Fraud perpetrated on claimant – Claimant suffering loss – Proceedings against chief land registrar – Whether loss caused wholly by claimant’s lack of proper care to see that ownership and control of property were properly managed – Section 83 of Land Registration Act – Appropriate test – Action struck out – Appeal allowed
In 1981 the claimant, a Kenyan citizen, purchased an investment property in London through the medium of a Gibraltan company known as Honeysuckle Ltd. Honeysuckle Ltd thereafter owned the property, with the shares and directorship being held by the claimant. Subsequently, a fraud was perpetrated on the claimant by his wife, the first defendant, and two others, the second and third defendants. The fraud consisted of allowing Honeysuckle Ltd to be struck off the register of companies in Gibraltar for failing to pay the appropriate fee for foreign investment companies. The first to third defendants then incorporated a company (with exactly the same name) that purported to deal with the property, in particular, by allowing it to be purchased by the third defendant, who took out a mortgage in 1990. Payments on the mortgage were not kept up, and, in 1994, the mortgage company took possession of and sold the property.
The claimant issued proceedings against, inter alia, the chief land registrar (the fifth defendant) under section 83 of the Land Registration Act 1925. Under that Act, the registrar was liable to indemnify a person if rectification were not possible. The registrar applied for the claim against him to be struck out, contending that the claimant had no real prospect of success by virtue of section 83(5) of the Act, which stated: “No indemnity shall be payable under this Act: (a) on account of any loss suffered by a claimant… wholly as a result of his own lack of proper care.” The application was allowed.
The claimant’s appeal was dismissed. The judge found that: (i) the public and the chief land registrar were entitled to expect the owners of property to take proper care to see that their ownership and control were properly managed; (ii) the claimant had done nothing about his company, which had owned the property; and (iii) “but for” his failure to take proper care to see that its ownership and control were properly managed, the claimant would not have suffered any loss. The claimant appealed.
Held: The appeal was allowed.
The judge had been wrong in applying the “but for” test for the purposes of section 83 of the Act. The “but for” test did not necessarily exclude the possibility that there were other causes of the claimant’s loss. It was plain from the words of the section that the loss had to be “wholly” a result of the claimant’s own lack of proper care. The first to third defendants, who had defrauded the claimant, had, at least in part, caused the claimant’s loss, and, accordingly, it could not be said that the loss had been suffered wholly as a result of the claimant’s failure to take proper care. In the law of tort, the fact that two people had caused loss did not prevent a claimant from suing either person for 100% of the loss.
Kim Lewison QC and Nigel Meares (instructed by Hugh Cartwright & Amin) appeared for the claimant; Mark Cunningham (instructed by the Treasury Solicitor) appeared for the fifth defendant; the other defendants did not appear and were not represented.
Thomas Elliott, barrister
