Land registration – Disposition by bankrupt – Indemnity – Bankrupt transferring property before bankruptcy restriction entered – Restriction subsequently entered – Disponee applying to register title – Defendant registrar registering title and removing restriction – Whether that a mistake entitling claimant trustee in bankruptcy to indemnity – Effect of section 86(5) and (6) of Land Registration Act 2002 – Preliminary issue determined in favour of defendant The claimant was the trustee in bankrupty to a person who, prior to the bankruptcy, had been the sole registered proprietor of a property. The bankrupt’s estate vested in the claimant by virtue of section 306 of the Insolvency Act 1986. After the bankruptcy, but before any bankrupty restriction was entered on the title to the property, the bankrupt transferred that property to a purchaser. The purchaser did not effect registration of her title within the priority period. Subsequently, the claimant entered a bankruptcy restriction against the title. On an application by the purchaser, the defendant registrar registered her as proprietor in place of the bankrupt and cancelled the restriction. The claimant contended that the registration of title and cancellation of the restriction was a mistake, for which he was entitled to an indemnity. A preliminary issue was tried as to whether the purchaser could rely on section 86(5) of the Land Registration Act 2002, as a purchaser for valuable consideration in good faith and without notice of the bankruptcy, in order to take free of the claimant’s rights. The claimant contended that the purchaser could not rely on section 86(5) where her title had not been registered before the bankruptcy restriction was entered. He relied on section 86(6) of the 2002 Act, pursuant to which subsection (5) only applied if the relevant registration requirements were met in relation to the disposition. He contended that the title of a trustee in bankruptcy was not avoided until such registration took place. Held: The preliminary issue was determined in favour of the defendant. Section 86(5) of the 2002 Act focused on the time of the disposition, not the time of registration. The trustee’s title was avoided if no restriction was registered at the date of disposition, rather than any later date. There would be no point in so precisely specifying the date of disposition for the purposes of notice if the restriction could be entered at any time before registration in order for the trustee’s title to be saved. The reason why the protection afforded by section 86(5) only took effect in favour of a proprietor who became registered was to ensure that it only extended to persons who were entitled to be registered. If the disponee did not become registered for some unrelated reason, then the protection did not come into operation. However, the registration could be effected at any time. Section 86(5) and (6) were modelled on the provision that they replaced, namely section 61(6) of the Land Registration Act 1972. There was nothing to suggest that the new provisions were intended to have a different effect from the old, as opposed merely to clarifying them. There was nothing in the 2002 Act to suggest a shift in policy. The statute could not protect both the innocent disponee from the bankrupt and innocent unsecured creditors. To the extent that the 1972 Act favoured one or the other, the same applied to the 2002 Act: Trustee in Bankruptcy of St John Poulton v Ministry of Justice [2010] EWCA Civ 392; [2010] 3 WLR 1237 applied. The registrar was specifically empowered, under section 41(2) of the 2002 Act, to disapply a restriction where the circumstances warranted it and it had been appropriate and correct for him to do so in the instant case. James Dawson (instructed by DWF LLP) appeared for the claimant; Timothy Morshead (instructed by the Treasury Solicitor) appeared for the defendant. Sally Dobson, barrister
Land registration – Disposition by bankrupt – Indemnity – Bankrupt transferring property before bankruptcy restriction entered – Restriction subsequently entered – Disponee applying to register title – Defendant registrar registering title and removing restriction – Whether that a mistake entitling claimant trustee in bankruptcy to indemnity – Effect of section 86(5) and (6) of Land Registration Act 2002 – Preliminary issue determined in favour of defendant The claimant was the trustee in bankrupty to a person who, prior to the bankruptcy, had been the sole registered proprietor of a property. The bankrupt’s estate vested in the claimant by virtue of section 306 of the Insolvency Act 1986. After the bankruptcy, but before any bankrupty restriction was entered on the title to the property, the bankrupt transferred that property to a purchaser. The purchaser did not effect registration of her title within the priority period. Subsequently, the claimant entered a bankruptcy restriction against the title. On an application by the purchaser, the defendant registrar registered her as proprietor in place of the bankrupt and cancelled the restriction. The claimant contended that the registration of title and cancellation of the restriction was a mistake, for which he was entitled to an indemnity. A preliminary issue was tried as to whether the purchaser could rely on section 86(5) of the Land Registration Act 2002, as a purchaser for valuable consideration in good faith and without notice of the bankruptcy, in order to take free of the claimant’s rights. The claimant contended that the purchaser could not rely on section 86(5) where her title had not been registered before the bankruptcy restriction was entered. He relied on section 86(6) of the 2002 Act, pursuant to which subsection (5) only applied if the relevant registration requirements were met in relation to the disposition. He contended that the title of a trustee in bankruptcy was not avoided until such registration took place. Held: The preliminary issue was determined in favour of the defendant. Section 86(5) of the 2002 Act focused on the time of the disposition, not the time of registration. The trustee’s title was avoided if no restriction was registered at the date of disposition, rather than any later date. There would be no point in so precisely specifying the date of disposition for the purposes of notice if the restriction could be entered at any time before registration in order for the trustee’s title to be saved. The reason why the protection afforded by section 86(5) only took effect in favour of a proprietor who became registered was to ensure that it only extended to persons who were entitled to be registered. If the disponee did not become registered for some unrelated reason, then the protection did not come into operation. However, the registration could be effected at any time. Section 86(5) and (6) were modelled on the provision that they replaced, namely section 61(6) of the Land Registration Act 1972. There was nothing to suggest that the new provisions were intended to have a different effect from the old, as opposed merely to clarifying them. There was nothing in the 2002 Act to suggest a shift in policy. The statute could not protect both the innocent disponee from the bankrupt and innocent unsecured creditors. To the extent that the 1972 Act favoured one or the other, the same applied to the 2002 Act: Trustee in Bankruptcy of St John Poulton v Ministry of Justice [2010] EWCA Civ 392; [2010] 3 WLR 1237 applied. The registrar was specifically empowered, under section 41(2) of the 2002 Act, to disapply a restriction where the circumstances warranted it and it had been appropriate and correct for him to do so in the instant case. James Dawson (instructed by DWF LLP) appeared for the claimant; Timothy Morshead (instructed by the Treasury Solicitor) appeared for the defendant. Sally Dobson, barrister
