Экзамен зачет учебный год 2023 / Sparkes, A New Land Law

2.Restrictions with and without the consent of the proprietor

[14.33] Since 1996203 restrictions entered with consent of the registered proprietor have been differentiated from those without his consent, a scheme which is now continued but has been explained in the context of trusts of land.204

3.Corporate and other special landowners

[14.34] Optional restrictions are used to denote landowners with limited powers under special statutory regimes.205 Companies can of course be registered. If they are registered under the Companies Act 1985 the register must state the company’s registered number.206 Corporations limited by charter have powers which depend upon its charter and the register must record by restriction any limit on its powers of dealing with its land.207 In the case of a dealing by a non-registered company it will be necessary to produce evidence that the transaction is within its powers.208

Restrictions are also needed with partnerships, limited liability partnerships,209 and clubs. Specialised restrictions are used for building societies, development corporations, ecclesiastical landowners, – especially Church of England incumbents210 – European bodies, housing associations, liquidators, the National Trust and many others.211

J.INSOLVENCY

[14.35] Insolvency of an individual leads to his bankruptcy. If a company becomes insolvent it will be put into liquidation. In each case all property is removed from the insolvent and applied for the benefit of the creditors. The person who looks after the interests of the creditors is either a trustee in bankruptcy of an individual or a liquidator if it is corporate. The use of restrictions to record the process of the insolvency is considered elsewhere,212 as are the rare exceptional cases in which insolvency cause an estate in freehold land to terminate.213

203LRR 1996, SI 1996/2975.

204LRA 2002 ss 42–43; see above [13.34].

205DLRR 2003 rr 95–96.

206R 181.

207Law Com 271 (2001), [6.40], EN [196–202].

208DLRR 2003 r 183.

209Limited Liability Partnership Act 2000; SI 2000/1090; M Rodrigues [2001] 12 EG 219; [2001] 16 LSG 37 (LR guidance); SI 2002/2539 sch 1 para 10; DLRR 2003 r 181(4).

210DLRR 2003 rr 174–175.

211Encyclopaedia FP (5th ed, 1999 reissue) vol 25 (1), [3599–3643].

212See below [28.51].

213See above [3.46ff].

K. ORDINARY POWERS OF ATTORNEY

[14.36] A trust vests management power in a trustee whilst separating the rights of enjoyment in the beneficiaries. Management control can also be passed by a landowner to an outside person by a power of attorney, the difference being that legal and equitable ownership is retained in the hands of the landowner – he has merely ceded the right to deal. The power of attorney passes to the donee (the attorney) the ability to deal with the property belonging to and vested in the donor. The attorney does not have the duties of a trustee, but he is a fiduciary, that is he is obliged to act in the interests of the donor.

1.Ordinary powers

[14.37] Any property owner can give an attorney a mandate to carry out transactions with his land. What transactions are covered depends upon the wording but most are general powers putting the attorney in the same position as the donor.214 The attorney usually executes a sale in his own name acting by the authority of the landowner, but he may also sign using the donor’s name.215 Authority for the attorney to act continues only so long as the person creating the power (the donor) has capacity, so that it will be revoked by death, bankruptcy or loss of mental competence, or by a change of mind. This is a trap for the attorney, for whom protection is provided,216 and even more so for buyers.217

2.Irrevocable powers of attorney

[14.38] Powers are irrevocable when given to secure a proprietary interest of the attorney or an obligation owed to him. Almost always this means that the donor of the power is a borrower who has mortgaged his land to the donee of the power (the lender) who has been given a power of attorney permitting him to sell the land if the borrower defaults in repaying the loan. Such a power in an equitable mortgage cannot be revoked by the borrower so that death, mental incapacity or bankruptcy become irrelevant.218 A purchaser’s title is safe unless he knows that the power was not in fact given as security for a property interest.

L. ENDURING POWERS OF ATTORNEY

[14.39] Lack of mental capacity will remove a property owner’s ability to deal with his property and will also revoke any ordinary power of attorney he has created.219

214PAA 1971 s 10, sch; SI 2000/215 (Welsh forms). Delegation of the functions of trustees or personal representatives is a specialised topic calling for extended treatment below [14.44ff].

