Land registration – Rectification of register – Appellant holding long lease of flat – Appellant appealing against county court order dismissing claim to have land register rectified to correct mistaken failure to enter unilateral notice against freehold title to protect claim to lease extension – Whether court having power to make consequential order – Whether unjust not to make alteration – Appeal dismissed
On 1 September 2011, the appellant took assignment of the lease of flat K at 82 Portland Place, London together with the benefit of a claim to a 90-year lease extension under section 42 of the Leasehold Reform, Housing and Urban Development Act 1993.
At the time the section 42 notice was served, a process of collective enfranchisement to acquire the building was already in progress under section 13 of the 1993 Act. It had the effect of suspending the operation of the appellant’s section 42 notice until completion of the collective enfranchisement process.
In order to protect her interest, the appellant applied to enter two unilateral notices against the registered titles of the freehold reversion and the headlease. The application in respect of the freehold title was rejected by the Land Registry in error but a notice was entered against the headlease title.
When the collective enfranchisement process was completed, the second respondent, as nominee purchaser, acquired the freehold and the headlease. The headlease was merged into the freehold. On the same day, the second respondent granted the first respondent a concurrent, overriding 999-year lease of flat K without payment of a premium and at a nominal rent. The second respondent was registered as the freeholder of the building and the first respondent was registered as the overriding lessee of flat K. The respondents argued that, because the appellant’s section 42 notice had not been registered against the freehold at the date of completion, it was not binding on them.
The appellant applied to have the register rectified pursuant to schedule 4 of the Land Registration Act 2002 to correct the consequences of the mistaken failure by the Land Registry to enter the unilateral notice against the freehold. The county court dismissed the application. The appellant appealed.
Held: The appeal was dismissed.
(1) When deciding to grant rectification by an alteration of the register, the court had power to make ancillary orders to correct the consequences of the mistake, and if necessary could do so by changing priorities as between the respective interests of the applicant and respondent in a manner that gave the applicant’s interest the priority which it should have had, but for the mistake: MacLeod v Gold Harp Ltd [2014] EGILR 73; [2014] 3 EGLR 133 applied.
The respondents, relying on the Court of Appeal decision in Curzon v Wolstenholme [2017] EGLR 38, had sought to distinguish Gold Harp on the basis that it concerned leases which, as between the parties, had continued to be valid at all times, so that the effect of the consequential order made was limited to altering priorities between interests in land that had continued in existence. However, Curzon was an extreme case on the facts, and did not apply to the present case because Curzon was not a case in which there had been any mistake made in relation to the protection of a notice under section 13. If Curzon had involved a mistake in registration of a unilateral notice, the court would have the power to order an alteration of the register. There was no reason to reach any different conclusion in relation to section 42 notices.
Under section 43 of the 1993 Act, section 42 notices had effect “to the like extent as rights and obligations arising under a contract for leasing freely entered into between the landlord and the tenant”. As a form of statutory contract, there was no reason why such notices should be any less suitable for protection by an effective rectification remedy than any actual contract relating to land. Accordingly, the court had jurisdiction to give effect to an alteration of the register to put the parties into the position that they would have been in had the unilateral notice been registered against the freehold title: Macleod applied. Curzon distinguished. Wiggins v Regent Wealth Ltd [2014] 3 EGLR 157; [2014] EGILR 75, Sainsbury’s Supermarkets Ltd v Olympia Homes Ltd [2016] 1 P&CR 17 and NRAM Ltd v Evans [2017] EWCA Civ 1013; [2017] PLSCS 154 considered.
(2) Under paragraphs 2 and 3 of schedule 4, where the power existed to alter the register so as prejudicially to affect the title of a registered proprietor, the court had to do so unless there were “exceptional circumstances” which justified it not doing so. But a special level of protection existed for proprietors in possession of land, against whom rectification could only be ordered if one of the requirements in paragraph 3(2) was met.
Pursuant to section 131 of the 2002 Act, the second respondent, as registered proprietor of the freehold, was in possession and was entitled to the extra protection given by paragraph 3(2) in relation to a claim for rectification of its title. The appellant was only entitled to rectification if she could discharge the extra burden of showing that the case fell within either paragraph 3(2)(a) or (b), which gave the court the power to rectify a mistake on the register where the proprietor of an estate had by fraud or lack of proper care caused or contributed to the mistake, or where it would be unjust for an alteration not to be made.
(3) In the present case, the respondents in no way caused or contributed to the mistaken omission of the appellant’s unilateral notice from the register, and they knew no more than the simple facts that a section 42 notice existed and had not been protected by a unilateral notice. To give such a low level of knowledge any weight in the determination under paragraph 3(2)(b) would introduce risks and complications for transacting parties which would undermine the reliability of the register and the purpose of the registration system to make conveyancing faster, easier and cheaper.
On the facts, the absolute amount of the appellant’s loss caused by having to pay an increased premium for a new lease if rectification was not granted, would be mirrored by the amount that the respondents would not receive if rectification was granted and the appellant was able to acquire a new lease for a correspondingly lower premium. The appellant had failed to show that it would be unjust not to rectify the register.
Christopher Heather QC (instructed by David Conway & Co) appeared for the appellant; Philip Rainey QC (instructed by Cripps Pemberton Greenish) appeared for the respondents.
Eileen O’Grady, barrister
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