REF/2008/0633

 

The Adjudicator to Her majesty’s Land Registry

LAND Registration act 2002

 

IN the matter of a reference from hm land registry

 

BETWEEN

 

ROSSETTI LIMITED

APPLICANT

and

 

(1) THRESHER WINES ACQUISITIONS LIMITED

(2) FIRST QUENCH RETAILING LIMITED

(3) WHITBREAD (UK) LIMITED

RESPONDENTS

 

Property Address: 5 High Street, Whitstable, Kent CT5 1AP

 

Title Number: K362485

 

Before: Owen Rhys sitting as Deputy Adjudicator

 

 

D E C I S I O N

 

Derbyshire County Council v Fallon [2007] 3 EGLR 44 at 48

J A Pye (Oxford) Ltd v UK [2008] 1 EGLR 111 at 116

 

 

 

INTRODUCTION

1. This Decision has been made without a hearing, at the request of the parties and pursuant to the provisions of Rule 33 of the Adjudicator to HM Land Registry (Practice and Procedure) Rules 2003 (“the Rules”). Both parties have submitted detailed written submissions in support of their respective cases, in addition to their Statements of Case and supporting documents, and their witness statements. They have also agreed a joint statement of facts. They have supplied substantial documentation, running to some 755 pages. The reference to the Adjudicator was made on 12^th May 2008, and arises out of the Respondents’ objection to the Applicant’s application to alter the register of title number K362485. That application was made on 19^th July 2007.

2. The disputed application relates to premises known as 5 High Street, Whitstable. This consists of a building, currently used as a “Wine Rack” shop on the ground floor with separate and independent residential accommodation on the first floor. At the rear of the building there is a yard or car park, and at the rear of the yard some dilapidated former garages. The Applicant is the registered proprietor of title number K362485, as identified on the filed plan of the title (“the Registered Title”). This includes the building itself, and part of the rear car parking area. The Registered Title was sold to the Applicant by the First Respondent (“Threshers”) by auction on 21^st February 2007, with completion effected by a Transfer dated 21^st March 2007 (“the 2007 Transfer”). The Second Respondent (“First Quench”) is a tenant of the ground floor and part of the rear yard under the terms of a Lease dated 21^st March 2007 (“the Lease”) granted by the Applicant at the time of its purchase of the Registered Title. Between 19^th July 2000 and 6^th February 2003 it was also the registered proprietor of the Registered Title. The Third Respondent (“Whitbread UK”) claims to be the unregistered owner of the land which I shall describe, being the land in dispute in these proceedings. Whitbread UK (formerly Thresher Company Limited) was also the proprietor of the Registered Title from the date of first registration in July 1971 until disposal to First Quench in February 2003. All three Respondents are associated in some way, being part of the same group of companies, although I do not have the full details of the corporate structure to which they belong.

 

 

THE DISPUTE

3. The dispute arises in this way. As I have said, at the rear of the building known as 5 High Street there is a yard, used as a car park, and at the back of the yard some disused garages. It is apparent from the filed plan to the Registered Title that the easternmost section of the yard, including the disused garages, lies outside the registered boundary: it is not included within the boundaries of the Registered Title as shown on the filed plan. I shall call this land “the Disputed Land”. By its application dated 19^th July 2007, the Applicant has applied to alter the register, by means of altering the filed plan so as to include the Disputed Land within the boundaries of the Registered Title. The application is made under Schedule 4 para 5 of the Land Registration Act 2002 (“the 2002 Act”) – for the purposes of correcting a mistake. The mistake in question is this. The conveyance which gave rise to the first registration of the Registered Title was made on 13^th October 1970 (“the 1970 Conveyance”) between Collards Wine Limited (1) and Thresher Company Limited (now Whitbread UK) (2). The 1970 Conveyance – as all the parties now agree – included the Disputed Land. However, due to a mistake by the Land Registry, which it now accepts, and for an unknown reason or reasons, the Disputed Land was not included within the boundaries of the Registered Title as shown on the filed plan. That remains the position. The Applicant, as the current proprietor of the Registered Title, claims to be entitled to add the Disputed Land to the title by way of an alteration to the filed plan. The Respondents oppose that application, on the basis that Whitbread UK retains ownership of the Disputed Land, and there are no proper grounds for alteration of the register. The Respondents’ arguments are far more detailed than this summary suggests, and at the appropriate time I shall discuss these arguments in the detail that they merit.

 

FINDINGS OF FACT

4. Before I consider the parties' respective arguments, there are some findings of fact which I need to make. As I have said, I have reached the Decision in this case without an oral hearing, the parties having requested this in order to save costs. Although I have been asked to look at the witness statements, I cannot of course resolve any direct disputes of fact in the evidence in the absence of cross-examination. However, certain facts have been agreed in the form of the "Agreed Summary of Facts". This includes the admission by the Respondents (a) that the Disputed Land was included in the 1970 Conveyance to Whitbread UK and (b) that it was omitted from the filed plan by a mistake. These are of course important admissions. Beyond the agreed facts, however, it seems to me that I am in a position to make certain other findings of fact, by inference or otherwise, which are material to the dispute. These are as follows:

4.1 At least since 1987, the Disputed Land was treated as included within the Registered Title by Whitbread UK and was used and enjoyed together with the land and buildings comprised within the Registered Title. I derive this evidence from the Statutory Declaration of Mr Mark Bending, First Quench’s local manager, which as far as I can see is unchallenged. This statement was used by Threshers in support of its application for a possessory title, made on 26^th March 2007 and subsequently withdrawn.

