Land registration – Unilateral notice – Cancellation – Claimant registering unilateral notice against defendant’s title to property to protect claim to equitable interest – Defendant seeking removal of notice – Whether court having inherent power to order cancellation of notice registered under Land Registration Act 2002 – Whether allowing defendant access to property to raise funds to defend claim appropriate – Application granted in part
The defendant was 99 years old and owned a farm comprising about 74 acres of land. The claimant was her grandson who claimed that, in equity, he would be entitled to the farm on the defendant’s death on the basis that her had acted to his detriment in reliance on a promise made to him by the defendant and her late husband. The defendant said that she did not intend to leave the farm to the claimant but he claimed that she was acting unconscionably and that the court had power to intervene on his behalf. In particular, he claimed a declaration that she was not free to sell more of the farm than was reasonably needed to meet her needs and debts and that the balance of the farm and its proceeds should be left by will to the claimant; if not, it was to be considered as held in equity for his benefit. He also sought an order during the defendant’s lifetime to protect his claim.
The defendant resisted the claim to an equity based on proprietary estoppel. The claimant registered a unilateral notice against the defendant’s registered title to the farm in order to protect the interest he claimed. The defendant applied for an order cancelling the unilateral notice to enable her to raise funds, whether by selling or charging the land or some part of it, in order to pay for her defence of the proceedings.
An issue arose whether the court had, following the Land Registration Act 2002, an inherent power to order the cancellation of a unilateral notice registered against a title registered under the 2002 Act and, if so, how such a power should be exercised. A further question arose as to when it was appropriate to allow a defendant access to an asset for the purposes of raising funds to defend a claim when ownership of that asset was claimed by the claimant.
Held: The application was granted in part.
(1) Section 77(1) of the 2002 Act provided that a person must not exercise the right to apply for the entry of a notice “without reasonable cause”. The practical effect of the unilateral notice in the present case was to prevent the defendant selling the land or borrowing money on the security of a charge over the land. A purchaser or a chargee could become registered in relation to the interest they acquired but they would be subject to the claimant’s rights in equity, if he established them. A person with a reasonably arguable case in support of the existence of the interest claimed had reasonable cause to enter a unilateral notice to protect such an interest, even where a court later ruled against the existence of the interest claimed. If the beneficiary of the notice did not have reasonable cause, he had committed a statutory tort pursuant to section 77. On the evidence in the present case, the claimant had, in good faith, made a claim which was reasonably arguable. Accordingly, the court was unable to say that the defendant had raised a serious issue to be tried as to whether the claimant had committed a statutory tort. Moreover, the court would not make an order under paragraph 2 of Schedule 4 to the 2002 Act that the register be altered by the removal of unilateral notice to bring the register up to date since the issue whether the claimant’s interest existed could only be finally determined at trial: Fitzroy Development Ltd v Fitzrovia Properties Ltd [2011] EWHC 1849 (Ch); [2011] PLSCS 184 applied.
(2) It was settled law that, if the present case had arisen under the Land Registration Act 1925, the Land Charges Act 1925 or the Land Charges Act 1972, a judge at first instance would be bound to hold that the court had jurisdiction to make an order to vacate an entry in the land register. There had been no sufficient change of substance between the earlier provisions and the 2002 Act which would justify the conclusion that the existence of the inherent jurisdiction was incompatible with the 2002 Act. Accordingly, the jurisdiction, recognised and developed by the courts in relation to the vacation of cautions registered under the Land Registration Act 1925, applied also in relation to unilateral notices registered under the 2002 Act. However, since, on the material before the court, the claimant’s case was well arguable, the court could not order the cancellation of the unilateral notice on the ground that his claim was without substance: Clearbrook Property Holdings Ltd v Verrier [1974] 1 WLR 243, Tiverton Estates Ltd v Wearwell Ltd [1975] Ch 146 and Tucker v Hutchinson (1987) 54 P & CR 106 applied. Loubatieres v Mornington Estates (UK) Ltd [2004] EWHC 825 (Ch); [2004] PLSCS 105 considered.
(3) The clear philosophy of the earlier cases was that the court should not allow the beneficiary of the notice to have the protection of the notice pending trial without the court considering the position of the registered proprietor. The principles to be applied were those established in relation to permitting a defendant the subject of a proprietary freezing order to have access to the frozen property for the purpose of raising funds to conduct the defence of the underlying claim. The burden was on the defendant to show that she did not have access to any other available assets on which she could draw to pay her legal expenses. It was relevant to consider whether she could effectively call on family or friends with the means to support her in paying her legal expenses. In all the circumstances of this case, justice required the court to exercise its jurisdiction to permit the defendant to raise funds to defend the claim by way of an appropriate sale or charge of the land or a part of it.
Michael Jefferis (instructed by Stephen Gisby & Co, of Bristol) appeared for the claimant; Christopher McNall (instructed by Kirwans, of Moreton, Wirral) appeared for the defendant.
Eileen O’Grady, barrister
