Property Law uk

Maintained by Gary Webber

Land Registration

Rectification

Forgery - rectification of transfer and charge – LRA Act 2002 s 58 and Sched 4

Barclays Bank Plc v Guy
[2008] EWCA Civ 452

Summary

The court has power to order the rectification of a forged transfer, but upon registration, the register is deemed to be conclusive and it may be difficult to show that a charge entered into by the registered proprietor is a mistake entitling the innocent party to rectification.

Facts

Mr Guy owned 8 acres of valuable development land. A transfer of the land to a company Ten Acres Limited was “procured” and the company was registered as proprietor. Some time later, the company charged the land to Barclays Bank Plc as security for borrowings. Mr Guy then asserted that the transfer had been procured by fraud or forgery. The bank took proceedings to establish the validity of its security and its entitlement to sell, and sought summary judgment against Mr Guy. The trial judge found for the bank. Mr Guy appealed. The case report deals with Mr Guy’s renewed oral application for permission to appeal.

Findings

For the purposes of the application, the Court of Appeal was prepared to assume that the transfer was a forgery and therefore void (para 8). However, the Court of Appeal also made clear that by virtue of s 58 of the Land Registration Act 2002, the register is conclusive, subject only to its rectification. The company was the registered proprietor and was therefore able to charge the property to Barclays Bank. It wasn’t enough for Mr Guy to set aside the transfer, he also had to obtain rectification of the register to remove the charge (para 9). As to this, he had to show that the order removing the charge was for the purpose of correcting a mistake (paras 14 and 19). Lloyd LJ stated (at para 19):
    "I can see that he could well arguably show that the registration of the original transfer was a mistake, especially if the transfer was the product of a forgery, because the registration of something that was not properly executed on the part of the registered proprietor must be a mistake. There is no question of that kind as regards the charge. It was properly executed by [the company]…"
The Court of Appeal then went on to consider the meaning of ‘mistake’ and although it left it open to be explored, discussed and developed in future case law, Lloyd LJ stated (at para 23)
    "…I cannot see that it is arguable that the registration of the charge can be said to have been a mistake, or the result of a mistake, unless at the least Mr Guy can go so far as to show that the bank, the mortgagee, had either actual notice, or what amounts to the same, what is referred to as “Nelsonion” or “blind eye notice”, of the defect in title of the mortgagor, Ten Acre Limited in the present case. I simply cannot see how it could be argued that if the purchaser or chargee knows nothing of the problem underlying the intermediate owner’s title, that the registration of the charge or sale to the ultimate purchaser or chargee can be said to be a mistake. That seems to me to be inconsistent with the structure and terms of the 2002 Act. So the question is whether Mr Guy can show an arguable case, on the evidence, for saying that Barclays Bank had actual notice or was turning a blind eye to matters that it knew, which would if it had addressed them properly, have shown it that Ten Acre Limited did not have a good title to the property".
The Application for permission to appeal was accordingly dismissed

Comment


Forgery – correction of “mistake”

Trevor Anthony Antoine (Administrator to the estate of Joseph Antoine, deceased) v (1) Barclays Bank Plc (2) The Chief Land Registrar (3) Athena Ethel Taylor (Personal Representative of George Taylor, deceased)
[2018] EWHC 395 (Ch)

Summary

The registration of a legal charge, entered into by a registered proprietor, who obtained title pursuant to a court order which had been based on forged documents, was not a ‘mistake’ for the purposes of Sched 4, para 2(1)(a) of the Land Registration Act 2002.

Facts

In 2006, Trevor’s personal representative (T) sued Athena’s personal representative (A) for relief in respect of a mortgage, relying on certain contested documents. T obtained an order in A’s absence for the vesting of the property. T was duly registered as proprietor at HM Land Registry and subsequently charged the property to Barclays Bank. The order was subsequently set aside, without prejudice to Barclays’ charge.

Much later, A’s personal representatives issued separate proceedings against Barclays and the Chief Land Registrar, seeking to both set aside the charge on the basis that the contested documents were forgeries, and for an order for alteration of the register to remove the charge.

Barclays and the Chief Land Registrar did not dispute the forgery claim but disputed the entitlement to alteration on the ground of ‘mistake’.

Issues

Whether a court order which is said to have been obtained by reference to forged documents and which leads to an entry on the register results in a ‘mistake’ such that the court has power to alter the register to correct that mistake.

Decision

The court directed itself on the correct approach to be taken to an allegation of forgery. An allegation of forgery is an allegation of fraud. Relying on the observations of John Martin QC, sitting as a Deputy High Court Judge in Pittas v Christou [2014] EWHC 79 (Ch) (a case involving an allegation of forgery in relation to a will) the court should first assess the lay evidence and then see whether or not the handwriting evidence supports the view the court has reached on the lay evidence. Further, relying on the observations of Lord Nicholls in Re H [1996] AC 536, an allegation of fraud is serious and requires a higher standard of proof. Weighing both the lay evidence and the expert evidence, there was strong evidence that the contested documents were forgeries.

In respect of the registration requirements, the conclusiveness of the register under s 58(1) Land Registration Act 2002 is subject to the powers of alteration in Schedule 4. ‘Mistake’ was not defined, but had been considered recently by the Court of Appeal in NRAM Ltd v Evans [2018] 1 WLR 639. Although there is a distinction between a voidable transaction which did not give rise to a mistake on the register, and a void transaction which did, this did not cover the case where the court had made a vesting order, but the order had been induced by fraud (by reliance on forged documents).

As to this, the contested documents had no dispositive effect; that was achieved by the order which conferred title irrespective of the documents. Thus, at the time the order was made, it was valid and effective, albeit susceptible to being set aside. Whether or not it is right to refer to an order as ‘voidable’, it was akin to a voidable transaction.

The Registrar was only concerned with the effect of the order, not the contested documents. As a matter of public policy, if the registration of title pursuant to a court order could be impugned as a mistake, it would undermine the conclusiveness of the register. It followed that the registration of the charge, at a time when the order had not yet been set aside, could not possibly have been a mistake. T was therefore entitled to exercise owner’s powers including the power to charge the property under s 23(1)(b).

Comment

This is another in the recent run of cases on the scope of the alteration provisions in Schedule 4, Land Registration Act 2002. An alteration which involves the correction of a ‘mistake’ and which prejudicially affects the title of a registered proprietor amounts to rectification and engages the additional requirements of paragraph 3, as well as the indemnity provisions in Schedule 8.

Although the court took a structured approach to weighing the evidence of forgery, in practice the court usually adopts a holistic approach – weighing all the evidence in the round, including:
  • evidence from the parties themselves,
  • evidence from [attesting] witnesses,
  • contemporaneous evidence about the circumstances in which the document was allegedly signed, as well as
  • forensic handwriting evidence.
Many of these issues are now routinely dealt with on contested applications before the First Tier Tribunal, Property Chamber, Land Registration Division.


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