4.2 I infer that that this was the position from the date of first registration. Mr Bending’s evidence begins in 1987 because that was the date of his first acquaintance with the property. However, there is nothing to suggest that the Disputed Land has not always been regarded as an integral part of the Registered Title. His evidence (at paragraph 5 of the Statutory Declaration) suggests as much.

4.3 By the same token, it is clear that Whitbread UK, during the entire period that it was the registered proprietor, mistakenly considered that the Disputed Land formed part of the Registered Title. This may be inferred from the absence of any application to rectify under the Land Registration Act 1925 (“the 1925 Act”) the title in order to correct the mistake, coupled with the fact that the Disputed Land was openly used and enjoyed by it in conjunction with the remainder of the Registered Title. The only reasonable inference to be made is that it considered that it already owned the Disputed Land.

4.4 For the same reason, I infer that First Quench was under a similar belief, and also Threshers until some time in February 2007. Indeed, Threshers admits that the defect in title only became apparent shortly before the date of the auction (when solicitors for a potential bidder drew attention to it) – see paragraph 15 of the Statement of Case. That all parties believed that at least the bulk of the Disputed Land fell within the title is also manifest from the original plan to Lot 112, and the intention to include it within the Lease to First Quench. This was only corrected at a late stage (and it is not clear to me whether the Lease plan was ever corrected).

4.5 It is also apparent that at the time of the sale to the Applicant, Threshers was unaware that the Disputed Land had been included in the sale to its predecessor in title Whitbread UK under the 1970 Conveyance. Its refusal to include the Disputed Land in the 2007 Transfer was attributable to a belief that it could not make title to it. This is apparent from the correspondence, and from the decision by Threshers to apply for a possessory title. It was not until the email dated 3^rd July 2007 that Threshers formulated a claim that the Disputed Land remained within its ownership (not, it may be noted, within Whitbread UK’s ownership).

4.6 For the same reason, it is apparent that none of the Respondents became aware that there had been a mistake on first registration until well after the sale to the Applicant. Indeed, the Respondents did not unequivocally accept the existence of a mistake until the delivery of the Statement of Case in July 2008, or shortly before.

 

ALTERATION, NOT RECTIFICATION, OF THE REGISTER

5. I shall now turn to the parties' respective contentions with regard to the claim for alteration of the register. Before doing so, I should make it clear that the application is for alteration, not rectification, of the register, notwithstanding some confusion in the early stages on the part of the Applicant. Rectification of the register gives rise to a right to indemnity - alteration does not. The distinction between the two is that rectification amounts to an alteration of the register that prejudices the title of a registered proprietor. Since, on any footing, there is no registered proprietor of the Disputed Land - subject to the Applicant's argument that it is the owner - any alteration of the register to add the Disputed Land to the Registered Title will not cause any such prejudice. The absence of indemnity is a point relied on by the Respondents, and I shall consider this in due course if relevant.

 

THE APPLICANT’S CASE IN OUTLINE

6. The Applicant's case, as I understand it, is as follows.

6.1 The Disputed Land was - as is common ground - included in the 1970 Conveyance to Whitbread UK. Again, it is common ground that Whitstable was then in an area of compulsory first registration.

6.2 Whitbread UK presented the 1970 Conveyance to the Land Registry for registration pursuant to section 123 of the 1925 Act.

6.3 By an error, the Disputed Land was omitted. However, Whitbread UK was registered as first proprietor of the Registered Title, although the filed plan did not include the Disputed Land.

6.4 Nevertheless, the effect of first registration of the transaction effected by the 1970 Conveyance was to vest the legal title to the Disputed Land to the first registered proprietor. The Applicant does not explain this step in the argument in much detail, but the following passages from its Submissions and Supplementary Submissions encapsulate the argument.

Submissions dated 4^th August 2009

“10…….Consequently the submission in paragraph number 9(b) of the Respondents’ Statement of Case is incorrect since the registered title of the whole of the property the subject of the [1970 Conveyance] vested in Thresher Company Limited the first Proprietor of Title Number K362485 and therefore the Applicant as their successor in title has the right to make the application…..

11. If the disputed land was not included within title number K362485 then it would require a new title number for which there is no procedure available so to do since it could not form the subject of a First Registration ….”

Further Submissions dated 12^th August 2009

“5. It is the case of the Applicant that at the time of first registration the conveyance giving rise to the first registration vested the whole of the property, the subject of that document, in the Transferee once that Transferee’s name had been entered on the register. Whatever transpired between October 1970 and July 1971 does not alter the fact that in July 1971 the Land Registry chose to accept the application for first registration and created the registered title and at that moment the subject matter of that conveyance vested in the new proprietor. At that moment and thereafter R3 became the registered proprietor of the whole of the property even though the mistake was not then noticed.”

6.5 Accordingly, it argues, it is entitled to apply under Schedule 4 para 5 of the 2002 Act for alteration of the register simply to formalise its legal ownership of the Disputed Land. Although it is necessary to amend the filed plan to include the Disputed Land, in law the land is already vested in the proprietor of the Registered Title. I hope I am doing justice to this argument, which is not entirely easy to spell out from the Submissions.

