LORD JUSTICE SCOTT: This is an appeal against the judgment of Knox J. given on 15th December 1989. The appeal concerns a freehold property, 2 Arlow Road, Winchmore Hill, London. Title to the property is and has at all material times been registered at H.M. Land Registry. In October 1964, the appellant, Mr. Michael Derek Steed, purchased the property for the sum of £3,300. He did so with the aid of a loan from the local authority. The loan was secured by a mortgage of the property. Mr. Steed was duly registered at H.M. Land Registry as the proprietor of the property. The local authority's mortgage was duly registered in the charges register.
After the purchase the property became the home of Mr. Steed and his family. Various members of his family have resided there from time to time. The important ones, for the purpose of these proceedings, are his mother, his sister, Mrs. Claire Hammond, and her husband, David Hammond.
In 1976 Mr. Steed emigrated to California. While he was in California his mother, Mrs. Steed, and his sister and brother-in-law Mr. and Mrs. Hammond, continued to live in the property. Under an informal family arrangement they paid the mortgage instalments falling due under the local authority mortgage.
On 14th April 1979 Mr. Steed executed in California a power of attorney naming his mother, Mrs. Steed, as his attorney. The document had been prepared in England by a solicitor, Mr. Lawrence, of W.H. Hopkins, acting on the instructions of Mrs. Hammond. Mrs. Hammond had taken the document out to California for Mr. Steed to execute. When he had done so she brought it back to England.
The power of attorney gave Mrs. Steed power
"... to buy, sell or exchange lands of any tenure whether by private contract or by public auction for such consideration and subject to such covenants, conditions and restrictions as the attorney shall think fit" (paragraph 1);
and
"Generally to execute any deed or sign any document which may be required and to do any other act matter or thin which the attorney shall consider necessary or expedient for carrying out any of the purposes or acts hereby authorised". (paragraph 3).
It is accepted that this power of attorney was valid and effective to vest in Mrs. Steed power on Mr. Steed's behalf to sell the property and to execute a transfer for that purpose.
There was no evidence that Mrs. Steed was ever informed either by Mr. Steed or by Mrs. Hammond of this power of attorney or of her power to sell the property. There was some evidence that she was in complete ignorance of the power of attorney and of her power of sale.
In August or September 1979 a transfer of the property bearing, or appearing to bear, Mrs. Steed's signature came into existence. The transfer was in the usual Land Registry form and bears the date 4th September 1979. It provided as follows:-
"In consideration of £24,500 the receipt whereof is hereby acknowledged MICHAEL DEREK STEED of 2 Arlow Road Winchmore Hill London N21 by his Attorney MARY STEED of 2 Arlow Road aforesaid as beneficial owner hereby transfer to DAVID HAMMOND and CLAIRE MADELEINE HAMMOND his wife both of 2 Arlow Road Winchmore Hill London N21 the land comprised in the title above mentioned".
In the testatum the transfer was expressed to be
"Signed, sealed and delivered by the said Mary Steed as the Attorney of MICHAEL DEREK STEED and on behalf of the above named MICHAEL DEREK STEED".
A signature purporting to be that of Mrs. Steed appears opposite.
During the summer of 1979 Mr. and Mrs. Hammond had made arrangements with Argyle Building Society, now known as Norwich and Peterborough Building Society and the respondent on this appeal, to borrow £15,000 on the security of the property in order to enable them to purchase the property for £24,500 from Mr. Steed. The usual conveyancing arrangements were made between the building society's solicitors, Messrs Warrens, and the Hammonds' solicitors, W.H. Hopkins & Co. These arrangements led in due course to the building society sending the £15,000, less a sum in respect of its conveyancing costs, to W.H. Hopkins & Co., pending completion of the purchase and mortgage. The Hammonds executed a legal charge of the property in what was, presumably, the building society's usual form of charge. This document, too, bears the date 4th September 1979. The executed legal charge was sent to Warrens to be held, in escrow, pending completion.
Following completion W.H. Hopkins & Co. released to the Hammonds the balance of the f15,000, after deduction of fl,800 odd needed to discharge the local authority's registered charge and of a sum in respect of their own costs, and on 17th September 1979 sent to Warrens the transfer, apparently executed by Mrs. Steed as attorney for Mr. Steed, together with the discharge of the local authority's charge and various other conveyancing documents.
On 9th October 1979 the building society submitted the transfer, the legal charge and the discharge to the Land Registry for registration. Registration was completed on 17th December 1979. The Hammonds' names were entered in the Proprietorship Register as owners of the property in place of Mr. Steed. The legal charge in favour of the building society was entered in the charges register. The entry in the charges register relating to the local authority's charge was deleted.
It subsequently transpired that the conveyancing arrangements I have described were part of a fraudulent scheme of the Hammonds to obtain money for themselves using the property as security. Mr. Steed knew nothing of the sale. He received no part of the purported consideration of £24,500 nor any benefit therefrom save that £1,800 or thereabouts had been expended in discharging his liability under the local authority mortgage.
Mrs. Steed, too, insisted that she knew nothing of the sale. She died before the case came to trial but a written statement signed by her on 16th December 1985 was received into evidence under the Civil Evidence Act 1968. In this statement she denied that the signature on the transfer was hers. She said:
"... I did not sign the Transfer which has been shown to me. The signature on this document is not my signature".
She denied that she knew anything about the power of attorney.
She said:
"Claire did not show me the Power of Attorney ... nor did she tell me that I had been made Michael's Attorney".
It is implicit from her statement that, according to her, Mr. Steed, too, had not told her that he had appointed her to be his attorney.
The building society was, of course, an innocent third party. It had lent money on mortgage for the purpose of an apparently genuine sale. The transfer to its mortgagors, the Hammonds, and its own legal charge had been registered at H.M. Land Registry. Everything appeared to be in order.
In addition to borrowing money from the building society on the security of the property,the Hammonds raised money from other sources on the same security. We have not seen the details but it appears that Provident Mutual Life Assurance Association, Barclays Bank plc and Lloyds Bank plc obtained registered charges. They were made parties to these proceedings but, since the debt owing to the building society now exceeds the value of the property and since they can be in no better position than the building society, they have taken no part in the proceedings.
