Re Rayleigh Weir Stadium

[1954] 2 All ER 283

(Judgment by: Harman J)

Re Rayleigh Weir Stadium

Chancery Division

Judge: Harman J

Hearing date: 18, 19, 23 February 1954
Judgment date: 23 February 1954

Judgment by:
Harman J

Harman J stated the facts and continued. The document which the respondent, Randall, described either as an estate contract or a general equitable charge and which he mislaid was in fact, so he says, a receipt. What was the form of receipt he modestly declines to say. He avers moreover that he put it in a drawer immediately after he received it and has not been able to find it. He is not quite sure whether he ever saw it again, but he says that a search for it has produced no result. Consequently, the instrument said to constitute the document of charge is not forthcoming. It is said, and, fortunately, no doubt, it is so, that on a summons of this kind to vacate the register the question whether or not there ever was such a document is not one which I can determine. I think I must proceed with this application on the footing that the respondent did, as he says, pay to McGreavey and Rundle £5,000 each. On his examination in the bankruptcy proceedings, he produced two cheques, one of which went to McGreavey and one to Rundle, drawn on the respondent's clients' account, being moneys on which he was, apparently, entitled to draw and which cheques he drew in his own favour and indorsed severally. What was in the receipt remains a mystery. As far as I can tell, it was not a contract. It may have been a memorandum of a contract and it may have contained the terms of a contract, but its operative effect, according to the respondent, was to go beyond that of a receipt. It is extraordinary that a solicitor of experience, as the respondent was, should pay the whole of his purchase money and have no scrap of paper to show for it, or, indeed, that he should pay the whole of the purchase money and have nothing but a receipt. The applicant, the trustee in bankruptcy, has claimed that in fact what the respondent did was to enter into partnership with McGreavey and Rundle to the tune of £10,000 for an eighth share. But the respondent denies that and says that, although he bought one-eighth of the assets, he certainly did not buy one-eighth of the liabilities. That, too, is not a matter which I can determine.

I have to decide whether this alleged receipt, or the contract evidenced by this receipt, is capable of registration under the Land Charges Act, 1925. Section 10(1) provides:

"The following classes of charges on, or obligations affecting, land may be registered as land charges in the register of land charges, namely ... ";

So that it must be a charge on land. In the definition section, s 20(6), "land" does not include "an undivided share in land". So, by definition, if this be only a charge on an undivided share in land, it cannot be registered under the Act. The respondent's first thoughts were to register in Class C (iv) where the following is defined as an "estate contract":

"Any contract by an estate owner ... to convey or create a legal estate ... (in this Act referred to as 'an estate contract')."

McGreavey was, undoubtedly, "an estate owner", though Rundle was not. The question, therefore, is whether there was a contract by McGreavey to create a legal estate. In Class C (iii), which was the second category on which the respondent relied, a general equitable charge is thus described:

"Any other equitable charge [other than a charge under C (ii)] which is not secured by a deposit of documents relating to the legal estate affected and does not arise or affect an interest arising under a trust for sale or a settlement and is not included in any other class of land charge ... "

Therefore, in order to come under Class C (iii) the instrument has first to constitute an equitable charge, and, secondly, it has to be an equitable charge not affecting an interest arising under a trust for sale.

What was the position on 11 October 1948? McGreavey, who had been the absolute owner of this land, had taken Rundle into partnership. He then became obliged to hold the property which constituted partnership property on trust for himself and Rundle in equal shares. He retained the legal estate, but he could have been obliged by Rundle to sell it and divide the proceeds equally between them. Rundle could not have obliged him to convey to him a half share in the land itself. That emerges, first, from the Law of Property Act, 1925, s 1(6), which provides:

"A legal estate is not capable of subsisting or of being created in an undivided share in land ... "

Section 34(1) is to the same effect and provides:

"An undivided share in land shall not be capable of being created except as provided by the Settled Land Act, 1925, or as hereinafter mentioned".

When I turn to s 42(6) of the Law of Property Act, 1925, I find this rather oracular statement:

"Any contract to convey an undivided share in land ... shall be deemed to be sufficiently complied with by the conveyance of a corresponding share in the proceeds of sale of the land in like manner as if the contract had been to convey that corresponding share".