 

THE RESPONDENTS’ ARGUMENTS

7. The Respondents, in the comprehensive written submissions of their Counsel Mr Charles Harpum, has identified four separate ways in which, it accepts, the Applicant might be entitled to the benefit of the right to obtain alteration of the register. Indeed, the basis of the Applicant’s application has not always been transparent, and the Respondents have therefore sensibly decided to deal with all the possible arguments. These are as follows:

7.1 By retrospective application;

7.2 By express assignment of the right to apply for alteration;

7.3 By implied assignment of such a right;

7.4 By a statutory right under Schedule 4 paragraph 5 of the 2002 Act.

Although this categorisation of the different methods of obtaining alteration of the register is most helpful in identifying many of the relevant issues, I do not think that it is strictly accurate. The Applicant's application for alteration of the register is made and could only be made under Schedule 4 of the 2002 Act. Any person can apply to alter the register - the Act itself contains no limitation on the class of applicant. The Applicant accepts that it is basing its application on Schedule 4 – see paragraph 10(d) of the Applicant’s commentary on the Respondents' Submissions. The real question, however, is whether the Applicant, being entitled by statute to make the application, is entitled to obtain that relief.

 

LEGAL TITLE TO THE DISPUTED LAND

8. In my view, the Applicant is wrong in contending that in some way the legal title to the Disputed Land vested in the first registered proprietor on first registration, and the alteration of the register is thus merely a technical adjustment. The true position is this. When the Registered Title was created, it excluded the Disputed Land. A registered title consists of the three elements of the register, namely (A) the Property Register, (B) the Proprietorship Register, and (C) the Charges Register. The Property Register defines and describes the property by reference to the red edging on the filed plan. Subject to the minor adjustments allowed by the General Boundaries rule, a registered title does not extend beyond the limits of the filed plan boundaries. Having regard to the filed plan of title number K362485, therefore, it cannot be argued that the Disputed Land falls within the Registered Title. However, it was conveyed to Whitbread UK in the same conveyance that led to first registration, and, in my judgment, must have vested in Whitbread UK as an unregistered title. It is perfectly possible, as a matter of law, for part of the title to be registered and part unregistered, and that is what occurred here. For the reasons given by both parties - and reference in particular is made to the Court of Appeal decision in Proctor v Kidman (1985) 51 P & CR 67 - the 1970 Conveyance (as regards the Disputed Land) was not avoided by non-registration, as would normally be the case in an area of compulsory first registration. As at the date of first registration in July 1971, therefore, Whitbread UK's title was split into two - registered as regards the property included within the property register of the Registered Title, and unregistered as regards the Disputed Land. On this point, therefore, I accept the Respondents' submissions and reject the Applicant's.

 

DOES THE APPLICANT HAVE A RIGHT TO ALTER THE REGISTER?

9. That is not, of course, the end of the matter. As I have said, the Applicant is entitled to apply for alteration of the register. In order to obtain the alteration requested - the addition of the Disputed Land to the Registered Title - the Applicant must show that it is entitled to ownership of the Disputed Land. I do not see there could be any basis for adding the Disputed Land - which is currently a separate, unregistered title - unless in some way the Applicant can show an entitlement to it. This is of course a rather obvious point, but it is central to the dispute. In substance, the register will only be altered to give effect to a right on the part of the Applicant. If the Applicant has no right in or title to the Disputed Land there is no justification for altering the register. On what basis - other than the basis put forward by the Applicant, which I reject - can it be argued that the Applicant has a right to the Disputed Land?

 

10. The starting point is that a mistake was made when the 1970 Conveyance was submitted for registration. The Disputed Land ought to have been included within the Registered Title - by means of inclusion within the red edging to the filed plan - but it was not. Undoubtedly, at that stage the registered proprietor - Whitbread UK - was entitled to apply for rectification of the register under Section 82 of the 1925 Act. The material parts of the section are as follows:

82 Rectification of the register

(1)The register may be rectified pursuant to an order of the court or by the registrar, subject to an appeal to the court, in any of the following cases, but subject to the provisions of this section:—

……………………………………………………

(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.

Since it is accepted, for the purposes of this adjudication at least, that the Disputed Land was omitted from the Registered Title by means of a mistake, an application for rectification would have been bound to succeed. For so long as it retained the Registered Title, Whitbread UK could have made such an application under section 82(1)(h of the 1925 Act. Clearly, the right to apply to rectify the register, by including the Disputed Land within the Registered Title, is a right that could only benefit the registered proprietor. It seems to me that the real issues in this case, therefore, are

10.1 whether the right to apply for rectification of the register, to correct the original mistake, survived the disposal by Whitbread UK of the Registered Title in 2000, and if it did

10.2 whether that right (or, rather, the equivalent right under Schedule 4 of the 2002 Act) has passed to the Applicant.

I shall consider these issues in turn.

 

THE NATURE OF THE RIGHT TO RECTIFY

 

11. It seems to me that there are two possible ways of characterising the Disputed Land, and the right to rectify the register. Strictly speaking, due to the mistake by the Land Registry, it inadvertently allowed the Disputed Land to remain as a separate, unregistered title, vested in the registered proprietor of the Registered Land. On this basis, the Disputed Land can be regarded as a separate title, capable of being dealt with and disposed of in isolation from the Registered Title. The fact that the existence of the separate title was unknown to the first registered proprietor is irrelevant. On the other hand, in the particular circumstances of this case, it might be argued that the Disputed Land was never regarded as a separate title, but as an integral part of the Registered Title. It is a fact that it was always used and enjoyed in conjunction with the Registered Title, and it was not known until 2007 that the titles were not united. Even then, it was Threshers (NOT Whitbread UK) that claimed ownership, initially on the basis of adverse possession, and subsequently on the basis of a paper title. It can therefore be argued that the undoubted right to rectify the register in order to unite the title to the Disputed Land with the Registered Title was a right that attached to and passed on transfer of the Registered Title, either by express assignment or pursuant to section 63 of the Law of Property Act 1925 (“the LPA 1925”). Section 63 is in these terms:

63 All estate clause implied

(1)Every conveyance is effectual to pass all the estate, right, title, interest, claim, and demand which the conveying parties respectively have, in, to, or on the property conveyed, or expressed or intended so to be, or which they respectively have power to convey in, to, or on the same.