215S 7.

216S 5.

217See below [14.50ff].

218S 4.

219Drew v. Nunn (1879) 4 QBD 661, CA.

Senility often creeps in as a person ages, and considerable expense and embarrassment is involved in formal application to the Court of Protection for appointment of a receiver.220 Enduring powers of attorney221 avoid this problem by providing an inexpensive method of selecting in advance a person to look after an elderly person’s property if, unfortunately, he loses grip.222

1.Capacity

[14.40] The object of an enduring power is to confer management powers on the attorney in the event of loss of capacity, but this delegation can only be made at a time that the donor of the power is mentally capable. It is often appropriate to take this action during a lucid interval after the first signs of mental instability have manifested themselves.223 It is wise to have a doctor present at the execution of the document. According to Hoffmann J224 the donor must be able to understand that the attorney could assume complete control of his affairs if he becomes incapable, with power to do anything which he (the donor) could have done, and that the delegation is irrevocable without confirmation by the court. Disputed capacity is a ground for objection to registration of the power.225

2.Selection of the attorney

[14.41] An enduring power must be in a prescribed form226 with prescribed explanatory material. It requires execution by the donor and the attorney in the presence of witnesses. Usually the court will accept the donor’s choice of attorney, who should be a competent adult or trust corporation,227 but there remains a discretion to refuse an unsuitable choice.228 Attorneys cannot be substituted, so it is wise to appoint several, either to act collectively (jointly) or to have power to act individually (severally as well as jointly).229 Each nominated attorney must execute230 the power to indicate his acceptance of office,231 to acknowledge his duty to register when the donor becomes incapable, and to accept any limitations on the scope of his authority.

220Re R [1990] Ch 647, 650B, Vinelott J.

221Enduring PAA 1985; Law Com 122 (1983).

222Re K [1988] Ch 310, 311–312, Hoffmann J.

223At 315G, Hoffmann J.

224At 316C–F.

225Enduring PAA 1985 s 5(5); Re K [1988] Ch 310; Re R [1990] Ch 647; Re W [2001] Ch 609, [21–22], Sir Christopher Staughton (onus on objectors); Re C [2000] 2 FLR 1, CA.

226SI 1990/1376; Encyclopaedia FP (5th ed, 1999 reissue) vol 31, [4601]. An earlier power does not necessarily revoke an earlier one: Re E [2001] Ch 364, Arden J.

227Enduring PAA 1985 ss 2(7), 13. Bankruptcy terminates an appointment: s 2(10).

228S 6(5)(e).

229Ss 2(9), 11, sch 3.

230Defects: ss 2(6), 5(5)(a); Practice Direction [1989] 2 All ER 64.

231Disclaimer requires notice to the donor: s 2(12).

3.Statement of authority

[14.42] Mandated authority stated in an enduring power will usually be general.232 If it is limited to particular acts or parts,233 the donor’s intentions cannot be overridden by the court, which is limited to interpretation,234 giving consents, directing management, ordering accounts, and allowing payment to the attorney. Attorneys must generally act for the benefit of the donor. Birthday presents and similar gifts must be reasonable in amount in relation to the size of the donor’s estate.235 Benefits to others, including the attorney, are limited to what the donor might have been expected to provide for their needs or to meet his obligations.236 In Re R237 the applicant had been employed as a resident housekeeper, cook, and companion, who had accepted low pay in the expectation that she would be provided for. A nephew (acting under an enduring power) terminated the companion’s employment and asked her to leave the house. The court declined to order payment where the only obligation to make them was moral.

