Myles v Prospect Properties Ltd

• Jurisdiction: Cayman Islands
• Judge: (Schofield, J.)
• Judgment Date: 30 March 1989
• Court: Grand Court (Cayman Islands)
• Date: 30 March 1989

Grand Court

(Schofield, J.)

MYLES and WINTON

and

PROSPECT PROPERTIES LIMITED and WOOLF

T. Shea for the plaintiffs;

N.W. Hill, Q.C., D. Ritch and Ms. C. Bridges for the second defendant.

Cases cited:

(1) Barry v. HeiderUNK(1914), 19 C.L.R. 197, followed.

(2) Great W. Perm. Loan Co. v. Friesen, [1925] A.C. 208, followed.

(3) Midland Bank Trust Co. Ltd. v. Green, [1981] A.C. 513; [1981] 1 All E.R. 153, dicta of Lord Wilberforce applied.

Legislation construed:

Registered Land Law (Law 21 of 1971), s.3: The relevant terms of this section are set out at page 310, lines 26–35.

s.23: The relevant terms of this section are set out at page 312, lines 6–22.

s.30: The relevant terms of this section are set out at page 315, lines 3–5.

s.38: The relevant terms of this section are set out at page 313, line 28 – page 314, line 2.

s.127(1):‘Any person who-

(a) claims any unregistrable interest whatsoever, in land . . . may lodge a caution with the Registrar forbidding the registration of dispositions of the land, lease or charge concerned and the making of entries affecting the same.’

Land Law-contract of sale-constructive trust-contract to sell land creates trust in favour of purchaser-breach of trust if vendor subsequently in bad faith creates charges over same property in favour of third party

Land Law-registration-equitable interests-earlier unregistered equitable interest takes priority if registered legal interest acquired with knowledge of earlier interest-failure to register or to lodge caution under Registered Land Law, ss. 30 and 127 may not invalidate properly founded equitable interest

Land Law-registration-indefeasibility of title-proprietor may not claim indefeasibility of title under Registered Land Law, s.23 against potential purchaser after intentionally creating equity in his favour

The plaintiffs sought specific performance of contracts for the sale of land or, alternatively, damages for breach of such contracts.

The plaintiffs had contracted with the first defendant to purchase certain lots of land of which they were the registered owners. The second defendant was involved in the management of the first defendant and knew of its contracts with the plaintiffs. After instalments had been paid both defendants, ignoring the plaintiffs” interest under the contracts, caused charges over the same lots to be registered in favour of the second defendant who subsequently refused to discharge them. The plaintiffs then ceased to pay any further instalments and applied for orders to compel the second defendant to discharge the charges and for specific performance against the first defendant. Alternatively, they claimed damages for breach of contract.

The plaintiffs submitted that (a) the first defendant had become a trustee for them when the contracts of sale were made and had been in breach of its duty to protect the equitable interest they had thereby acquired; (b) that interest had priority over subsequent equitable and legal interests except those of a bona fide purchaser of an interest for value without notice of their own interest; (c) the second defendant had had notice of their interest and consequently could not establish an interest which was superior to theirs, and (d) in any event, no valuable consideration had been given for the charges raised in favour of the second defendant.

The second defendant submitted in reply that (a) equitable principles did not apply because the Registered Land Law was intended to be

applied comprehensively and exclusively and did not recognize the plaintiffs” equitable and unregistered interest so that under s.38 he was not required to go behind the register and need not have acknowledged any equitable interest not noted on the register; (b) by failing to lodge a caution under s.127 the plaintiffs had lost any claim to priority over his own registered interest and his knowledge of the contracts should not be used to defeat the legal interest he had acquired by registration; (c) the indefeasibility of his right to a prior claim on the property by virtue of the charges was protected under s.23; (d) in any event the plaintiffs, by not complying with ss. 30 or 127 either to register their claims or lodge a caution, had waived their right to raise them or alternatively were estopped from pursuing them; and (e) the contracts expressly provided for the entitlements of the plaintiffs should the first defendant be unable to deliver title to the lots and accordingly, since the circumstance had arisen due to the existence of the charges, damages were the appropriate remedy to be granted for breach of contract.

