Registration — Rectification — Fraudulent signature of original registered proprietor on transfer — Transferee under forged transfer registered as proprietor — Transferee transferring property to purchaser — Bank advancing loan to purchaser on security of charge on property — Application by purchaser and bank to register titles — Application by original registered proprietor to be restored as proprietor by rectification of register — Exercise of discretion
Until July 2001, the claimant had been the registered proprietor of a property. In April 2001, his name was forged on a transfer of the property. Although he became aware of improper dealings with his bank account and that the title deeds had been sent to an unknown solicitor, he took no steps to prevent the first defendant from becoming registered as proprietor in his place. The first defendant sold the property to the second defendant in January 2003, by a transfer for a consideration of £223,000, of which the third defendant bank provided £189,550. In April 2003, the claimant discovered that he was no longer the registered proprietor. He applied to the Land Registry for rectification of the register, under section 82 of the Land Registration Act 1925. He issued proceedings claiming rectification of the register. His claim was resisted by the second and third defendants on the ground that their applications for registration of their respective interests, of February 2003, took priority over the claimant’s application for rectification of April 2003, and should be given effect.
Held: The claim was dismissed. The first defendant was the registered proprietor, but had not been in possession at the date of the application for rectification; the second defendant was in possession but was not the registered proprietor. Section 82(3) of the 1925 Act did not fetter the discretion of the court since rectification was not being sought to effect the title of the proprietor in possession. The claimant’s loss had been caused by his lack of care in not making inquiries at a time that would have prevented innocent parties from acquiring title. The indemnity provisions under the 1925 Act, which might have aided the second and third defendants, were irrelevant and could not be treated as reasons for rectification.
The following cases are referred to in this report.
Boodle Hatfield & Co v British Films [1986] PCC 176, Ch
Butler v Rice [1910] 2 Ch 277
Castle Phillips Finance Co Ltd v Piddington (1995) 70 P&CR 592; [1995] 1 FLR 783, CA
Hayes v Wade Yacoub unreported 10 June 1994
Kingsalton Ltd v Thames Water Developments Ltd [2001] EWCA Civ 20; [2002] 1 P&CR 15
Malory Enterprises Ltd v Cheshire Homes (UK) Ltd [2002] EWCA Civ 151; [2002] Ch 216; [2002] 3 WLR 1
Norwich and Peterborough Building Society v Steed (No 2) [1993] Ch 116; [1992] 3 WLR 669; [1993] 1 All ER 330
Pinto v Lim [2005] EWHC 630 (Ch) unreported 19 April 2005
This was the hearing of a claim by the claimant, Amir Nouri, for an order of rectification of the proprietorship register under section 82 of the Land Registration Act 1925, which was resisted by the defendants, Ali Marvi, Safaa Rafaq, and Bank of Scotland.
Philip Jones (instructed by Mackrell Turner Garrett) appeared for the claimant; Ian Mason (instructed by Knights Solicitors) represented the second defendant; Hugh Jackson (instructed by Eversheds LLP, of Cardiff) represented the third defendant; the first defendant did not appear and was not represented.
Giving judgment, Judge Rich QC said:
[1] The first defendant (Mr Marvi) is the registered proprietor of the leasehold property at 8 Bron Court, Brondesbury Road, London NW6. He was so registered, on 4 July 2001, on presentation to the Land Registry of a transfer dated 2 April 2001 from the claimant to Mr Marvi. It is accepted in these proceedings that the claimant’s signature on that transfer was forged, and the claimant seeks rectification of the register to restore him as registered proprietor.
[2] Mr Marvi did not appear before the court. It is said that he is untraceable. He has no interest in maintaining the entry of his name on the register because, on 20 December 2002, he contracted to sell the leasehold to the second defendant, Mr Safaa Rafaq. That contract was completed by a transfer, on 7 January 2003, for a consideration of £223,000, of which the third defendant (the bank) provided £189,550 in return for a charge. A mortgage that Mr Marvi had taken from Kensington Mortgage Company in the sum of £152,000 or thereabouts was discharged, but he walked away with £70,000-odd.
