REF/2009/1459

ADJUDICATOR TO HER MAJESTY’S LAND REGISTRY

LAND REGISTRATION ACT 2002

 

IN THE MATTER OF A REFERENCE FROM HM LAND REGISTRY

 

 

BETWEEN

KNIGHTS CONSTRUCTION (MARCH) LIMITED

 

APPLICANT

 

and

 

1. ROBERTO MAC LIMITED
2. THE CHIEF LAND REGISTRAR

 

RESPONDENT

 

Property Address: The Salvation Army Hall, High Street, March

Title Number: EGL41071

Before: Mr. Michael Mark sitting as Deputy Adjudicator to HM Land Registry

 

Sitting at: Victory House

On: 6 and 7 September 2010

And at 45 Bedford Square on 12 January 2011

 

Applicant Representation: Andrew Gore, Counsel

First Respondent Representation: Stephen Jones, Counsel

Second Respondent Representation: Mr. Timothy Morshead, Counsel (12 January 2011 only)

___________________________________________________________________________­

 

 

On voluntary first registration in 2007, the land registered by mistake included land the paper title to which was vested in the Applicant. It adjoined a block of flats and shops and was used, for the most part under rights granted by their leases, for car parking and waste bins by the tenants. One part was fenced off with the common parts of the flats and had been used as a drying area by the tenants but was now derelict. The car parking area had been tarmaced by the Applicant in 1985 when the development was built but had been neglected since then and was open to the road. The newly registered proprietor sold the land with the adjoining building to the Respondent in 2009, and the transfer was registered. The Respondent cleared and fenced the land, but was immediately met with protests from the tenants and the Applicant. The fencing was then removed and pending resolution of the dispute as to ownership the land was used for parking by all parties and continued to be used for the residential tenants’ bins. Most of the tenancies were on long leases without any rent being payable. There were two flats let on assured shorthold tenancies.

 

Held: 1. The Respondent was not in possession of the land for the purposes of paragraph 6 of Schedule 4 to the Land Registration Act 2002.

2. The Applicant was in actual occupation of the fenced off drying area in a manner that should have been obvious to the Respondent on a reasonably careful inspection, so that the Respondent’s registered title was subject to the Applicant’s interest by virtue of paragraph 3 of Schedule 3 to the Land Registration Act 2002 and the Applicant was entitled to have the register altered to remove that land from the Respondent’s title.

Epps v Esso Petroleum, [1973] 1 WLR 1071, Abbey National Building Society v Cann, [1991] AC 56, Malory Enterprises Ltd v Cheshire Homes (UK) Ltd, [2002] Ch 216 and Link Lending Ltd v Bustard, [2010] EWCA Civ 424 applied.

3. If the Applicant was in actual occupation of the remainder of the land, it was not in such a way that would have been obvious on a reasonably careful inspection.

4. The Applicant was not in receipt of any rents or profits relating to the disputed land and was not therefore entitled to rely on the transitional provisions in paragraph 8 of Schedule 12 to the Land Registration Act 2002 which, if applicable, would have meant that the Respondent’s title to the whole of the disputed land would have been subject to the Applicant’s rights.

5. Insofar as the register was not altered to remove the land from the Respondent’s title, the rights of the tenants over would survive only insofar as they fell within the provisions of paragraph 3 of Schedule 3 or paragraph 9 of Schedule 12 to the Land Registration Act 2002.

Nevill Long v Firmenich & Co, (1984) 47 P & CR 59 considered

6. The Applicant was entitled to have the registered title rectified to exclude the land which had been included in error, there being no exceptional circumstances which should lead to the power to rectify not being exercised.

Ajibade v Bank of Scotland, REF/2006/0163 and 0174 followed.

Stewart v Lancashire Mortgage Corporation REF/2009/0086 and 1556 not followed.

Barclays Bank v Guy, [2007] EWHC 893 (Ch) distinguished.

Dicta in Odogwu v Vastguide Ltd, [2008] EWHC 3565 (Ch) and Barclays Bank v Guy [2008] EWCA Civ 452 not followed.

Dicta in Barclays Bank v Guy [2010] EWCA Civ 1396 and Pinto v Lim, [2005] EWHC 630(Ch) considered and applied.

Argyle Building Society v Hammond (1984), 49 P & CR 148 and Norwich and Peterborough Building Society v Steed, [1993] Ch 116 considered.

 

 

The Registered Title

 

1. The old Salvation Army Chapel in March lies between the High Street and Chapel Street. Between the back of the chapel and Chapel Street is a roughly rectangular piece of land (the disputed land). It appears from a statutory declaration dated 6, 7 and 8 April 1943 by various officers of the Salvation Army and by solicitors acting for the Salvation Army that the title deeds relating to the Salvation Army Chapel had been destroyed by enemy bombing during the Second World War. The statutory declaration further indicated that the freehold title to the Chapel had been acquired on about 31 March 1888. The statutory declaration gave no indication as to the boundaries of the property so acquired.

 

2. In 2007, the Salvation Army was contemplating selling the Chapel. It decided to apply for voluntary first registration of the property at the Land Registry. For this purpose a further statutory declaration was sworn by Andrew David Axcell. He had been working for the Salvation Army from 1979 to 1989 as Chief Surveyor within its property department. He had also rejoined the property department in September 2002. He claimed to be fully conversant with the records of the Salvation Army Trustee Company and of its property affairs since the date of his appointment in 1979. He went on to assert that the freehold premises known as The Salvation Army High Street March Cambridgeshire were shown in red on the plan marked ADA annexed thereto, were conveyed to William Booth the then General of The Salvation Army on 31 March 1888 and by virtue of Section 6 of The Salvation Army Act 1931 they became vested in The Salvation Army Trustee Company on1 October 1931. He drew attention to the destruction of the title deeds by reference to the 1943 statutory declaration to which I have already referred and to a further statutory declaration dated 6 February 1984 which was not in evidence.

 

3. The premises shown in red on the annexed plan included the disputed land.

 

4. The statutory declaration of Mr Axcell went on to depose that from the completion of the “said Statutory Declaration on the dates aforesaid to the present time The Salvation Army Trustee Company has been in free undisturbed and undisputed possession of the said premises and in receipt of the rents and profits thereof”. He stated that he deposed to the above from information obtained from the records of The Salvation Army Trustee Company and from his own knowledge of that company’s property affairs since his appointment in 1979.

 

5. Mr Axcell did not give evidence at the hearing, and no explanation has been provided by the Salvation Army as to how the disputed land came to be included in the land which he asserted that The Salvation Army Trustee Company had been in free undisturbed and undisputed possession of and in receipt of the rents and profits thereof. It is abundantly clear from the evidence to which I shall refer below that it never had title to the disputed land and had never, at least since the mid-1980s, been in possession of it or had anything to do with it, except pursuant to rights granted to it as underlessee of shop premises, 87 High Street, owned by the Applicant, Knights Construction.

 

6. The Land Registry accepted Mr Axcell's statutory declaration, so far as the evidence before me appears, without question or further investigation. On 5 November 2007 it registered “The Freehold land shown edged with red on the plan of the above title files at the Registry and being The Salvation Army Hall, High Street, March” with title number CB328270. The land shown edged red on the title plan included the disputed land.

 

7. The Salvation Army then sought to sell the property, which was surplus to its requirements, initially according to the evidence of Roberto Divkovic, the managing director of the Respondent, Roberto Mac Ltd., for £150,000. It appears to have been seriously overpriced, and was eventually acquired by Roberto Mac for £85,000. Roberto Mac was duly registered at the Land Registry as proprietor of the land with title absolute 13 March 2009 on the same date a registered charge dated 12 March 2009 was registered, the proprietor being Barclays Bank plc.

