Despite Augusta not being party to any valid express declaration of trust1, she may establish a beneficial interest by proving a constructive or resulting trust. 2 By contributing her savings of £25,000, Augusta has acquired an equitable interest in ‘Old House’, which is registered under the name of Wilson. The fact that another person, Augusta, has established an equitable interest means that in equity the property is co-owned. Thus, a trust of land is in existence where Wilson holds ‘Old House’ on trust for himself and Augusta in equity3; there is one trustee of the land and two co-owners in equity.
Therefore, as Wilson is the only trustee, Savequick Bank cannot rely on overreaching to give them priority over any equitable owners, with the bank being bound by Augusta’s equitable interest according to the rules of registered land (to be discussed later), which the bank might have not discovered due to its informal nature. As stated before, no express trust exists although the facts in question seem able to fit into the requirements of both a resulting and constructive trust.
By contributing to the purchase price of ‘Old House’, Augusta can claim an equitable interest in Wilson’s property, despite her name not being registered alongside his. This resulting trust arises from the ‘common intention’ of Wilson and Augusta that she should have an interest in the property through part provision of the purchase price. 4 This is further re-inforced as the contribution was made for acquisition not repairing of property,5 and as they moved into the property together on 2nd February 1996, there was a common intention for joint ownership. Augusta’s financial contribution were not simply used in running of the household,7 but actually enabled Wilson to purchase the property, giving rise to her direct interest in the property. Consequently, despite Augusta having contributed less to the purchase price, the conduct of the two persons and their true intentions means that her share can be expanded into a larger, perhaps fifty percent, share. 8 Yet, a resulting trust might not exist if it can be established that the money was given to Wilson by way of gift or loan.
Wilson may have given an assurance10 to Augusta that she had a share in the property, and if she relies11 on this to her detriment12 (spending her life savings), Wilson cannot deny the interest promised. 13 Hence, Augusta can be the beneficiary of a constructive trust, and be entitled to an equitable interest in ‘Old House’, with her interest equivalent to what she had been promised and deprived of. It can be presumed that, with all her life-savings invested, she was offered a ‘home for life’, which should generate a fifty percent share, despite her contribution to the purchase price being less than his. 4 The above analysis provides that Augusta may claim an interest in the property belonging to Wilson through either a resulting or constructive trust, notwithstanding the differences between the two in regards to payments and promises, due to the common intention between the two persons. The equitable interest established by either of the two trusts highlights that Wilson and Augusta’s co-ownership in equity takes the form of a tenancy in common.
This is because one of the four unities15 of a joint tenancy is lacking, for example in this scenario there is no unity of interest; Augusta’s equitable interest was of a lesser extent in relation to money paid. With the basic principle that a purchaser takes the land subject16 to any existing, even undiscoverable,17 overriding interests,18 Augusta may have what constitutes a overriding interest even if does not appear on the register as a registrable interest or a minor interest. 9 Augusta’s factual situation is capable of being an overriding interest under her right of actual occupation (2nd February 1996-7th February and 15 March 1996 onwards) of the land,20 consequently giving her a proprietary right binding automatically on the land.
Thus, Savequick bank after lending money to the registered proprietor Wilson by way of mortgage, the proprietary rights of Augusta in actual occupation of the land affects the bank through overriding interest. She has a equitable proprietary right21 in the land, as opposed to any inherently personal right,22 where legal title is vested in another. 3 From the facts provided, it can be presumed that Augusta’s proprietary right was not substantively registered elsewhere under the land registration system and not excluded as a overriding interest by other statutes, thus this proprietary right is an overriding interest.
However, Savequick bank will argue Augusta was not in ‘actual occupation’ of the land at the time the mortgage from the bank was executed,25 her occupation of the land was, for a period of time, temporary and there was no “degree of permanence and continuity which would rule out mere fleeting presence”. 6 Augusta might not be able to reprieve herself with the fact that Wilson, as her agent on the relevant land, gave her the necessary measure of occupation, this has been previously shown in regards to the presence of builders27, a relative28 and a child29 at the request of the right holder. Also, there exists a certain implied consent to the mortgage, as this is what Augusta founded her beneficial occupation on, this ceded priority to the bank. The fact of occupation does not improve any interest upon which it based, Augusta cannot claim against the bank which enabled her and Wilson to acquire the property,31 she would have had a overriding interest if a prior beneficial interest existed.
On the other hand, actual occupation is a question of fact in each case,32 Augusta was absent through illness, a circumstance different to the facts in cases mentioned previously and she had moved into the house five days beforehand with her belongings; indicating new residence and actual occupation. Thus, the temporary absence of Augusta from ‘Old House’, with the intention of returning permanently, does not detract from the existence of the overriding interest once it has been established,33 and there is no need to occupy the property forever. 4 Despite the undiscoverable nature of the interest, even through physical inspection, the bank will still be bound by that interest35 as “going into hospital… no more changes occupation than going on holiday”,36 leaving the bank to obtain a consent from Augusta to the proposed mortgage. 37 Consequently, Augusta did not deny the existence of her right due to the bank not even inquiring about her or asking the correct person,38 with the result that her overriding interest remains valid.
She did not waive voluntarily, or imply by conduct,39 the priority given to her by expressly consenting to the mortgage of the land over which the right exists. The requirement is one of Augusta’s consent, which the facts do not portray, to the mortgage, not simple knowledge of it40 (which was more than likely the case). Her consent was not implied beyond doubt, and she will not lose her interest even if she knew the legal owner was about to mortgage. 1 Thus, in addition to not fully investigating at all if there was another occupier of the house, Savequick bank could have taken the precaution and protection of an express consent form, so Augusta could waive her rights in favour of the bank.