For the sake of completeness I would add that the Hammonds have been convicted of offences of dishonesty arising out of their financial arrangements with the building society and that a bankruptcy order has been made against Mr. Hammond.
Following the completion of the transaction with the building society, Mrs. Steed, Mrs Hammond and Mr. Hammond continued to live in the property. But the Hammonds fell into arrears in payment of the mortgage instalments due to the building society. So the building society commenced possession proceedings. This was in February 1982, ten years ago. The Hammonds, of course, had no defence and the building society obtained a possession order against them. But at about this time Mr. Steed returned from the U.S.A. and resumed residence in the property. He applied to be joined in the proceedings as a defendant and for a stay of the possession order. He contended, among other things, that his mother's signature on the transfer of 4 September 1979 was a forgery. He claimed to be entitled to rectification of the Register both as against the Hammonds and as against the building society. The county court judge before whom the action came concluded that the building society was entitled to possession as against Mr. Steed even if the transfer to the Hammonds were a forgery. So he confirmed the order for possession. Mr. Steed appealed. The judgment of the Court of Appeal is reported as Argyle Building Society v. Hammond in Vol. 49 P. & C.R. page 148. The judgment of the court was given by Slade L.J. He held that, on the assumption that the transfer to the Hammonds was a forgery, the court would have power under section 82(1) of the Land Registration Act 1925 to rectify the Register not only as against the Hammonds but also as against the building society. He also expressed the opinion, obiter, that the court would have the like power if the transfer were merely voidable, as opposed to void. So the appeal was allowed, the order for possession was set aside as against Mr. Steed and the case was transferred to the Chancery Division for a new trial at which the facts regarding the execution or non-execution of the transfer and Mr. Steed's entitlement to rectification of the Register would be determined.
On 12th December 1985 the building society commenced in the High Court the action that in due course came before Knox J. It sued only Mr. Steed as defendant and claimed possession of the property. Mr. Steed's defence served on 16th April 1987 pleaded that the transfer was forged. He counterclaimed, joining the other chargees whom I have mentioned as well as Mr. Hammond's trustees in bankruptcy and Mrs. Hammond as defendants to the counterclaim, for rectification of the proprietorship register, by the removal of the Hammonds' names and the insertion of his own name, and of the charges register, by the deletion of the entries relating to the building society's charge and the charges of the other chargees. The counterclaim, like the defence, was based on the allegation that the transfer was forged. There was no other relevant allegation. Forgery of the transfer had constituted the "assumed facts" on the basis of which the Court of Appeal had found in Mr. Steed's favour.
Mrs. Steed died not long after she signed her statement on 16th December 1985. She had, it will be recalled, expressly denied that the signature on the transfer was hers. A handwriting expert was instructed. The expert's report dated 26th April 1989 concluded that there was a high probability that Mrs. Steed did sign the transfer. The trial had been fixed to commence on 5th May 1989. The expert's report was somewhat of a bombshell and an adjournment was granted to enable Mr. Steed to consider his position.
The upshot of this was that the forgery allegation was abandoned and wholly new lines of defence were added by amendment to Mr. Steed's counterclaim for rectification. The new pleading, so far as relevant to the claim against the building society, constituted (i) a plea of non est factum based on the proposition that Mrs. Steed did not know she had been appointed attorney and did not know she was signing a transfer of the property; (ii) a plea that the transaction effected by the transfer was not a sale and was not within the power conferred by the power of attorney.
These two pleas took the place of the forgery plea as justifying the conclusion that the building society's charge was "void" (see paragraph 8 of the counterclaim) and that Mr. Steed was "entitled to an order for rectification" (see paragraph 9 of the counterclaim).
Knox J. found against Mr. Steed, both on the non est factum issue and also on the ultra vires issue. He concluded that the transfer was not void but was, by reason of the fraud perpetrated by the Hammonds, voidable. He, therefore, ordered that the proprietorship register be rectified by the removal of their names and the substitution of Mr. Steed's name. It would seem from the pleadings to which I have referred that that should have been the end of the case. But the contention was put forward on Mr. Steed's behalf that, even if the transfer were only voidable and notwithstanding that the building society was not implicated in and had had no notice of the Hammonds' fraud, nonetheless the court had a discretionary power under section 82 of the Land Registration Act 1925 to order that the building society's charge be deleted from the Register, leaving Mr. Steed with an unencumbered title and the building society to claim an indemnity under section 83. It was contended that in the circumstances of the case the discretion should be exercised in Mr. Steed's favour and the charges register rectified accordingly.
I have some doubt whether these contentions were open to Mr. Steed on the pleadings. But no pleading point was taken and the learned judge entertained them. He accepted that the court did, under section 82, have the wide discretionary power of rectification contended for. Indeed the contrary does not seem to have been argued. Certain dicta of Slade L.J. in Argyle Building Society v. Hammond were taken as establishing the point. But the learned judge, as a matter of discretion, declined to order the rectification sought.
So the upshot of the trial was that Mr. Steed was restored to the position of registered proprietor but had failed to upset the building society's charge. He has appealed. There are three issues to be decided. The first issue is whether, it being accepted that the signature on the transfer is that of Mrs. Steed, the appellant can repudiate the transfer under the doctrine of non est factum. If he can, then the transfer is void, no better than if Mrs. Steed's signature had been forged. The second issue is whether, assuming he fails on non est factum, the appellant can repudiate the transfer as being ultra vires the power of attorney. This is put forward as an alternative basis on which the transfer should be held to be void. If the appellant succeeds on either of these issues, there would, strictly, be an issue as to whether or not an order for rectification of the register, as against the building society, ought to be made. But, for reasons which I will later mention, it seemed to us that there would be no serious answer to the appellant's rectification claim and Mr. Rayner James for the building society did not contend otherwise. The third issue, which arises if the appellant fails to establish that the transfer was void, is, first, whether the court has power under section 82 to order rectification as against the building society and, second, if it does, whether the power should be exercised. Non est factum
Taken literally, the doctrine of non est factum applies when the person sought to be held liable has not, in fact, signed the document (see Lord Reid in Gallie v. Lee [1971] A.C. at 1015G). But it also covers cases in which a person who has signed a document is nonetheless allowed to repudiate the document. The authorities all concern cases of the latter sort.
