Collings v Lee and another

Defendant fraudulently effecting sale of claimant’s property – Defendant registering property in alias name – Defendant executing legal charge under alias name in favour of lender – Lender registered as proprietor of charge – Claimant applying for rectification of register – Section 70(1)(g) of Land Registration Act 1925 – Application allowed – Appeal dismissed The claimant and her late husband lived at 6 Strawberry Hill Road, Twickenham, Middlesex, which was registered in their joint names and was held by them as beneficial joint tenants. In June 1991 they were introduced to the first defendant, who agreed to find a purchaser for the property and to assist them in finding a new house. Between July and August 1991, the first defendant: (i) received £6,500 from the claimant and her husband as fees for finding a buyer for the property; (ii) represented to them that he had sold the property to “S” for £250,000; (iii) obtained the title deeds to the property; procured their execution of a transfer of the property to S; and (iv) obtained a payment from them of £26,000 as a deposit on a new house. In fact, the sale of the property was fraudulent, in that S was an alias for the first defendant, who, under that name, was registered as the proprietor. He had no intention of effecting a sale to a third party, and neither the claimant nor her husband received any of the £250,000. In January 1992 the first defendant executed a legal charge under the name of S in favour of the second defendant, Halifax plc, to secure repayment of an advance to him of £125,030. Halifax was registered at the Land Registry as the proprietor of the charge. Criminal proceedings were subsequently commenced against the first defendant, and in 1992 he pleaded guilty to various offences of obtaining property by deception. The claimant issued proceedings, claiming rectification of the register on the ground that the transfer to the first defendant had been fraudulent. Halifax conceded that the claimant had at all times had a right to set aside the transfer of the property as against the first defendant, but denied that her right was an overriding interest within section 70(1)(g) of the Land Registration Act 1925. The judge concluded that the claimant’s right was an overriding interest and that, as such, it was binding on Halifax. Accordingly, it was ordered that the Land Register be rectified. Halifax appealed. Held: The appeal was dismissed. 1. From the time the first defendant obtained the payment of £6,500, he owed a general fiduciary duty to the claimant and her husband. From the moment he obtained the title deeds, he owed them a particular fiduciary duty to procure the transfer of the property to S for £250,000. He had acted in breach of his fiduciary duties, and no court of equity would allow him to assert a beneficial interest in the property as against the claimant or her late husband. The registration of the first defendant as proprietor of the property was effective to vest the legal estate in him, and it was clear that, at all times, he held it on trust for the claimant and her husband. It followed that in January 1992 they had an equitable interest in the property and an overriding interest within section 70(1)(g) of the Act. 2. It thus became unnecessary to examine the more general question of whether a mere equity, such as a right to avoid a transfer of registered land, did or did not fall within section 70(1)(g) of the Act, where, although procured by fraudulent representation, it was otherwise valid and effective. The claimant and her husband had not intended to transfer the property to the first defendant without consideration. The first defendant had acquired the property without their knowledge and consent and in breach of his fiduciary duties to them. Accordingly, the equitable interest remained in the claimant. James Behrens (instructed by Theresa Evans Solicitors, of Epsom) appeared for the claimant; Edward Nugee QC and Colin Braham (instructed by Dibb Lupton Alsop) appeared for the second defendant; the first defendant did not appear and was not represented. Thomas Elliott, barrister