(2)This section applies only if and as far as a contrary intention is not expressed in the conveyance, and has effect subject to the terms of the conveyance and to the provisions therein contained.

 

12. The Respondents argue that there has been no express assignment of the right to alter the register, and that must be right. However, it is a moot point whether the right to rectify the register in order to add the Disputed Land to the Registered Title is a right capable of passing automatically on a transfer. Mr Harpum has referred me to a number of authorities. He accepts that section 63 of the LPA 1925 will operate to pass the benefit of a right to seek rectification of a lease – see Boots the Chemist Ltd v Street [1983] 2 EGLR 51 . He also accepts that, in certain cirumstances, a right to rectify the register under section 82 of the 1925 Act is a transmissible property right. He has referred me to the Court of Appeal decision in Malory Enterprises Ltd v Cheshire Homes (UK) Ltd [2002] Ch 216. The issue in that case was whether a person in actual occupation of land with a right to seek recitification of the register had an overriding interest inder section 70(1)(g) of the 1925 Act. To have such a right, the claimant had to show that it had a proprietary right. Arden LJ gave the judgment of the Court and held as follows:

“In my judgment, the right to seek rectification to reflect a proprietary interest in land fulfils the criteria approved in Williams & Glyn’s Bank Ltd v Boland [1981] AC 487, namely that it is a right in reference to land which is capable of transmission through different ownerships of land. There is no reason why the sale by Malory BVI of its beneficial interest in the rear land with any rights attaching thereto should not be effective to vest in the purchaser the right to apply to the court for rectification of the register. Berkeley Leisure Group Ltd v Williamson [1996] EGCS 18 (Beldam and Morritt LJJ) (30 January 1996), which is cited by Megarry & Wade, The Law of Real Property, 6^th ed (2000), para 6-128, supports this conclusion. In that case the Court of Appeal held that the equity to claim rectification of an agreement for the sale of registered land could pass on sale by the vendor of adjoining land to the purchaser of adjoining land as a result of the operation of section 63 of the Law of Property Act 1925 (which applies to all conveyances of land). (In that case the land and the adjoining land were previously part of a single property within the same title and a mistake had been made with respect to the boundary between subdivided plots). As respects transmissibility there can be no distinction between the equity of rectification of a document and a claim for rectification under section 82. Moreover in this case the right cannot be exercised in isolation from the interest in land Malory BVI has, and thus in my judgment is a right in reference to land.”

 

13. However, Mr Harpum submits on behalf of the Respondents that the right to alter the register in this case is not a right capable of passng under section 63. He accepts that “if the facts fell within the wording of the so-called “all estate clause”, LPA 1925, s 63, that right would pass on a conveyance of the land by reason of that clause”. Paragraph 67 of his Submissions reads as follows:

“In the present case, LPA, s 63 cannot have passed any right to seek alteration of the register from [Threshers] to [the Applicant]. The right to seek alteration of the register in this case is not in reality a right or claim “in, to or on the property conveyed”. It is in substance a claim to a separate parcel of land owned by a stranger to the conveyance to which s 63 applies. There is no case on LPA 1925, s 63 that has gone so far as to enable a person to claim a wholly separate parcel of land.”

He draws attention to the fact that, on the 2007 Transfer from Threshers to the Applicant, the vendor was not prepared to grant any rights over the Disputed Land, and the Applicant “backed away from any claim to the Disputed Land as opposed to asking for rights over it…”.

 

TRANSMISSION OF RIGHT TO RECTIFY – SECTION 63 LPA 1925

14. I think that it is clear from the cases referred to that the right to alter the register to correct a mistake is a property right capable of passing under section 63. . A right to rectify a lease in order to add to the demised premises some land that has been mistakenly excluded, is in my view no different in substance from a right to alter or rectify the register in order to add a parcel of land mistakenly omitted from the filed plan on first registration. In each case, until the order of the court (in the case of "equitable" rectification) or of the registrar or court (in the case of rectification of the register) is made, the additional land remains vested in a third party. It is a separate title, albeit a defeasible title in the sense that it is or may be subject to the right of rectification. In an "equitable" rectification case the additional land may have passed to a successor in title of the original vendor, but rectification would still be ordered subject to questions of notice - see Blacklocks v JB Developments (Godalming) Ltd [1982] Ch 183. The unregistered title in the Disputed Land, created as a result of a mistake, is also defeasible, in the sense that it is subject to the statutory right to rectify under section 82 of the 1925 Act, or the right to alter under Schedule 4 of the 2002 Act. The essence of all such cases is the existence of a mistake, whereby the title to the additional land ought to have vested in the applicant or his predecessor in title, but due to the error (whether in the documentation, or by the Land Registry) it is vested in a third party. I cannot therefore agree with Mr Harpum's reading of section 63, and his very narrow construction of the words "all the estate, right, title, interest, claim, and demand which the conveying parties respectively have, in, to, or on the property conveyed, or expressed or intended so to be," - to the effect that the right to rectify under section 82, or to alter under Schedule 4, is excluded. The right to rectify or alter the register is a right “attaching” to the title, to adopt the description of Arden LJ in the Malory case (albeit that section 63 of the LPA 1925 was not under consideration). Furthermore, the position is the same as it was in Malory, where “the right cannot be exercised in isolation from the interest in land Malory BVI has, and thus in my judgment is a right in reference to land.”. In my judgment, therefore, the right to correct the original mistake is capable of passing to the purchaser on a transfer of the Registered Title, subject to any contrary intention being expressed in the transfer. I think it would be perverse to treat the right to rectify or alter as an interest in land, but deny that such a right is capable of passing automatically under section 63 of the 1925 Act.