[3] At the time of Mr Marvi’s purported purchase, it was he who instructed the solicitor that purported to act for the claimant. He thus procured that the proceeds of that transaction, which should have been paid to the claimant, were also paid either to himself, some £22,500, or at his nomination to a Dr Khan, £30,731.50. Mr Marvi had also, on 15 August 2000, before the transfer to himself, forged the claimant’s signature on a mortgage for £105,000 to iGroup. He used part of the proceeds of that mortgage to redeem the two charges for a total of £60,000 odd that the claimant had himself granted, coincidentally, to the bank. Mr Marvi, however, diverted the rest of the moneys advanced by iGroup into his own account, £42,369 odd. Thus, Mr Marvi has obtained some £165,000 out of his dealings with the property and left the claimant without any title to it.
[4] The claimant’s claim for rectification is resisted by the two remaining defendants, which counterclaim declarations that Mr Rafaq’s entitlement, by virtue of the statutory magic arising under section 69 of the Land Registration Act 1925 (the 1925 Act), to be registered as proprietor, and the bank’s registration of its charge should each be given priority, in accordance with their application dated 14 February 2003 over the claimant’s application for rectification, which is dated 24 April 2003.
[5] The defendants’ solicitors do not appear to have made any search of the register before the contract with Mr Marvi was signed on |page:72| 20 December 2002. They were therefore unaware of a caution entered by a Mr Jafari, who had a claim against Mr Marvi, on 16 December 2002. It was only on the day following the transfer that they made such a search and then made their application to register within the priority period. Accordingly, Mr Jafari was able to enter an objection to registration. It appears from a direction of the Land Registry dated 24 May 2005, that the Land Registry had directed Mr Jafari to issue proceedings for the determination of whether his caution should be cancelled on or before 11 December 2003 and that, because he had failed to do so, his caution was cancelled, pursuant to r 299(4) of the Land Registration Rules 1925.
[6] That rule empowers the registrar, in such circumstances, also to direct that effect should be given to the defendants’ application (that is to say to register) as though the objection had not been made. The registrar did not, however, so direct because, on 24 April 2003, the claimant had made the application “under section 82 seeking cancellation of existing owner registration and the restoring of the register of the claimant”. That was supported by a statutory declaration by the claimant’s attorney, a Mr Razawi, who declared:
6. Upon a visit to the United Kingdom in December 2002 Mr Amir Nouri informs me that he learnt from Mr Ali Marvi that not only did he sell the property to himself he was also in the process of completing a sale of the property to a third party. The sale price of this is not known to Mr Amir Nouri or myself.
7. I was instructed by Mr Amir Nouri to investigate the matter and have accordingly instructed the firm of Mackrell Turner Garrett… to apply for a rectification of the register under s82(3) of Land Registration Act 1925.
[7] This was treated, as has been agreed at the bar was right, as an application to rectify the register. Accordingly, the registrar directed, on 14 October 2003, as follows:
WHEREAS:
(1) The registered proprietor of the property is Ali Marvi, registered on 4 July 2001.
(2) On 14 February 2003, the Applicant applied to register a transfer dated 7 January 2003 made between (1) the said Ali Marvi and (2) the Applicant (“the 2003 transfer”).
(3) The Respondent was previously registered as proprietor of the Property on 8 August 1996.
(4) The Respondent has objected to the registration of the 2003 transfer on the grounds that an earlier transfer of the Property dated 2 April 2001 made between (1) the Respondent and (2) the said Ali Marvi was not executed by or with the authority of the Respondent.
The Solicitor to HM Land Registry directs the Respondent to issue proceedings in the Chancery Division of the High Court of Justice on or before 11 December 2003 for the purpose of determining whether the register should be rectified to show the Respondent as registered proprietor.
[8] It is in compliance with that direction that these proceedings have been issued. In their course, the bank, by a letter dated 26 August 2005, formally admitted:
1. The Third Defendant accepts that the signatures on the Legal Charge to the iGroup and upon the Transfer from the Claimant to the First Defendant are not in the hand of the Claimant.
