Mortgage – Registration – Cancellation – Mistake – Respondent’s predecessor making loan to appellants secured by legal charge over property – Mortgage conditions providing for charge to cover further advances – Respondent registering charge at land registry – Original loan being redeemed – Registered charge being cancelled – Respondent making further loan to appellants – Respondent submitting form to Land Registry and charge being discharged from property – Court granting respondent’s application to rectify register – Appellants appealing – Whether judge erring in ordering rectification of register to reinstate registration – Whether mistake requiring correction – Whether appellants entitled to indemnity – Appeal dismissed
The appellants had fallen into arrears with payments in respect of a loan made by the respondent’s predecessor bank. A dispute arose whether the loan was secured by a charge on the appellants’ property at 22 Parc Penscynnor, Cilfrew Neath, South Glamorgan. The respondent argued that it was so secured by virtue of a mortgage deed signed by the appellants in relation to an earlier loan which had been redeemed. Further, a cancellation of the registered charge in respect of that deed (e-DS1), in which the respondent acknowledged that the property was no longer charged as security for sums due under the charge, had been made as a result of a mistake by the bank.
The respondent contended that the mistake had been made inadvertently in large part following receipt of a letter from the appellants’ solicitor, stating that the mortgage secured on the property had been discharged and requesting the removal of the entry by submission of form e-DS1, but referring to the original loan account number. The appellants, who had been subsequently made bankrupt, contended that the deed only applied to a loan advanced at that time and not to further advances. Therefore, the e-DS1 had been submitted correctly.
Under clause 1.2 of the mortgage conditions, which applied to the charge, “mortgage debt” was defined as: “(a) all of the money you owe us from time to time under any offer, including any unpaid interest, costs and fees…”. Clause 3 provided: “This mortgage secures further advances.” The court granted the respondent’s application for rectification of the register and directed that the Land Register be altered by re-registration of the charge and dismissed a claim by the appellants for compensation and relief against the respondent: [2015] EWHC 1543 (Ch); [2015] PLSCS 167.
The appellants appealed contending that the judge had erred in rescinding the application for discharge and ordering that the register be “altered and/or brought up to date” by re-registration of the bank’s charge with the same priority as if it had never been removed. They also sought an indemnity from the Chief Land Registrar who was granted permission to intervene.
Held: The appeal was dismissed.
(1) The correct starting point was to consider whether, in the circumstances of this case, the alteration of the register that the judge was invited to order was properly classified as made for the purpose of bringing the register up to date within para 2(1)(b) of Schedule 4 to the Land Registration Act 2002 or for the purpose of correcting a mistake within para 2(1)(a). It was correct to focus on the position at the point in time when the entry or deletion was made. If a change in the register was correct at the time it was made, it was hard to see how it could be called a mistake. A distinction had to be drawn between a void and a voidable disposition. An entry made in the register of an interest acquired under a void disposition should not have been made, and the registrar would not have made it had the true facts been known. By contrast, a change made to the register to reflect a transaction which were merely voidable was correct at the time it was made. Accordingly, the registration of a voidable disposition such as that in the present case, before it was rescinded, was not a mistake for the purposes of Schedule 4. If the disposition was made by mistake, that did not render its entry on the register a mistake. The entry could not become a mistake if the disposition was avoided at a later date: Norwich and Peterborough Building Society v Steed (No 2) [1993] Ch 116 followed. Baxter v Mannion [2011] 2 EGLR 29 considered.
(2) Once the judge had rescinded the e-DS1 application to discharge, it was necessary to alter the register by bringing it up to date to reflect the rights of the parties as the judge found them to be. Under para 3(3) of Schedule 4, if the court had the power to make an order under para 2, it had to do so unless there were exceptional circumstances which justified not doing so. There were no exceptional circumstances in the present case: Garwood v Bank of Scotland [2013] EWHC 415 (Ch); [2013] PLSCS 71 considered.
(3) The judge appeared to have elided the question whether the e-DS1 constituted a mistake with whether there was a mistake in the register and incorrectly taken the view that the alteration amounted to rectification. The alteration sought by the respondent was to bring the register up to date. It was therefore unnecessary to establish that the appellants had caused or contributed to the mistake or that it was unjust for the alternation not to be made. The respondent remained entitled to be re-registered as proprietor of the 2004 charge but the judge’s order had to be varied. The court had no power to change for the future the priority of an interest or backdate the alteration to re-register the charge “as if it had never been removed”.
(4) Where the correction of a mistake would prejudicially affect the title of a registered proprietor, Schedule 8 of the 2002 Act made provision for an indemnity by the registrar in the circumstances there set out. However, this case fell outside the scope of para 1(1) of Schedule 8 since it involved neither rectification nor a mistake. Accordingly, the application for an indemnity failed.
The appellants appeared in person; Nicole Sandells (instructed by Walker Morris LLP, of Leeds) appeared for the respondent; Nicholas Trompeter (instructed by the Government Legal Department) appeared for the intervenor.
Eileen O’Grady, barrister
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