NRAM plc v Evans [2017] EWCA Civ 1013; [2017] PLSCS 154 concerned the discharge of a registered charge. The lender had sent the Land Registry an electronic discharge after being informed by the borrowers that the loan secured by reference to a particular mortgage account number had been repaid. Had the lender checked its records more carefully before doing so, it would have discovered that the borrowers had reorganised their financial affairs and consolidated several different loans. As a result, the original loan had been redeemed and the borrower was given a new mortgage account number. So the debt remained, but the lender’s security had vanished – and the borrowers were now arguing that the charge did not secure the new loan.
The judge at first instance disagreed. The original charge secured “all of the money you owe us from time to time under any offer”, which was effective to cover the new loan. Consequently, the judge allowed the lender to rescind its e-DS1 on the ground that there had been mistake and ordered the Land Registry to re-register the charge.
On appeal, the court had to decide whether the alteration to the register was required to bring it up to date, or in order to correct a mistake. The answer was important because different conditions must be satisfied to make alterations required in such cases. In addition, the Land Registry is not liable to pay compensation if an alteration is required to bring the register up to date – but may be liable to indemnify anyone who loses out when it rectifies a mistake.
The Court of Appeal accepted that, if a change in the register is correct when it is made, it would be hard to call the entry a “mistake”. It followed that there is a distinction between void and voidable dispositions. A change to the register to reflect a transaction that is voidable is correct at the time it is made. But an entry recording an interest acquired under a void disposition is a mistake; the register should not have been changed and would not have been changed, had the true facts been known at the time. In this case, the electronic discharge might have been issued by mistake – but it was valid until it was rescinded. So its registration had not been a mistake and could not be turned into a mistake retrospectively if the disposition was avoided at a later date.
Paragraph 2(1)(b) of Schedule 4 of the Land Registration Act 2002 enables the court to make an order for the alteration of the register by bringing it up to date. And paragraph 3(3) provides that if the court has power to make an order under paragraph 2, it must do so, unless there are exceptional circumstances that justify its not doing so.
It had been necessary to alter the register by bringing it up to date to reflect the rights of the parties. However, there had not been any mistake and the alteration did not constitute rectification of the register within the meaning of the 2002 Act. So the lender did not need to satisfy any of the conditions that apply before mistakes can be rectified and the Land Registry was not liable to compensate the borrowers because the charge had been restored to the register.
Allyson Colby is a property law consultant