2. The Third Defendant accepts that the Claimant did not intentionally permit the First Defendant to sign documents in the Claimant’s name for the purpose of entering into the Legal Charge to the iGroup or the Transfer from the Claimant to the First Defendant.
[9] Likewise, on 27 September 2005, Mr Rafaq made the following admissions (I read only those that are material):
1. The following admissions are made on behalf of the second defendant and Part 20 claimant:
(a) The 2001 transfer was not signed by the claimant;
(b) The signature on the 2001 transfer purporting to be that of the claimant is not in the hand of the claimant;
(c) On a balance of probabilities the 2001 transfer was a fraudulent transaction carried out by the first defendant.
…
3. It is further admitted that the signatures on the legal charge to the iGroup are not in the hand of the claimant.
[10] Section 82 of the 1925 Act provides:
(1) The register may be rectified pursuant to an order of the court or by the registrar, subject to an appeal to the court, in any of the following cases, but subject to the provisions of this section: –
I will read only cases (d) and (g) for reasons that will appear:
(d) Where the court or the registrar is satisfied that any entry in the register has been obtained by fraud;
…
(g) Where a legal estate has been registered in the name of a person who if the land had not been registered would not have been the estate owner…
[11] One of the provisions to which this power to rectify is subject is found in subsection (3), which (as amended) reads:
The register shall not be rectified, except for the purpose of giving effect to an overriding interest [or an order of the court]…
(Those last words having been inserted by the Administration of Justice Act 1977):
so as to affect the title of the proprietor who is in possession –
[(a) unless the proprietor has caused or substantially contributed to the error or omission by fraud or lack of proper care; or]
…
(c) unless for any other reason, in any particular case, it is considered that it would be unjust not to rectify the register against him.
[12] The claimant had pleaded that cases (a), (b) and (h) (which I have not read) applied as well as (d) and added case (g) only by way of amendment, permitted by consent in the course of the hearing on the bank’s contention that only (g) applied. Mr Hugh Jackson, for the bank, had maintained this point, because he submitted that, if the jurisdiction to rectify arose only under case (g), the discretion to rectify as against Mr Rafaq would be fettered by subsection (3), whereas under the case as pleaded, it would be unfettered, as he accepted that it would be in any case under any of the cases, against the bank.
[13] I think that this distinction is mistaken because my understanding of Peter Gibson LJ’s judgment in Kingsalton Ltd v Thames Water Developments Ltd [2001] EWCA Civ 20; [2002] 1 P&CR 15 is that the court’s discretion is unfettered by subsection (3) in any case. It is only the discretion of the registrar that may be fettered when the circumstances of subsection (3) are satisfied. I read from his judgments in [17] and [18]:
17. The first issue which arises is a point taken by Mr Elvin QC for Kingsalton for the first time in this Court. By its respondent’s notice, Kingsalton says that the Deputy Judge need not have considered section 82(3) because the questions raised by the subsection do not arise where rectification of the register is made pursuant to an order of the court. …
18. It is unfortunate that the point was not taken before the Deputy Judge. Mr Lewison QC for the defendants sought to argue, first, that section 82(1)(g), not section 82(1)(a), was the applicable provision in this case, and second, that the words in section 82(3) “except for the purpose of giving effect to… an order of the court” had no application to the circumstances of the present case in consequence. I can accept neither limb of that argument. It may well be that the Deputy Judge could have found that the case fell within section 82(1)(g). But it is plain that he regarded section 82(1)(a) as the applicable provision, as para (a) was the only para in section 82(1) to which he refers in his judgment. The applicability of that para was not debated before the Deputy Judge. … He must… be taken to have thought that the case was within section 82(1)(a), as indeed it was. But even if that is wrong, it seems plain to me that the case falls within the words of exception in section 82(3). It cannot sensibly make a difference that the order to which effect is given is made in the same proceedings as those in which rectification is sought rather than earlier proceedings. The expression “the court” in section 82(3) is limited to the High Court (see section 3(ii) of the 1925 Act, no rules having been made to confer jurisdiction on the county court), and Parliament can be seen to have intended to entrust the High Court with an unfettered discretion when ordering rectification. Mr Lewison was not able to suggest any meaning for the words of the exception which would exclude their application to the present case. I have no hesitation in accepting the submission of Mr Elvin that section 82(3) does not apply. |page:73|
[14] In any case, I accept the submission of Mr Philip Jones for the claimant, although on the view as to its effect that I have taken, the point can be relevant at most as to costs, but the admitted facts fall within case (d), as explained by Scott LJ in Norwich & Peterborough Building Society v Steed (No 2) [1993] Ch 116, at p134C. Scott LJ, there, after rejecting the submission that it is sufficient to satisfy (d) that the transfer had been induced by fraud, said:
The registration of a forged transfer could, in my opinion, at least if the application for registration had been made by the forger, be annulled under para (d). The entry would have been obtained by fraud in the presenting of a forged transfer for registration.