Held, granting the orders sought:

(1) The plaintiffs had acquired equitable interests in the property when the contracts were made, thereby making the first and second defendants trustees for them. Both defendants had been in breach of trust when the first defendant created charges in favour of the second defendant who could not benefit from the protection of the Registered Land Law, s.38(2) since (a) having known of the plaintiffs” prior equitable interests, his acquisition of the charges had not been bona fide and without notice; and (b) in any event, he had given no valuable consideration for the creation of the charges. Furthermore, having intentionally created the equity, the first defendant could no longer claim an indefeasible title as proprietor of the land under s.23 and the section did not protect the second defendant as the proprietor of a charge. Consequently, even though the charges had been registered and the plaintiffs had failed to register their own interests (s.30) or lodge a caution (s.27), those interests still took priority and they had a valid claim to recognition of them. They were therefore entitled to specific performance of the contracts as the appropriate remedy. Accordingly, the second defendant would be ordered to discharge the charges and the order for specific performance would be granted against the first defendant (page 313, lines 9–20; page 314, line 38 – page 315, line 17; page 316, lines 3–22; page 318, lines 3–8).

(2) The Registered Land Law did not itself explicitly state that equitable interests were not to be recognized. In general they were given recognition unless by s.3 they were inconsistent with the Law. More directly, the equitable doctrine of notice was clearly embodied in s.38(2): the reference to a ‘bona fide purchaser,’ its embodiment of the concept of good faith and its intrinsic relationship with the doctrine of notice supported the view that the doctrine was not in itself to be regarded as inconsistent with or excluded by the Law. The fact that s.38(2) made no specific reference to ‘notice’ did not justify the

conclusion that the Law excluded it. The doctrine was accordingly compatible with the Law and had not been superseded by any of the provisions (such as s.23 or s.30) regarding registration (page 314, lines 16–31; page 315, line 18– page 316 line 2).

SCHOFIELD, J.: These are consolidated suits filed by Grace
Myles and Charles Winton against Prospect Properties Ltd. (in
liquidation) and Douglas Woolf.
Prospect Properties was the registered owner of a parcel of
30	land referred to in the land register as Spotts Registration
Section, Block 24E, Parcel 148. This parcel was to be subdivided
into various lots which were to be sold by Prospect Properties.
Myles entered into an agreement dated December 2nd, 1981
with Prospect Properties to purchase Lot 48 for US$7,500. She
35	paid a deposit of $750 and the balance, according to the
agreement, was to be paid over five years, with interest accruing
thereon. I do not think it is disputed that Myles paid her
instalments diligently but withheld further instalments when the
difficulties to which I shall later refer became apparent. She
40	maintains she is ready and willing to pay the balance.
Winton entered into two agreements dated January 8th, 1982

to buy two lots of Parcel 148, i.e. Lots 61 and 52, from Prospect
Properties. In both cases the purchase price was US$9,000, a
deposit of $125 was paid immediately, the balance of deposit of
$775 was paid, and instalments were to be paid over a five-year
5	period, with interest. Again, I do not think it is in dispute that the
full purchase price would have been paid for each lot.
Spotts Registration Section, Block 24E, Parcel 148, i.e. the
whole of Prospect Properties” estate was, in or about September
1982, sub-divided to form, inter alia, Parcel 166, and was further
10	sub-divided in or about June 1983 to form, inter alia, Parcel 210,
which corresponds to Lot 48 which Myles had contracted to
purchase, and Parcels 186 and 187, which correspond to Lots 61
and 52 which Winton had contracted to purchase.
The plaintiffs claim that Woolf was employed by Prospect
15	Properties to manage and supervise the development and the sub-
division of the estate at the time they entered into their contracts.
This is denied by Woolf, who states he was a director of Prospect
Properties from October 21st, 1982 to April 28th, 1983 and that
he has never received any remuneration, payment, salary or
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