 

The Paper Title

 

8. The unregistered paper title to the disputed land can be traced back to an indenture dated 24 February 1908. That indenture related to property to the south of the disputed land and of the chapel. That land was eventually acquired by Knights Construction in 1981, and it has built a block of flats and two shops on it. The disputed land, which is to the west of the chapel and to the north of the land on which the flats are built, is shown at that stage as including four buildings, two of which are shown as being in the occupation of Mrs E Spriggs. There follows an indenture dated 20 April 1920 between Emma Spriggs as vendor and others, respectively as trustees and as purchaser, by which Emma Spriggs conveyed to the purchaser, inter alia, “All those Three cottages or tenements situate in and being Numbers 6, 7, and 8 Chapel Street in March aforesaid and the yard and premises adjoining Together with the outbuildings and strip of land on the opposite side of the said Street in the respective occupations of Mrs Williams, [illegible] and Robert Fitzjohn.” The land and property conveyed by that conveyance included the whole of the disputed land, which was identified on the plan as including 6, 7 and 8 Chapel Street.

 

9. The title deeds go on to show that in 1937 the disputed land became vested in William Sam Cartwright, and it was transferred by him to his wife in 1943. As described in the conveyance to Mrs Cartwright, the disputed land is described as being all those three cottages or tenements situate in and being Numbers 6, 7, and 8 Chapel Street in March aforesaid and the yard and premises adjoining, and they are identified further by reference to the plan on the 1920 indenture to which I have referred.

 

10. Mrs Cartwright then sold to Knights Construction by a conveyance dated 13 August 1981 firstly the land conveyed by the indenture dated 24 February 1908 to which I have referred, and secondly “ALL THAT piece or parcel of land formerly forming the site of three cottages or tenements formerly being numbers and 6 7 and 8 Chapel Street March aforesaid together with the outbuildings and strip of land on the opposite side of the said street all which said property First and Secondly hereinbefore described is for the purpose of identification delineated and coloured pink and blue on the Location Plan annexed hereto”. The Location Plan clearly includes nearly all the disputed land, although for no apparent reason an irregular area in the north east corner of the land appears to have been omitted. That area includes part of the site of the former 7 Chapel Street. There is no evidence to suggest that that part of the site was ever transferred elsewhere, or that anybody else has ever made any claim to it. I accept the evidence of Mr Rodney William Purser, a director of Knights Construction, that the land acquired was with the benefit of outline planning permission for the erection of 8 one bedroom flats, 2 bed-sitter flats 7 Garages and the provision of three parking spaces, and that the land he thought he was acquiring included the whole of the land in the 1929 conveyance.

 

The development and use of the disputed land since 1981

 

11. Subsequently, planning permission was granted for the erection of two shops and 8 flats. The plan attached to the planning permission shares in the same area of the disputed land edged red as is shown in the 1981 Location Plan. It also shows the car parking area with 8 designated spaces for the flats and two further spaces for numbers 87 and 89 High Street, the two shops. The flats and shops were duly constructed, and were completed in 1985. Their postal addresses are 1, 3, 5, 7, 9, 11, 15 and 17 Chapel Street. At the same time, almost all the disputed land, including the irregular area outside the plan on the 1881 conveyance but excluding the drying compound to which I will refer, was tarmaced to provide a parking area for residents of the flats and tenants of the shops, together with a small area of additional land between the disputed land and the block of flats which had been part of the land included in the 1908 indenture. Knights Construction constructed a row of concrete bollards along the northern boundary separating the disputed land from a public footpath that led between Chapel Street and High Street. The development included a garage under the Flat 1 close to Chapel Street, access to and from which could only be obtained by crossing part of the disputed land.

 

12. The disputed land was not fenced off from Chapel Street, thus making it easier for those with a right to park on the land. In the south-eastern corner of the disputed land a drying compound was constructed for the exclusive use and benefit of the occupiers of the flats. This comprised a concrete base surrounding which was a 1.8 m close boarded fence with an un-gated entrance leading to it on the southern side from a footpath forming part of the development which led from Chapel Street and High Street to the entrances to the flats. There was also space for four cars to park on land on the opposite side of Chapel Street owned by Knights Construction.

 

13. Knights Construction still controlled until recently Flats 1 and 15, which were let on assured shorthold tenancies, although Flat 1 may have recently been sold on a 999 year lease. These tenancies contained no express rights over the disputed land, although Mr. Purser stated, and I accept, that he had told the tenants of Flats 1 and 15 when he handed over the keys that they could park on that land and use the drying area.

 

14. The other flats were sold on 999 year leases following completion of the development, all of which leases contain similar terms. A copy of one of the leases, relating to Flat 5, is included in the trial bundle. The demise refers to the 1981 conveyance and defines “the freehold” as the property shown on the location plan annexed thereto and thereon edged with red. The location plan includes the disputed land with the exception of the area not included in the plan on the 1981 conveyance. The lease includes the following rights:

 

(i)                 The right of free and unrestricted passage and running of electricity water and soil from and to the demised premises through the sewers conduits cables and soakaways on in or under the adjoining maisonettes shops and remainder of the freehold subject to the payment of a fair proportion of the expense of maintaining renewing altering rebuilding cleansing and repairing the same unless the same shall be the liability of the Local Authority Statutory Undertaker or any other Corporation.

(ii)               The right for the Tenant to enter the remainder of the freehold for the purpose of repairing maintaining renewing altering rebuilding and cleansing the demised premises or any part thereof and the services thereto.

(iii)             The right in common with Knights Construction and all other persons having like right with or without vehicles at all times and for all purposes connected with the demised premises to pass and repass to and from the demise premises over and along the drive paths and yard coloured green on the site plan annexed -an area which included the disputed land - subject to payment of a fair proportion of the expenses of maintaining renewing altering rebuilding and repairing the same.

(iv)             All the easements and similar rights now enjoyed by the demised premises in relation to the remainder of the freehold.

(v)               The right in common with all others having like right to use the parking space as shown on the said site plan for the purpose of the parking of one private motor vehicle and/or motor or other cycles subject always to there being space available and also subject to the payment of a fair proportion of the expense of maintaining renewing altering rebuilding and repairing the same.

 

15. The recent lease of Flat 1, a copy of which is in the trial bundle, contain similar provisions. The shops at 87 and 89 High Street were let to Mr Purser by a lease dated 21 June 1989, also for a term of 999 years. Once again, this lease contained similar provisions to those set out above in relation to Flat 5. The shop at 89 High Street was underlet by Mr Purser to Jacqueline Drewery by an underlease dated 5 December 1989 for a term of 25 years from that date. The underlease contains similar provisions to those set out above. The shop at 87 High Street was at one stage let to the Salvation Army Trustee Company by an underlease dated 23 February 1996 made between Mr Purser and that Company and which was terminated by that Company as from 1 December 2004. The actual underlease was not in evidence, but the letting particulars stated that there was car parking at the rear, and I am satisfied that the underlease would have contained similar provisions as those in the lease of 89 High Street. There was then a void at 87 High Street for a few months until it was relet.

 

16. Evidence was given, which I accept, by Mr. Neville Young, that he purchased flat 7 in 2004, and subsequently transferred it into the name of his company. He described the vegetation and the bins as being around the perimeter of the car parking area, but not so as to prevent car parking. He let the flat on assured shorthold tenancies, and when he visited the flat, he would park on the disputed land. He spent 2 to 3 weeks there decorating the flat when he first bought it. He would also visit every 2 weeks when there were voids. He would see other cars parked there, which he knew belonged to the owners or visitors of the block of flats and the two shops. His right to park, dry clothes or keep a bin were never challenged. He would not have bought the flat without a right to park. He could not get to within about 4 to 5 feet of the chapel wall because of the vegetation, but had no problem getting fully onto the land and to within a foot of that vegetation, with the back of the car pointing towards the road, at which point his car would be several feet from the road in most places and would never be hanging over the road. He was not sure anybody used the drying compound as such and occasionally saw pieces of furniture there, although never, as was suggested in cross-examination, faeces.

 

17. Evidence was also given, which I accept, by Ms Stephanie Allen, the owner of the lease of 9 Chapel Street, which she purchased in October 2006. She used the bins, and she parked her car on the disputed land overnight, from about 5.45pm to 8am, and also at weekends during the day. She was aware of the drying compound and had seen a washing line there. She did not use it, but thought that one family in the block used it about 2-3 times a month for part of the time she was there. Overnight and at weekends the cars parked were mostly the same, and she believed they belonged to the occupiers of the flats. Her visitors would also sometimes park there. She also confirmed that the trees and shrubs were along the border and drying area. Before Roberto Mac came, 6 to 7 cars could park facing inwards along the frontage. She identified the area in which she parked her car as that shown in a photograph at p.226 of the trial bundle, in front of the chapel beyond the drying compound. The car would be 2-3 metres from the chapel wall facing it or with the back of the car towards it. There would still be some space behind and a reasonable distance to the vegetation in front of the chapel.