 

15. It may be that the Respondents concede this point, and this may be what Mr Harpum means when he says “if the facts fell within the wording of the so-called “all estate clause”, LPA 1925, s 63, that right would pass on a conveyance of the land by reason of that clause”. At paragraph 67 of the Respondents’ Submissions it is argued that the right to rectify/alter did not pass to the Applicant, having regard to the “factual matrix”. Section 63 itself, of course, provides that the section applies “only if and as far as a contrary intention is not expressed in the conveyance, and has effect subject to the terms of the conveyance and to the provisions therein contained”. This suggests that the section will apply unless expressly or impliedly excluded by the terms of the conveyance itself. If it is the case that no contrary intention can be derived from the terms of the conveyance, it is not clear to me whether it is possible to infer such a contrary intention by reference to the factual matrix. However, in order to construe any conveyance the factual matrix may be considered. In deciding whether there a contrary intention is expressed in the conveyance, I may therefore consider the factual matrix. However, I cannot see that the factual matrix can affect the construction of section 63 itself. Accordingly, I hold that the right to apply under section 82 of the 1925 Act and Schedule 4 of the 2002 Act, to the Land Registry to add the Disputed Land to the Registered Title, is a right which in principle passes from one proprietor of the Registered Title to the next. Whether it has been excluded in this particular case depends on a consideration of the circumstances surrounding the execution of the various Transfers..

 

HAS THE RIGHT PASSED TO THRESHERS?

16. First I must decide whether, in the circumstances of this case, and in the light of the facts as far as they are known, the right to rectify the register passed to the Second Respondent in 2000, or whether the right was extinguished upon sale and the Disputed Land remained in the ownership of Whitbread UK free from that right. It seems to me that it follows that the right to correct the original mistake can only survive the sale, if it did pass to the purchaser and was intended to do so. If it did not pass to the purchaser - in other words, if the parties agreed that Whitbread UK would retain the title to the Disputed Land as a separate entity or otherwise agreed to exclude the right to rectify from the disposal - then in my view it comes to an end. Only the owner of the Registered Title could have applied to rectify the mistake. I should say that I have not seen the contracts for sale as between the various Respondents, nor have I seen the transfers in 2000 and 2003. It may be that there are obligations and remedies under those documents - equitable rectification, for example, or actions on the covenants for title - which have the same effect as a claim to rectify or alter the register. I am bound to decide this case on the basis of the material that has been put before me, and I cannot therefore make any findings as to rights arising under the contracts. However, in the light of the findings made in paragraph 4 above, I conclude that the right to rectify the Registered Title did pass from Whitbread UK to First Quench, and from First Quench to Threshers, by implied assignment under section 63 of the 1925 Act. Since none of the interested parties was aware that the Disputed Land had been excluded from the Registered Title by mistake, I cannot see that the right to rectify would have been reserved out of or otherwise excluded from the successive transfers of the Registered Land. All parties were proceeding on the assumption that the Disputed Land was part and parcel of the Registered Title. It was used and enjoyed as such in the mistaken belief that it was included. It follows, in my judgment, that the right to rectify passed to Threshers by virtue of the transfer from First Quench in 2003. I cannot see that Whitbread UK would have been entitled to oppose rectification of the register, had the application been made whilst Threshers was the registered proprietor. The fact that the title to the Disputed Land was a separate unregistered title was a pure windfall as far as Whitbread UK was concerned.

 

HAS THE RIGHT PASSED TO THE APPLICANT?

17. However, the Respondents argue that the terms of the Auction contract and subsequent transfer between Threshers and the Applicant were such that the right to alter the register did not pass to the Applicant. Helpfully, the sequence of events has been set out in some detail in the Respondents’ Submissions, at paragraphs 32 to 42. In summary the undisputed facts are as follows:

17.1 Whitbread UK put the property up for sale by auction, to be held on 21^st February 2007. The property was Lot 112 in the Auction Catalogue and was described as “5 High Street, Whitstable. Kent CT5 1AP”. The Auction Particulars contained details of the tenancies affecting the premises. It was stipulated that the purchaser would grant a lease of the ground floor of the building, and part of the Disputed Land, to First Quench on completion.

17.2 The Auction Particulars contained a plan of the property, which comprised the Registered Title together with part of the Disputed Land. The verbal description of the property was as follows:

“The property comprises a ground floor retail unit with ancillary accommodation and a self contained residential maisonette on first and second floors. The property also benefits from a rear yard providing car parking.”

The rear yard is included in the Disputed Land.

