Land registration – Restriction on title – Cancellation – Parties agreeing surrender of lease subject to payment agreement – Respondent director of tenant company entering restriction on registered freehold title – Appellant owner applying to remove restriction – First-tier Tribunal (FTT) refusing application – Appellant appealing – Whether FTT erring in law – Appeal allowed in part
The appellant was the registered freehold proprietor of The Carlton Tavern, Carlton Vale, London, NW6. The respondent was the sole director and owner of a company (GPS) which had been the tenant of the property since October 2010.
The appellant acquired the property in 2013 for redevelopment. Following negotiations between the appellant, GPS and the respondent, a surrender of the lease was agreed (the payment agreement). There was a form of transfer (TR1) in April 2015, which effected the surrender.
A restriction was entered against the property in August 2015, apparently pursuant to the payment agreement. The appellant sought the removal of the restriction. It argued, amongst other things, that by reason of the forged signature of the then sole director of the appellant (C), the payment agreement was a nullity. Since the respondent objected to its removal, the application was referred to the First-tier Tribunal (FTT).
The FTT concluded that the appellant was not entitled to have the restriction removed and directed the Chief Land Registrar to cancel the application. The judge held, amongst other things, that as solicitors appointed by the appellant had, in their dealings with the respondent, acted with the ostensible authority of the appellant, the appellant was bound by the payment agreement.
The appellant appealed. The critical point was that the purported signature of C on the appellant’s counterpart of the payment agreement was a forgery.
Held: The appeal was allowed in part.
(1) An ostensible authority was a legal relationship between the principal and the contractor created by a representation that the agent had authority to enter on behalf of the principal into a contract within the scope of the apparent authority, which rendered the principal liable to perform any obligations imposed upon him by such contract. The representation, when acted upon, operated as an estoppel, preventing the principal from asserting that he was not bound by the contract. It was irrelevant whether the agent had actual authority to enter into the contract: Ruben v Great Fingall Consolidated [1906] AC 439, Lloyd v Grace, Smith & Co [1912] AC 716 and Freeman & Lockyer v Buckhurst Park [1964] 2 QB 480 considered.
The availability of the doctrine of ostensible authority depended upon the particular facts of the case. A fairly unusual set of facts would be required for the doctrine to operate in a case of forgery of a company document. In such a case, the doctrine could, in principle, operate so that the contract fell to be treated as validly signed on behalf of the company: Ruben considered.
Therefore, as a matter of law it was open to the FTT, at least in principle, to find that the solicitors acted with the ostensible authority of the appellant, in representing that the payment agreement had been validly executed.
It was a question of fact for the FTT what ostensible authority the appellant’s solicitors had when they exchanged the ostensibly executed copy of the payment agreement. Ultimately, there was no basis upon which to conclude that the FTT made findings that were not open to it.
(2) The principle that a contract should be interpreted, so far as possible, so as not to permit one party to take advantage of its own breach of that contract, applied where a causal connection could be shown between the wrong of a party and the contractual right which that party sought to rely upon. The principle was not an absolute rule. It might be displaced by express contractual provision or by the intentions of the parties apparent from the express terms of the contract: Alghussein Establishment v Eton College [1988] EGCS 69; [1988] 1 WLR 587 applied.
In the present case, the principle could not apply because of the absence of a causal connection between the appellant’s breach of its obligation to make the payment, pursuant to clause 3.2 of the agreement and its reliance upon clause 6.4 which provided that the restriction would be removed after five years. As the appellant did not need to rely upon its breach of clause 3.2 to rely upon clause 6.4, the required causal connection did not exist.
Similarly, the wider common law doctrine that a party could not rely upon an illegality in support of its cause of action could not apply in the present case. Since the appellant had no need to rely upon its own breach of clause 3.2 to rely upon clause 6.4, the required causal connection did not exist. Therefore, the common law principle that a party could not take advantage of his own wrong was not engaged.
(3) The respondent’s obligation to assist in the removal of the restriction from the expiry of the five-year period in clause 6.4 was not affected by the fact that the appellant’s obligation to make the payment had been triggered, but not complied with, either as a matter of construction of the payment agreement or by any wider principle that a party could not take advantage of its own wrong.
Accordingly, the FTT was wrong, as a matter of law, to decide that the payment agreement did not require the removal of the restriction five years after the payment agreement was entered into.
It followed that the respondent was obliged to assist the appellant in the removal of the restriction. It was impossible to say that the restriction was still required under rule 97.2 of the Land Registration Rules 2003. The UT would remake the relevant parts of the decision as a decision that the restriction was no longer required and should be removed from the registered title.
(4) (Obiter) Section 44(5) of the Companies Act 2006 deemed a document to have been duly executed by a company if it purported to be signed in accordance with section 44(2) in favour of a purchaser in good faith for valuable consideration.
Section 44(5) was not intended to operate where the signature or signatures on behalf of the company, which appeared on the relevant document in apparent compliance with the requirements of section 44(2), had been forged. The FTT had been wrong, as a matter of law, to decide that section 44(5) could operate in such circumstances: Lovett v Carson Country Homes Ltd [2009] EWHC 1143 (Ch) considered.
Brooke Lyne (instructed by Naylor Solicitors LLP) appeared for the appellant; The respondent appeared in person.
Eileen O’Grady, barrister
Click here to read a transcript of Carlton Vale Ltd v Gapper