We have been referred to Hunter v. Walters (1871) 7 Ch. App. 75, National Provincial Bank v. Jackson 33 Ch. 1, King v. Smith [1900] 2 Ch 425 and Gallie v. Lee (sub nom. Saunders v. anqlia Building Society) [1971] AC 1004. In each of these cases the victim of a fraud had signed a document not understanding what he or she was doing. In each case an innocent third party had for value acquired rights under the document. In each of these cases the existence of the doctrine of non est factum was affirmed, in each the acceptable limits of the plea was discussed, in none was the plea allowed to prevail. It is easy to understand why the plea is likely to be unsuccessful. A person who signs a document at the request of another puts into circulation a document on which, depending on its contents, others may rely. Where a fraudster has tricked, first, the signer of the document, in order to induce the signature, and then some third party, who is induced to rely on the signed document, which of the two victims is the law to prefer? The authorities indicate that the answer is, almost invariably, the latter. The signer of the document has, by signing, enabled the fraud to be carried out, enabled the false document to go into circulation.
In Gallie v. Lee Lord Reid said at page 1015 that the doctrine of non est factum
"... must be kept within narrow limits if it is not to shake the confidence of those who habitually and rightly rely on signatures when there is no obvious reason to doubt their validity".
And at page 1016 that
"there must be a heavy burden of proof on the person who seeks to invoke this remedy".
In the same case Lord Wilberforce said at page 1027 that
"... a person who signs a document, and parts with it so that it may come into other hands, has a responsibility, that of the normal man of prudence, to take care what he signs, which if neglected, prevents him from denying his liability under the document according to its tenor".
In each of the authorities to which we referred, and in particular in Gallie v. Lee, the doctrine of non est factum is explained in different words by different judges, but with a striking uniformity of concept and of emphasis. Knox J. in his judgment cited a passage from the speech of Lord Wilberforce starting at 1025D. I would add the passage immediately following at 1026A where Lord Wilberforce said this:
"How, then, ought the principle, on which a plea of non est factum is admissible, to be stated? In my opinion a document should be held to be void (as opposed to voidable) only when the element of consent to it is totally lacking, that is, more concretely, when the transaction which the document purports to effect is essentially different in substance or in kind from the transaction intended. Many other expressions, or objectives, could be used - 'basically' or 'radically' or 'fundamentally'. ...
To this general test it is necessary to add certain amplifications. First, there is the case of fraud. The law as to this is best stated in the words of the judgment in Foster v. Mackinnon (1869) L.R. 4 C.P. 704, 711 where it is said that a signature obtained by fraud 'is invalid not merely on the ground of fraud, where fraud exists, but on the ground that the mind of the signer did not accompany the signature; in other words, that he never intended to sign, and therefore never did sign, the contract to which his name is appended'.
In other words, it is the lack of consent that matters, not the means by which it is brought about. Fraud in itself may do no more than make a contract voidable.
Secondly, a man cannot escape from the consequences, as regards innocent third parties, of signing a document if, being a man of ordinary education and competence, he chooses to sign it without informing himself of its purport and effect. This principle is sometimes found expressed in the language that he is 'doing something with his estate' ... but it really reflects a rule of common sense on the exigency of busy lives.
Thirdly, there is the case where the signer has been careless in not taking ordinary precautions against being deceived".
There then followed the passage which I have already cited in which Lord Wilberforce stressed the responsibility lying on persons who sign documents. He went on to add this:
"As to persons who are illiterate, or blind, or lacking in understanding, the law is in a dilemma. On the one hand, the law is traditionally, and rightly, ready to relieve them against hardship and imposition. On the other hand, regard has to be paid to the position of innocent third parties who cannot be expected, and often would have no means, to know the condition or status of the signer. I do not think a defined solution can be provided for all cases. The law ought, in my opinion, to give relief if satisfied that consent was truly lacking but will require of signers even in this class that they act responsibly and carefully according to their circumstances in putting their signature to legal documents".
In my judgment these passages from Lord Wilberforce's speech express the approach and the principles that must be applied to a non est factum plea.
In the present case there was a glaring absence of any reliable evidence as to exactly what happened on the occasion on which Mrs. Steed had placed her signature on the transfer. Mrs. Hammond gave evidence about the occasion but the judge rejected her evidence. Mrs. Steed's statement, too, dealt with her lack of any recollection of the occasion or knowledge that she had been asked to sign a transfer of the property. But the reliability of Mrs. Steed's statement was seriously undermined by the circumstance that she had denied ever having seen the transfer and had denied that the signature was hers. Both these denials had been shown to be false. It is clearly established that the onus lies on the party repudiating the signed document to establish the necessary ingredients of non est factum and it would, in my opinion, have been open to the learned judge simply to have said that there was no evidence before him sufficient to establish Mrs. Steed's lack of understanding of what she had signed.
The judge did not, however, take that easy course but, instead, accepted at its face value Mrs. Steed's statement that she had not known what she was signing. This part of Mrs. Steed's statement had the merit of being believable. Neither Mr. Lawrence of W.H. Hopkins, nor anyone else from that firm had ever communicated with her regarding the sale of the property to the Hammonds. The form of the transfer had been prepared by W.H. Hopkins & Co., acting for the Hammonds, and submitted to Warrens, the building society's solicitors, for approval. W.H. Hopkins & Co. sent Warrens an authority to inspect the register. It has not been explained how they were able to do so without taking any instructions from Mrs. Steed, but it has not been suggested that Mrs. Steed authorised them to do so. The Hammonds, intent on fraud, certainly would not have explained the proposed sale transaction to Mrs. Steed. So it is believable that, up to the moment when the time came for her to sign the transfer, she knew nothing of it. She was, it may be inferred, tricked into signing without reading the document.
