Swift 1st Ltd v Chief Land Registrar

Land registration – Alteration of register – Rectification for mistake – Land Registration Act 2002 – Defendant registering legal charge over property in favour of claimant – Defendant rectifying register by cancellation of forged disposition – Claimant seeking indemnity – Whether alteration of register amounting to rectification – Whether claimant prejudicially affected by alteration of register – Claim allowed R was registered at the Land Registry as the sole proprietor of a house in Ilford, Essex. She resided at the property. A legal charge purporting to bear the signature of R was executed in favour of a money lending company to secure a loan which was registered in the charges register for the property. The claimant received a mortgage application, purportedly signed by R, for another loan said to be for the purpose of home improvements. Part of the funds received was used to redeem the prior registered charge. A legal charge of the property was registered in favour of the claimant and the prior charge was removed. There were defaults in repayment of the claimant’s loan and it issued proceedings in the county court for possession of the property. R’s defence was that both charges had been forged. She counterclaimed for an order that the charge be set aside and the register amended accordingly. In the light of evidence from a handwriting expert, the claimant accepted that R had been the victim of a fraud and the charge on the register was cancelled. The claimant then wrote to the defendant registrar claiming an indemnity under Schedule 8 to the Land Registration Act 2002 as the proprietor of a registered charge claiming in good faith under a forged disposition. It argued that the cancellation of the forged disposition was a rectification under paragraphs 1(1)(a) and 11(2) of Schedule 8 to the 2002 Act. For the purposes of paragraph 11(2), there had been an alteration of the register which involved the correction of a mistake which prejudicially affected the claimant’s title. For the purposes of paragraph 1(1)(a), the claimant was to be regarded as having suffered loss by reason of such rectification as if the disposition had not been forged, under paragraph 1(2)(b). The defendant contended that paragraph 1(2) of Schedule 8 was only engaged for limited purposes under paragraph (1)(1)(a) and had no independent or wider effect. It was a pre-condition that there had been a rectification within the meaning of paragraph 11(2). In the present case, while there had been an alteration of the register which involved the correction of a mistake, it did not prejudicially affect the claimant’s title because it was always subject to R’s overriding interest which took priority by virtue of section 29 of the 2002 Act. Held: The claim was allowed.(1) In circumstances where there had been a forged transfer of land, the original owner remained as beneficial owner and was entitled to rectification, the transferee who became the registered proprietor acquiring no more than the legal estate. Whilst the relevant provisions could have been more clearly drafted, in the case of a registered proprietor claiming in good faith under a forged disposition, the concept of a prejudicial effect of an alteration to the register in paragraph 11(2)(b) could not be separated from the issues of loss under paragraphs 1(1)(a) and 1(2)(b). In section 83 of the Land Registration Act 1925, such a person was deemed to have suffered loss and in consequence his title could be said to have been prejudicially affected, subject to the overriding interest point. As the proposals to the 2002 Act made clear, paragraph 11(2) was principally introduced to deal with that point but not otherwise significantly to alter the existing law: Malory Enterprises Ltd v Cheshire Homes (UK) Ltd [2002] EWCA Civ 151; [2002] Ch 216; Fitzwilliam v Richall Holdings Services Ltd [2013] EWHC 86 (Ch); [2013] 2 EGLR 183 and Park Associated Developments Ltd v Kinnear [2013] EWHC 3617 (Ch) applied. (2) It was clear from the passages in the 2002 proposals dealing with indemnity that an exception was made in a case where a registered proprietor was claiming in good faith under a forged disposition. Exception was therefore made, at least to some extent, for forged dispositions. The wording of paragraph 1(2)(b) of Schedule 8 added to the phrase “is to be regarded as having suffered loss by reason of such rectification”, the words “as if the disposition had not been forged”. Giving effect to those added words, the loss suffered by a registered proprietor claiming in good faith under a forged disposition was now to be determined on the basis that the disposition had not been forged. On that basis, the overriding interests of the purported disponor could not be set up to reduce or defeat the claim. In all the circumstances, the claimant was entitled to an indemnity. (3) The claimant was entitled to the agreed sum of £90,658.99 as the amount of the claimant’s loss as at the date of rectification. There would be no reduction under paragraph 5 of Schedule 8 since there was no evidence of any lack of proper care on the part of the claimant which made it substantially responsible for the loss which occurred. (4) Simple interest was payable on that amount from the date of rectification to the date of payment pursuant to rule 195(4) of the Land Registration Rules 2003 (SI 2003/1417). However, no interest was payable from 2 January 2010 to 2 September 2011 under rule 195(3) since the court was satisfied that, as consequence of delay, the claimant had not taken reasonable steps to pursue its claim for an indemnity during that period. Josephine Hayes (instructed by the Swift Group Legal Department) appeared for the claimant; Timothy Morshead QC (instructed by the Treasury Solicitor) appeared for the defendants. Eileen O’Grady, barrister