The Gazette 1985

GAZETTE

APRIL 1985

the Boland decision in support of the argument that the Bank's claim was postponed to that of the wife. In holding that at the date of the equitable mortgage the wife had in fact no interest in the lease and that the Bank's claim therefore had priority, Barrington J. opined that the Boland decision turned on the fact that the property in dispute was the matrimonial home. He, however, was dealing with a commercial property and with the wife in her capacity as a trader. In his view the social considerations stressed in Boland had no application, and it was in the interests of traders in general and of the wife herself that she be treated like any other trader in the market. These remarks — strictly obiter — are, with respect, erroneous. The Boland decision was not so limited. Lord Wilberforce and Ormrod L.J. were at pains to make it clear that the law involved was property law and not matrimonial law. Moreover, Lord Denning pointed out that two partners in a business can be in actual occupation. The better view would seem to be that no distinction can be drawn between matrimonial property and commercial property in this context. Unregistered Land The question whether a purchaser or mortgagee of unregistered land will take subject to beneficial interests under undisclosed trusts depends on whether he has notice (actual, imputed or constructive) of such interests. Section 3(1) of the Conveyancing Act, 1882 provides that a purchaser (which includes a mortgagee) is affected by notice of matters which he would have discovered by reasonable inquiries and inspections or which his solicitor would have discovered in the same way. What are reasonable inquiries and inspections must depend on the circumstances of the individual case. However, it is clear, as Wylie points out, that they encompass two matters: inspection of the property and an investigation of the title. As a purchaser has always been under a duty to inspect the property, he will be put on notice of an occupier's rights by the latter's occupation. If he does not inspect the property, he will be deemed to have constructive notice of such rights as he would have discovered if he had done so. This occupational aspect of the doctrine of constructive notice is the rule in Hunt -v- Luck 26 . The question is whether that rule operates to give notice of an occupier's rights when the vendor is also in occupation. Dicta in the older cases seemed to indicate that it did not. More recently in Caunce -v- Caunce 27 it was held that a wife's occupation of the matrimonial home was insufficient to put a mortgagee bank on notice of her equitable interest. "She was there," said Stamp J., "ostensibly because she was the husband's wife and her presence there was wholly consistent with the title offered by the husband to the Bank." He went on to lay down the proposition that "where the vendor or mortgagor is himself in possession and occupation of the property, the purchaser or mortgagee is not affected with notice of the equitable interests of any other person who may be resident there, and whose presence is wholly consistent with the title offered . . . The reason is that the vendor being in possession, the presence of his wife or guest or lodger implies nothing to negative the title offered." Since Boland. it is extremely doubtful whether this represents the correct view of the law. In Hodgson -v- Marks Russell L.J. found the proposition unacceptable. In Boland, Lord Wilberforce agreed and stated that the occupation of the vendor did not exclude the possibility of

occupation by others. Lord Scarman doubted whether Caunce was correctly decided. The clear implication of Boland is that, even if the vendor is in occupation of the unregistered land, the rights of other occupiers must be considered. The decision is "of general importance as showing clearly that in the context of investigation of title, more than one person can be in occupation of land at any given time and a prospective purchaser or mortgagee must act accordingly." 28 This is also the position in Ireland since Northern Bank -v- Henry. In that case the Bank was fixed with constructive notice of a wife's claim to an interest in the family home. The Bank had taken a second charge on the property from the husband (the legal owner) to secure overdraft indebtedness. Although it knew that the property was a family home and that the husband no longer resided there, the Bank made only a negative search in the Registry of Deeds against him. As it trans- pired, the husband did not have title to the property. If the Bank had raised proper requisitions when taking its security, it would have discovered not only that the wife was in occupation, but that a claim by her to the ownership of the house was imminent. Not surprisingly, the Supreme Court held that the Bank had notice of her claim and was therefore postponed to it. The Supreme Court emphasised that the test of what inquiries and inspections ought reasonably to be made was to be judged from the standpoint of the reasonable purchaser — by what an ordinary purchaser, given competent legal advice, would reasonably inquire about or inspect in order to get a good title. Henchy J. defined the reasonable purchaser as "one who not only consults his own needs or preferences but has regard to whether the purchase may prejudicially and unfairly affect the rights of their parties in the property". He is expected to make such inquiries and inspections as will "normally disclose whether the purchase will fraudulently or unconsionably trench on the rights of such third parties." The Henry case sounds a clear warning to purchasers, mortgagees and their solicitors that they cannot simply accept the vendor's title deeds at face value but must advert to and investigate the possibility of rights existing in others. If they do not, they cannot claim the immunity which the statute affords the reasonable purchaser. Suggested Precautions So what is the conscientious purchaser or lender to do in order to get a good title or an indefeasible security? It is clear that there must be a reassessment of traditional practices and procedures. For registered land, the usual practice in the past has been to obtain at closing a statutory declaration sworn by the vendor as to the existence or non-existence of s.72 burdens. 29 This can no longer be considered adequate to obviate possible equitable interests supported by actual occupation. Inquiry of the vendor is not enough. If a purchaser makes inquiries only of the legal owner and is incorrectly informed that no one else is in occupation or has rights, the purchaser will nevertheless be bound by the occupier's rights because he has not addressed his inquries to the occupier as required by the proviso to s.72(l)(j). J0 The main difficulty for purchasers and lenders is how to discover who actually is in occupation of a particular property. An inspection of the property would seem to be called for. In the Henry case, Kenny J. stated that a mortgagee was not bound to inspect the property over 63