That, of course, is what happened in the circumstances in the present case.
[15] There is a yet further reason why I regard the discretion that I have to exercise as unfettered by subsection (3). The subsection limits the discretion to rectify so as to affect the title of the proprietor in possession. Attention was directed to the issue as to whether Mr Rafaq was, or is, in possession within the extended meaning given to that expression by section 3(xviii) of the Act, which includes receipt of rents and profits or the right to receive the same.
[16] For reasons that will appear when I turn to consider the facts more closely, there is, in my judgment, no doubt that Mr Rafaq was in possession at the date of the claimant’s application to rectify and is so today. He, however, neither is, nor was at that date, the proprietor within the meaning of the definition, namely the registered proprietor for the time being of an estate in land or of a charge.
[17] Reference to the register tells us who the registered proprietor is. It is Mr Marvi, who equally clearly is not in possession. Section 69 provides that:
The proprietor of land… shall be deemed to have vested in him without any conveyance… where the registered land is leasehold the legal term created by the registered lease, but subject to the overriding interests, if any, including any mortgage term or charge by way of legal mortgage created by or under the Law of Property Act 1925, or this Act or otherwise which has priority to the registered estate.
[18] Thus, without the conveyance that Mr Marvi forged, he has vested in him such title enabling him thus by the so-called statutory magic, to pass good title to others, including, therefore, to Mr Rafaq.
[19] I accept the submissions of Mr Ian Mason for Mr Rafaq. Indeed, it is not disputed that the effect of the Land Registration Rules is that upon registration of the transfer to Mr Rafaq, Mr Rafaq will be the registered proprietor from the date of his application, namely 14 February 2003, but until that application has been dealt with, he is not the registered proprietor.
[20] The exploration of these issues has not, however, been entirely futile because, as Mr Jones accepted, it must be material to the exercise of a discretion that would affect Mr Rafaq’s title that he is, subject only to the effect of the claimant’s claim for rectification, entitled to be registered and is in possession. Mr Jackson submitted that such entitlement either deprived the court of the power to rectify or at least would render rectification abortive. This, he said, is because in the absence of an objection being upheld, Mr Rafaq is entitled to registration from the date of his application, whereafter the rectification of the registration of Mr Marvi’s title would have no effect. If what was said, albeit obiter by Arden J in Malory Enterprises Ltd v Cheshire Homes (UK) Ltd [2002] EWCA Civ 151; [2002] Ch 216, in [79], namely that there is no power to order that rectification should take effect from a date prior to the date of application is accepted as, in the absence of contrary argument I do, then Mr Jackson submitted rectification of an earlier title from such later date can have no effect.
[21] Mr Jackson was not clear that this is the result of Mr Rafaq’s application being pending rather than his title having been actually registered, or whether he was contending that the assumption made, for example, by Blackburne J in Pinto v Limb [2005] EWHC 630 (Ch), to which I was referred, that it is implicit in subsection (3) that effective rectification could be made after a title had been registered other than by the original fraudster, was wrong. In my judgment, Mr Jones was right in submitting that rectification could effectively entitle the claimant’s title to be entered on the register, with the effect of bringing Mr Rafaq’s right to be registered to an end by virtue of section 82(2). This provides:
The register may be rectified under this section, notwithstanding that the rectification may affect any estates, rights, charges, or interests acquired or protected by registration, or by any entry on the register, or otherwise.