Augusta could also have a minor interest, which comprise of the equitable rights of a person other than the owner. 43 Although the basic principle is that Augusta’s rights should be registered (which the facts do not show) against the land in order to bind Savequick bank, an unregistered minor interest may qualify as an overriding interest. 4 Thus, Augusta’s particular equitable interest could be registered as a minor interest, but will bind the bank as an overriding interest because she was in actual occupation of the land.
Yet, Augusta’s equitable rights might be ‘overreached’ through ‘statutory magic’,45 and are transferred to the order of sale and will no longer bind the bank, a fact true even if the rights fit into the overriding interests or minor interests group. 6 Augusta’s equitable rights exist behind either a resulting or constructive trust through the formation of co-owned land with Wilson; hence, these rights can be overreached because they have a readily identifiable monetary value. 47 However, two criteria must be fulfilled before Savequick bank can claim appliance to the overreaching process. Firstly, the concept can only come into play in certain and defined48 circumstances, the situation of equitable co-ownership rights behind a trust of land,49 such as the one which exists between Augusta and Wilson, is one which is defined and this concept can be applied to.
Secondly, it is a statutory requirement that both Wilson and Augusta, with two trustees the minimum needed,50 constitute in the overreaching transaction with the bank. This would have had the effect of overreaching Augusta’s equitable rights in the execution of the mortgage for funds, with Savequick bank’s interest having priority over that of hers; the result is if the land was to be sold, the bank would be paid first.
It is assumed that overreaching occurs when the monies advanced by the mortgage are actually paid to the two trustees,51 with the objective that Augusta takes a share of the money in compensation for the loss of her right to the land. Yet, it can be argued that in fact Augusta was not one of the trustees to the transaction, with the bank as she was in hospital and is not a legal owner (two are required)52. Consequently, Wilson acted alone as the sole trustee and did not fulfill the statutory requirement for two trustees to be involved in the contract in question.
It has been decided that if money is payable on the transaction, it must be paid by the two trustees, but even if it is not payable overreaching will operate due to the successful execution of the mortgage. 53 However, Augusta must have realized that a mortgage was required to purchase the property, she had only contributed £25,000 and, despite Wilson’s good occupation, the rest of the money required was a high sum and hence had to be borrowed from elsewhere.
That Augusta came back and lived in the house after the transaction completed highlights that although she was not physically around at the time of the transaction, she would have agreed to it if she were present. This was the only method of purchasing the property, and it can be assumed this was previously agreed upon between the two persons, thus, the overreaching would be justified in principle because Augusta’s equitable interests took effect in the money paid through the mortgage in benefit of both trustees.
In addition, the transaction in question seems indicative of a operation of strict settlement,54 a device where land will be given to Wilson for life, thence to Augusta. The ‘trustees of settlement’ is Wilson alone, who has the power to deal with the land in an overreaching manner (as has occurred) to take Augusta’s interests into the transaction. This argument cannot be totally defeated by the notion that the inability to create new strict settlements after 31st December 199655 would make them increasingly rare, this is because the transaction came into existence before this restriction came into force.
Moreover, overreaching is possible, as the transaction was a made by a mortgage and also if made under order of the court56; the proceedings have just begun, but if it should be directed that the land should be sold, this effects an overreaching transaction for the benefit of the bank. Hence, overreaching can occur if these conditions are present and satisfied, yet Augusta’s equitable interests are still intact and able to bind the bank as a result of a failure to pay the mortgage money to two trustees, as required by most overreaching transactions. 7 Consequently, there is a failure to overreach, and as Augusta’s right falls into the category of overriding interests (actual occupation) or even unregistered minor interests, the bank will be bound by the right and restricted accordingly. Augusta remains entitled to use the land, although the bank could have the land sold,58 the courts are unlikely to order such a sale as she the equitable owner has priority and this is only done in exceptional cases. 9 Also, her prior consent, as required of the equitable owner,60 was not sought and produced and consequently the transaction ‘may not be exercised without that consent’. 61 In conclusion, overreaching does not occur, as there is only one trustee (legal owner) of the property,62 caused by someone else, Augusta, gaining an equitable interest in the property63 after it had been conveyed unto Wilson’s name; a trust of land arises,64 despite there being only one legal owner.
The money lent on the property was given to one trustee only, so the bank cannot rely on overreaching to protect itself from Augusta’s equitable rights, and the normal rules of registered lend takeover. Although Augusta was not literally in actual occupation of the property at the time of the mortgage,65 the continuing presence of her personal property (after moving in and living there for five days) and her continuing intention to occupy is sufficient to constitute actual occupation for the purposes of the s. 0 (1) (g) LRA 1925. 66 Also, although one might assume that Augusta implied to consent to the mortgage,67 without which purchase of the property would have been difficult, the onus remained on the bank to inquire into any other occupiers of the property and receive their consent. Simple knowledge of a proposed mortgage is not enough,68 there was no active participation or acting in relation to the transaction by Augusta; no express or implied consent at all.
Thus, the above analysis leads me to conclude that Augusta still has an equitable interest which binds the bank, so any further action by them can be responded to by the petition of breach of trust, through personal action or tracing claim. However, it must be noted, taking into consideration the previous cases assessed above, that any successful action relies upon the interpretation given to actual occupation and consent; a generous approach will certainly guarantee a successful claim, as opposed to a literal approach.