It is proposed to replace enduring powers with continuing powers, which would extend to health care and general welfare as well as dispositions of property. Living wills will allow advance directions refusing particular treatments and also, for the future, advance consent to positive treatments.238

4.Registration on impending incapacity

[14.43] The donor retains control of his affairs after executing an enduring power, but he has given his attorney the authority to take over when mental instability emerges. A duty to register arises when the attorney has reason to believe that the donor is becoming incapable by reason of mental disorder of managing and administering his property and affairs.239 Written notice240 must be given to the donor, to the three closest relatives of the donor, and to other nominated attorneys,241 with application following immediately after the last notice.242 Registration usually occurs without a hearing.243 Grounds for objection are invalidity of the power, fraud or undue pressure, mental capacity of the donor, and unsuitability of the attorney.244 The Court of Protection will adjudicate on any objections245 and may appoint a Mental Health Act receiver instead.246

232Even here there are limits: for example a notice to enfranchise must be signed by a leaseholder personally and so not by his attorney, an odd result: St Ermins Property Co v. Tingay [2002] EWHC 16733, [2002] 40 EG 174, Lloyd J.

233S 3(1)–(2).

234S 8.

235S 3(5).

236S 3(4).

237[1990] Ch 647, Vinelott J.

238Law Com 231 (1995); Who Decides? (HMSO, December 1997).

239Enduring PAA 1985 ss 4(1), 13; disclaimer requires consent of the court: s 4(6).

240S 13; SI 1994/3047 r 7; Form EP1.

241Enduring PAA 1985 s 4(3), sch 1.

242S 4(2), (4); SI 1994/3047 rr 8, 9; Form EP2; amended by SI 2002/1944.

243Enduring PAA 1985 s 6(1); SI 1994/3047 r 11.

244Enduring PAA 1985 ss 5(5), 13; SI 1994/3047 rr 11–25.

245Enduring PAA 1985 s 6(4); SI 1994/3047 rr 10–13.

246Enduring PAA 1985 s 6(2).

Registration shifts management power from the donor to the attorney.247 The donor requires permission from the court to revoke the power,248 and recovery of capacity will not automatically revive his powers, though it is certainly a ground on which registration can be cancelled.249

M. DELEGATION OF TRUSTS

1.Collective delegation of management functions

[14.44] Trustees may delegate any management function to an agent. This might for example allow trustees to appoint an estate agent to market the land held by the trust, or a solicitor to conduct the conveyancing. It will also allow the appointment of a stockbroker to conduct investment and (subject to a policy document drawn up by the trustees) to choose investments for the trust fund. Attorneys may only be given delegable functions,250 a concept which does not allow them to select between beneficiaries, appoint trustees, or set fees.

It is possible for the trustees to delegate to one of their number.251 A delegate may also be a nominee or custodian. However, a beneficiary cannot be a delegate and substitutes are not generally allowed

The trustees will be under a duty of care when delegating and are required to review delegations252 and also to consult with the beneficiaries of a trust of land.253 Trustees who act properly in the appointment and review properly will not be liable for the acts of the delegate,254 though the corresponding statutory duty is imposed on the delegate.255

2.Collective delegation to a beneficiary

[14.45] Trustees of land may delegate the functions of their trust to a beneficiary of full age entitled to an interest in possession.256 This might include both administrative functions and execution of the trust itself. One ends up with an arrangement rather similar to a strict settlement in which the life tenant who is most intimately concerned with the estate has management control of it. The delegation is of indefinite duration, not limited to one year at a time, but it is always revocable. Since the power to delegate is collective all trustees must join in making the delegation and it follows that this can be revoked by any one trustee, as well as on any change of trustees, or the loss of

247Until bankruptcy of the attorney or appointment of a receiver: s 2(10)–(11).

248S 7.

249Ss 7(3), 8(4); SI 1994/3047 r 26.

250TA 2000 s 11; this is a considerable improvement on the earlier law in TA 1925 ss 23, 30. The trust instrument may extend or restrict the statutory power.

251TA 2000 s 12.

252TA 2000 sch 1 para 3.

253TLATA 1996 s 11(1); TA 2000 s 13(3)–(5).

254TA 2000 s 23.

255Terms restricting liability of the agent or authorising a conflict of interest are only permitted where they are reasonably necessary: TA 2000 s 23.