[22] I turn therefore to consider the exercise of a discretion to rectify the register on the basis that the claimant is the admitted victim of Mr Marvi’s fraud.
[23] Mr Jones submitted, and I accept, that there must be at least a presumption in favour of rectification where a person has been deprived of his ownership of a property by the forgery of another. I put it this way because the circumstances to which Mr Cherryman QC, sitting as a judge of the High Court in Hayes v Wade Yacoub unreported 10 June 1994, referred as usually constituting an overwhelming case for rectification do not arise, namely where the forger is actually a co-owner.
[24] Mr Jones, although accepting that the availability of indemnity under section 83(1) for any person suffering loss by reason of the rectification assessed as at the date of rectification should not be decisive, submitted that it should be taken into consideration. He further prayed in aid the fact that any indemnity to which the claimant might be entitled under section 83(2), should the error that has occurred in the register not be rectified, will be based upon the value of the property only as at the date of the registration of Mr Marvi’s title, namely 2 May 2001, albeit plus interest, and that it may be further reduced if the Land Registry invokes para 5(2) of Schedule 8 to the Land Registration Act 2002 (the 2002 Act). That provides:
(2) Where any loss is suffered by a claimant partly as a result of his own lack of proper care, any indemnity payable to him is to be reduced to such extent as is fair having regard to his share in the responsibility for the loss.
[25] Although Mr Jones did not rely upon, because he did not admit the bank’s claim, it seems to me that a further consideration in favour of rectification is that the bank would, upon rectification, be entitled to be subrogated to security that would, in effect, put it back into the position of enjoying its original security granted by the claimant, which additional security is now valued with interest at £79,530.41, although it would have to look to indemnity under section 83 for the loss of the security for £189,550 advanced on the purchase by Mr Rafaq.
[26] Although Mr Jones did not feel able to concede such entitlement to subrogation, his submissions to the contrary were, I think I may properly say, merely formal. I can therefore set out the basis for such entitlement quite shortly.
[27] Mr Jackson referred me to Boodle Hatfield & Co v British Films [1986] PCC 176, where Nicholls J applied the doctrine of subrogation to the circumstances that a solicitor had, on behalf of the company that went into liquidation, paid money due on completion of the purchase of property by the company, on the faith of the company’s representations that the cheque provided to the solicitor to cover such payment would be met on its presentation. It was not. Nicholls J held that the solicitor should be subrogated to the lien that the vendors would have had over the property had the solicitor not paid that part of the purchase price because, in the circumstances of the case, that would not have led to an unfair result.
[28] Mr Jackson limited his claim for such subrogation to the extent of the claimant’s enrichment were he to become entitled to a title unencumbered by the bank’s original security, paid off by money obtained by Mr Marvi by charging the property to iGroup by the use of forged documents.
[29] Mr Jones submitted that there would be no equitable lien in favour of Mr Marvi and therefore there is nothing for the bank to be subrogated to. In my judgment, that cannot be right. The fact that Mr Marvi was acting fraudulently as against the true owner merely means that he would be the constructive trustee of the money due from the purchaser of the title that section 69 of the 2002 Act enabled him to |page:74| pass to that purchaser. If, therefore, the purchaser failed to pay the due price, Mr Marvi would have held such lien on behalf of the claimant and the bank can properly be held to be subrogated to it, to the extent that that avoids unjust enrichment of the claimant.
