In Chief Land Registrar v Caffrey & Co [2016] EWHC 161 (Ch) the High Court was asked to consider whether a conveyancer, who had submitted a paper application to register the discharge of a registered charge, was liable to the Land Registry for the loss caused by the deletion of the charge from the register, following the discovery that the DS1 form that the borrower had provided was, in fact, a forgery.
The borrower had informed the conveyancer that the lender was represented by another firm of solicitors. That was untrue, but the conveyancer submitted the form to the Land Registry without verifying the position and responded to the Land Registry’s requisition requesting evidence that the person who signed the DS1 had had the authority to do so by certifying and sending the Land Registry a copy of the power of attorney supplied by the borrower.
The Land Registry removed the charge from the title of the property and, although it was restored to the register when the fraud was discovered, the lender had to cede priority to a bank that had registered a charge against the property in the meantime. The lender sought and obtained an indemnity from the Land Registry, which, in turn, sought to recoup its losses from the conveyancer who submitted the DS1.
The Land Registry suggested that the conveyancer should have verified that the DS1 was genuine and claimed to be subrogated to any rights that the lender had against him. It claimed that he should have checked whether another firm of solicitors had, in fact, acted for the lender, whether the power of attorney was genuine, and whether the lender actually wished to discharge the charge. The judge rejected the Land Registry’s arguments. He observed that it was not fair, just or reasonable to make the conveyancer responsible to the lender for the risk of fraud within an inherently risky system – and ruled that the conveyancer had not acted for, and did not owe a duty of care to, the lender.
Surprisingly, and for reasons that are unexplained, the judgment makes no mention of the Land Registry’s identification rules, even though they were in force when the conveyancer submitted the DS1 to the Registry. However, the judge decided that the conveyancer was liable to the Land Registry in tort for negligent misrepresentation because he had known that the Registry would rely on the information provided.
The judge accepted that the conveyancer was not a detective and that he was dealing with professionals engaged in running the land registration system. But, in the absence of any challenge to the Land Registry’s arguments – because the conveyancer did not appear, and was not represented – the judge felt obliged to accept the registrar’s argument that the conveyancer had expressly or impliedly represented to the Land Registry that he had taken sufficient steps and/or was in possession of sufficient facts to satisfy himself that the discharge was valid.
Practitioners will welcome the judge’s observation that the result might be different in another case, if a solicitor were to challenge the case brought by the Land Registry. Meanwhile, the decision reminds us of the need for constant vigilance in a market that attracts fraudsters of all shapes and sizes.
Allyson Colby is a property law consultant