 

18. Mr. Jon Blyth, the owner of 17 Chapel Street since May 2004 gave evidence to similar effect and also confirmed that on occasions the shrubs and weeds were cleared by one of the owners of the flats on the occasion of their selling. During his period of occupation the bins had been on the northern edge of the disputed land close to the footpath from Chapel Street to High Street. He had also not used the drying compound but had seen clothes drying there, which he believed had been put there by a family occupying a ground floor flat. He also had never seen faeces there.

 

19. Ms Jacqueline Drewery, who had been tenant of 89 High Street since 1989 under a 25 years underlease from Mr Purser, gave evidence to the same effect as regards car parking since that time. She would arrive to park between 8.30 and 8.45am Monday to Saturday and would leave between 3.30 and 5.00pm. She would see the cars of some flat owners there during the day. The car park was busiest on Saturday. She and the other used to park right across the whole area. She also saw no faeces in the drying area, which was occasionally used. Her estimate of the depth of the vegetation was 1 to 1.5 metres.

 

20. None of the witnesses had ever seen anybody from the Salvation Army use the disputed land. All also gave evidence as to the problems caused by the work done by Roberto Mac to the land and as to the congestion and difficulties caused by the additional presence of his vehicles, including gangmaster minibuses, since April 2009.

 

21. I accept the evidence of those witnesses and find that the disputed land has been used for car parking by several of the flats and by the shop at 89 High Street since 1985 or thereabouts. It has also been used by Mr Purser to park his car when he has come into March, and to deliver and collect materials stored in the garage under Flat 1. The garage was used to store these materials and has never been used as a garage. On rare occasions when there was no space available on the disputed land, Mr. Purser would park across the road. The drying area seems to have been infrequently used and does not appear to have been used at all in recent years, except that rubbish was dumped there. Council bins for refuse from the flats have also been kept on the disputed land in various places over the years, although principally, as Mr. Purser confirmed, in front of the drying compound. The parts of the disputed land closest to the rear wall of the chapel have become overgrown. No maintenance has been carried out on the disputed land by Knights Construction since 1985. It has occasionally been tidied up by tenants seeking to improve the appearance of the area when they were trying to sell the flats.

 

22. Mr Divkovic confirmed in his evidence that he had inspected the land, that he was aware that cars parked there, including, at least in the area close to the flats, cars belonging to tenants of the flats. The Salvation Army had ceased to occupy the chapel in about 2007 and he knew that the parked cars did not include cars belonging to the Salvation Army. He drew attention to an area close to the chapel wall which was raised by about 15 to 20 cm, and was too high and rough for cars to park on. The raised area identified by him can be seen in the photographs at p.59 of the trial bundle and barely extends beyond the limit of the vegetation as described by the witnesses for Knights Construction. It would not have inhibited parking as described by them. Mr Divkovic also knew that the bins were used by tenants of the flats.

 

23. He was also able to see that the drying compound was fenced off, and that the only practical access to it was from the path alongside the flats from which access had specifically been provided by the paving slabs to which I have already referred. Although theoretically access might have been obtained from the remainder of the disputed land, this would not have been a practical way of obtaining access due to the presence of the fencing and the narrow gap between the fencing and the wall of the Chapel. It would also have been rendered wholly impracticable by reason of the vegetation close to the chapel wall and around the fence of the drying compound. Nevertheless, Mr Divkovic thought that the drying compound area belonged to the Salvation Army. He stated that it was derelict and contained faeces.

24. The only issue of fact as to which there has been a serious dispute is as to the extent to which the disputed land had become overgrown by the time of the sale to Roberto Mac. Mr Divkovic contended that it had become so overgrown that most of it could not be used for car parking. While cars could be seen on it, if they parked with their back to the road, they were in fact parked partially on the road. The vegetation according to him extended across most of the site. The evidence of the tenants who gave evidence was that they had no problem in parking their cars on the site unless it was already fully occupied by other vehicles. The vegetation was only at the back of the site and immediately in front of the drying compound where there was a tree or large shrub, the base of which can still be seen in photographs in the trial bundle.

 

25. I am satisfied that the vegetation was not nearly as extensive as Mr Divkovic suggests. The other witnesses were all clear that there was ample room for 6 to 8 cars to park off the road in front of the vegetation. That is borne out by the photograph on page 226 of the trial bundle and by that on page 204. I appreciate that the photograph on page 226 was taken in winter, and that the perspective could be distorted. Nevertheless, it shows two cars parked with their rears pointing towards Chapel Street, and does not appear to show vegetation extending much beyond the extension to the chapel apart from a tree or shrub of some age and size in front of the drying compound. The photograph at page 204 also clearly shows left in front of the drying compound and in that area cars could park well off the road. In addition, although other parking was available on the other side of Chapel Street, which had become a cul-de-sac for anything larger than a bicycle in about 2005, it was plainly advantageous to the tenants to be able to park off the road on their own side of it, and I doubt that they would have remained silent had the vegetation encroached to such an extent that they were no longer able to park.

 

26. I accept that when Mr Divkovic saw the drying compound, there were faeces and rubbish there. Nevertheless, faeces were not normally to be found there, and although the area was not regularly used for drying clothes and could be used to dump rubbish, it was used as part of the common parts of the block of flats.

 

The sale of the chapel to Roberto Mac

 

27. The contract for the sale of the chapel is dated 15 January 2009. The solicitors for the Salvation Army confirmed by letter dated 15 January 2009 that they were not prepared to answer CPSE1 enquiries in this matter. They had, however, made it clear, according to the letter, that they were prepared to answer any specific enquiries that Roberto Mac’s solicitors wished to make and it appears that they had answered enquiries as the transaction proceeded. So far as appears from the evidence, however, there were no enquiries as to the boundaries of the disputed land or as to its occupation.

 

28. Completion appears to have taken place on 12 March 2009. After completing its purchase, in March 2009 Roberto Mac sought to enclose the disputed land and turn it into a private car park. In the process it got rid of the vegetation and two of the bollards, took down the fencing of the drying compound, and dug up the concrete foundation. Mr Purser was immediately advised of this by Jacqueline Drewery. He met with an employee of Roberto Mac on the site and told him that the disputed land was owned by his company and that he had the title deeds. Mr Divkovic subsequently told him in turn that Roberto Mac had bought the land from the Salvation Army.

 

29. There then appears to have been a stand-off. The new fencing was removed and the disputed land appears to have been used since for parking both by Roberto Mac and by the various tenants and undertenants of Knights Construction. On 20 April 2009 Knights Construction registered their title to their land other than the disputed land under title number CB344497. Their application, dated 1 April 2009, related to the whole of the land to which they had a paper title and also sought the removal of the disputed land from Roberto Mac’s title.

 

The Land Registration Act 2002

 

30. Section 11 of the Land Registration Act 2002 (the 2002 Act) provides as follows in relation to the effect of first registration:

 

“11 Freehold estates

(1) This section is concerned with the registration of a person under this Chapter as the proprietor of a freehold estate.

(2) Registration with absolute title has the effect described in subsections (3) to (5).

(3) The estate is vested in the proprietor together with all interests subsisting for the benefit of the estate.

(4) The estate is vested in the proprietor subject only to the following interests affecting the estate at the time of registration—

(a) interests which are the subject of an entry in the register in relation to the estate,

(b) unregistered interests which fall within any of the paragraphs of Schedule 1, and

(c) interests acquired under the Limitation Act 1980 (c. 58) of which the proprietor has notice.

(5) If the proprietor is not entitled to the estate for his own benefit, or not entitled solely for his own benefit, then, as between himself and the persons beneficially entitled to the estate, the estate is vested in him subject to such of their interests as he has notice of.”

 

31. For the purposes of section 11(4)(b), the unregistered interests referred to in Schedule 1, so far as relevant to the present case, are as follows:

 

“Leasehold estates in land

1 A leasehold estate in land granted for a term not exceeding seven years from the date of the grant, except for a lease the grant of which falls within section 4(1) (d), (e) or (f).