[30] Mr Jackson claims rectification alternatively by the route that Peter Gibson LJ adopted in Castle Philips Finance & Co Ltd v Piddington [1995] 1 FLR 783, applying the principle enunciated in Butler v Rice [1910] 2 Ch 277 to a chain of transactions. The principle is that “where a third party pays off a mortgage, he is presumed, unless the contrary appears, to intend that the mortgage should be kept alive for his own benefit”, see p790D. The lord justice then said, at p792F:
Mr Norman advanced the further argument that it would be an unwarranted extension of the Butler v Rice principle if CP were to be held entitled to step into the shoes of Lloyds by what he called sub-subrogation. For my part, I see no conceptual difficulty in this. As the judge held, Barclays was entitled to the Lloyds’ security by subrogation when Barclays discharged the debt to Lloyds, thinking that it was to obtain an effective security for its own money. When CP discharged the debt to Barclays, thinking that it was obtaining an effective security for its own money, it became entitled to the same security as Barclays did. I would, therefore, hold that by subrogation CP became entitled to the same security as that held by Barclays, that is to say the Lloyds’ charge.
[31] I have already traced how the bank’s payment enabled the discharge of Battersea Park’s security. Battersea Park’s money had discharged iGroup’s security. iGroup’s money had discharged the valid mortgages granted by the claimant to the bank. Thus, iGroup, which obtained no valid security, was subrogated to the bank, and Battersea Park obtained the same security as iGroup had had and the bank in turn became entitled to that same security when its money was used to discharge Battersea Park’s security granted to it by Mr Marvi, before Mr Marvi had registered the title that would have enabled him to make an effective disposition.
[32] This analysis was advanced by way of amendment to the bank’s original claim to be subrogated to the invalid mortgage granted to Battersea Park. Such amendment was permitted by consent during the course of the hearing. I think that this claim is a proper alternative to the claim to be subrogated to the unpaid vendor’s lien, but leads only to the same conclusion.
[33] The first consideration against the exercise of a discretion to rectify is that the policy of the 1925 Act favours registered proprietors in possession being left with their title undisturbed: see Kingsalton Ltd, per Peter Gibson LJ, in [28], per Arden LJ, in [40], and per Sir Christopher Slade, in [52]. Of course, as I have already held, Mr Rafaq is not the registered proprietor, although it is the mere accident of Mr Jafari’s unjustified caution that has had that result. The important consideration, however, is that he is now and was at the date of the claimant’s application already in possession. I have heard his evidence as to that, and had some documents placed before the court.
[34] Although Mr Rafaq’s evidence, given through an interpreter, appeared somewhat evasive and less than frank, I am satisfied that he agreed to buy the flat through an estate agent in a perfectly ordinary way, completely ignorant of any wrongdoing by Mr Marvi as vendor. I am further satisfied that immediately after the transfer to him, on 7 January 2003, he went into the flat, found that Mr Marvi or friends of his still had access to it, and secured his possession by changing the locks. He then gave a builder called Aboud access to do work while he went to Syria until the end of the month. On his return, he found Aboud in occupation. He attempted to evict him and, on 5 February 2003, Aboud obtained an injunction restraining him from so doing. That injunction was discharged on 31 March 2003, although it was not until a year later that Mr Rafaq was granted an order for possession. It then took until August 2004 before he let the premises. At all times, however, he has been in possession in the sense that he has had the right to receive rents and, since August 2004, he has in fact done so.
[35] I find, however, that he bought the flat fully furnished. I do not believe that he had any immediate intention to occupy it as his home, still less, as he told me, with his wife and child from whom he was separated. He has, however, clearly expended money in obtaining physical possession, and on rendering the flat fit for occupation. Although Mr Rafaq would be entitled to the loss of the investment value of the flat should the register be rectified, I do not think that he would be entitled to compensation in respect of such trouble and expense that was embarked upon in ignorance of the claimant’s claims and as I believe continued in good faith.
[36] Nevertheless, if these factors were the totality of relevant considerations, I would, on balance, conclude that the register should be rectified in the claimant’s favour. I think, however, that the circumstances in which the erroneous entry has come to be made on the register make that clearly inappropriate and that justice would be best served by my refusing the claimant’s application.
[37] Even allowing (as I do) for the claimant’s less than complete facility in English and his apparent diffidence in the face of the court, he was an unsatisfactory witness. He was either telling the court a great deal less than he knew, or, as I think more probable, he knew a great deal less about his claim than one would expect a young man with a title to a valuable property to have known about the dealings in respect of it. Although a scanty witness statement has been signed by his father, he has not attended because it is said that the father’s mother has fractured an arm.
