Land registration – Mistake – Rectification – Court making vesting order in respect of property and legal charge registered in favour of bank – Court later setting aside vesting order as obtained by reference to forged documents without prejudice to rights of bank – Claimant seeking rectification of register – Whether court order obtained by reference to forged documents and entered on Land Register resulting in “mistake” under Land Registration Act 2002 giving court power to alter register for purpose of correcting mistake – Claims dismissed
The deceased (J) owned a property at 14 Mirabel Road, London, SW6. When he died in February 1996, the claimant was granted letters of administration but did not register himself as proprietor of the property at the Land Registry and it was vacant for several years. In 2006, the third defendant’s husband (T) brought a claim against J seeking relief in respect of the property which he said had been used as security for a loan provided by him to J in 1987. He relied on three documents as evidencing the transaction and, among other things, sought the transfer to him of the leasehold and freehold interests in the property. On 12 July 2007, the court made a vesting order that entitled T to be entered as the registered proprietor of the property. T charged the property to the first defendant bank and the charge was registered with deemed effect from 29 February 2008.
When the claimant learned about the proceedings, he applied to set aside the vesting order on the ground that it was irregular and had been obtained in reliance on forged documents. By an order dated 10 July 2008, the court ordered that the 2006 claim should continue against the claimant as personal representative of J. He set aside the July 2007 Order albeit without prejudice to the rights of the first defendant and its registered legal charge over the property. The Land Registrar, acting on the July 2008 Order, reinstated the claimant, as administrator of his father’s estate, as proprietor of the property.
The 2006 claim had not been determined when T died on 13 June 2016 and the third defendant continued as his personal representative. The claimant commenced a fresh claim in 2016, contending that the first defendant’s charge was a mistake on the Register that ought to be corrected by rectification. The third defendant was joined, as T’s personal representative. The two claims were tried together. Both the first defendant and the second defendant Land Registrar accepted that the contested documents were forgeries but maintained that the registration of the vesting order was not a mistake as a matter of law, and that there was no proper basis for rectifying the Register by cancelling the first defendant’s charge.
An issue arose whether a court order said to have been obtained by reference to forged documents and given effect to by an entry on the register at the Land Registry resulted in a “mistake” for the purposes of the Land Registration Act 2002, such that the court had power to alter the register for the purpose of correcting that mistake under Schedule 4 para 2(1)(a).
Held: The claims were dismissed.
(1) The third defendant’s claim should be dismissed and she was not entitled to the relief claimed. Although T had carried out extensive renovations to the property, there was no evidence on which the court could determine whether, and if so to what extent, such renovations had in fact increased the value of the property. Furthermore, the claimant would now be left in the unenviable position of either having to sell the property to repay the monies due under the loan obtained by T from the first defendant, or of being subject to the exercise of the first defendant’s power to sell the property to recover the outstanding sum due under that loan. The claimant had not been unjustly enriched in such circumstances.
(2) The contested documents had no dispositive effect in themselves since this was not a case in which a forged transfer had been registered. Although the contested documents had been provided to the Registrar at an earlier date, they were not provided at the time of the application for transfer of the freehold and leasehold title in the property to T. That application was made solely on the basis of the July 2007 Order without which the Registrar could not have made any entry in the register. The July 2007 Order effected the disposition of title; it conferred title on T independently of the contested documents. At the time it was made, the July 2007 Order was valid and effective, albeit susceptible to being set aside by a further order of the court. It had to be complied with under the 2002 Act unless and until it was set aside. Whether or not it was right as a matter of terminology to refer to a court order as being “voidable”, the July 2007 Order was akin to a voidable transaction for the purposes of the analysis of whether it amounted to a mistake under para 2(1)(a) of Schedule 4 to the 2002 Act: Hadkinson v Hadkinson [1952] P 285 applied.
(3) The question of mistake was judged at the time of registration: as a result, the registration of a void transaction might be a mistake on the Register for the purpose of Schedule 4 of the 2002 Act, but the registration of a voidable transaction could not be a mistake if it had not been declared void and set aside before it was registered. As registered proprietor of the freehold title, T had been entitled to exercise an owner’s powers in relation to it pursuant to section 24 of the 2002 Act. Those powers included the power to charge the freehold at law with the payment of money (section 23(1)(b)). In granting the legal charge, T was exercising that power. Furthermore, section 26(3) of the 2002 Act precluded the title of a disponee under owner’s powers being questioned on the basis that some limitation would otherwise affect the validity of the disposition. It could not therefore be said that the creation of the legal charge was invalid, nor that its entry on the register was a “mistake” for the purposes of Schedule 4, para 2(1)(a). Accordingly, the legal charge was valid and bound the freehold title. Any right or equity that the claimant had to apply to set aside the July 2007 Order was unprotected on the register at the time when the legal charge was registered and therefore the legal charge took priority over it pursuant to section 29 of the 2002 Act. If T’s registration as owner of the property was not a mistake, the registration of the first defendant’s charge could not be a mistake either; and neither of those events could retroactively become mistakes on the Register once the vesting order had been set aside and the Register had been updated to reflect the later order: NRAM Ltd v Evans [2018] 1 WLR 639; [2017] PLSCS 147 applied.
Chima Umezuruike (instructed by Riverbrooke Solicitors) appeared for the claimant; Justin Althaus (instructed by TLT LLP) appeared for the first defendant; Katrina Yates (instructed by the Government Legal Department) appeared for the second defendant; Yosefaly Serugo-Lugo (instructed by Montas Solicitors) appeared for third defendant.
Eileen O’Grady, barrister
