OPERATION OF DEEDS BY ESTOPPEL - ESTATES BY ESTOPPEL - WHEN GRANTOR HAS NO TITLE - OPERATION OF RULE - MORTGAGEE APPLYING TO REGISTER CHARGE - WHETHER LEGAL MORTGAGE CREATED BY ESTOPPEL - WHETHER DOCTRINE OF FEEDING THE ESTOPPEL APPLICABLE TO CREATION OF LEGAL CHARGE OF REGISTERED LAND

On 10 July 1991 T and M executed a legal charge by which they purported to charge a registered property by way of legal mortgage to the plaintiff bank to secure their indebtedness. The charge contained no recital or other representation of their title. At the time of its execution neither T nor M was the registered proprietor of the property or entitled to be registered as proprietor, although T claimed to be entitled to a beneficial interest in a half share of the property and had agreed in principle with the sole registered proprietor to buy his interest therein. On 12 September 1991 the legal estate in the property was transferred to T, who was duly registered as proprietor on 9 December 1991. In July 1992 the bank delivered the legal charge to the Land Registry and applied for it to be registered. T objected to the registration, contending that the charge was ineffective since under ss 25 and 37 of the Land Registration Act 1925 only the registered proprietor or a person entitled to be registered as proprietor could create a charge over registered land, and as at 10 July 1991 he had been neither. The bank brought proceedings against T and applied for summary judgment, claiming a declaration that the legal charge should be registered and an order restraining T from objecting to such registration. The bank contended that although T had not been in a position to create a legal charge on 10 July 1991, he had created a legal mortgage by estoppel and when he afterwards obtained the legal title by registration the estoppel was "fed" and the bank thereby became entitled to register the legal charge. The judge dismissed the bank's application for summary judgment, ruling that the bank was not entitled to have its existing charge registered because the doctrine of feeding the estoppel had no application in the absence of a clear and unambiguous recital in the charge that the grantor was seised of the legal estate. The bank appealed. T contended that the doctrine of feeding the estoppel did not apply to registered land since the provision in the 1925 Act that a charge over registered land could only be created by a person who was at the time of creation the registered proprietor or person entitled as such precluded its creation by a person who was neither at the time but became registered subsequently: Held the appeal would be allowed and summary judgment entered for the bank for the following reasons-(1) The doctrine of feeding the estoppel applied both to estoppel by representation at common law and to the more widely based estoppel by deed, which did not depend on the presence of any recital or other express representation of title by the grantor and was the product of the fundamental principle of the common law which precluded a grantor of a legal estate from denying that he had legal title at the time of the grant. The doctrine therefore operated without the need for a clear and unambiguous recital of seisin in the grantor. Assuming that the doctrine of feeding the estoppel applied to the creation of a legal charge of registered land, the bank would have acquired a legal mortgage by estoppel on 10 July 1991 binding on T and M and a legal mortgage in interest when T later fed the estoppel by acquiring the legal estate, and although in the absence of a recital or other representation in the legal charge the bank's security would not prevail against a bona fide purchaser of the legal estate from T without notice of the charge, neither T nor M could challenge the validity or effect of the charge or object to its registration.

(2) Sections 25 and 37 of the 1925 Act, in empowering the proprietor of registered land to charge the land provided (i) he was the registered proprietor or entitled to be registered as such and (ii) executed an appropriate instrument of charge, did not stipulate that those requirements were to be carried out in any particular order. It followed that there was nothing in the 1925 Act or the rules made thereunder which would preclude the doctrine of feeding the estoppel, under which the order in which the two conditions of title and execution were satisfied was immaterial, from applying to the creation of a legal charge of registered land. Accordingly, if a person executed an appropriate instrument of charge when he was neither the registered proprietor nor entitled to be registered as proprietor, he brought a registrable charge into being as soon as he afterwards became entitled to be registered as proprietor, and there was no need for him to execute a fresh instrument in order to do so.