Land registration — Alteration of register – Rectification for mistake – Claimant seeking to alter Land Register to restore charge over certain land and show claimant as proprietor of other land – Whether transfer being duly authorised – Whether claimant to be denied relief because of illegality – Claim allowed
The claimant had a charge over land at Bordean, Petersfield in Hampshire (the Bordean land) and was the registered proprietor of land at Alder Road, Headley Down, Bordon in Hampshire (the Alder Road land). In May 2014, the charge over the Bordean land was removed from the register because the Land Registry had been told that the property was no longer charged. In November of that year, the first defendant was registered as the proprietor of the Alder Road land in place of the claimant on the basis of a transfer that had been lodged with the Registry. The claimant challenged both the removal of its charge and the transfer of the Alder Road land and contended that the register ought to be altered by restoring its charge and to show it as the proprietor of the Alder Road land.
The claimant contended, amongst other things, that neither the transfer of the Alder Road land to the first defendant nor the release of the claimant’s charge was duly authorised. The court should, it was said, order alteration of the register under the Land Registration Act 2002. In contrast, the defendants maintained that the transfer of the Alder Road land and the release of the claimant’s charge were in accordance with a general settlement agreed in the middle of 2013. It would in any event be inappropriate to grant equitable relief or order alteration of the register and the claimant should be denied any relief because of illegality.
Held: The claim was allowed.
(1) On the evidence, the transfer of the Alder Road land and the release of the claimant’s charge were not agreed as part of a general settlement in 2013. Not only was no such agreement committed to writing, but there was no reference to one in the contemporary documents. The likelihood was that no general settlement was agreed.
(2) On the facts, the illegality defence would be rejected. Since the point was not raised in the defences, the misconduct alleged had not been the subject of proper disclosure or investigation. Therefore, the court was not in a position to decide the matter. Even if it was, the claimant was not debarred from pursuing the present proceedings. On any view, the transfer of the Alder Road land and the release of the claimant’s charge were not undertaken for any illegal purpose. Denying the claimant the chance to recover the Alder Road land and reinstate the claimant’s charge might be said to condone improper conduct on the part of the defendants. In the circumstances, it could not be harmful to the public interest to permit the claimant to seek the relief it did.
(3) Paragraph 2(1) of schedule 4 to the Land Registration Act 2002 conferred on the court a power to make an order for alteration of the register for the purpose of (a) correcting a mistake, (b) bringing the register up to date or (c) giving effect to any estate, right or interest excepted from the effect of registration. In the context of para 2(1)(a), “mistake” was widely interpreted and was not confined to any particular kind of mistake. Void and voidable dispositions were treated differently. An entry in the register in respect of a disposition that was void would be a “mistake” within the meaning of paragraph 2(1)(a). However, an entry reflecting a voidable disposition was valid until it was rescinded and the entry in the register of such a disposition before it was rescinded could not properly be characterised as a mistake. A disposition might be made by mistake but that did not render its entry on the register a mistake, and it was such entries with which schedule 4 was concerned. Nor could such an entry become a mistake if the disposition was at some later date avoided. On the other hand, alteration of the register could potentially be ordered under para 2(1)(b) once a voidable disposition had been rescinded, for the purpose of bringing the register up to date. Alteration which involved the correction of a mistake and prejudicially affected the title of a registered proprietor was termed “rectification” (para 1 of schedule 4). If the conditions for rectification were satisfied, the court’s powers extended to changing for the future the priority of any interest affecting the registered estate or charge concerned (para 8 of schedule 4). The words “for the future” meant that the beneficiary of the change in priority (i.e. the person whose interest had been restored to the register) could exercise his rights as owner of that interest, to the exclusion of the rights of the owner of the competing interest, as from the moment that the order was made. He could not be treated as having been entitled to do so up to that point: Baxter v Mannion [2011] EWCA Civ 120, [2011] 2 EGLR 29, MacLeod v Gold Harp Properties Ltd [2014] EWCA Civ 1084, [2014] EGILR 73; [2014] 3 EGLR 133 and NRAM Ltd v Evans [2017] EWCA Civ 1013; [2017] PLSCS 154 considered.
(4) In the present case, the removal of the claimant’s charge from the charges register was a “mistake” within the meaning of para 2(1)(a) both because the indebtedness secured by the charge had not in fact been repaid and because the lodging of the applications to change the register was not duly authorised by the claimant. The debt secured by the claimant’s charge could not have been discharged. The claimant had not been paid any of the money secured and, on the facts found, no global settlement agreement had been concluded. Since, in the absence of a deed, the release of a debt was not binding unless there was consideration, the charge would have continued to secure indebtedness to the claimant even if the applications to change the register had been properly authorised. Further, the void/voidable distinction was irrelevant in this context. There was no need for the claimant to rescind a voidable contract as it never entered into one. It followed that, since there was no evidence that the Bordean land was physically in the possession of the defendants, the court had to make an order rectifying the register in the claimant’s favour unless there were exceptional circumstances justifying not doing so: see para 3 of schedule 4 to the 2002 Act. There were no such circumstances in the present case.
Andrew Butler (instructed by Douglas-Jones Mercer, of Swansea) appeared for the claimant; Charles Apthorp (instructed by De Brett, of Sutton) appeared for the first defendant and third defendants; Sophie Evans (instructed by Engleharts, of Hove) appeared for the third defendant.
Eileen O’Grady, barrister