256TLATA 1996 s 9.

beneficial entitlement.257 Trustees avoid liability for the acts of delegates provided that they exercise reasonable care when deciding to delegate.258 Delegation is by ordinary259 power of attorney and the purchaser is protected in the same way as any other person buying from an attorney.260 Purchase money must be paid to at least two trustees.261

3.Unilateral delegation of trust functions – non-beneficiaries

[14.46] The Trustee Delegation Act 1999262 allows a unilateral delegation of the functions of trusteeship, that is a delegation by one trustee (T1) to a person selected by that trustee (A to work with T2). There is a more generous rule, discussed below,263 for a trustee who is also beneficially entitled under the trust, but first we must consider the normal rule for pure trustees, that is a trust in the form:

To T1 and T2 on trust for B1 and B2.

The trustees here are different individuals from the beneficiaries. Under the Trustee Delegation Act 1999264 a trustee function can be delegated to an attorney under a power of attorney, but any such delegation265 must comply with the statutory power in the Trustee Act 1925:266 a delegate can only be given authority for a limited period, with a maximum of one year at a time. Delegation commences on date stated in the power of attorney267 or, if none, the date of its execution and then continues for that 12 months maximum, or any shorter period stated.268 Written notice should be given before or within seven days after the delegation by the donor to the person entitled to appoint trustees, and to the other trustees,269 but failure to give notice does not affect title.

It will probably be normal to effect a general delegation, meaning that T1 steps out of the trust for a year and allows A to act in his stead as trustee. A form is prescribed for this general type of delegation,270 though it is also possible to use any form to like effect which makes clear which statutory power of delegation is being exercised. Variations from the prescribed form would be needed if the intention is to delegate

257S 9(2), (6).

258S 9(8).

259An enduring power is not allowed: s 9(6).

260S 9(2). There is no need to produce evidence of the delegation: LRR 2002, SI 2002/2539 sh 1 para 3; LRA 1925 r 82A; LR Form 115; DLRR 2003 r 64.

261TLATA 1996 s 9(7); this is clearly intended despite a slight ambiguity.

262In force March 1st 2000: SI 2000/216; Law Com 220 (1994).

263See below [14.47].

264S 1(1).

265A delegate may not delegate further: TA 1925 s 25(8).

266TA 1925 s 25, as redrawn by T Delegation A 1999 s 5 for powers executed after March 1st 2000. It has not been necessary since 1971 for the trustee to be abroad.

267Query whether it is possible in 2002 to execute a series of powers of attorney each for one calendar year – 2002, 2003, 2004 etc. This infringes the spirit but not the letter of the new law. The legislation also leaves open an inconvenient possibility that the commencement could be on a contingency, eg when the trustee is certified incapable by a GP.

268TA 1925 s 25(2).

269S 25(4); ss (10) provides for notices by prs or SLA owners.

270S 25(5)–(6).

particular functions, where several trustees are delegating their functions, or where several trusts are included.

The new law more or less follows the pre-existing law for ordinary powers of attorney,271 but narrows it for enduring powers.272 Use of an enduring power ensures that the delegate can sell the land when the trustee has become incapable,273 but an enduring power affected by the new law only permits delegation of trust functions for a maximum period of one year.

4.Unilateral delegation of trust functions – beneficiary trustees

[14.47] Wider powers of delegation are allowed under a trust involving land274 where the trustee is also a beneficiary

X and Y hold as trustees for themselves (X and Y) as beneficial joint tenants.

A purchaser needs to be sure that the trustee was also a beneficiary and so is entitled to the wider powers. Hence there is provision enabling a purchaser to rely on an appropriate statement made by the attorney,275 which is conclusive evidence provided it is made at the time of sale or up to three months afterwards.

If a joint tenant such as X executed a normal power of attorney in favour of A this delegate acquired authority over X’s beneficial interest but not, it was decided in 1985,276 authority to deal with X’s interest as legal co-owner of the property. This was very inconvenient! It severely circumscribed the value of an ordinary power of attorney since the authority it gave excluded any co-owned house, but the new law widens the power of delegating to trustee-beneficiaries.277 It is not necessary to use a Trustee Act delegation278 and so any delegation may extend beyond one year to an indefinite duration.

