Land registration – Alteration of register – Rectification – Legal charge registered over property in favour of respondent bank – Appellant alleging signature forged – Appellant seeking rectification or alteration of register – Judge refusing to order rectification – Appellant appealing – Whether exceptional circumstances justifying refusal of alteration – Appeal dismissed
From about 1993, the appellant had occupied a property owned by the local authority at 47 Moresby Road, London E5 as a secure tenant. By 1999, the appellant had acquired a right to buy the property under section 118 of the Housing Act 1985. She sought to exercise that right and the property was transferred into her name. However, she said that her application had been fraudulently hijacked in the course of which her signature was forged on a number of documents. The property was subsequently transferred to CEL which granted a legal charge over the property to the first respondent’s predecessor.
The appellant subsequently sought an order directing the rectification or alteration of the register maintained by the second respondent chief land registrar, pursuant to para 2 of schedule 4 to the Land Registration Act 2002, by deleting the entry relating to the legal charge.
The appellant maintained that the transfer of the property to CEL was void by reason of her signature, as registered proprietor, having been forged on the transfer document by which her title to the property was transferred. Although the charge was valid as between CEL and the first respondent, its entry should be removed from the property’s charges register because it was derived from the allegedly fraudulent transfer to CEL. Both respondents opposed the claim on a variety of procedural and substantive grounds.
Under para 3(3) of schedule 4 to the 2002 Act, the court had to alter or rectify the register “unless there are exceptional circumstances which justify its not doing so”. The judge found that there were such exceptional circumstances in the present case and dismissed the claim: [2019] PLSCS 51. The appellant appealed.
Held: The appeal was dismissed.
(1) The best guide to the test of “exceptional circumstances” was in Paton v Todd [2012] EWHC 1248 (Ch); [2012] 2 EGLR 19. The question was whether there were exceptional circumstances in the particular case; and whether those exceptional circumstances justified not making the alteration. The first of those questions required one to know what was meant by exceptional circumstances and then to establish whether such circumstances existed as a matter of fact. “Exceptional” was an ordinary, familiar English adjective. It described a circumstance which was such as to form an exception, which was out of the ordinary course, or unusual or special, or uncommon. The search was not for exceptional circumstances in the abstract but those which had a bearing on the ultimate question whether such circumstances justified not rectifying the register.
(2) The appellant’s argument that the judge had wrongly elided the test in para 3(2) of schedule 4 (“unjust for the alteration not to be made”) with the test in para 3(3) (“unless there are exceptional circumstances which justify not doing so”) was unfounded. Although the judge had referred to both tests, that had no effect on his reasoning or the result. He never focused only on the incorrect test; he applied both. He applied the correct test of exceptional circumstances and no criticism of his approach could be sustained. In any event, it was a criticism of form rather than substance. The current academic view was that the “unjust” test was a higher hurdle than the “exceptional circumstances” test: since the judge found that both were met in the present case, the slip (if that was what it was) could not have been to the detriment of the appellant. Further, the judge’s conclusions were not inconsistent with the prior authorities. He had properly applied the two-stage test, asking whether there were exceptional circumstances, and whether they justified the non-rectification of the register: Paton applied. Strachey v Ramage [2008] EWCA Civ 384; [2008] PLSCS 113, Walker v Burton [2013] 3 EGLR 129 and Antoine v Barclays Bank UK plc [2018] EWCA Civ 2846; [2018] PLSCS 39 considered.
(3) The judge, having concluded that the appellant’s title was no better and no worse than the title of CEL, was obliged to focus on the appellant because the exceptional circumstances arose from her position: her inability to afford to buy the property; the forgery of her signature on the relevant transfers; the nature of her title following the dissolution of CEL; and the circumstances in which she came to be living in a valuable property without ever having paid anything for it. By contrast, the first respondent’s position was unexceptionable.
The loss or potential loss of a charge in favour of a lender in good faith was not uncommon because of the unfortunate proliferation of mortgage fraud. But it was wholly exceptional for such a loss to occur in circumstances where the occupier never owned the freehold of the property; paid nothing towards the property; could never have afforded to buy the property without immediately selling it; where the original conveyance to the occupier was void because it was procured by fraud; and, if the register was rectified, the occupier would become the owner of the unencumbered freehold as a result of that fraud. Those were unusual and uncommon factors which were not routinely or normally encountered. Those circumstances were exceptional and justified the non-rectification of the register.
(4) Rectification of the register would create a windfall for the appellant. She would be put in a much better position than if the fraud had not taken place. In addition, the appellant’s indirect attempt to rely on the fraudulent transfer was at least a relevant factor when considering whether the non-rectification of the register was justified. If the register was not rectified, the appellant would be in much the same position as if she had exercised her right to buy. She would have bought the property with a mortgage and then sold it, leaving her with an equity of redemption. That was the position now, with the additional factor (in her favour) that the equity of redemption in 2002 would have been worth nothing like the £350,000 odd which it was now estimated to be. Non-rectification was amply justified and a just and proportionate outcome.
Mark Warwick QC and Camilla Chorfi (instructed by Rainer Hughes Solicitors, of Shenfield) for the appellant; Timothy Polli QC (instructed by Dentons UK) appeared for the first respondent; Nicholas Trompeter (instructed by the Government Legal Department) appeared for the second respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Dhillon v Barclays Bank plc