McGreavey's obligation to Rundle, therefore, could have been carried out by the conveyance of a share in the proceeds of sale. Accordingly, McGreavey, in my view, held the land on trust for sale although the trust for sale did not appear in the title, and, no doubt, he could have made a good title at that time without showing it if Rundle did not choose to object or to register his interest.

That being the position, what was it that the respondent received for his two sums of £5,000? From Rundle he could receive no more than Rundle could give him, viz, one-eighth of Rundle's interest in the partnership assets. That was clearly an interest in the proceeds of sale and nothing else. Indeed, even if Rundle had expressly contracted to give him an undivided share in land, a conveyance of a corresponding share in the proceeds of sale would, by virtue of s 42(6), have satisfied the contract. On the other hand, what did McGreavey convey or agree to give to Randall, if anything? He agreed to give him one-eighth share of his interest in the land and the chattels. His interest in the land, in my view, having regard to his obligations vis-a-vis Rundle, was clearly only an interest in the proceeds of sale. Therefore, I think that the respondent received by this payment, at the highest, a contract to convey or to assign to him a share in the proceeds of sale of the land. Looking, therefore, at Class C (iv), which relates to estate contracts, I do not think that this was a contract (if it were a contract at all) by McGreavey to convey or create a legal estate.

Leading counsel for the respondent argued that McGreavey was bound to create a legal estate, not in Randall, but in himself and his partner in order to implement the trust for sale, and he referred me to Turley v Mackay in support of the proposition that a legal estate to be conveyed or created in conformity with Class C (iv) need not be created in favour of the obligee. I accept that, but I do not see that McGreavey was under any necessity of creating a legal estate. It seems to me the trust for sale existed while the property was in his hands. It is true that, if somebody wanted him to execute the trust, it would be necessary for him to appoint a trust corporation to be trustee, or to appoint another person to give a good receipt to the purchaser, but that is merely a matter of machinery, and it does not seem to me that there was a contract to convey or create a legal estate as envisaged by Class C (iv). In my judgment, therefore, this was not a contract (assuming there was such a thing) which could be registered under Class C (iv).

Turning now to Class C (iii), counsel says, first, that the respondent, having paid his purchase money and not having a conveyance, is entitled to a general equitable charge on the land, and he cites for that Rose v Watson. There Lord Cranworth, in concurring in Lord Westbury's opinion, says (10 HL Cas 683):

"There can be no doubt, I apprehend, that when a purchaser has paid his purchase-money, though he has got no conveyance, the vendor becomes a trustee for him of the legal estate, and he is, in equity, considered as the owner of the estate. When, instead of paying the whole of his purchase-money, he pays a part of it, it would seem to follow, as a necessary corollary, that, to the extent to which he has paid his purchase-money, to that extent the vendor is a trustee for him; in other words, that he acquires a lien, exactly in the same way as if upon the payment of part of the purchase-money the vendor had executed a mortgage to him of the estate to that extent".

Now, says leading counsel for the respondent, payment of part of the purchase money for the whole gives a lien. So, also, does payment of the whole of the purchase money for a part. It is a neat way of turning the thing upside down, but, in my judgment, it does not help him because, in order to come within Class C (iii), he must have a charge which does not affect an interest arising under a trust for sale. In my judgment, that is precisely what this charge does. The interest of both McGreavey and Rundle was an interest arising under a trust for sale, and it is precisely that which is excluded from Class C (iii) in s 10(1). The respondent, if he received anything, received a charge, I suppose a general equitable charge, on the proceeds of sale of this partnership property. Whether he became a partner or not does not seem to me to matter for that purpose. Therefore, I take the view that, assuming the respondent to have all that he says he has, and notwithstanding the fog in which the facts remain concealed, I cannot find that on the facts stated he could have any such interest in this land as entitled him to register a charge against it, and I, accordingly, propose to make an order vacating the registration in both classes.

Declaration accordingly.

Solicitors: Zeffertt, Heard & Morley Lawson agents for Heard & Coleman, Hadleigh, Essex (for the applicant); E C Randall (for the respondent).
Miss Philippa Price Barrister.