Property in joint names — Forgery of signature by co-owner on transfer to sole name — Sale at full value to purchaser without notice of forgery — Rectification sought — Whether court should exercise discretion to refuse rectification — Section 82(1) of Land Registration Act 1925 — Claim allowed in part
The claimant was an Indian citizen who was initially granted permission to study in the UK. After that permission had expired, he remained in the country and subsequently married the first defendant. The couple purchased a property, which was paid for largely with the assistance of a mortgage, and they were registered as joint proprietors. However, the claimant never resided in the property and made little contribution to its acquisition. He was subsequently deported, and, in his absence, the first defendant obtained a divorce. She then registered herself as the property’s sole proprietor, pursuant to a transfer upon which she forged the claimant’s signature. She sold the property to her brother, the second defendant, who became the registered proprietor. The transaction was for full value and without the second defendant having notice of the earlier forged transfer. The purchase was financed by a mortgage, which was also registered. The second defendant lived in the property with his wife for four years.
The claimant subsequently acquired Portuguese citizenship and returned to the UK. He brought proceedings in which he sought: (i) a declaration that he held a beneficial share in the property; and (ii) rectification of the land register to show the proprietors as being himself and either one of the defendants. It was common ground that the proceedings were governed by section 82 of the Land Registration Act 1925 (the 1925 Act), and not by the regime of the Land Registration Act 2002 (the 2002 Act), which replaced it. The defendants accepted that the case fell within one or another of the grounds for rectification in section 82(1) of the 1925 Act, but argued that the court should exercise its discretion to refuse rectification. The claimant submitted that, although rectification was discretionary, an overwhelming case had arisen for it because of the forgery by one co-owner.
Held: The claim was allowed in part.
Since the first defendant had not sought an account to reflect the parties’ relative contributions to the purchase, the court would declare that the claimant had acquired an equal beneficial half-share in the property.
However, the court would exercise its discretion under section 82(1) to refuse rectification. The discretion fell to be exercised under section 82(1), unfettered by section 82(3), and so, the court was not limited to granting rectification only where it would be unjust not to do so. None the less, in exercising the discretion, it was relevant to have regard to the policy of the 1925 Act, which favoured the person in possession: Kingsalton Ltd v Thames Water Developments Ltd [2001] EWCA Civ 20; [2001] EGCS 12 applied. The fact of possession was a matter to which the court should attach special weight. Where all else was equal, it might be decisive in tipping the scales against rectification. In the present case, the second defendant was entitled to rely upon that policy. Given his long possession, strong circumstances only would justify making an order that could result in his losing possession. Moreover, the court was not persuaded that the value of the claimant’s beneficial interest in the property, at the time of the transfer to the second defendant, was other than fairly small. Although no attempt had been made to claim an account, that did not mean that such matters were irrelevant to the exercise of the discretion under section 82(1); they went to the quantification of the claimant’s share and, therefore, the extent of his loss. Although the forgery was an important factor, it was not decisive, and, in the circumstances, it did not provide the claimant with an overwhelming case for rectification: Hayes v Nwajiaku (6 October 1994) (summarised at [1994] EGCS 106) distinguished. The claimant could pursue a claim for an indemnity in respect of his loss under Schedule 8 to the 2002 Act, or to the extent that that claim did not meet his losses, seek compensation from the first defendant.
Andrew Short (instructed by David Tagg & Co) appeared for the claimant; Michael Roberts (instructed by Jeffrey Green Russell) appeared for the first defendant; Evan Price (instructed by Shoosmiths) appeared for the second defendant.
Sally Dobson, barrister
