Rectification – Transfer of land – Transferee registered as proprietor – Transferee granting charge in favour of respondent bank to secure indebtedness – Appellant claiming transfer obtained by fraud – Whether charge invalid – Whether rectification available to set aside charge – Permission to appeal refused
A company owned by L obtained a transfer of eight acres of developable land from the claimant. The transfer showed a purchase price of £15m, but the claimant maintained that that sum had not in fact been paid to him and that the transfer had been obtained by fraud or was a forgery. In 2005, the company executed a charge over the land in favour of the respondent bank to secure indebtedness that later reached £100m. When the company went into liquidation, the respondent wanted to sell the land as mortgagee but was obstructed by various Land Registry registrations. Those had been made by the appellant, who claimed that he was still the beneficial owner of the land. The respondent brought proceedings against the appellant to clear its title. By his defence and counterclaim, the appellant sought to have the property transferred into his own name free from the charge, which he claimed was defective in circumstances where the title charged had been procured by fraud or forgery.
The respondent applied for summary judgment in its favour on the ground that the appellant had no arguable defence. Giving judgment for the respondent, the judge held that even if the matters alleged by the appellant rendered the transfer void, the register was still conclusive as to the matters shown therein unless rectified and that the company, as the registered owner, could charge the property to the respondent; even if the transfer could be set aside, the appellant would still have to show grounds for rectification to remove the charge.
Permission to appeal was refused by the court below and by the Court of Appeal on paper. In a renewed oral application, the appellant contended that: (i) rectification was available to him under para 2(1)(a) of Schedule 4 to the Land Registration Act 2002 for the purposes of correcting a mistake; and (ii) the charge was a mistake or the result of a mistake in circumstances where the mortgagee had actual notice that the mortgagor did not have good title to the land. He contended that the respondent ought to have known that L was untrustworthy and that the transaction was suspect and he relied upon the fact that L had been disqualified as a director for the maximum period of 15 years and imprisoned for contempt of court. He further submitted that rectification might be available even where the mortgagee did not have such notice.
Held: Permission to appeal was refused.
Although the appellant could probably show that the registration of the original transfer was a mistake where it had been obtained by fraud, he needed to show that the registration of the charge was a mistake or the result of a mistake. The charge had been executed in proper form by the registered proprietor and it was not intrinsically flawed. The phrase “correcting a mistake” needed to be explored and developed in future litigation, but it was not arguable that the registration of a charge could be said to be an error or the result of a mistake unless the party asserting the mistake could show that the mortgagee had had actual notice of the defect of title of the mortgagor or that it had ignored matters that, had it addressed properly, would have shown that the title was defective. No case would arise for rectification for mistake in the absence of such notice. The appellant was not able to show that the respondent had had notice of the kind required.
The appellant’s complaints with regard to the lack of a proper title on the part of the company should have been dealt with by lodging a caution against the title; had he done so, the respondent would have been on notice of his interest and would not have taken the charge.
The appellant appeared in person; Simon Hartley (solicitor-advocate at Linklaters LLP) appeared for the respondent.
Sally Dobson, barrister