Land registration – Alteration of register – Overreaching – Appellant purchasing house in development – Respondents mistakenly registered as proprietors – Appellant seeking alteration of land register on grounds of mistake – County court dismissing claim – Appellant appealing – Whether judge erring in holding that appellant’s overriding interest overreached – Whether judge erring in not exercising jurisdiction under schedule 4 of Land Registration Act 2002 – Appeal determined accordingly
The appellant purchased one of three houses in a development consisting of six plots of land in Marlborough (the property). On 20 August 2015, she exchanged contracts for the purchase of the property and its surrounding land from the developers and completed the purchase the next day, when she went into occupation of the property. However, it was not until 11 February 2016 that her solicitors applied to HM Land Registry to register her as proprietor.
Meanwhile, by a transfer dated 7 December 2015, the respondents acquired one of the three undeveloped plots. As the appellant’s property had not yet been registered in her name, it remained part of the development land and was inadvertently transferred to the respondents along with the undeveloped plot which they had intended to purchase. The mistake was discovered in April 2016 when the respondents sold their plot of land and a pending application by the appellant was found on the Land Register in relation to the property.
The appellant brought proceedings against the respondents for alteration of the register under schedule 4 to the Land Registration Act 2002 because of the alleged mistake in registering them as owners of the property. The appellant argued that her unregistered purchase gave her at least an equitable interest which, coupled with her actual occupation, amounted to an interest which overrode subsequent interests pursuant to section 29 of, and para 2 of schedule 3 to, the 2002 Act. The respondents argued that, since they had paid for land, which inadvertently included the property, any equitable interest of the appellant was overreached and subordinated to their interest pursuant to sections 2(1)(ii) and 27(1) of the Law of Property Act 1925. The county court dismissed the appellant’s claim. The appellant appealed.
Held: The appeal was determined accordingly.
(1) Under the rules of priority set out in the 2002 Act, a registered disposition of a registered estate, which the transfer to the respondents unequivocally was, took effect subject to certain unregistered interests which were specified to “override” the disposition. Those unregistered overriding interests were set out in schedule 3 to the 2002 Act. The appellant had an equitable interest in the property, buttressed by the actual occupation. In those circumstances, the disposition to the respondents took subject to the appellant’s overriding interest. That was the plain meaning of section 29 of the 2002 Act; but that conclusion was subject to the question of overreaching.
(2) The concept of overreaching concerned the translation of interests in property into equivalent interests in the purchase price of that property. Provided that a disposition of a freehold or leasehold estate was made in the statutorily authorised manner, the Law of Property Act 1925 allowed the disponee to overreach several kinds of pre-existing equitable interest. The disponee was accorded a substantial immunity from adverse interests in the subject land, whilst those same interests survived the transaction concerned and lived on in permutated guise in the money proceeds of the disposition.
In the present case, the appellant’s equitable interest transferred to the £2,500 received by the developers from the respondents. To hold the contrary would be to disregard the binding authority of City of London Building Society v Flegg [1988] AC 54. Matters would have been different if the purchase monies had been paid to a single trustee: the combination of section 27 of the Law of Property Act 1925 and the fact that the appellant’s interest was an overriding one would have ensured that the respondents took subject to the appellant’s rights. But that was not the present case. The judge was correct to conclude that the appellant’s overriding interest in the legal estate was overreached.
(3) Schedule 4 to the 2002 Act drew a clear and important distinction between the alteration of the register and its rectification. Clearly, any system concerned with the recording of transactions involving ownership of and dispositions in land would require entries on the register to change, without their necessarily being any mistake. Schedule 4 dealt with both types of change, differentiating between those changes to the register that were necessary to keep the register up to date and the correction of mistakes. The basic concept employed by the Act was that of alteration of the register and that term covered all types of alteration that might be made in the register.
Rectification was a form of alteration that was subject to the special conditions set out in para 3 of schedule 4. Rectification could only occur: with the proprietor’s consent; where the proprietor had by fraud or lack of proper care caused or substantially contributed to the mistake; or where it would for any other reason be unjust for the alteration not to be made.
(4) The appellant had specifically contended for a much narrower form of mistake than was recognised under the 2002 Act, simply in order to avoid contending that the register needed to be rectified. That submission rightly failed before the judge. It was difficult to identify in the disposition between the developers and the respondents, or in the contract underlying that disposition, the elements necessary to establish common mistake. The judge was right in the conclusion he reached in relation to the points articulated before him.
(5) The outcome before the judge had been compelled less by the law, and more by the manner in which the appellant had put her case. Although, ordinarily, the way in which a party chose to put their case dictated the way in which the case was decided, a court could invite, in terms amounting closer to an instruction, a party to take a point not previously taken. In this case, the appellant’s decision to confine the case to one of alteration but not rectification of the register had narrowed the range of relevant mistakes that could be contended for to, in effect, common mistake, which did not exist here.
Accordingly, the appellant would be permitted to amend her particulars of claim, if so advised, to plead rectification of the register. This was obviously a case of rectification not so much because it involved the “correction of a mistake” but because the amendment “prejudicially affects the title of a registered proprietor”. It would then be open to contend that there had been a mistake requiring correction and that one or other of the requirements of para 3(2) of schedule 4 had been met. If the appellant did not wish to make the application to amend, the appeal would be dismissed.
James Howlett (instructed by DGR Law, of Marlborough) appeared for the appellant; Simon Williams (instructed by Humphries Kirk Solicitors) appeared for respondents.
Eileen O’Grady, barrister
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