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possessors, for example, are already clearly covered by section 12: see further Notes and Questions 14.3 below). Consequently, so the argument goes, section 14 must be read as not limited by these words (i.e. as if the words ‘to which he may be entitled in right of such possession or occupation’ were omitted) – otherwise section 14 is robbed of all meaning.

However, the House of Lords rejected the argument and held that the Fleggs’ interests were overreached by the mortgage to the building society, and consequently the building society was entitled to evict them from their home. They declined the invitation to construe section 14 so as to restrict the overreaching of the interests of beneficiaries in occupation, not so much because of the technical difficulties of construing it in that way, but because of the unlikelihood that it could have been intended, in 1925, to bear such a meaning, and the significant restriction on the operation of the overreaching machinery that would be introduced for the first time if they accepted such a construction.

However, the reaction to the Flegg decision prompted the Law Commission, already involved in a reconsideration of the whole of the law relating to trusts of land, to carry out a separate consultation exercise on overreaching. In a Working Paper published in 1988, they canvassed the possibility of reforming the machinery so that either occupying beneficiaries’ interests could not be overreached without their consent, or the protection given by the two-trustees rule should be reinforced by requiring at least one of the trustees to be a solicitor or licensed conveyancer. As a result of the consultation exercise, they published a report recommending the former (see Extract 14.2 below).

The trusts of land project was completed and eventually resulted in the enactment of the Trusts of Land and Appointment of Trustees Act 1996, but the recommendations made about overreaching the interests of occupying beneficiaries were never implemented.

14.4.4. Transactions capable of overreaching beneficiaries’ interests

If, as suggested above, overreaching is indeed the process by which the interests of beneficiaries transfer from land held on trust for them to its proceeds of sale when it is sold or mortgaged by the trustees, it would seem to follow that their interests will not be overreached by a transaction that does not produce proceeds of sale. If a ‘sale’ or mortgage of trust land by trustees which involves no immediate capital payment by the purchaser/mortgagee to the trustees nevertheless ‘overreaches’ the beneficial interests under the trust, overreaching means no more than extinguishing, and affords the beneficiaries no protection whatsoever.

In State Bank of India v. Sood [1997] Ch 276, the Court of Appeal accepted that this would be the effect of allowing beneficial interests to be overreached by transactions which did not produce capital money, but nevertheless held that section 2(1)(ii) of the Law of Property Act 1925 had to be construed to produce this result. In the case itself, two members of the Sood family jointly held the legal title to the house they lived in with five other members of the family. They

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in any of the cases on overreaching, and there are strong policy reasons why it should not be restricted in this way, as we see below. However, in Sood, Peter Gibson LJ assumed it to be correct. This is obiter, because it was common ground that the mortgage the Soods granted was within their powers. However, if it is correct, it significantly decreases the protection that overreaching provides for purchasers, because it becomes necessary for purchasers to check the authority of the trustees to enter into the transaction. To make matters worse, it is by no means clear which transactions count as authorised for these purposes. In ‘The Impact of the Trusts of Land and Appointment of Trustees Act 1996 on Purchasers of Registered Land’, Graham Ferris and Graham Battersby argued that the 1996 Act had curtailed trustees’ powers for these purposes, but this view has been criticised (Martin Dixon, ‘Overreaching and the Trusts of Land and Appointment of Trustees Act 1996’; and see also Ferris and Battersby, ‘Overreaching and the Trusts of Land and Appointment of Trustees Act 1996 – A Reply to Mr Dixon’). Also, Ferris and Battersby have subsequently argued persuasively that the Harpum analysis accepted by Peter Gibson LJ in Sood is unconvincing in other respects (Ferris and Battersby, ‘The General Principles of Overreaching and the Reforms of 1925’).

This uncertainty as to the scope of overreaching of course defeats its object. If it is not immediately clear to purchasers on the face of the transaction whether it is one that will overreach beneficial interests, their only safe course is to enquire into the details of the trust in all cases, which was precisely what the 1925 legislation was seeking to avoid.