17.3 It appears that Threshers’ solicitors had their attention drawn to the discrepancy between the plan in the Particulars (by a potential bidder), and the filed plan of the Registered Title, shortly before the Auction. As a result, an Addendum to the Auction Catalogue was issued on 20^th February 2007 – the day before the Auction – and the Auctioneer read out the correction immediately before the lot was offered for sale. The filed plan of the Registered Title was already shown on Threshers’ solicitors’ “Dealroom” internet site, and a link to that site had been sent to the Applicant’s solicitor on 2^nd February 2007.

17.4 The Addendum relating to Lot 112 was in these terms:

“The title mark up in the catalogue is incorrect. The correct mark up can be found within the legal pack and the purchaser will be deemed to have purchased with full knowledge thereof.”

The “correct mark up” presumably refers to the filed plan as shown on the “Dealroom” website. No new plan was substituted for the Auction plan, and nothing seems to have been said about the proposed Lease, which included an area of the Disputed Land.

17.5 Following the Auction, there was correspondence between Threshers’ solicitors, and A’s solicitors, with regard to the terms of the transfer.

17.5.1 By letter dated 2^nd March 2007 the Applicant’s solicitors invited Threshers’ solicitors to include “whatever area is occupied by your client or the benefit of any rights”. This request was coupled with an allegation that the Replies to Commercial Property Standard Enquiries included a misrepresentation as regards Threshers’ use of land outside the title – a misrepresentation that has been admitted. A draft transfer was sent, which included the following form of words in the property description – “together with such rights as the Transferor may have over [the Disputed Land]…”

17.5.2 The response from Threshers’ solicitors in their letter of 5^th March 2007 was as follows: “….we have removed reference to the additional area at the back of the property which was clearly not part of the auction sale. The reason the addendum was issued was that this piece of land is not included in our client’s title and they are therefore not in a position to sell it.”

17.6 Despite further protest by the Applicant’s solicitors, Threshers refused to include any reference to the Disputed Land, or any rights over it, in the draft transfer. Eventually, the Transfer was executed on 21^st March 2007. The Property was described as “5 High Street Whitstable Kent” and the title number K362485 given.

 

18. Based on these facts, the Respondents argue that the Disputed Land, and any rights over the Disputed Land, were deliberately excluded from the Transfer to the Applicant and, accordingly, section 63 of the LPA 1925 does not operate – in other words, a contrary intention has been proved. Certainly, the correspondence that I have referred to above provides the context against which the Transfer must be construed. The original draft transfer provided by the Applicant’s solicitors included a proposed grant of “such rights as the Transferor may have over [the Disputed Land]”. This was deliberately excluded, and Threshers’ solicitors made it clear that their clients had not intended to sell the Disputed Land, because they did not have title to it. Does this necessarily mean that the Transfer cannot be construed as including the right to apply for alteration of the register to correct the underlying mistake? In considering this question, certain other matters of context – or factual matrix – may be borne in mind, namely:

18.1 At the date of the Auction, and the Transfer, neither the Applicant nor Threshers was aware that the Disputed Land had been omitted from the Registered Title by mistake.

18.2 It follows that neither party aware that there was a right to apply for alteration of the register, which right (as I have held) was vested in Threshers.

18.3 At this time, Threshers believed that the legal title was vested in an unknown third party – hence the application for possessory title.

 

19. In the circumstances, at the time of the Auction and subsequent Transfer, the parties manifestly were not directing their minds to the right on the part of the registered proprietor to apply to add the Disputed Land to the Registered Title, by way of altering the register to correct the mistake. It is possible to read the correspondence between the parties as a refusal by Threshers to contemplate the grant of any rights relating to the Disputed Land, including the right to correct the register. However, in my judgment this reading would not be correct. It seems to me that the rights which the parties were contemplating are more in the nature of rights of occupation and associated easements. If Threshers had accepted at this time that it did have a right to seek alteration of the register, and given the dispute between the parties both as to the alleged misrepresentation and the effectiveness of the auctioneer’s correction of Lot 112, almost certainly the Applicant would have taken a much stronger line with regard to the contents of the Transfer. Threshers’ refusal to include any rights over the Disputed Land was based on the mistaken view that it had no such rights, and that since it could not prove title to the land it was not prepared to refer to it in the Transfer. It was not the legal owner of the Disputed Land, to be sure, but it was entitled to apply to the Land Registry to achieve that end.

 

 

 

ARE THERE EXCEPTIONAL REASONS WHY ALTERATION SHOULD BE REFUSED?

20. Accordingly, since I have held that the right to rectify (under section 82 of the 1925 Act) vested in Threshers when it became the proprietor of the Registered Title, and since I have held that the right passed to the Applicant by virtue of the Transfer, by implication under section 63 of the LPA 1925, it follows that the Applicant does have the right to apply to the Land Registry to alter the register and correct the mistake. In this event, the Respondents have addressed a number of arguments to me as to why, in the circumstances of this case, the Land Registry should not be directed to effect the alteration. They accept that, by analogy with rule 126 of the Land Registration Rules 2003 – as explained in Derbyshire County Council v Fallon [2007] 3 EGLR 44 at 48 - “if the registrar can alter the register he generally should do so, unless there are exceptional circumstances that justify not doing so (see LRR 2003, r 126(2). There plainly are exceptional circumstances in the present case.” (Respondents’ Submissions at paragraph 71). I shall consider these alleged exceptional circumstances in turn. The paragraph headings are derived from Mr Harpum’s Submissions.