[38] The claimant was born, according to his passport, on 19 October 1973. He was, therefore, a little older than he said in his witness statement when, in 1995, he came to England, first to study English and then to enrol on a business studies course at Westminster University. At first, he lived in a flat in Cricklewood owned by a Mr Abadi, a friend of his father who was studying in Cambridge. Mr Abadi helped him to instruct a firm of solicitors, Nattu & Co, and to complete the documentation, including the application for a mortgage containing false particulars of employment, which he needed for the purchase, the following year, of the flat for £69,000.
[39] Of that sum, £30,000 was provided by his father and the remainder borrowed from the bank. His monthly payments to the bank began on 11 August 1996. Although I have not been able to trace the payments through the bank statements that he produced, I accept that they were made by direct debit out of his accounts with Barclays bank to which his father provided the income. He similarly discharged the service charge for the flat.
[40] Shortly after the purchase of the flat, Mr Marvi arrived in England. The claimant’s father knew Mr Marvi’s stepfather and arranged for the claimant to meet him at the airport and accommodate him in the flat when he was in London. In 1998, Mr Marvi came to study in London and moved into the flat entirely. The claimant said that during this period he lent Mr Marvi money to meet his needs. Meanwhile, in July 1997, the claimant obtained a second loan, this time of £30,000 from the bank. He was unable to say for what purpose he obtained the loan; the application said that it was to purchase a second property. Nor could he say what happened to the money. The increased monthly payments were met from his Barclays account, which appears for the most part to have had deposits made in cash. Presumably his father approved, or maybe initiated this second mortgage.
[41] It seems that the claimant left the United Kingdom in around July 1999, leaving Mr Marvi in occupation of the flat under an arrangement that he would pay sufficient money into the claimant’s Barclays’ account to meet the payments on the bank’s mortgage and the outgoings on the flat.
[42] Before he left, a letter dated 17 June 1999 was received by the bank enquiring as to the outstanding debt. The claimant denies writing it. I think that it must have been written with his knowledge on his behalf. He admitted that he did instruct Nattu & Co to provide a power of attorney that, on 22 July 1999, he executed in favour of a Mr Musawi, whom he describes as a friend of his father’s. Presumably his father then discontinued his payments into the claimant’s Barclays’ account. The mortgage payments fell into arrears and, on 1 November 1999, it appears that it was probably Mr Marvi who phoned the bank to ascertain the amount of the arrears. This probably followed receipt of a default letter sent on 27 October 1999, whereafter only two further payments were made on the first account, although more were made on the second. |page:75|
[43] The claimant was in England at the beginning of 2000. He said that he made no enquiry as to the state either of the mortgage that Mr Marvi was supposed to have been paying or of his bank account, which Mr Marvi was supposed to be feeding. It appears, however, from a witness statement from his father that, by this time, Mr Marvi’s stepfather had incurred substantial debts to the father. During that year, it was proposed that such sums should be repaid by Mr Marvi’s mother using a legacy that she had been left in Canada to clear the bank’s mortgages.
[44] On 15 August 2000, the bank’s charge was indeed redeemed, not, however, by Mr Marvi’s mother but by a remortgage to iGroup obtained by Mr Marvi in the claimant’s name and forging his signature. The claimant, however, admitted to having visited England again in June 2000, although he denied discussing the mortgage or his affairs with Mr Marvi. None the less, it appears that both he and his father accept that Mr Marvi and/or his family had authority to redeem the mortgage. The claimant made no arrangement with Mr Marvi as to what payment he should make for his continued occupation of the flat once the liability to the bank had been discharged in consideration of the loan to Mr Marvi’s stepfather. This is explicable only because either the claimant regarded the property as his father’s rather than his, or because he was wholly neglectful of his own interests.
[45] If the beneficial interest does indeed belong to the father, and it is he who has managed these affairs, the lack even of a comprehensive witness statement from him, accepting the difficulty in his actually coming to give oral evidence, shows his neglect of his interests.
