Rectification of register

Exceptional circumstances

Dhillon v Barclays Bank plc

[2020] EWCA Civ 619

Summary

 An application to rectify the register by the removal of a legal charge was refused.  There were exceptional circumstances which justified the non-rectification of the register.

Facts

Mrs Dhillon (D) was the secure tenant of a property owned by Hackney Borough Council. She made a right to buy application that was not progressed because she could not afford to make the required payment.

Subsequently, the Council transferred the freehold of the property pursuant to a transfer in favour of D, but her signature had been forged and she knew nothing about the transfer. The property was then immediately transferred on to a third party (CEL) which charged the property to Barclays (B). D had not been registered as proprietor as the two transfers were submitted for registration simultaneously.

D later became the registered proprietor of the property after CEL had been dissolved and the Crown disclaimed title to the property.  D’s title (which was the title that had been vested in CEL) was subject to B’s charge.

D sought rectification of the register by the removal of B’s charge.  Schedule 4 to the Land Registration Act 2002 provides that where there has been a mistake and the proposed alteration does not affect the title of a registered proprietor in possession, the court must direct the alteration unless there are “exceptional circumstances which justify its not doing so”. D was therefore entitled to the alteration unless there were exceptional circumstances.

Issues

Were there “exceptional circumstances” in this case?

First instance

The High Court found that D had not signed either of the transfers and was therefore unable to rely on the first transfer to herself, which was void. There was also no evidence that she would have been able to raise the funds to purchase the property (or, in any event, she would have required a mortgage to do so). D's claim to the property was therefore derived from the vesting order.

The proposed alteration would enable D to rely on the void transfer to put herself in a better position than she could otherwise ever have been. These were exceptional circumstances that justified not granting the order.

Decision on appeal

The Court of Appeal dismissed D's appeal. The judge had been correct to conclude that the circumstances were exceptional and justified the decision not to rectify the register.

Coulson LJ stated in his judgment why this was a case of exceptional circumstances:

  • D had never been the freehold owner of the property (which may be an exceptional circumstance on its own);
  • D could never have afforded to buy the property;
  • D could never have been in a better position than CEL because the title vested in her was the title that had been vested in CEL;
  • D’s claim for rectification was based on a void transfer, so that she was seeking to obtain the property free of charge by relying on a document which she did not see and did not sign and which was the first stage of a fraud about which she had no knowledge.

He stated that those were unusual and uncommon factors and therefore exceptional.  The exceptional circumstances justified the non-rectification of the Register because rectification would create a windfall for D whereas non-rectification would place her in much the same position as she would have been in had she exercised her right to buy.

 

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