 

DEPRIVATION OF PROPERTY RIGHTS WITHOUT COMPENSATION

21. The Respondents argue that an order that the register be altered so that the Disputed Land is incorporated into the Registered Title would contravene Article 1, Protocol 1 European Convention on Human Rights as incorporated into English law by the Human Rights Act 1998. As it is put in paragraph 78 of the Respondents’ Submissions:

“In the present case, if the register is altered so that the Disputed Land is incorporated in the [Registered Title], R3 will be divested of its land without compensation.”

They rely on a passage taken from the decision of the Grand Chamber in J A Pye (Oxford) Ltd v UK [2008] 1 EGLR 111 at 116, paras 53-4, which includes this statement:

“54. A taking of property under the second sentence of the first paragraph of Article 1 without payment of an amount reasonably related to its value will normally constitute a disproportionate interference that cannot be justified under Article 1.”

If alteration – as opposed to rectification – of the register occurs, there is no provision for the payment of an indemnity under the 2002 Act, hence the argument that it amounts to expropriation.

 

22. Whilst this argument may have considerable theoretical force, in practice, on the facts of this case, it amounts to very little. I have held that Whitbread UK disposed of the right to seek rectification of the register when it disposed of the Registered Title to First Quench. Although, through a historical anomaly, it retained the unregistered legal title to the Disputed Land, that title was always subject to the registered proprietor’s unanswerable claim for rectification. In reality, the Disputed Land never had any value in the hands of Whitbread UK once it had disposed of the Registered Land. Indeed, Whitbread UK did not lay claim to the Disputed Land until very recently, certainly until well after the date of the Applicant’s application. This is apparent from a number of documents. I shall refer to two. First, Whitbread UK’s Defence to the proceedings commenced by the Applicant in the Chancery Division under the reference HC07C01847 (“the Chancery Proceedings”). The claim was, as I have said, brought against Whitbread UK as Defendant, and sought a declaration that the Disputed Land should be part of the Registered Title. By paragraph 3 of the Defence, Whitbread UK pleaded that (if the Applicant was right and the Land Registry made a mistake in 1971) the Disputed Land belonged to Threshers. It is of course now conceded that such a mistake was made. Paragraph 5(5) reinforces the point, by pleading that the Chancery Proceedings should have been brought against Threshers, and (by implication therefore) not against Whitbread UK. Secondly, the Respondents’ combined letter of objection to the instant application – dated 9^th January 2008 – states specifically that Threshers is the owner of the Disputed Land. I think this demonstrates the extreme artificiality of the argument concerning expropriation. Whitbread UK had no idea that it “owned” the Disputed Land until recently. This undoubtedly reflects the fact that it, and its purchaser, considered that it had been “sold” as part and parcel of the Registered Title many years ago. Even if the argument is correct in principle, therefore, I cannot see that Whitbread UK would suffer any real financial loss as a result of alteration. Nor, for the reasons that I have explained, would Threshers. This factor cannot, therefore, amount to an exceptional circumstance.

 

UNJUST ENRICHMENT

23. The Respondents argue that if the register were to be altered in favour of the Applicant, it would receive a windfall at Whitbread UK’s expense. The point is explained as follows:

“For the reasons more fully explained …below, A ….. could never have thought that it was bidding for both the Property and the Disputed Land. Accordingly, in deciding how much to bid, A…would not have taken into account the expectation of acquiring the Disputed Land……..If A were to receive the Disputed Land by the present application, it would receive a windfall. It would acquire land that it could never have thought that it was buying…”.

The Respondents rely on the events preceding the Auction, and the alleged notification to the Applicant’s representative that the Disputed Land was to be excluded from the sale.

 

24. There is a conflict of evidence as to what exactly Mr Gary Munday, the Applicant’s representative at the Auction, thought that he was buying. Although the documentation supplied by Threshers before the Auction, and the announcement made by the Auctioneer, indicates that the area of Lot 112 was reduced, Mr Munday’s own evidence (see his Witness Statement dated 17^th June 2009) is that he was unware that none of the Disputed Land was included. As far as I can tell, there was considerable confusion on the part of Threshers as to the land being offered for sale. The Lease to First Quench includes part of the Disputed Land, and no definitive plan was produced at the Auction itself to indicate the revised area. In any event, Lot 112 was sold as an investment property with a rental stream of £25,839 per year, and no doubt the bid price was calculated on that basis. I do not therefore consider that I am able to assume, as the Respondents invite me to, that the Applicant was well aware that the whole of the Disputed Land was omitted from the sale, and that the bid price did not reflect any part of it. In any event, I do not think it is right to characterise the addition of the Disputed Land as a “windfall” for the Applicant. The Disputed Land has always been regarded as an integral part of 5 High Street Whitstable – if anything, it is the Respondents which are seeking to retain an area of land which (certainly as regards First Quench and Whitbread UK) they never believed they retained.

 

NO INTENTION THAT APPLICANT SHOULD ACQUIRE THE DISPUTED LAND

25. In paragraph 17 above I have summarised the Respondents’ case on this point and identified the main documents relied on. On the evidence before me, there is some doubt as to the actual understanding on the part of the Applicant (in the person of Mr Munday) as to what it was bidding for, whatever may have been the true position on an objective basis. It is fair to say that Threshers made it clear that it did not have title to the Disputed Land and was not therefore including it in the sale. That does not, however, mean that the Applicant necessarily intended not to acquire it, or some rights in it. To take an obvious example, it would have been open to the Applicant to apply to register a possessory title to the Disputed Land, relying on the fact that it had been enjoyed for many years as an adjunct to the Registered Title. I cannot see that there is anything necessarily unjust in allowing the Applicant to acquire land which, at the time of the Auction, none of the Respondents believed that they owned. It might be regarded as ironic that Mr Harpum has cited the case of James Hay Pension Trustees Ltd v Cooper Estates Ltd [2005] EWHC 36 in support of his submissions. In his judgment Hart J had this to say:

“Cooper is the accidental owner of a small parcel of land which it never intended to acquire and which is of no use to it save as a means of extracting a ransom payment from James Hay, a stance which however legitimate commercially does not commend itself to this court as in any way meritorious.”

