Claimant’s solicitor applying for Land Registry search — Certificate giving erroneous information — Claimant reaching costly compromise with other party to transaction — Claimant seeking indemnity from registrar under section 83 of Land Registration Act 1925 — Whether claimant partly responsible for loss — Claimant recovering 90% indemnity
By a transfer made in October 1997 by L&G, the claimant, P, acquired a London office block (the property) for £9.9m. At all material times, the entire property was occupied by a bank, whose long leasehold interest therein was registered under title NGL242448.
In July 1997, as part of his prior investigation into L&G’s (reversionary) title, the solicitor acting for P (C) had applied to the Land Registry for an official search that was intended to reveal whether the land comprised in the reversion to the bank’s interest was registered, and, if so, under what title number. Later that month, the registry issued a search certificate highlighting eight parcels, of which seven bore title numbers corresponding to those already furnished by L&G. The outstanding parcel (parcel 116) related to an area of 14m² that extended into a shared service area. An extract from the parcels index attached to the certificate, stated that no freehold title was registered for parcel 116, all of which was, however, included in title NGL242448. In September 1997, following further inquiries both by C and L&G, the Registry wrote, stating that the decision to grant an absolute leasehold title of the entire property had been made, notwithstanding the fact that no documentary evidence of title to parcel 116 had been lodged.
Being satisfied that the risk of any adverse claim to parcel 116 was insignificant, P and L&G went ahead with the completion on the basis, inter alia, that the solicitor acting for L&G would apply for first freehold registration of parcel 116. C assumed that this would be done as a matter of course.
In June 1999, P negotiated a sale of the property to SPI for £12.65m, following which the solicitor to SPI obtained a search certificate that carried the same information on parcel 116 as that given to C. However, upon learning that no application had been made for the first registration of that plot, SPI insisted on retaining £500,000 of the purchase price, such sum to be paid over only if such registration were obtained within six months of completion. The sale to SPI was completed on those terms in June 1999. By two letters dated October 1999, the Registry, responding to an application by SPI to be registered as freehold owner of the property, disclosed for the first time that no part of parcel 116 was unregistered, and that the state of the register was such that SPI could only be registered as proprietor of 9m² (the green land) of the 14m² in question. The reason given for the admitted discrepancy between the current information and that given in the 1997 certificate lay in errors that had occurred during the preparation of later editions of the index map. Certain errors in the plan for title NGL242448 were eventually rectified.
These events led to litigation between P and SPI, which was eventually compromised on terms that left SPI with £450,000 of the £500,000 retained. As allowed by section 2(1) of the Land Registration and Land Charges Act 1971, P then joined the registrar as second defendant, claiming to be indemnified under the provisions of section 83 of the Land Registration Act 1925.
Held: P should recover 90% of its loss.
1. As agreed by counsel at the hearing, the only relevant provision was section 83(3)**, which gave a right of indemnity to “any person [who] suffers loss… by reason of an error in an official search”. Such errors, which had clearly occurred in the issue of the 1997 certificate, were the effective cause of P’s agreement to the retention provision, and the consequent loss of the amount eventually retained***. The errors did not have to be the sole effective cause.
2. The outstanding issues were whether the claim should fail entirely under section 83(5), as being for a loss wholly resulting from the claimant’s own lack of proper care, or whether the amount of the indemnity should be reduced under section 83(6) to such extent as was just and equitable, having regard to the claimant’s share in the responsibility for the loss. In either case, the yardstick was the conduct of P’s agent, C, who, as the person who obtained the certificate, could not be answerable for losses arising from any error therein: see r 295 of the Land Registration Rules 1925. Given the unequivocal terms of the certificate, the only failing that could be imputed to P was the failure to ensure that first registration was obtained, following the 1997 purchase from L&G. However, the risk that such an application was designed to obviate (the existence of an adverse interest in unregistered land) was not the risk that eventuated, namely the unforeseen existence of other registered titles. The indemnity should not, accordingly, be reduced by more than 10%: Jayes v IMI (Kynoch) Ltd [1985] ICR 155 and Dean v Dean (2000) 80 P&CR 457 considered.
* Editor’s note: The official transcript names this case as Prestige Properties Ltd v Scottish Provident Institution and Chief Land Registrar. However, the claim against Scottish Provident Institution was settled some time prior to this hearing.
** Editor’s note: The judgment explains why the eventual rectification of the error in the filed plan for LN216688 did not allow for an indemnity claim under section 83(1)(b) or section 83(2).
*** Editor’s note: A claim by the registrar that P had, by making those arrangements with SPI, failed to mitigate its loss was disallowed for procedural reasons.
Simon Browne-Wilkinson QC and Elizabeth Weaver (instructed by Fladgate Fielder) appeared for the claimant; Mark Cunningham QC (instructed by the Treasury Solicitor) appeared for the respondent.
Alan Cooklin, barrister