5.Two trustee rule

[14.48] An attorney of a trustee proves title in the same way as any other attorney, but in addition sales must comply with the two trustee rule to ensure that overreaching occurs.279 New rules dating from 1999280 ensure that two separate individuals receive

271PAA 1971 s 10; Walia v. Michael Naughton [1985] 1 WLR 1115.

272See below [14.49].

273T Delegation A 1999 s 6; LPA 1925 s 22(2), s 22(3) added by T Delegation A 1999 s 9; A Hawes [1993] NLJ 1360.

274T Delegation A 1999 s 1. Land is defined by ss 10, 11. An interest in the proceeds of sale suffices in those rare cases in which conversion continues to apply despite TLATA 1996 s 3. The exclusion of chattels is unfortunate: M Mallender [2000] 12 LSG 16.

275T Delegation A 1999 s 2; LR Practice Leaflet 32 suggests: “I [Attorney] confirm that [donor of power] has a beneficial interest in the property on the date of this document”); it also suggests an alternative varying the form of execution of the deed.

276Walia v. Michael Naughton [1985] 1 WLR 1115.

277T Delegation A 1999 s 1(1).

278TA 1925 s 25.

279R Oerton [1995] 12 LSG 18; PR Saunders [1993] NLJ 1360; RT Oerton [1993] NLJ 840.

280T Delegation A 1999 s 7. This applies both prospectively and retrospectively. For the two trustee rule see above [13.11].

the money, although they may be acting in different capacities eg as trustee and as attorney. Thus:

(1)if there are two trustees and T1 delegates to T2, T2 cannot act to receive the purchase money;

(2)if both trustees (T1 and T2) delegate separately to A, A cannot receive purchase money;

(3)if T2 delegates to T3, T1 may sell with T3.

There is the usual exception for a trust corporation to act alone.281

6.Earlier enduring powers

[14.49] An enduring power survives the incapacity of the trustee. The rules described above apply to any enduring power of attorney executed in or after March 2000, and they also apply to any older enduring power if the incapacity of the trustee causing the power to be registered occurs in or after March 2001.

Earlier, a much wider authority282 allowed the delegation of any trust by an enduring power, whether or not the trustee was also a beneficiary, and unlimited in time. This earlier power may continue to apply to an older (pre-March 2000) enduring powers if the incapacity and registration occurred before March 2001, and indefinitely so unless the trustee recovers capacity and the registration is cancelled. The changes to the two trustee rule described above do not apply,283 but there is a new power284 for the attorney under an enduring power to appoint an extra trustee to meet the two trustee rule where he is the only active “trustee”.

N. PURCHASE FROM ATTORNEYS

1.Proof of a power of attorney

[14.50] After a sale the attorney will usually retain the original power for future use, so a buyer has to prove title with a copy which is acceptable evidence of the existence of the power if it is certified as a true copy by a solicitor, notary public, or stockbroker.285

2.Protection of purchasers – sale within 12 months of delegation

[14.51] Protection is available for purchasers against the risk that the power of attorney had been revoked at the time that the land is bought from the attorney, so long as the buyer did not know at that time of an act causing a revocation.286 A later buyer

281A proper delegate under TA 1925 s 25(3).

282Enduring PAA 1985 s 3(3); this was a response to Walia v. Michael Naughton [1985] 1 WLR 1115, decided as the 1985 Bill was in Parliament.

283T Delegation A 1999 s 7.

284T Delegation A 1999 s 8. This must be produced to the registry: DLRR 2003 r 62.

285PAA 1971 s 3; DLRR 2003 r 62; also a copy of a copy; Evidence and Powers of Attorney Act 1940. It will no longer be necessary to lodge the original if a conveyancer certifies that he holds this.

286PAA 1971 s 5.

depends for his title upon the knowledge of the first buyer at the time of the initial acquisition from the attorney. If the first sale occurs within 12 months of the execution of the power of attorney, all subsequent purchasers are protected by a conclusive presumption that the first purchaser had no knowledge of revocation.

