Abbey National Building Society v Cann [1990] UKHL 3; [1991] 1 AC 56
House of Lords — mortgage-funded purchases — actual occupation — overriding interests
What the case decided
The House of Lords dismissed an appeal against a building society’s claim to possession. A purchase funded by a mortgage and the grant of that mortgage formed one indivisible transaction: the purchaser never acquired the property free of the lender’s security. A family member’s interest derived from that purchaser could not obtain priority by being inserted into an imagined interval between the two steps.
The court also decided that actual occupation under section 70(1)(g) of the Land Registration Act 1925 had to exist at completion of the relevant transaction. Moving furniture and laying carpets shortly beforehand were, on these facts, preparatory acts rather than actual occupation.
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Facts and proceedings
Daisy Cann had lived in a succession of homes acquired with the involvement of her son, George. The first purchase had benefited from her position as a protected sitting tenant, and George had assured her that she would always have a home. She had a beneficial interest in the property they occupied before the transaction in dispute.
In 1984, George arranged to sell that property and buy a smaller leasehold home at 7 Hillview, Mitcham, for £34,000. The purchase was in his name alone. Abbey National agreed to lend £25,000 on the security of the property after George represented that he would be its sole occupier. Both sale and purchase completed on 13 August 1984. George’s title and the society’s charge were registered on 13 September.
Mrs Cann was abroad on holiday on completion day. George and Abraham Cann, whom she later married, brought her furniture to the new home. When the vendor left at about 11.45 am, carpet-layers entered and unloading began. Completion occurred at or shortly after 12.20 pm. The relevant interval was therefore about 35 minutes; Mrs Cann herself did not move in during it.
After George defaulted, Abbey National sought possession. Mrs Cann and Abraham resisted, claiming that an equitable interest protected by actual occupation took priority over the mortgage. The county court and Court of Appeal rejected their defence, and they appealed to the House of Lords.
The purchase and mortgage were inseparable
Mrs Cann’s argument depended on treating George as acquiring the property, however briefly, free of the mortgage before granting the society its charge. Her interest could then attach during that interval and claim priority.
The House rejected this supposed scintilla temporis, or momentary gap. The lender supplied the funds on terms that it would receive security over the property, and the purchase depended on that advance. Looking at the transaction as a whole, George acquired only an interest already subject to the mortgage. Mrs Cann could derive no greater interest from him.
Lords Oliver and Jauncey rejected the contrary reasoning in Church of England Building Society v Piskor [1954] Ch 553 and followed the approach in Re Connolly Brothers Ltd (No 2) [1912] 2 Ch 25. The point was the relationship between this purchase and its financing, rather than a general rule that a mortgage always defeats an occupier’s existing rights.
When actual occupation had to exist
Occupation at the later registration date was insufficient. A lender or purchaser could inspect and make enquiries before committing the money at completion; entry into occupation afterwards could not retrospectively create protection against that transaction.
The judges agreed on this answer for section 70(1)(g), although they discussed different approaches to the Act’s wider provisions on overriding interests. The decision should therefore not be reduced to a statement that completion was necessarily the decisive date for every type of overriding interest.
Actual occupation also did not itself create a proprietary right or enlarge one. It could protect an existing right within the statutory scheme, but could not turn an interest already subject to the mortgage into a superior interest.
Why the activities before completion were insufficient
Lord Oliver accepted the trial judge’s finding that unloading furniture and fitting carpets were preparations for later residential occupation. Actual occupation required some permanence and continuity; these acts, permitted by the vendor shortly before completion, did not establish it.
Mrs Cann’s personal absence was not treated as automatically fatal. Lord Oliver recognised that occupation might be exercised through another person, such as a caretaker. The difficulty was the preparatory character of what was happening at this property.
Outcome
The appeal was unanimously dismissed, leaving the possession order in place. Lord Oliver also accepted the Court of Appeal’s additional reasoning that Mrs Cann had authorised George to obtain mortgage finance, without communicating any limit on that authority to the lender. She could not therefore defeat the society’s security by complaining that he borrowed more than she had contemplated. Lord Jauncey considered the inseparable purchase-and-mortgage analysis sufficient without deciding her awareness of the borrowing.