 

Interests of persons in actual occupation

2 An interest belonging to a person in actual occupation, so far as relating to land of which he is in actual occupation, except for an interest under a settlement under the Settled Land Act 1925 (c. 18).

 

Easements and profits a prendre

3 A legal easement or profit a prendre.”

 

32. Section 26 deals with the transfer of a registered estate or charge as follows:

 

“26 Protection of disponees

(1) Subject to subsection (2), a person’s right to exercise owner’s powers in relation to a registered estate or charge is to be taken to be free from any limitation affecting the validity of a disposition.

(2) Subsection (1) does not apply to a limitation—

(a) reflected by an entry in the register, or

(b) imposed by, or under, this Act.

(3) This section has effect only for the purpose of preventing the title of a disponee being questioned (and so does not affect the lawfulness of a disposition).”

 

33. Sections 28 and 29 deal with the effect of dispositions on priority as follows:

 

“28 Basic rule

(1) Except as provided by sections 29 and 30, the priority of an interest affecting a registered estate or charge is not affected by a disposition of the estate or charge.

(2) It makes no difference for the purposes of this section whether the interest or disposition is registered.

 

29 Effect of registered dispositions: estates

(1) If a registrable disposition of a registered estate is made for valuable consideration, completion of the disposition by registration has the effect of postponing to the interest under the disposition any interest affecting the estate immediately before the disposition whose priority is not protected at the time of registration.

(2) For the purposes of subsection (1), the priority of an interest is protected—

(a) in any case, if the interest—

(i) is a registered charge or the subject of a notice in the register,

(ii) falls within any of the paragraphs of Schedule 3, or

(iii) appears from the register to be excepted from the effect of registration, and

(b) in the case of a disposition of a leasehold estate, if the burden of the interest is incident to the estate.

(3) Subsection (2)(a)(ii) does not apply to an interest which has been the subject of a notice in the register at any time since the coming into force of this section.

(4) Where the grant of a leasehold estate in land out of a registered estate does not involve a registrable disposition, this section has effect as if—

(a) the grant involved such a disposition, and

(b) the disposition were registered at the time of the grant.”

 

34. For the purposes of section 29(2)(a)(ii), so far as relevant here, Schedule 3 provides that the following unregistered interests override registered dispositions:

 

“Leasehold estates in land

1 A leasehold estate in land granted for a term not exceeding seven years from the date of the grant, except for—

(a) a lease the grant of which falls within section 4(1)(d), (e) or (f);

(b)a lease the grant of which constitutes a registrable disposition.

 

Interests of persons in actual occupation

2 An interest belonging at the time of the disposition to a person in actual occupation, so far as relating to land of which he is in actual occupation, except for—

(a) an interest under a settlement under the Settled Land Act 1925 (c. 18);

(b) an interest of a person of whom inquiry was made before the disposition and who failed to disclose the right when he could reasonably have been expected to do so;

(c) an interest—

(i) which belongs to a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition, and

(ii) of which the person to whom the disposition is made does not have actual knowledge at that time;

(d) a leasehold estate in land granted to take effect in possession after the end of the period of three months beginning with the date of the grant and which has not taken effect in possession at the time of the disposition.

 

Easements and profits a prendre

3(1) A legal easement or profit a prendre, except for an easement, or a profit a prendre which is not registered under the Commons Registration Act 1965 (c. 64), which at the time of the disposition—

(a) is not within the actual knowledge of the person to whom the disposition is made, and

(b) would not have been obvious on a reasonably careful inspection of the land over which the easement or profit is exercisable.

(2) The exception in sub-paragraph (1) does not apply if the person entitled to the easement or profit proves that it has been exercised in the period of one year ending with the day of the disposition.”

 

35. Schedule 3 is further widened by paragraph 8 of Schedule 12 to include an interest which, immediately before the coming into effect of Schedule 3, was an overriding interest under section 70(1)(g) of the Land Registration Act 1925 by virtue of a person’s receipt of rents and profits, except for an interest of a person of whom inquiry was made before the disposition and who failed to disclose the right when he could reasonably have been expected to do so. It is also widened by paragraph 9 of Schedule 12 to include and easement or profit a prendre which was an overriding interest in relation to a registered estate immediately before the coming into effect of Schedule 3 but which would not fall within paragraph 3 of that Schedule if created after the coming into force of that Schedule.

 

36. Section 58(1) of the 2002 Act provides that, subject to certain exceptions which do not apply here, if on the entry of a person in the register as the proprietor of the legal estate, the legal estate would not otherwise be vested in him, it shall be deemed to be vested in him as a result of the registration.

 

37. Schedule 4 to the 2002 Act contains provisions as to the alteration of the register. Paragraph 5 permits the registrar to alter the register for the purpose of (a) correcting a mistake, (b) bringing the register up to date, (c) giving effect to any estate, right or interest excepted from the effect of registration, or (d) removing a superfluous entry. Paragraph 6 limits the power under paragraph 5 so far as referring to rectification – defined by paragraph 1 of that Schedule, where used in that Schedule, as referring to alteration which (a) involves the correction of a mistake and (b) prejudicially affects the title of a registered proprietor. Such an alteration affecting the title of the proprietor of a registered estate in land may be made under paragraph 5 without the proprietor’s consent in relation to land in his possession unless (a) he has by fraud or lack of proper care caused or substantially contributed to the mistake, or (b) it would for any other reason be unjust for the alteration not to be made.

 

38. Schedule 8 to the 2002 Act contains provision for a person to be indemnified by the Chief Land Registrar if he suffers loss by reason of, inter alia, (a) rectification of the register or (b) a mistake whose correction would involve rectification of the register. Paragraph 11(2) of that Schedule provides that in that Schedule references to rectification of the register are to alteration of the register which (a) involves the correction of a mistake, and (b) prejudicially affects the title of a registered proprietor.

 

The application of the law to the facts of this case

 

39. It is clear that, whether or not the Salvation Army Trust Company had title to the disputed land before first registration, to the extent that the disputed land was included in the land registered in title CB328270 title to it vested in that company by virtue of section 58(1) of the 2002 Act. At the hearing I raised the question whether it was in fact included, or whether all that was registered was the land conveyed to General Booth by the 1888 conveyance, the disputed land being shown on the general plan as included in error, as in Lee v Barrey, Derbyshire County Council v Fallon and Strachey v Ramage. Neither counsel showed any enthusiasm for approaching the matter in that way, and in my judgment rightly so. The statutory declaration of Mr. Axcell makes it clear that the application is to register title to the whole of the area shown on the plan annexed to the declaration, including the disputed land, and the registration was intended to give effect to that request. Counsel for Knights Construction further contended that the yellow line drawn by surveyors on the disputed land on the basis of the plans provided to them indicated the boundaries of the registered land. Near the boundary between the highway on Chapel Street, there was a significant area outside that yellow line which had been tarmaced in 1985 by Knights Construction in the same way as the land inside the line. It was submitted that this demonstrated that the registered land did not include a strip of land between the yellow land and the highway, thus providing Knights Construction with a ransom strip if their other claims were unsuccessful. I reject this contention. It is apparent from the statutory declaration of Mr. Axcell that he was claiming the land up to the highway and if there was an error in the dimensions on the plan used by him, or an error in the measurements subsequently carried out by Roberto Mac’s surveyors, that does not alter the fact that the land claimed, wrongfully, by Mr. Axcell extended to the public highway. I am satisfied therefore that the Salvation Army Trust Company was registered as proprietor of the disputed land.

 

40. Knights Construction had no knowledge or means of knowledge that this registration had taken place. It may of course have registered a caution against first registration, but understandably did not do so, and probably had no reason to be aware of this procedure. It may also have voluntarily have registered its own title at an earlier date, but again understandably did not do so. There is no doubt that had it become aware at that stage of what had happened then it would have had a cast iron case for alteration of the register. There was a plain mistake, there were no exceptional circumstances, and the rectification provisions in paragraph 6 of Schedule 4 to the 2002 Act would not have applied as it is clear that the Salvation Army Trust Company were not in possession of that land.