[46] Nevertheless, it does appear that the claimant and/or his father were anxious to receive confirmation that the bank’s charge had been redeemed. There can be no other explanation of the letter dated 11 September 2000 from the bank addressed to the claimant giving such confirmation, at least in respect of one account, in response to a phone call, even if the phone call was made by Mr Marvi impersonating the claimant. That was faxed to the claimant with a covering sheet, clearly wrongly dated, Sunday, 1 January 2000. I do not think that that was a mistake for 1 January 2001, which was not a Sunday. Perhaps the month was wrong rather than the day or the year and it should have been October. Whatever was the proper date, I infer that it was probably received before 19 December 2000 when Mr Musawi, as the claimant’s attorney, instructed Nattu & Co to obtain such confirmation from the bank. The claimant was himself in England over Christmas to the New Year of that year.
[47] The solicitor on his behalf asked also for the return of his life policy that he had charged to the bank. It was told, at any rate no later than early March 2001, that the charge had been redeemed but that the title deeds had been sent to another firm of solicitors, Bernard Elliston & Son. It reported that to Mr Musawi. The claimant denied being told. It may be that Mr Musawi reported only to the claimant’s father. Mr Musawi, however, instructed Nattu & Co to obtain office copy entries and they were obtained by 3 May 2001. They showed the claimant still as the proprietor, but they showed the charge to iGroup that he had not authorised.
[48] Although Mr Marvi had by that time forged the transfer from the claimant to himself, namely on 2 April 2001, it was not registered until 4 July 2001. Before that date, however, it was known to the claimant’s attorney that: (i) the title deeds had been sent to an unknown solicitor without the claimant’s authority; (ii) a charge had been completed and registered in favour of iGroup without his authority; and (iii) his life policy had not been returned as it should have been. The claimant could also have taken steps to trace the dealings on his bank account, which he had left, in effect, in Mr Marvi’s control. If at that time any steps had been taken to protect the claimant’s interests, either the registration of Mr Marvi’s title would have been prevented, or at least rectification proceedings could have been begun before Mr Marvi had the opportunity for further dealing with the property.
[49] Not only was nothing done with the urgency that such evidence of improper dealing demanded, nothing was done before Mr Marvi contracted to sell to Mr Rafaq on 20 December 2002, that is to say, more than 18 months later. At that date, the claimant was again in England. He had met Mr Marvi and become aware that Mr Marvi had, at the least, stolen the money in his bank account and then closed it. In spite of this, no steps were taken to protect his position and the application to the Land Registry for rectification was not made until 24 April 2003.
[50] I know nothing as to what may have passed between the claimant’s father and Mr Marvi’s family during this period of more than 18 months. It seems improbable that, if the claimant is to be believed when he said that Mr Musawi did not report to him, he failed also to report to the claimant’s father at whose suggestion he had been appointed the claimant’s attorney. Either the claimant’s father knew of the improper transactions, or he was as little vigilant for his own affairs as was the claimant.
[51] It seems to me that, even if the fraudulent registration of Mr Marvi’s title was not wholly the result of the claimant’s own lack of proper care, the failure to inform himself about it or to take steps that would have avoided innocent parties being given title to the property, does show such lack. Although, in my judgment, I should try to assess the balance of equity between the parties, both innocent of any fraud, without regard to the effect of the statutory indemnity, just as in other fields the court does not treat a party differently according to whether it is insured, nevertheless, I cannot put it wholly out of my mind. Where, as I here find, a party’s loss is caused by its own lack of proper care, I think that it would be perverse to have regard to the effect of the statutory indemnities available to the respective parties as disadvantaging the claimant and therefore, as I was asked to do, to treat that result as a reason for rectification, rather than treating the statutory indemnity position as a reason additionally to refuse rectification and avoid relieving the claimant of the consequences of his own disregard for his own interests.
[52] It is for these reasons that, notwithstanding the factors that would otherwise lead to rectification, I dismiss the claimant’s claim.
Claim dismissed.