14.4.5. The two-trustees rule

A final word needs to be said about the effectiveness of the two-trustees rule. It was introduced by the 1925 legislation on the basis, as the Law Commission put it, that ‘two heads (containing consciences as well as brains) ought to be better than one’ (Law Commission, Trusts of Land: Overreaching (Law Commission Consultative Document No. 106, 1988), paragraph 3.1). In that working paper, the Law Commission invited views on whether this was the best method of providing protection to beneficiaries, or whether perhaps the safeguard should be strengthened to require one of the trustees to be a solicitor. However, there was little support for change on consultation, and the Law Commission concluded that the added complications in conveyancing that would be caused by such a change outweighed any benefits (see Extract 14.2 below). Consequently, the two-trustees rule remains.

Extract 14.2 Law Commission, Transfer of Land: Overreaching: Beneficiaries in Occupation (Law Commission Report No. 188, 1989)

P A R T I I T H E P R ES E N T LA W

Introductory

2.1. It is an established, flexible and convenient feature of English land law that property can be legally owned by trustees, who hold it on behalf of one or more beneficiaries. The

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nature of the beneficiaries’ interests can vary widely, as indeed can the degree of formality with which they are created. The fact that the law can accommodate many different and separate ownership interests in the same property, whether they are concurrent or consecutive, gives owners the chance to deal with their property in almost any way they choose. It can, however, present real problems when the land comes to be disposed of – a purchaser needs to be assured that he is acquiring the whole of the interest for which he contracted. If that interest has been fragmented, proving title can be complicated, costly and time-consuming. ‘The central dilemma of land law is how to reconcile security of title with ease of transfer.’1

2.2. This dilemma was tackled in the property legislation of 1925, because before 1926 ‘the purchaser had to examine the lengthy, and, for this purpose, mainly irrelevant, provisions of the settlement in order to discover the principal facts essential to his obtaining a good title . . . To discover these facts was often a tedious task, for the settlement was a long document setting out the trusts in full and a purchaser often had to waste time in reading clauses which were of no interest to him in order to ascertain a few simple facts. There were corresponding inconveniences to the beneficiaries and trustees.’2 The 1925 legislation effected a compromise by making land held in trust freely marketable, while preserving the interests of the beneficiaries under those trusts, by the device of overreaching, which had originally been developed by conveyancing practitioners in connection with express trusts for sale, as a means of keeping the equities off the legal title.

. . .

2.6.In recent years there has been a sharp increase in the number of married couples acquiring their matrimonial homes and other property in joint names.3[9] Commercial property owned by partnerships is normally also held in this way. In every case, the legal owners are technically trustees, even if they are themselves the beneficiaries for whom they hold the land.

2.7.At the same time, as the incidence of ownership by more than one person has increased, the concept of equitable interests arising informally has been developed. So, where two people contribute to the purchase price of the property which is then conveyed into the name of only one of them, both contributors are equitable tenants in common.4[10] The contribution which entitles someone to a share of the property in equity may be made after the purchase. In one case, where an agreement to share could be implied and one member of a couple who were living together did a great deal of

physical work to a property belonging to the other, she was held to have an equitable interest.5[11] The claimant has to demonstrate a common intention that, even if he

did not contribute to the purchase price, he and the legal owner should both have beneficial interests in the property and that he acted to his detriment on the basis of that intention, believing he would acquire a beneficial interest.6[12]

1 Megarry and Wade, The Law of Real Property, 5th ed. (1984), p. 141. 2 Ibid., p. 327.

3Fifty-one per cent of all owner-occupied homes bought in 1960–1 were purchased in joint names; in 1970–1, the equivalent figure was 74 per cent (source: Todd and Jones, Matrimonial Property

(1972). p. 80). Experience suggests that this increasing trend has continued. 4 Bull v. Bull [1955] 1 QB 234. 5 Eves v. Eves [1975] 1 WLR 1338.

6 Grant v. Edwards [1986] Ch 638.