Registration

Purchaser’s ability to rely on register as conclusive

Limits on the registered owner's powers to make a disposition that are not reflected in an entry on the register

Ghai v Maymask (228) Ltd

[2020] UKUT 293 (LC)

Summary

A purchaser buying registered land need not be concerned about potential limits on the registered owner's powers to make a disposition that are not reflected in an entry on the register.

Facts

A building in a city centre (“the Property”) was owned by BHL with the benefit of a loan from Auction Finance Ltd (“the Lender”).  The loan was secured by a first legal charge over the Property.  BHL was unable to keep up its loan repayments and in November 2017 the Lender appointed receivers over the property.

The sole director of BHL completed the sale of the Property to the Respondent in June 2018.  The sale was not by the receivers, whose appointment was terminated on the same day.  After the discharge of the loan the director apparently appropriated most of the net sale proceeds.

The appellants, shareholders in BHL, were informed of the sale by one of the receivers on the day it completed.  They argued that the receivership was only terminated as a result of the redemption of the charge and therefore after completion of the sale, and that the director had not had the power to sell the Property.

There was no entry in the register referring to an appointment of receivers or to any limit on the registered owner's powers to make dispositions of the Property.

The appellants’ solicitors wrote to the Land Registry, lodging an objection to the registration of the Respondent as proprietor of the Property on the basis that the director must have acted without authority in effecting the sale. As the Respondent was aware of the appointment of the receivers the sale to it was said consequently to be void.  The Land Registry referred the objection to the First-Tier Tribunal. 

First instance

The FTT dismissed the objection on the following basis:

“A disposition of the legal interest in property is effected by the registration of a duly completed and executed transfer in form TR1.

At the time the subject transfer was presented to HM Land Registry for registration the appointment of the receivers had been discharged.  The sole director had authority to execute the form TR1. Insofar as may be necessary he did so with the consent and authority of the receivers. In any event, if there was at any relevant stage a want of authority due to the appointment of receivers, that is a matter for the receivers and not the respondents as shareholders.

The respondents as shareholders have no proprietary interest in the property. Any dispute there may be between the respondent as shareholders and [the director], whether as shareholder or as the sole director, does not give the respondents a proprietary interest in the property, such that they can prevent registration of the transfer.”

Decision on appeal

On appeal to the Upper Tribunal (Lands Chamber), Martin Rodger QC held that a buyer of registered land could rely on a transfer executed by the sole director of a company in receivership where there was no limitation on the title register. S26 Land Registration Act 2002 made it unnecessary for the buyer to be concerned about potential limits on the registered owner's powers to make a disposition that were not reflected in an entry on the register.

 If a limitation was reflected by an entry on the register, then the buyer could ensure that limitation was addressed. If there was no entry, a buyer was protected. In this case there was no entry in the register referring to an appointment of receivers or to any limit on the registered owner's powers to make dispositions of the property. It followed that s26 provided a complete answer to the issue of whether the disposition was valid. The buyer was entitled to proceed on the assumption that the registered owner's right to exercise owner's powers was free of limitation, whatever the buyer knew of the true facts.

Comment

When registering a charge, some lenders also require a restriction to be entered in a property's proprietorship register that any disposition requires their consent. On accepting an appointment, receivers should look for such a restriction as this should indirectly provide that protection.

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