Mrs. Steed's evidence was not, however, that she had thought she was signing a document of some different character from that which in fact she had signed. It was not that she had signed under some induced misapprehension as to the nature or character of what she was signing. Her evidence was that she had not known what she was signing and that, trusting her daughter, Claire, as she did, she would have signed anything her daughter had put before her. Knox J. held that
"... Mrs. Steed was tricked into signing what her daughter put before her because she trusted her ...". (page 29 of the transcript).
That, he held, was not sufficient to enable the plea of non est factum to succeed.
Mr. Lloyd Q.C., counsel for the appellant, has attacked this part of the judgment by relying heavily on the proposition that Mrs. Steed did not know anything about the power of attorney and her status thereunder. In that state of ignorance she could not, when she signed the transfer, have known she was dealing with her son's property. She must have supposed she was dealing, in some way, with her own affairs. So, it was argued, she was mistaken as to the essential character of the document she signed and of the transaction which it effected.
Submissions on these lines, as Butler-Sloss L.J. pointed out during argument, place Mr. Steed on a species of Morton's fork. Let it be supposed that Mrs. Steed was a lady of sufficient general understanding and capability to be a suitable donee of the power of appointment. Why then did she not inform herself of the purport and effect of the transfer before signing it? Her failure to do so brings the case within the second of Lord Wilberforce's amplifications. On the other hand, let it be supposed that she lacked ordinary competence and capacity. Lord Wilberforce referred to persons "illiterate, or blind or lacking in understanding". If Mrs. Steed falls into this category, what was Mr. Steed about when he appointed her his attorney? The donor of a power of attorney who appoints as his attorney a person incapable of understanding the import of a simple transfer can hardly be allowed, if the donee signs a transfer without any understanding of what he or she is doing, to repudiate the transfer on the ground of a lack of understanding on the part of the donee.
As to Mrs. Steed's ignorance of the power of attorney, if she was ignorant of it, the ignorance was attributable to Mr. Steed's incomprehensible failure to tell her either that he was about to or that he had made the appointment. It is known that he and she spoke on the telephone at about the time the power of attorney was executed. If it was really the case that he did not mention the power of attorney when speaking to her on that occasion and left her in ignorance of her responsibilities and status, his failure shows, in my opinion, such a want of care as to preclude him from relying, in support of his non est factum plea, on her ignorance of the power. As between an innocent third party purchaser such as the building society on the one hand, and Mr. Steed on the other hand, his failure to take the ordinary precautionary and prudent step of informing his mother of her appointment as his attorney requires, in my judgment, that the building society be preferred.
In my judgment, and for substantially the same reasons as those given by the learned judge, the non est factum plea fails.
Ultra Vires
The submission that the transfer fell outside the authority conferred on Mrs. Steed under the power of attorney must be approached on the footing that, the non est factum plea having failed, the transfer was validly executed by Mrs. Steed. The transfer purported to transfer the property in consideration of the payment of the sum of £24,500. A transfer of property for a price is a sale. Mr. Lloyd's submission was that the reference to the price was a sham. No price was in fact paid or ever intended to be paid. The £1,800 odd paid on discharge of the local authority mortgage may be ignored for the purposes of the argument. The transaction effected by the transfer was, whatever the transfer may have said, a transfer for no, or if the £1,800 is taken into account a derisory, consideration and was not a sale.
The building society in its defence to counterclaim pleaded estoppel by deed. But, submitted Mr. Lloyd, the Hammonds, the other parties to the transfer, could not, by reason of their own fraud, raise an estoppel by deed. That being so, the building society, which claimed through the Hammonds could not rely on estoppel by deed. Mr. Lloyd may be right in his answer to the estoppel by deed point. If estoppel was to be relied on, it ought, I think, to have been estoppel by representation. The transfer records a transaction of sale. If, in reliance on the transfer, the building society accepted the legal charge executed by the Hammonds and parted with the £15,000, an estoppel by representation would, as it seems to me, bar Mr Steed from denying that the transaction completed by the transfer was a sale. I think Mr. Lloyd accepted, in principle, that that would be so. But he pointed out that estoppel by representation was not pleaded, and that no evidence had been led to establish that the building society in advancing the £15,000 had relied in any relevant sense on the contents of the transfer.
I am, for two reasons, unable to accept Mr. Lloyd's submissions on this ultra vires point.
First, the transfer purports to be executed in completion of a sale. The execution of a transfer on completion of sale is unquestionably within the power conferred by the power of attorney. The transfer was executed by the donee of the power of attorney. Prima facie, therefore, the transfer was, in my opinion, valid and effective according to its tenor. No question of ultra vires arises. True the £24,500 was never paid (bar the £1,800 odd) but, despite the receipt clause, Mr. Steed would have been entitled to sue for the outstanding sum. The Hammonds would have had no defence to an action for the price. As between Mr. Steed and the Hammonds, therefore, the transfer was not a nullity. It was merely voidable. If it was merely voidable vis-a-vis the Hammonds, it cannot have been void as against the building society. As a matter of principle, if a deed has been executed by a donee of a power of attorney apparently acting within the terms of the power, a purchaser does not, in my judgment, have to enquire further into the substance of the transaction.
But, secondly, it seems to me plain as a pikestaff that the building society, in parting with its money, relied on the transfer. The £15,000 was advanced in order to enable the Hammonds to complete a purchase from Mr.Steed at a price of £24,500. The form of the proposed transfer had been approved by the building society. The £15,000 was held by W.H. Hopkins & Co. pending completion of the sale. Not until the transfer in the form approved by the building society had been executed by Mrs. Steed was W.H. Hopkins & Co. free to release the £15,000. To say that there was no evidence that the building society relied on the transfer being, as it purported to be, a transfer on sale, flies in the face of reality. It is true that estoppel by representation was not pleaded, but estoppel by deed was pleaded and the evidence was sufficient to support the former plea. If it had been necessary I would have unhesitatingly given leave for an amendment to be made.