 

41. However, in March 2009 the land was disposed of to Roberto Mac, which I am satisfied took it in good faith and for valuable consideration. I am also satisfied that the parking facilities which the disputed land afforded were a significant factor in that company’s decision to acquire the chapel. They needed the parking for their staff and occasionally needed the space for other purposes. There was no suggestion that Knights Construction had any knowledge of their land being included in this sale, and I am satisfied that they were not aware of it until contacted by Ms Drewery, at which point they acted very promptly.

 

Are Roberto Mac in possession of the disputed land?

 

42. I would add that I am satisfied that Roberto Mac are not in possession of the disputed land. It had been in the possession of Knights Construction since 1985, and although that company had allowed part of it to become overgrown, I do not consider that it was abandoned by it. It continued to be used by its tenants and sub-tenants in accordance with the terms of their leases and on occasions by Mr Purser as well. When Roberto Mac attempted to take possession of it, there was an immediate reaction from Mr Purser which led to that attempt being abandoned, and to the land being effectively shared since then. I do not consider therefore that paragraph 6 of Schedule 4 has any application in this case even if it would have been relevant had Roberto Mac taken possession – an issue which would also depend upon a determination that any alteration would involve the correction of a mistake, a matter to which I shall return. I would add that even if Roberto Mac were to be treated as in possession of the disputed land between the yellow line drawn by their surveyor and the chapel, they could not be treated as in possession of any part of it between the yellow line and the highway, as Mr. Divkovic understood the yellow line to represent his boundary and acted accordingly.

 

The position of Barclays Bank as chargee

 

43. I do not deal in this decision with the position of Barclays Bank as chargee, as it is not before me.

 

Actual occupation by Knights Construction

 

44. The next factual issue is whether at the time of the disposition (a) Knights Construction was in actual occupation of any part of the disputed land and (b) its occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition. Apart from the drying area, it was obvious to Mr. Divkovic that the land was being used for parking on by cars and for tenants’ bins. It was also clear to Mr. Divkovic that at least close to the garage it was tenants’ cars that were being parked and he stated in evidence that he did not think he was buying the land right up to the garage but only up to 2 to 3 metres from it. He also drew on the photograph at p.58 of my copy of the trial bundle approximately where he thought that the boundary came to allow enough space to enable a car to get in and out of the garage without trespassing on the land he thought he was buying. The line ran from the south western corner of the drying compound to the highway going away from the garage at an angle of about 45 degrees, covering half, diagonally, of about one additional parking space beyond the car shown in the photograph parked outside the garage. He never enquired as to the exact boundary either of his solicitors or of the vendors. There is no difference between the surface on one side of the line drawn by him and the other side. Nor did he make any enquiry as to the reason for the fencing around the drying compound or the access provided to it from the path outside the flats.

 

45. It has been submitted by Mr Gore on behalf of Knights Construction that that company was in actual occupation of the car park, including the drying compound. He has pointed out that the rights granted to the various tenants did not render the disputed land part of the physical demise in the sense of giving any of the tenants exclusive possession of the disputed land. Knights Construction had laid the tarmac and erected the bollards on the land and erected the drying area concrete pad the fencing around it and the washing line. He also placed reliance on the presence of the bins on the land for the use of the tenants, although it appeared from the evidence that these bins were the property of the local authority and there was no evidence that they were in fact placed there by Knights Construction. Mr Gore referred me to the test as to actual occupation set out by Lord Oliver in Abbey National Building Society v Cann, [1991] AC 56 at 93D-94B, and to the recent decision of the Court of Appeal in Link Lending Ltd v Bustard, [2010] EWCA Civ 424, and in particular to the judgment of Mummery LJ at paragraphs 17-31.

 

46. Mr Gore also submitted that I should give a purposive construction of the relevant provisions of the 2002 Act and treat the occupation of the lessees as occupation by Knights Construction. Alternatively is a submitted by him that policy reasons dictate that the sufficiency of a landlord's actual occupation should be judged against the fact that a number of its tenants have been granted rights over part of the landlord's land.

 

47. Mr Jones contends that the mere parking of vehicles is not actual occupation, and he refers to the decision of Templeman J in Epps v Esso Petroleum, [1973] 1 WLR 1071. He also draws attention to a need for a degree of permanence and continuity which he contends has not been present in this case.

 

48. I do not find it necessary to set out at any length the passages referred to in the Abbey National and Link Lending cases cited by Mr Gore. Those cases were concerned with actual possession of dwelling houses. As Mummery LJ pointed out in paragraph 27 in the Link Lending case:

 

“Whether Ms Bustard was in "actual occupation" of the Property at the relevant date was an issue on which the trial judge had to make an evaluation based on his findings of primary fact. As for the law he considered the relevant authorities on the concept of a "person in actual occupation" of land in the earlier Land Registration legislation and now found in the 2002 Act. The construction of the earlier equivalent provisions by the House of Lords is binding on this court. The trend of the cases shows that the courts are reluctant to lay down, or even suggest, a single legal test for determining whether a person is in actual occupation. The decisions on statutory construction identify the factors that have to be weighed by the judge on this issue. The degree of permanence and continuity of presence of the person concerned, the intentions and wishes of that person, the length of absence from the property and the reason for it and the nature of the property and personal circumstances of the person are among the relevant factors.”

 

49. Taking into account all factors, including those identified by Lewison J with reference to earlier decisions in Thompson v Foy, in a passage cited and approved by Mummery LJ, I have still to apply them to the wholly different circumstances and property in the present case, and I must take into account that it is not every person in actual occupation whose interest will be protected under the 2002 Act. That must to some extent depend upon the nature of the occupation, as Schedule 3 expressly excludes an interest which belongs to a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition and which the disponee does not have actual knowledge of.

 

50. With the exception of the drying compound, whether or not Knights Construction was in actual occupation of the disputed land, I am unable to see how such occupation could have been obvious on a reasonably careful inspection. Knights Construction had done nothing to the land for over 20 years, it was unfenced and open to the road, and was apparently being used for parking and to keep waste bins. There was no sign, the bollards separating it from the public footpath could as well have been put there by the Salvation Army as by anybody else, and the area was in a dilapidated condition. I can see no basis on which I can find that such occupation as there may have been by Knights Construction was obvious on a reasonably careful inspection.

 

51. The position is different with regard to the drying compound. This was fenced off from the rest of the disputed land, and a reasonably careful inspection would have shown that for all practical purposes it was only accessible from the adjoining land which formed part of the flats development, and that it was not tarmaced in the same way as the other land. That inspection would also have shown that there were paving stones specifically providing access to that area from that development. Although the washing line had gone and the area within the drying compound was derelict, it appears to me to have been in the actual occupation of Knights Construction in the same way as the other common parts of the development. The fact that there is no caretaker or other person present on-site does not mean that the landlord is not in occupation of the common parts, or that that occupation cannot be obvious if there is no caretaker present. Further, it should be obvious to anybody inspecting the common parts that there may be areas within the common parts which are not being used and are derelict.

 

52. In my judgment it should have been obvious on a careful inspection that the drying compound was being occupied as part of the common parts of the flats and not by the Salvation Army. In those circumstances I also find it surprising that no enquiry about this area was ever addressed to the solicitors for the Salvation Army, and that Mr Divkovic should have assumed that it was included in the title he was acquiring even though part of the land between it and the public highway was, as he thought, not included.

 

53. I therefore conclude that Roberto Mac acquired title to the disputed land subject to the overriding interest of Knights Construction in the drying compound. Accordingly the Chief Land Registrar may alter the register under paragraph 5 of Schedule 4 to the 2002 Act to give effect to the beneficial interest of Knights Construction excepted from the effect of registration. As that is an absolute beneficial interest, the alteration that is appropriate is one which removes the drying compound from Roberto Mac’s title and adds it to the newly registered title of Knights Construction. Despite the contentions of Mr. Jones, I can see no exceptional circumstances which could justify not altering the register in this respect.

