Allyson Colby considers the difference between alteration of the land register and rectification
Key points
- The fact that a disposition was made by mistake did not necessarily mean that its entry on the register was a mistake as well
- The re-registration of a mortgage that was discharged by mistake was an alteration to bring the register up to date, and did not constitute rectification of the register
The Land Registry can alter the register when necessary: for example, to bring registers of title up to date, or to correct mistakes. However, this must be done in accordance with strict rules laid down in the Land Registration Act 2002 (the 2002 Act).
The legislation classifies alterations made to correct mistakes that prejudicially affect the title of a registered proprietor as “rectification of the register”, and prohibits rectification without the consent of the proprietor who is in possession of the land, unless it caused or substantially contributed to the mistake by fraud or lack of proper care, or it would be unjust for any other reason not to make the alteration. Furthermore, the Land Registry may be liable to compensate anyone who loses out if the register is rectified (although claimants who fail to exercise proper care must bear their fair share of responsibility for losses incurred).
In NRAM plc v Evans [2017] EWCA Civ 1013; [2017] PLSCS 154, the Court of Appeal had to decide whether the restoration of a charge that had been deleted from the register constituted an alteration to, or rectification of, the register. The answer was sufficiently important that the Land Registry was given permission to make its own submissions to the court.
Discharge
The lender had discharged a registered charge electronically without checking its records carefully enough. Had it done so, it would have discovered that the borrowers were still in debt to it under a different mortgage account number. So the debt remained, but the lender’s security had vanished, and the borrowers had subsequently been made bankrupt.
However, the lender’s charge had secured “all of the money you owe us from time to time”, and the trial judge ruled that this covered the outstanding borrowing. Consequently, the judge allowed the lender to rescind its e-DS1 on the ground that it had been issued by mistake and ordered the Land Registry to re-register the charge.
The question that arose in the Court of Appeal was: did the re-registration of the charge constitute rectification of a mistake on the register? If so, the lender would have to obtain the borrowers’ consent to re-register its charge; or show that they had, either by fraud or lack of proper care, caused or substantially contributed to the mistake; or that it would be unjust for some other reason if the charge were not to be restored to the register. Furthermore, the Land Registry might have to compensate the borrowers for any loss caused by the re-registration of the charge, even though it had not acted carelessly when it acted on the lender’s instruction to delete its charge from the register.
Mistake
The 2002 Act does not define the term “mistake” (except to say that it includes mistaken omissions: see paragraph 11 of Schedule 8). However, the term is generally understood to encompass a wide range of circumstances, including changes to the register that would not have been made had the true state of affairs been known at the time. The accidental registration of the same land in two different titles and the registration of a proprietor pursuant to a void disposition (such as a forged transfer, or a transfer of land that has already been sold) are often cited as being “mistakes”. But what is the position if the Land Registry registers a transfer that is voidable, but which has not been declared void at the date of registration?
Kitchin LJ, who spoke for the Court of Appeal, accepted that, if a change to the register is correct when it is made, one cannot call the entry a “mistake”. Furthermore, the distinction between void and voidable dispositions had been recognised in Norwich and Peterborough Building Society v Steed (No 2) [1993] Ch 116 (a case under the Land Registration Act 1925). It followed that, although an entry recording an interest acquired under a void disposition is a mistake (because the register would not have been changed had the facts been known at the time), a change to the register to reflect a transaction that is voidable, but which has not yet been declared void, is correct at the time it is made.
In this case, the e-DS1 had been issued by mistake. But it was valid until it was rescinded. Therefore, its registration by the Land Registry was not a mistake, and it could not be turned into a mistake retrospectively.
The register needed to be brought up to date to reflect the rights of the parties. And, because there had not been any mistake, the alteration did not constitute rectification of the register within the meaning of the 2002 Act. Therefore, the lender did not need to satisfy any of the conditions that apply before the Land Registry can rectify the register and the Land Registry was not liable to compensate the borrowers for any loss suffered because the charge had been restored to the register.
Implications
It is worth noting the wider implications of this decision. If a registered proprietor loses his land as a result of a void disposition (for example, due to forgery, the application of the doctrine of “non est factum”, fundamental mistake, defective execution of the transfer or lack of title), there will be a mistake to correct and a potential claim for an indemnity from the Land Registry. But, if a registered proprietor loses his land because something renders a disposition voidable (for example, due to misrepresentation, undue influence or lack of capacity), there will be no mistake to correct, no rectification, and no indemnity from the Land Registry.
Allyson Colby is a property law consultant
