Unravelling fraud is never easy. Dhillon v Barclays Bank plc [2020] EWCA Civ 619 concerned a property that had belonged to Hackney LBC and was let to a secure tenant, who was in arrears with her rent but, nonetheless, sought to exercise her right-to-buy. It seems that her husband then took control of her right-to-buy application, without her knowledge, and purchased the property in her name for £167,000, forging her signature on the transfer, and then forging it again in order to effect a sale to a company for £250,000.
The company borrowed against the security of the property before being struck off the companies’ register. Meanwhile, the claimant and her husband had gone to Pakistan. While they were away, their possessions were removed from the property, which the claimant discovered when she returned. Her husband was convicted of fraud. And, when the company was struck off the register, title to the property vested in Crown, which disclaimed it.
The claimant sought an order vesting the property in herself and – for reasons best known to the judge who dealt with it – her application was successful. But the title remained subject to a legal charge to the bank, which now secured a debt of more than £650,000. Could the charge be removed from the charges register and who should suffer the loss caused by the fraud?
The court can make an order for the alteration of the register in order to correct a mistake, to bring the register up to date, or to give effect to any estate, right or interest excepted from the effect of registration. In addition, paragraph 3(3) of Schedule 4 of the Land Registration Act 2002 provides that, if the court has the power to alter the register, it must do so – unless there are “exceptional circumstances which justify its not doing so”. And the Court of Appeal took the view that there were exceptional circumstances in this case, which justified the High Court’s decision to let the register stand.
The claimant’s claim for rectification of the register relied on the original transfer, which she had not signed and knew nothing about at the time, and was the first step in the mortgage fraud that followed. The court noted that the claimant would not have been able to buy the freehold without a loan. And, if the register were to be rectified, the claimant would become the owner of an unencumbered freehold, for which she had not paid “a penny piece”, which was now worth more than £1m. By contrast, the retention of the charge would leave the claimant in a position that was similar to that in which she would have been had she had to borrow in order to exercise her right to buy.
The decision that the charge should be allowed to remain on the register meant that the question of whether the Land Registry would have had to indemnify the bank if the legal charge had been struck from the register did not arise. However, the claimant did try to persuade the court that the existence of a possible indemnity from the Land Registry justified rectification in her favour. But the Court of Appeal said that this was “emphatically not the law”, and refused to embark on a detailed analysis of the complex case law concerning indemnification by the Land Registry because it was not relevant to this case.
Allyson Colby, property law consultant