The learned judge dealt very shortly with the ultra vires point. He said this:-
"... the transfer on its face was a perfectly regular sale and as against third parties taking a legal estate for value and in good faith it was within the ostensible authority of Mrs. Steed and cannot now be repudiated against such third parties. Nothing short of non est factum rendering the transfer void, or forgery which has the same legal effect but is not now alleged, will suffice to defeat the building society's innocent reliance upon the transfer".
Save that I would not describe Mrs. Steed's authority to execute the transfer as "ostensible" authority, I am in complete and respectful agreement with the judge.
Rectification of the register
The transfer of 4th September 1979 was induced by the fraud of Mr. and Mrs. Hammond. It was voidable but not void. The building society advanced £15,000 to the Hammonds on the security of the charge which they executed and which was subsequently registered. The question is whether the court has power under section 82 of the Land Registration Act 1925 to order the register to be rectified by deletion of the entry of the building society's registered charge in the charges register. The question is primarily one of construction of the statutory language used in section 82.
Section 82, as amended, provides as follows:-
"(1) The register may be rectified pursuant to an order of the court or by the registrar, subject to appeal to the court, in any of the following cases, but subject to the following provisions of this section:-
(a) Subject to any express provisions of this Act to the contrary, where a court of competent jurisdiction has decided that any person is entitled to any estate right or interest in or to any registered land or charge, and as a consequence of such decision such court is of opinion that a rectification of the register is required, and makes an order to that effect;
(b) Subject to any express provision of this Act to the contrary, where the court, on the application in the prescribed manner of any person who is aggrieved by any entry made in, or by the omission of any entry from, the register, or by any default being made, or unnecessary delay taking place, in the making of any entry in the register, makes an order for the rectification of the register;
(c) In any case and at any time with the consent of all persons interested;
(d) Where the court or the registrar is satisfied that any entry in the register has been obtained by fraud;
(e) Where two or more persons are, by mistake, registered as proprietors of the same registered estate or of the same charge;
(f) Where a mortgagee has been registered as proprietor of the land instead of as proprietor of a charge and a right of redemption is subsisting;
(g) Where a legal estate has been registered in the name of a person who if the land had not been registered would not have been the estate owner; and
(h) In any other case where, by reason of any error or omission in the register, or by reason of any entry made under a mistake, it may be deemed just to rectify the register.
(2) The register may be rectified under this section, notwithstanding that the rectification may affect any estates, rights, charges, or interests acquired or protected by registration, or by any entry on the register, or otherwise.
(3) The register shall not be rectified, except for the purpose of giving effect to an overriding interest [or an order of the court], so as to effect the title of the proprietor who is in possession -
(a) [unless the proprietor has caused or substantially contributed to the error or omission by fraud or lack of proper care; or] ...
(c) unless for any other reason, in any particular case, it is considered that it would be unjust not to rectify the register against him.
(5) ... The registrar shall obey the order of any competent court in relation to any registered land on being served with the order or an official copy thereof".
It is convenient to refer at this point to section 83 of the Act, which makes provision for an indemnity to be given to those suffering loss by reason of the rectification of the register and, in certain circumstances, to those suffering loss where rectification is refused.
Section 83, as amended, provides so far as relevant, as follows:-
"(1) Subject to the provisions of this Act to the contrary, any person suffering loss by reason of any rectification of the register under this Act shall be entitled to be indemnified.
(2) Where an error or omission has occurred in the register, but the register is not rectified, any person suffering loss by reason of such error or omission, shall, subject to the provisions of this Act, be entitled to be indemnified. ...
(4) Subject as hereafter provided, a proprietor of any registered land or charge claiming in good faith under a forged disposition shall, where the register is rectified, be deemed to have suffered loss by reason of such rectification and shall be entitled to be indemnified under this Act.
(5) No indemnity shall be payable under this Act in any of the following cases:-
(a) [where the applicant or a person from whom he derives title (otherwise than under a disposition for valuable consideration which is registered or protected on the register) has caused or substantially contributed to the loss by fraud or lack of proper care;] ...
(6) Where an indemnity is paid in respect of the loss of an estate or interest in or charge on land the amount so paid shall not exceed -
(a) Where the register is not rectified, the value of the estate, interest or charge at the time when the error or omission which caused the loss was made;
(b) Where the register is rectified, the value (if there had been no rectification) of the estate, interest or charge, immediately before the time of rectification".
If an order of rectification is to be made the case must be brought within at least one of paragraphs(a) to (h) of subsection (1) of section 82. The dispute in the present case is as to the breadth of the power conferred by paragraphs (a) and (b) and, to a lesser extent, (d) and (h). There is no doubt but that, if Mrs. Steed's signature had been forged or if the non est factum plea had been made good, the case would have fallen squarely within paragraph (g). In neither case, if the land had been unregistered, would the Hammonds or the building society have obtained a legal estate. I cannot see any reasonable basis on which an order of rectification could have been withheld. If, however, as is the case, the transfer is only voidable, paragraph (g) does not apply. It is plain that, if title to the property had been unregistered, Mr. Steed would have had no remedy against the building society. He would have recovered the property from the Hammonds but the property would have remained subject to the charge. It is submitted, however, that paragraphs(a), (b), (d) or (h) can, since title is registered, be prayed in aid. This submission is made on the footing that, under one or more of these paragraphs, the court is given a general discretion to order rectification in any case in which it may be thought just to do so. If the submission is right, then section 82, or its statutory predecessors, achieved a remarkable and unnoticed change in the substantive law. If the discretion can be exercised where there has been a fraudulent misrepresentation, as in the present case, it must be exercisable also where a merely innocent misrepresentation has been made. It would, as Mr. Lloyd conceded, be exercisable also in a case where no misrepresentation inducing the transaction could be pointed to but where a registered proprietor had entered into a transaction under a misapprehension for which the other party to the transaction was not responsible, a misapprehension as to the value of the property, for example. Mr. Lloyd said that in such a case the discretion to order rectification against a bona fide purchaser, such as the building society in the present case, would be very unlikely ever to be exercised. But the proposition that the discretionary power contended for can be spelled out of the statutory language is, to me, so startling as to require the premise of the proposition to be very carefully examined.