 

54. I note that the conclusion to which I have come in relation to the drying compound is in accordance with Malory Enterprises Ltd v Cheshire Homes (UK) Ltd, [2002] Ch 216, which was not cited to me, where the question was as to actual occupation of land upon which there was a half constructed and derelict block of flats. At first instance, the trial judge, Judge Maddocks, made the following findings:

 

“In this case the land remained in a state which did not admit to any serious use or occupation. The rear flats were incomplete, derelict and uninhabitable. The land and the buildings were not appropriated to any alternative use, such as, for example, the parking of cars or the drying of clothes. As it is the only use relied upon is the temporary deposit of refuse items from the Hometel Flats – old mattresses and beds awaiting collection and removal in a skip, and the deposit of fencing panels to be broken up and used as hardcore on site. 
Such casual use and intermittent activities could not as themselves be viewed as “actual occupation”. I attach greater significance to the secure fencing on all three sides, coupled as it was with the unfenced boundary with the Hometel site and with the access (being the only means of access) from the Hometel Flats which were within the same management and control.
 Although the rear land and Hometel Flats were held by separate companies, both companies were under the same ownership (the Lee Chang Trust), both companies and both properties were under the same management as was Mrs Chang’s own company Home Management. Thus, Mr Donald, the joiner, carried out work on both properties and made use of the rear land for work on the flats.
 The wooden fence and the high security fence were partly on the front land. 
There was some evidence, which I accept, that some work was done, as required, to keep down the weeds in the yard, to maintain the fences that were damaged and to board up the window openings.
 Taking the evidence as a whole, my conclusion is that the undoubted possession of Malory BVI amounted to “actual occupation” within the meaning of section 70 (1)(g).”

 

55. The Court of Appeal declined to interfere with this finding. Arden LJ, with whom the other members of the Court agreed on this point, expressed herself as follows:

 

        “80. That leaves the question whether the judge’s finding that Malory BVI was in “actual occupation” of the rear land is susceptible to review on appeal. The judge’s finding involves questions of primary fact and the application of the correct principles to the facts. What constitutes actual occupation of property depends on the nature and state of the property in question, and the judge adopted that approach. If a site is uninhabitable, as the rear land was, residence is not required, but there must be some physical presence, with some degree of permanence and continuity (cf. Strand Securities Ltd v Caswell, above). As Lord Oliver said in Abbey National Building Society v Cann, above, at page 93:

        “It is, perhaps, dangerous to suggest any test for what is essentially a question of fact, for “occupation” is a concept which may have different connotations according to the nature and purpose of the property which is claimed to be occupied. It does not necessarily, I think, involve the personal presence of the person claiming to occupy. A caretaker or the representative of a company can occupy, I should have thought, on behalf of his employer. On the other hand, it does, in my judgment, involve some degree of permanence and continuity which would rule out mere fleeting presence. A prospective tenant or purchaser who is allowed, as a matter of indulgence, to go into property in order to plan decorations or measure for furnishings would not, in ordinary parlance, be said to be occupying it, even though he might be there for hours a time.”

        81. The requisite physical presence must, as it seems to me, in fairness be such as to put a person inspecting the land on notice that there was some person in occupation. (See generally per Lord Oliver in the Cann case, at page 87). None of the authorities which we have been shown deal with completely derelict land.

         

82. For my own part, I am not persuaded by Mr Martin’s arguments that the judge directed himself otherwise than in accordance with the principles which must be applied when determining “actual occupation”. I do not consider that the judge confused actual occupation with possession or occupation of the front land with occupation of the rear land. Nor do I consider that he was wrong in the circumstances to attach significance to the fencing of the rear land. In this particular case, the fencing cannot be regarded as wholly separate from occupation of the rear land. The fencing was one of the factors relevant to be taken into account. The judge was also right in my judgment to attach significance to the access permitted from the front land. Even though there was another gate, the access from the front land supported the notion that some person connected with the front land claimed a right to be on the rear land. On that basis the question of whether applying those principles there was “actual occupation” was essentially a question of fact for the judge. At the relevant time, there were derelict buildings on the rear land which meant that it was not possible to occupy it by living in those buildings or by cultivating the land or by using the land for recreation. The judge had to consider other acts denoting occupation such as boarding up the windows of the building and fencing the site (in both cases) to keep vandals and trespassers out, and also using the land for storage. In my judgment, the judge was entitled to draw the conclusion that Malory BVI was in occupation from the facts as found by him, and accordingly, his conclusion cannot be disturbed by this court. Moreover, no-one visiting the rear land at the time of the sale to Cheshire could have drawn the conclusion that the land and buildings on the rear land had been abandoned; the evidence of activity on the site clearly indicated that someone claimed to be entitled to be on it.”

 

56. Here there was no obvious legitimate activity in the drying compound, but the fencing and other points referred to by me ought in my judgment to have made it obvious that the drying compound was being dealt with as part of the common parts of the flats. So far as the remainder of the disputed land is concerned, I have concluded that Roberto Mac is not in possession of it. Accordingly, paragraph 6 of Schedule 4 to the 2002 Act has no application. However, paragraph 5 will also have no application on the facts as found by me, unless any alteration is for the purpose of correcting a mistake. There is also the question of the extent to which the rights of the tenants in the shops and the flats would survive if the register is not altered to restore Knights Construction as freehold owners.

 

Receipt of rent and profits

 

57. The long leases both of the flats and the shops did not involve the payment of rent. Mr. Gore sought to contend, however, that one of the shorthold tenancies had been in existence since before the 2002 Act came into force and that Knights Construction was in receipt of the rents and profits of that flat, which were paid not only in respect of the flat but of rights of way and parking rights over the disputed land so that it had an overriding interest by virtue of paragraph 8 of Schedule 12 to the 2002 Act. I am unable to accept that receipt of rent in respect of another property can also be treated as being in respect of the disputed land just because the tenant of that other property has rights over it, but in any event, no such rights were included in the tenancy. The rent under the tenancy was in respect of the rights granted by it, and it was only subsequently when he was handing over the keys that a gratuitous licence was granted to the new tenant by Mr. Purser on behalf of Knights Construction.

 

Mistake and indemnity under the 2002 Act

 

58. The scope of the provisions of paragraph 5(a) of Schedule 4 to the 2002 Act has recently been the subject of considerable debate. In particular, there are conflicting decisions of two other Deputy Adjudicators to which I shall refer. The relationship of that paragraph to the indemnity provisions in paragraph 1(1) of Schedule 8 are also of importance, as it would appear that the provisions were drafted to reflect each other.

 

59. With regard to the question whether an alteration of the register in respect of the disputed land other than the drying compound so as to transfer title in that land from Roberto Mac to Knights Construction would be for the purpose of correcting a mistake, when the case was heard by me last September, I was referred by Mr Gore to the decision of Mr Owen Rhys, sitting as a Deputy Adjudicator to the Land Registry, in the case of Ajibade v Bank of Scotland, (REF/2006/0163 and 0174).

 

60. If that decision is correct, and I shall refer to it in detail later in this decision, then Mr Gore is entitled to contend that the same approach should be adopted in the present case. Unfortunately, neither party was aware of what was then a very recent decision of Mr David Holland, also sitting as a Deputy Adjudicator to the Land Registry in Stewart v Lancashire Mortgage Corporation Ltd, (REF/2009/0086 and 1556) where Mr Holland reviewed extensively authorities to which Mr. Rhys had not been referred, and declined to follow his decision, holding instead that the original owner was not entitled to be restored to the register. Nor had either counsel referred me to any of the potentially relevant authorities identified by Mr. Holland in his decision.

 

61. In addition, it appeared to me that there was a potential problem as to the relationship between the provisions as to rectification and those as to indemnity, in that on one construction of the provisions, a party might end up without the land or an indemnity as a result solely of the provisions of the 2002 Act, although wholly without fault. I was concerned as to a possible conflict in this respect both between the losing party in the future and the Land Registry, and, if the result of the 2002 Act was that an innocent party lost its property without qualifying to claim an indemnity under Schedule 8, between the legislation as so interpreted and Article 1 of Protocol 1 of the Human Rights Convention.

 

62. As a result, after making findings of fact and of law which were not affected by this issue, I directed that the Chief Land Registrar should be added as 2^nd Respondent to enable the issues as to the meaning of the relevant provisions to be fully considered between all parties affected, and for a single decision to be given in respect of them. The Chief Land Registrar has been made a party only in relation to those limited issues and nothing I have found on other issues binds him.