There is no evidence before me as to the motives of the Respondents. They may have legitimate commercial reasons in seeking to retain ownership of a piece of land which has for at least 40 years, and probably much longer, been an integral part of 5 High Street, the access to it being largely controlled through those premises. However, it is indubitable that none of the Respondents believed that they owned it – First Quench and Whitbread UK because they had disposed of the Registered Title, and Threshers because it could not make title to it. To this extent Whitbread UK could very well be described as “the accidental owner of a small parcel of land which it never intended to acquire”. I therefore reject this ground of objection.

 

LAPSE OF TIME

26. It is objected that some 38 years have elapsed since the first application was made, and “it cannot be known for certain whether…the registrar rejected the application so far as it related to the Disputed Land, or whether he merely overlooked it.” (see the Respondents’ Submissions at paragraph 90). I am not sure that this argument is tenable, bearing in mind the express concession at paragraph 26 of the Respondents’ Submissions that there was a mistake in first registration, combined with the Land Registry’s admission to the same effect. In any event, I do not see why mere lapse of time should matter. The nature of the mistake is obvious and there is no dispute that it was made. It would be different if third party rights had been granted over the Disputed Land, but that is not the case. I therefore reject this argument.

 

ABUSE OF PROCESS

27. Finally, the Respondents argue that “The present application is an abuse of process because A commenced High Court proceedings for the same relief and then discontinued them”. It appears that the Applicant served Notice of Discontinuance on 7^th December 2007, immediately after the Land Registry that it would accept the Applicant’s application to alter the register dated 18^th July 2007. The defendant’s costs have been paid. My attention has been drawn to the provisions of Part 38.7 of the Civil Procedure Rules, which is in the following form:

“A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if –

(a) he discontinued the claim after the defendant filed a defence; and

(b) the other claim arises out of facts which are the same or substantially the same as those related to the discontinued claim.”

The gloss placed on the rule by the editors of the White Book suggest that permission will only be given in exceptional circumstances. The provisions of the CPR with regard to the effect of discontinuance are a specific application of the general principle of abuse of process, which requires the court to exercise “a broad, merits-based judgment” in the words of Lord Bingham Johnson v Gore Wood & Co [2002] 2 AC 1 at 31D-E. Although the Civil Procedure Rules do not apply to this jurisdiction, and cannot bind me, the general law regarding abuse of process does, and the reference to the overriding objective in rule 3 of the Rules suggests that where appropriate the Civil Procedure Rules may be looked at for guidance. I have seen the Applicant’s pleadings in the Chancery Proceedings and, broadly, they raise the same issues as those raised by the Statements of Case in this adjudication. The central allegation is that the Disputed Land was omitted from the Registered Title by mistake. The relief sought does not, however, include an order for alteration of the register – but the Applicant does seek a declaration that it is entitled to have the register rectified. The defendant is Whitbread UK – neither of the other Respondents is a party.

 

28. In my judgment, it is not an abuse of process for the Applicant to pursue the alteration of the register by means of an application to the Land Registry, notwithstanding the existence of the discontinued Chancery Proceedings. My reasons are as follows. The issues raised in the Chancery Proceedings have never been properly litigated. The Defence pleads that Threshers is the true owner of the Disputed Land, whereas the Respondents’ case in this adjudication is that Whitbread UK is the owner. Neither Threshers nor First Quench were parties to the Chancery Proceedings. The proceedings were discontinued at a fairly early stage, and the defendant’s costs have been paid. The Applicant had already made an application to the Land Registry for alteration of the register, and as soon as that application had been accepted the Chancery Proceedings were discontinued. The defendant was aware of this, since the Land Registry notified the Respondents of this application on 17^th December 2007. In all the circumstances, I do not see that any injustice is caused to the Respondents by the Applicant’s conduct. On the other hand, it would cause injustice if the Applicant were unable to pursue its claim for alteration (to correct an admitted mistake by the Land Registry). The Civil Procedure Rules are not directly in point since the Applicant has chosen to adopt a different method of obtaining alteration of the register, namely by direct application to the Land Registry, as opposed to seeking an order of the Court. Accordingly, there is no second claim which would be caught by CPR 38.7 in any event. Accordingly, I do not regard this as a reason for refusing alteration in this case.

 

CONCLUSION

29. I shall therefore direct the Chief Land Registrar to give effect to the Applicant’s application dated 18^th July 2007 to alter the register, as if no objection had been made. On the face of it, I do not see why the Respondents should not pay the Applicant’s costs, but I shall give them the opportunity of making submissions in writing on the point within 14 days of the date of this Decision. These should also be served on the Applicant, which may respond within 7 days. I also direct the Applicant to lodge and serve a detailed breakdown of its costs incurred since 12^th May 2008 within 7 days of the date of this Decision. The Respondents should in their written submissions deal both with the principle of the costs order, and the quantum.

 

Dated this 8^th day of September 2009

 

 

 

 

 

 

By Order of The Adjudicator to HM Land Registry