There is a sense in which the power to rectify under section 82 is undoubtedly discretionary. The words in subsection (1) are "may be rectified". Section 83(2) shows that rectification is not automatic. The power to rectify may, in a particular case, be present but, nonetheless, there is a general discretion to refuse rectification. It does not follow, however, that there is, in every case, a general discretion to grant rectification. The power to grant rectification is limited in subsection (1) to "any of the following cases". The power to order rectification must, therefore, be found within one or other of the subsection (1) paragraphs and cannot be spelled out of the words "may be rectified".
Paragraphs (a) and (b) provide a power to rectify that can only be exercised by the court. The power conferred by the other paragraphs can be exercised either by the registrar or by the court. Paragraph (a) enables an order of rectification to be made where the court "has decided that any person is entitled to any estate right or interest in or to any registered land or charge ..." This, in my judgment, is a clear reference to an entitlement under the substantive law. An example would be a case, such as Mr. Steed's case against the Hammonds, for the setting aside of a transaction on the ground of misrepresentation or some other sufficient cause. Another example would be the successful assertion of a possessory title. A third example might be the assertion of a right by a beneficiary under a trust who had become absolutely entitled to the land. In each of these cases, once the entitlement had been established the court would have power under paragraph (a) to order the register to be rectified so as to reflect the entitlement. But paragraph (a) does not, in my judgment, give any substantive cause of action where none before existed. It does not enable a voidable transaction to be set aside as against a bona fide purchaser who has acquired by registration a legal estate. And if no entitlement as against such a purchaser can be established, paragraph (a) does not, in my judgment, enable the register to be rectified as against such a purchaser. Paragraph (a) does not assist Mr. Steed in his rectification claim against the building society.
Paragraph (b) is the paragraph on which Mr. Lloyd pinned his main hopes. It applies, he submitted, whenever any person is "aggrieved" by an entry on the register. Paragraph (b) is something of a puzzle, not least because the form of the "application" is not "prescribed" by any rules made under the Act. The same language was used in section 96 of the 1875 Act, but there, too, no form of application was "prescribed". The legislative intention underlying paragraph (b) and its statutory predecessor is difficult to identify with clarity. The reference to "the application in the prescribed manner" makes me believe that it was contemplated that some form of summary process would be prescribed in order to enable speedy relief to be given in clear cases. Be that as it may, the real question at issue is whether the provision was intended simply to provide a remedy in respect of proprietary rights that either entitled the proprietor to have some entry made on the register or entitled the proprietor to have some entry removed from the register or whether the provision should be construed as creating a new cause of action entitling the court to make rectification orders as it might in its discretion think fit in favour of persons who would not under substantive law (apart from paragraph (b)), have any proprietary rights which they could assert against the registered proprietor or chargee. In my judgment, the question has only to be put for the answer to be apparent. Parliament could not have intended paragraph (b) to produce new substantive rights in respect of registered land, enabling registered dispositions to be set aside and removed from the register in circumstances where, if the land had not been registered, no cause of action would have existed. In my judgment, paragraph (b), like paragraph (a), provides a remedy but does not create any new substantive rights or causes of action.
The scope of paragraph (c) is self-evident and not relevant in the present case.
Paragraph (d) too was relied on by Mr. Lloyd. He contended that since the transfer had been induced by the Hammonds' fraud, both the registration of the Hammonds as proprietors and the registration of the building society's legal charge could be described as having been "obtained by fraud". In my judgment, this is a misreading of the paragraph. The paragraph is directed, in my opinion, to fraud practised upon the Land Registry in order to obtain the entry in question. No fraud was used to obtain the entry on the charges register of the building society's legal charge.
This construction of paragraph (d) derives support from the language used in section 174(1)(c) of the Law of Property Act 1922, the statutory predecessor of paragraph (d). Section 174(1)(c) enabled the register to be rectified:
"Where the Court or the registrar is satisfied that the registration of ... a charge, mortgage or other entry in the register ... has been obtained by fraud, by annulling the registration, notice or other entry".
This provision was reduced to its present succinct form in the Law of Property (Amendment) Act 1924 (see section 8 and Schedule 8, paragraph 16). It is the registration that must be obtained by fraud.
The registration of a forged transfer could, in my opinion, at least if the application for registration had been made by the forger, be annulled under paragraph (d). The entry would have been obtained by fraud in the presenting of a forged transfer for registration. But if a voidable disposition were registered before being avoided, I would doubt whether the register could be rectified under paragraph (d), even if the disposition were voidable on account of fraud. In such a case the entry on the register would not, it seems to me, have been obtained by fraud. Rectification could, of course, in such a case be obtained under paragraph (a) or paragraph (b). Whether or not that is right, and it need not be decided in this case, a registered disposition made by the fraudster to a bona fide purchaser cannot in my judgment be removed from the register under paragraph (d). The registration would not have been obtained by fraud. So paragraph (d) cannot in my judgment assist Mr. Steed as against the building society.
Paragraphs (e) and (f) are self-explanatory and are of no relevance to this case.
Paragraph (g) does not, in the event that the transfer is voidable, assist Mr. Steed as against the building society. It is, however, an important paragraph so far as an understanding of the scheme of section 82(1) is concerned.
In my opinion the scheme is reasonably clear. Paragraphs (a) and (b) give power to the court to make orders of rectification in order to give effect to property rights which have been established in an action or which are clear. Paragraph (c) enables orders to be made by consent. The remaining paragraphs, (d) to (h), are intended to enable errors to be corrected. Paragraph (d), paragraph (e), paragraph (f) and paragraph (g) each deals with an error of a particular character. But, since these paragraphs might not cover comprehensively all errors, paragraph (h) was added as a catch-all provision to cover any other errors. The breadth of the catch-all provision was, I imagine, the reason why it was thought appropriate to make the power exercisable "where ... it may be deemed just to rectify the register". There are no comparable words in any of the other paragraphs.
