Equity

Constructive trust - acquisition of registered land by fraudulent agent - transferor retaining equitable interestCollings v Lee and another: CA (Nourse, Mummery and Rix LJJ): 19 October 2000

The first defendant, claiming to deal in property, undertook to assist the claimant to sell her home.

He fraudulently misrepresented that he had arranged a sale to a third party for 250,000.

Without making payment the first defendant procured the claimant to execute a transfer of the property to him so becoming the registered proprietor of it.

He executed a legal charge over the property to secure an advance of 125,030 from the second defendant, a building society.

The claimant sought against both defendants rectification of the register.

The judge held that the claimant had an overriding interest in the property within s.70(1)(g) of the Land Registration Act 1925 and ordered rectification accordingly.

The second defendant appealed.

Edward Nugee QC and Colin Braham (instructed by Dibb Lupton Alsop, Leeds) for the second defendant.

James Behrens (instructed by Teresa Evans, Epsom) for the claimant.

The first defendant did not appear and was not represented.

Held, dismissing the appeal but for a different reason, that s.70 of the 1925 Act concerned 'liability of registered land to overriding interests'; that the case had been argued below on the erroneous assumption that the claimant had no equitable interest in the property, merely a right to set aside the transfer as against the first defendant: the claimant had constituted the first defendant her agent and acting as such he had been in breach of authority and fiduciary duty and thus held the property on trust for the claimant, giving her the equitable interest in it; and that that equitable interest was an overriding interest under s.70, entitling the claimant to rectification of the register against both defendants.