3.Protection of purchasers – sale more than 12 months after delegation

[14.52] Where a sale occurs more than 12 months after execution of the power future security of the title requires that the first purchaser execute a statutory declaration – before the purchase or within three months afterwards – stating that he did not have knowledge of any revocation or event terminating the power when he bought.287 This statutory declaration will be required by the registrar before the initial purchase can be registered. The precise contents of the declaration will vary according to the type of power. Under an ordinary power, it must affirm the absence of knowledge of revocation or death, incapacity or bankruptcy of an individual donor, or the winding up of a corporate donor.288

4.Enduring powers

[14.53] Enduring powers can also be proved by an office copy sealed by the Court of Protection, which is evidence of the contents of the power and the fact of registration.289

Under an enduring power290 the statutory declaration must assert absence of knowledge of (1) revocation by the court,291 (2) any event causing loss of power in the attorney such as the death or bankruptcy of the donor or bankruptcy of the attorney, and

(3)any ground for avoiding the registration such as fraud or lack of capacity.292

5.Delegation under trusts

[14.54] In the case of a delegation of powers under a trust of land293 it will be absence of knowledge that the power has been revoked by the donor of the power, or that new trustees had been appointed, or of any other revoking event.294 On a sale by a beneficiary under powers delegated by trustees of land, evidence will be required by statutory declaration that the buyer acted in good faith with no knowledge that it was not a proper delegation.295

287S 5(4); for post-1971 dealings.

288DLRR 2003 r 63; but since 2002 it has not been necessary to produce evidence of non-revocation if a conveyancer certifies that he holds adequate evidence: SI 2002/2539 sch para 2; LRA 1925 s 82A; LR Form 114.

289Enduring PAA 1985 s 7; searches for registration are allowed under SI 1994/3047.

290Enduring PAA 1985 s 9; DLRR 2003 r 62.

291Only a confirmed revocation counts: s 9(5).

292S 9(3)–(4).

293TLATA 1996 s 9. Note also the more general declaration referred to above at [14.51].

294DLRR 2003 r 64.

295DLRR 2003 r 64; since 2002 it is not necessary to produce this to the registry if a conveyancer certifies that they hold the evidence: LRR 2002/2539 sch 1 para 3; LRR 1925 r 82A; LR Form 115.

15

ONE-TRUSTEE TRUSTS

Endurability. Beneficial entitlement. Unregistered land: protected interests; honesty; diligence; occupiers. Registered land: priority; occupiers; when do occupiers bite? Removal of protection from occupiers.

A. BENEFICIAL INTERESTS NOT OVERREACHED

1.Maitland and endurability of beneficial interests

[15.01] Maitland introduced the Cambridge classes of the 1900s to his thesis that beneficial interests under trusts are personal in character in these words:

“Equitable estates and interests are rights in personam but they have a misleading resemblance to rights in rem.”1

Maitland’s insistence that the trust was a species of personal property placed emphasis on the form of judgment used to enforce a trust – a personal action for damages for breach of trust – and depends upon his supposition that the form of judgment is the most important diagnostic feature. In fact equity could replace trustees or order an official to execute a transfer, means of securing the land just as effective as any legal remedy. It is better to focus on the substantive nature of the rights created and the real question, whether a right binds a purchaser of the land. Mrs Boland2 could enforce her rights against a lender, which demonstrates conclusively the proprietary character of her interest. Equitable rights are proprietary,3 as Maitland himself recognised towards the end of his life.4

Maitland’s lectures remain of value because of the emphasis he placed on the need to establish personal liability against an individual defendant, a point developed below.5

2.Boland

[15.02] First instincts are usually right, but occasionally time for reflection gives rise to face saving second thoughts. So it was for the protection of beneficiaries. Only after the 1925 legislation has passed through Parliament was it amended to restrict

1Maitland’s Equity, 117.

2Williams & Glyn’s Bank v. Boland [1981] AC 487, HL.

3GW Keeton (1937) 1 MLR 86.

4FW Maitland, Collected Papers III (Cambridge UP, 1911), 349–350.

5See below [15.06].