Paragraph (h) is relied on by Mr. Lloyd. But in order for the paragraph to be applicable some "error or omission in the register" or some "entry made under a mistake" must be shown. The entry in the charges register of the building society's legal charge was not an error and was not made under a mistake. The legal charge was executed by the Hammonds, who were at the time transferees under a transfer executed by Mrs. Steed as attorney for the registered proprietor. The voidable transfer had not been set aside. The registration of the Hammonds as proprietors took place at the same time as the registration of the legal charge. Neither registration was an error. Neither entry was made under a mistake. So the case for rectification cannot be brought under paragraph (h).
As a matter of principle, if, as I think, the appellant's case for rectification as against the building society cannot be brought under any of the paragraphs of section 82(1), I would conclude that that must be an end to the rectification claim. Mr. Lloyd, however, has relied strongly on passages in the judgment of Slade L.J. in Argyle Building Society v. Hammond.
Before I come to those passages, it is convenient to refer to such earlier authority as there is.
Chowood Ltd. v. Lyall [1930] 2 Ch. 156 concerned a strip of land which had, on first registration, been included in a registered title notwithstanding that it was in the possession of an adjoining owner. The register was rectified under paragraph (h) on an application made by the adjoining owner, the defendant. In the Court of Appeal Lawrence L.J. said this:
"... I see no reason to limit the word 'mistake' in that section to any particular kind of mistake. ... I further agree ... that the rectification might also be made under clauses (a) and (g) of subsection (1). Moreover I am not satisfied that the defendant's application for rectification would not come under clause (b) as being made by a person who is aggrieved by an entry in the register. Mr. Armitage [junior counsel for the plaintiff] suggested that clause (b) applies only to a mistake made by the officials in the Registry and not to a mistake made or induced by one or other of the parties. I prefer not to express any concluded opinion on this point, ...".
Underlying this passage, as it seems to me, is Lawrence L.J.'s acceptance of the importance of bringing the rectification case within one or other of the paragraphs of section 82(1).
Calgary & Edmonton Land Co. v. Discount Bank [1971] 1 W.L.R. 81 concerned cautions which had been entered on the register in order to protect interests claimed in a pending action. The action had been struck out at first instance, an appeal to the Court of Appeal had failed but a petition for leave to appeal to the House of Lords was still pending. On an interlocutory notice of motion Brightman J. (as he then was) ordered that the register be rectified by vacating the cautions. He held that he had power to make the order either under paragraph (a) or under paragraph (b) and that "... it matters not whether the order is expressly made under paragraph (a) or paragraph (b) ..." I would respectfully accept that the order was justified under paragraph (a) but would regard the case as a classic example of the sort of case for which paragraph (b) was designed.
In re Leighton's Conveyance [1936] 1 All E.R. 667 a non est factum case was raised. The plaintiff sought rectification first, against her daughter, who had fraudulently induced the plaintiff to sign a transfer leading to the daughter's registration as proprietor and, secondly, against chargees who, without any notice of the daughter's fraud, had advanced money to the daughter on the security of registered charges. The case was, therefore, very similar to the present case. Luxmoore J. ordered rectification as against the daughter but, having concluded that the non est factum plea failed, he dismissed the rectification claim against the chargees. He said, at page 673:
"... I am satisfied that there are no grounds on which I can say that these charges are bad, but with regard to the equity of redemption I am satisfied on the evidence that what Mrs. Wardman did was at the request of and in reliance on her daughter, and under her influence. ... It follows that the conveyance to Mrs. Burgin can have no effect as against Mrs. Wardman, and she is still entitled to the equity of redemption in the property. ... With regard to the charges register, there is no ground for interfering with it and directing any rectification. They are good charges and remain enforceable against the property".
It was not stated in the judgment which paragraph or paragraphs of section 82(1) Luxmoore J. regarded as applicable, but the report of the argument of counsel and an editorial note at page 667 suggest that the learned judge was invited to act under paragraph (d). It appears also from the report of argument that rectification as against the daughter was conceded and that the only issue in the case against the chargees was the non est factum issue. In my opinion, paragraph (a), rather than paragraph (d), provided the power to rectify as against the daughter. If the non est factum case had succeeded, paragraph (g) also would have been in point, both against the daughter and against the chargees. It was not suggested by counsel for the mother that, if the non est factum plea failed, she might nonetheless be entitled to rectification against the chargees. And there is nothing in the judgment of Luxmoore J. to indicate that, having rejected the non est factum plea, he thought that he had any discretionary power to order rectification of the charges register.
I now come to the judgment of Slade L.J. in Argyle Building Society v. Hammond. For the purposes of his judgment Slade L.J. assumed that the allegation of forgery would succeed. He assumed nothing else. References to the "assumed facts" are references to the facts regarding the forgery. At page 157, having set out the text of section 82(1), he said this:
"... First, registers of title made pursuant to the 1925 Act consist of three parts, namely the property register, the proprietorship register and the charges register. The jurisdiction to rectify under the subsection plainly extends to all or any of these parts. Secondly, on the assumed facts in the present case, the court would, in our judgment, have clear jurisdiction to rectify the proprietorship register of the house by substituting the name of the appellant for that of Mr. and Mrs. Hammond, since the case would fall within all or any of sub-paragraphs (a), (b), (d), (g) and (h) of section 82(1). The present argument relates to the possibility or otherwise of rectification of the charges register".
At page 158 he made clear the opinion of the court that, on the assumed facts, the court would have power to rectify the charges register against the mortgagees as well as the proprietorship register against the Hammonds. I would respectfully agree, save that, for the reasons I have given, I do not think the case would come within paragraph (d). It would come, in my opinion, within paragraphs (a), (b), (g) and, perhaps, (h).