 

63. Mr. Timothy Morshead duly appeared on behalf of the Chief Land Registrar at the further hearing this month together with counsel for the other parties to argue the rectification and indemnity issues. I am grateful for the considerable assistance he has provided in comparing the provisions of the 2002 Act with those of the Land Registration Act 1925 which it replaced, and in researching the genesis and purpose of those changes.

 

64. In the 1925 Act, the provisions as to rectification were contained in section 82, and the provisions as to indemnity were contained in section 83. Section 82 included provision for rectification pursuant to an order of the court or by the registrar in 8 identified cases. These were as follows:

 

(a) … 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 the court is of opinion that a rectification of the register is required, and makes an order to that effect;

(b) … where the court, on the application … 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) … 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.

 

65. In addition the Land Registration Rules 1925, rr.13 and 14, contain provisions for the correction by the registrar of a clerical error.

 

66. Section 83 included the following provisions:

 

(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 any 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.

(3)   …

(4)   Subject as hereinafter 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.

 

67. In Schedule 4 to the 2002 Act, there was a change of language and ostensibly of content. The 1925 concept of ‘rectification’ of the register became ‘alteration’, and ‘rectification was defined for the purpose of Schedule 4 in relation to alteration of the register as “alteration which – (a) involves the correction of a mistake, and (b) prejudicially affects the title of a registered proprietor” (see paragraph 1 of Schedule 4). Paragraph 2 of Schedule 4 provides for the court to “make an order for alteration of the register for the purpose of – (a) correcting a mistake, (b) bringing the register up to date, or (c) giving effect to any estate, right or interest excepted from the effect of registration.” Paragraph 5 of Schedule 4 gives the same power to the registrar together with the additional power to alter the register to remove a superfluous entry.

 

68. Both Acts contain provisions to protect to some extent the position of proprietors of a registered estate in relation to land in their possession. The 1925 Act contained no definition of proprietor in possession. The 2002 Act contains such a definition in section 131, which was designed to reverse the decision of the Court of Appeal in Kingsalton Ltd v Thames Water Developments Ltd, [2001] EWCA Civ 20 that the registered proprietor was to be treated as being in physical possession unless he could be shown to have been dispossessed. For the purposes of the 2002 Act, land is in the possession of the proprietor of a registered estate if it is physically in his possession, or in the possession of a person who is entitled to be registered as the proprietor of the registered estate. I have held in the present case that Roberto Mac is not in possession of the disputed land.

 

69. The 2002 Act was the result of a review of Land Registration by the Law Commission and the Land Registry. Where a statute has been enacted as a result of the recommendations of the Law Commission, it is appropriate and permissible to consider those recommendations to help identify both the mischief which the Act is designed to cure and the public policy underlying it, even though the recommendations cannot be conclusive as to the construction of the provisions in the Act (see Yaxley v Gotts, [2000] Ch 162, at p.182, per Clarke LJ).

 

The Reports of the Law Commission and the Land Registry

 

70. I was referred by Mr. Morshead to the two joint reports which they produced. The first was entitled “Land Registration for the Twenty-First Century a Consultative Document”; and the second, which included the Land Registration Bill, was entitled “Land Registration for the Twenty-First Century A Conveyancing Revolution”, Law Com No 271. The second of these reports was laid before Parliament by the Lord Chancellor pursuant to section 3(2) of the Law Commissions Act 1965.

 

71. The Consultative Document contained the following observations as to rectification and indemnity (I omit the references to the footnotes):

 

“Rectification

2.37 We explain in detail in Part VIII of this Report the ten grounds on which the register

may be rectified. However, they may be broadly summarised as follows—

(1) Where a court makes an order which either gives effect to an established property right or interest, or orders the removal from the register of an entry in respect of a right which has not been established.

(2) Where the court or the registrar decides that the register is incorrect in some way.

(3) Where the registrar decides that a clerical error needs to be corrected.

….

 

2.39 The present law governing rectification works well in practice and gives rise to few difficulties. Nevertheless, this review of land registration offers an opportunity to simplify and clarify the legislation, and we make provisional recommendations to this effect in Part VIII.

 

Indemnity

2.40 The provisions for rectification and for indemnity are directly linked. Where the register is rectified, any person suffering loss by reason of the rectification may be indemnified. However, indemnity also serves a wider purpose in that it protects persons from loss—

(1) caused by errors and omissions on the register, even where the register is not rectified;

….

 

PART VIII

RECTIFICATION OF THE REGISTER

INTRODUCTION

8.1 … We conclude that the existing law and practice in relation to rectification are largely sound, and that the main deficiencies lie in the way in which the legislation is drafted. In the light of this, we make recommendations for reform which are primarily clarificatory rather than substantive.

 

8.2 Although rectification is commonly considered in conjunction with the right to indemnity for loss suffered as a result of errors and omissions in the register, we make no recommendations in this Report for the amendment of the provisions on indemnity. … However, we anticipate that, in the Land Registration Bill that will be drafted to reflect the responses to this Report, there may be a handful of minor amendments to reflect more clearly the current practice in relation to the payment of indemnity. These will not entail any change of substance.

 

THE NATURE OF RECTIFICATION

8.3 …There is no definition of rectification in the Act, but it can probably best be described as “any amendment to the register or its plan for the purpose of putting right any substantive error of omission or commission, or any legally recognised grievance”. Rectification is, therefore, concerned with the correction of mistakes in the register. This is reflected in the corresponding provisions in the Land Registration Act 1925 for the payment of indemnity. The statutory jurisdiction to award indemnity in cases where the register either is or is not rectified arises only where loss has been suffered as a result of some error or omission in the register. It is of course true that the provisions on rectification and indemnity are not exact correlatives. Nevertheless, it is a pointer to the true nature of rectification and one which we consider should be clarified in any new legislation.”

 

72. The report then considered the ten grounds on which the register could be registered under the then existing law (described in paragraph 8.4 as set out in section 82(1) of the 1925 Act and rules 13 and 14 of the 1925 Rules). In relation to section 82(1)(g), the report comments as follows:

 

“GROUND 7: WHERE THE PROPRIETOR WOULD NOT HAVE BEEN THE ESTATE OWNER HAD

TITLE BEEN UNREGISTERED

8.18 The seventh ground of rectification is—

[w]here 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. This ground of rectification covers a number of situations where a transfer of unregistered land would have been void and would not have vested a legal estate in the transferee. Obvious examples include—

(1) where B was mistakenly registered as proprietor of more land than was actually comprised in the transfer from A;

(2) where A purported to transfer land to B which A no longer owned, either because A had already transferred the land to C, or because C had acquired title to it by adverse possession;

(3) where the transfer from A to B was itself a nullity, because, for example, it was a forgery, or where A could plead non est factum, though rectification would commonly be under Ground 1; and

(4) where the transfer by A to B was ultra vires, though again, rectification would commonly be under Ground 1.

8.19 Because of the reference to the position in unregistered land, this ground of rectification has been much criticised. There is a concern that it may import the law on notice and land charges - the very things which the registered system was meant to obviate. In practice this has not happened, and by far the commonest reason for rectification under this head is the case exemplified in paragraph 8.18(1) above.”

 

73. Having dealt with the individual grounds, at paragraph 8.36 the report concluded that the then law governing rectification worked without undue difficulty in practice, and that its defects lay primarily in the way it was drafted. It summarised the defects as follows:

 

“8.37 No clear distinction is drawn between the rectification of an error or omission in the register (which is discretionary) and an amendment of the register because the court determines that A is entitled to an estate, right or interest in or over land of which B is the registered proprietor. The latter is not intrinsically different from an amendment to the register to indicate that, say, a lease has terminated. The first two grounds of rectification are situations where the court has determined the substantive rights of the parties and there is in practice no true element of discretion in its order that the register should be rectified to give effect to those rights.

8.38 The yardstick for determining whether there is an error or omission is, in some cases, the position that would have existed had title not been registered. There are a number of objections to this. First, there is the risk that it may bring into play aspects of unregistered land, such as the doctrine of notice and the registration of land charges, which the registered system was meant to supersede. The difficulty with this approach is to know just how much of the unregistered system is brought into play. Secondly, as the great majority of titles are now registered, it is inappropriate, particularly as the principles of unregistered conveyancing are becoming unfamiliar to practitioners. Thirdly, it is unnecessary. The existence of an error or omission can be readily defined according to the principles of registered conveyancing.