Slade L.J then referred to Re: Leighton's Conveyance, cited the passage from the judgment of Luxmoore J. that I have cited and continued at page 160:
"Reverting to the decision at first instance in the Leighton case, the report of the argument shows that the provisions of section 82(1) and (2) of the 1925 Act were drawn to the attention of Luxmoore J. We feel no doubt that he would have appreciated that, even in the absence of a successful plea of forgery or non est factum, the section would in terms have conferred a discretion on the court to rectify the charges register, even as against the innocent chargees. Nevertheless, it is readily intelligible that Luxmoore J. should have considered that, when the discretion fell to be exercised, the equities were all on one side - that is to say in favour of the chargees, who had acted on the faith of a document of transfer which the mother had herself executed after having failed to make inquiries which would have revealed that the document related to the property. If the title to the land had not been registered, the title of the daughter would, at worst, have been voidable, not void; and under general principles of equity, mortgagees from the daughter in good faith and for value, without notice of the facts giving rise to the voidability, would have acquired a good title to their mortgages. We can see no reason why the court in the Leighton case should have regarded the equities as being any different, as between the mother and the chargees, merely because the land happened to be registered land".
In my respectful opinion, this analysis of re: Leiqhton's Conveyance is not justified by Luxmoore J.'s judgment. There is nothing in the judgment or in the report of counsel's argument to suggest that the possibility of rectification against the chargees, in the absence of a successful plea of forgery or non est factum, was ever considered. At page 162 of his judgment Slade L.J. commented that
"... in a case where one or more of the conditions of section 82(1) are fulfilled, the court has at least theoretical discretion to rectify any part of the register, even as against innocent third parties, ..."
I would respectfully agree with this comment, based as it is on the premise that the case can be brought within one or other of the paragraphs of section 82(1). But Slade L.J. then went on to distinguish the case of a party "deprived of his title as a result of a forged document which he did not execute" from the case where the party "has been deprived as a result of a document which he himself executed, albeit under a mistake induced by fraud" and commented that "when the court comes to exercise its discretion, different considerations may well apply". The paragraph of section 82(1) under which the latter case could be brought was not identified. On the true construction of section 82(1) there is not, in my opinion, any paragraph under which the latter case could be brought.
Mr. Lloyd's argument that the court has a general discretionary power to order rectification of the register was based on the passages from Slade L.J.'s judgment to which I have referred. The passages were not part of the ratio of the decision by which we are bound and with which I respectfully agree. A voidable transfer was not part of the "assumed facts" on which the ratio was based. In my judgment, the obiter passages, regarding voidable transfers and innocent third parties claiming thereunder, were based on an incorrect construction of section 82(1) and should not be followed.
In my opinion, if the appellant's non est factum case is rejected, the court has no power under section 82(1) to order rectification as against the building society.
It is strictly unnecessary for me to deal with the issue of discretion which only arises if the court has power to rectify. Knox J. refused rectification as a matter of discretion. He held that as between the appellant and the building society "all the equities are on the building society's side". This would certainly be so if the land were unregistered. But under section 83(1) the building society, if rectification were ordered, would have what seems to me to be an unimpeachable statutory right to an indemnity against the loss it would thereby suffer. On the other hand, if rectification were refused, the appellant would not be able to claim an indemnity under section 83(2). Mr. Lloyd accepted, rightly, that, since the registration of the building society's charge was not an "error or omission", the case would not come within section 83(2). The financial consequences to the parties of ordering or refusing rectification make it difficult to weigh the "equities". If rectification were ordered, the loss would fall not upon the building society but upon the public purse. If rectification were refused, the public purse would be saved the burden of paying an indemnity. I mention these matters not in order to indicate any disagreement with Knox J.'s conclusions on discretion but because the indemnity provisions in section 83 seem to me to underline that the legislature did not contemplate the power of rectification being exercisable under section 82 except in cases either where an error or omission had occurred in the register (i.e. paragraphs (d) to (h)) or where a substantive cause of action against the registered proprietor required the register to be rectified (i.e. paragraphs(a) and (b)).
In "error or omission" cases, i.e. in cases coming within paragraphs (d) to (h), an indemnity would, if rectification were refused, be available under section 83(2) (subject always to section 83(5)(a)). In cases within paragraphs (a) and (b) but not within any of paragraphs (d) to (h), e.g. cases in which voidable transactions are set aside and, as a consequence, rectification of the register is required, it is difficult to construct any scenario in which rectification could be withheld. The construction of section 82(1) that I have suggested seems to me to mesh with and to explain the scheme of indemnity contained in section 83. The "general discretion" approach to section 82(1) does not.
For the reasons I have given I would dismiss this appeal.
LORD JUSTICE BUTLER-SLOSS: I agree.
LORD JUSTICE PURCHAS: I also agree that for the reasons given in the judgment of Scott L.J. this appeal should be dismissed. I wish only to add that in my judgment I have, after some hesitation, come to the conclusion that it is impossible to extract a general discretion to rectify the register from section 82(1)(h) of the Land Registration Act 1925 beyond that necessary to cover some unusual error which did not fall under sub-paragraphs (d) to (g). It is under sub-paragraphs (a) and (b) that rectification depending upon the prior determination of disputed rights by the court should be effected. With some diffidence, I find myself in agreement with Scott L.J. in coming to the conclusion that the analysis of the judgment of Luxmoore J. in re: Leiqhton's Conveyance in the judgment of the court delivered by Slade L.J. in the passage from the judgment already cited by Scott L.J. is not justified on a general reading of that case. At the time when the present case was first before this court sub nominee Argyle Building Society v. Hammond the plaintiff's case was based on the alleged forgery of Mrs. Steed's signature upon the transfer. This would have rendered the transfer void. The case would then fall squarely within sub-section 82(1)(g) and therefore the conclusion at page 162 of the judgment referred to by Scott L.J. was perfectly correct in the context. I am, I regret, unable to agree that the judgment of the court beyond this or that, in so far as it was obiter in the context in which it was delivered, can be supported or that it binds this court.
Order: Appeal dismissed with costs to include costs of application; not to be enforced without leave of the court, liberty to Legal Aid Board to show cause why order should not be made, such order not to prejudice rights of respondent to add costs of sum charged; legal aid taxation of appellant's costs