8.39 There is uncertainty as to the ambit of the restrictions on rectification that exist in favour of a proprietor who is in possession. Although this has not so far been the cause of much difficulty in practice, it could be, and it would be better to address the matter.”

 

74. The report went on to make proposals for reform as follows:

 

“PROPOSALS FOR REFORM

The essentials of an effective scheme of rectification

8.40 Any rectification scheme must overcome the deficiencies outlined above. To achieve this we regard as the essentials of any viable scheme the following features, which should be made clear in the legislation—

(1) The only function of the power to rectify is to provide a discretionary mechanism which enables errors and omissions in the register to be remedied. It should remain the case that indemnity is available for any loss that is caused as a result of rectification or where, as a matter of discretion, rectification is not ordered, its refusal.

(2) In the absence of any error or omission in the register, where a court makes a determination of substantive rights in or over registered land, it should do so in accordance with the principles of registered land. The principles governing unregistered land should come into play only if there is some issue which arises from the time prior to first registration. Following any such determination, the register should be amended to reflect its outcome. That amendment, unlike rectification, should not be a matter of discretion.

(3) Normally, the register should be rectified to give effect to an overriding interest, though as it is an application of the power to rectify, it should remain a matter for discretion.

(4) The existing principle of qualified indefeasibility which applies to a proprietor who is in possession should be retained but its scope should be clarified.

 

Grounds for rectification

8.41 As we have indicated, rectification is an issue where the register is in some way incorrect. We consider that rectification should be confined to that situation. The consequences of this view are as follows—

(1) It would no longer be appropriate to provide for rectification of the register to give effect to a court order that a person is entitled to an estate, right or interest in any registered land or charge. Where the court determines the substantive rights of the parties, the register should be amended to give effect to the order which it makes. There should be no element of discretion about it. Any determination would, of course, be undertaken in accordance with the principles applicable to registered land. This should preclude any possible argument that the principles of unregistered land are in some way relevant.

(2) We have recommended in Part VI of this Report that both the court and the registrar should be given a power to discharge or vary a caution, notice or restriction. The introduction of this general jurisdiction would obviate the need for the present power to rectify the register on the application by a person aggrieved by an entry. The exercise of this power to amend the register should cease to be regarded as rectification.

(3) There would be no need to have a list of grounds upon which rectification might be ordered as there are at present in section 82(1) of the Land Registration Act 1925. They would all be encompassed within the one general principle that the register could be rectified, as a matter of discretion, where there was an error or omission in it.

8.42 In the light of this, we provisionally recommend that, subject to the qualifications that we explain below, the court and the registrar should have a power to rectify the register whenever there has been an error or omission in it. Do readers agree?

8.43 That power would encompass all the cases presently included in section 82(1)(c)-(h) of the Land Registration Act 1925 (Grounds 3 - 8 above), as well as the ground listed in rule 14 of the Land Registration Rules 1925 (Ground 10 above).” (Italics provided)

 

75. Finally, in paragraph 8.58(10), in summarising its recommendations, the report states “the register might be rectified even though this might affect any estates, rights, charges, or interests acquired or protected by registration, or by an entry on the register, or any overriding interest”.

 

76. Following the consultation procedure, the draft bill was laid before Parliament with the commentary of the Law Commission and the Land Registry in Law Com No 271. That report contained the following statements as to the fundamental objective of the Bill (once again I omit references to footnotes):

 

“1.5 The fundamental objective of the Bill is that, under the system of electronic dealing with land that it seeks to create, the register should be a complete and accurate reflection of the state of the title of the land at any given time, so that it is possible to investigate title to land on line, with the absolute minimum of additional enquiries and inspections.

1.6 Although that ultimate objective may seem an obvious one, its implications are considerable, and virtually all the changes that the Bill makes to the present law flow directly from it.”

 

77. However in relation to alteration, rectification and indemnity, it states as follows:

 

“ALTERATION, RECTIFICATION AND INDEMNITY

2.38 Mistakes do occasionally occur in the register and it is also necessary to update it to take account of interests that have determined. The Bill does not make major changes to the present law and practice on the alteration of the register. What it does do is to codify that present practice in a way that makes its working apparent. The present legislation obscures what actually occurs.

2.39 The law governing the payment of indemnity for mistakes that have occurred in the register and other losses for which the Registry is responsible was revised by the Land Registration Act 1997. The Bill does not, therefore, make anything more than minor changes to the present law.”

 

78. The report goes on in Part X to explain the provisions of the draft Bill that govern alteration of the register and the payment of indemnity. In paragraph 10.1 it again refers to the ten grounds on which rectification may be ordered under the 1925 Act and Rules. It repeats the summary of those grounds contained in paragraph 2.37 of the Consultative Document. At paragraphs 10.3 to 10.4, it continues:

 

“10.3 Indemnity is, in some senses, the correlative of rectification. It is payable where a person suffers loss as a result of an error or omission in the register, whether or not the register is rectified, and in certain other circumstances. The availability of indemnity is of great importance to the system of land registration. It is the basis of the so-called “State guarantee of title” which registration confers.

10.4 In the Consultative Document, we explained that the practice that has developed both in the courts and in the Land Registry in relation to the rectification of the register was largely sound and that the deficiencies lay in the way in which the legislation was drafted. The provisions of the Land Registration Act 1925 tend to obscure the real nature of rectification and the manner in which it operates. We considered that the main task of any new legislation should be to recast the legislation in a much more transparent form. However, we did make a number of recommendations to change the law where it was either unsatisfactory or could be improved. We did not propose any substantive changes to the law governing indemnity because the subject had been considered recently by the Joint Working Group and its recommendations had been implemented by the Land Registration Act 1997. The recommendations in the Consultative Document on rectification, amendment and indemnity were strongly supported on consultation.”

 

79. The report then explains the new definitions of alteration and rectification (paragraphs 10.6 to 10.7, and in 10.8 states that the Bill makes it clear that “rectification of the register … can (as now) affect derivative interests”, but any such changes will be prospective only, which accords with the way in which the analogous provisions of the 1925 Act have been interpreted. In paragraph 10.10, it describes three cases in which the court may order the rectification of the register, the first being for the purpose of correcting a mistake, the second being for the purpose of bringing the register up to date and the third being to give effect to any estate, right or interest excepted from the effect of registration. At paragraph 10.29, the report states that although the provisions have been recast in the Bill, the substance of them has not been altered in any significant way.

 

80. It is clear that there is nothing in these reports to suggest that it was the intention of the Law Commission, or the Land Registry, that the law should be altered so as to remove from a former owner of land the right to have the register rectified just because, following a mistake, a third party had acquired an interest in it for valuable consideration. Rather, it was clearly the intention that the law should not be changed in that respect.

 

81. In this case the Salvation Army became registered with land to which it had no title, land which belonged to Knights Construction. It then transferred its registered title to Roberto Mac for valuable consideration. There is no doubt that the registration of the Salvation Army as proprietor of the disputed land was a mistake. The position in that respect, for present purposes, is the same as if a fraudster had forged the name of the freehold owner of unregistered land on a transfer to himself, got himself registered as proprietor and then transferred the title to Roberto Mac. In addition there is a further mistake. This was a first registration, and it may be said to be a mistake that the land is included in the registered title at all. In this respect it is different from the typical case of forgery because there the land has remained throughout in the correct title.

 

The law under the 1925 Act

 

82. In the light of the Law Commission’s reports, it is necessary first to consider what the law was in such a case before the 2002 Act came into force. That question was considered by the Court of Appeal in Argyle Building Society v Hammond (1985), 49 P & CR 148. In that case, A was the registered proprietor of a property. That property was transferred to B by a transfer for value which A alleged was a forgery. B was registered as owner in the proprietorship register in place of A. On the same date as the transfer, B charged the property to C as security for an advance of £15,000 and the charge was also registered in the charges register of the property. A preliminary issue was directed as to whether, if C took the charge in good faith and for value, without actual knowledge of the forgery, there was any possibility of A obtaining rectification of the register. I note that if the charge was granted on the same day as the transfer, B could not yet have been the registered proprietor.

 

83. The Court of Appeal held that the effect of registration was to vest in B the legal fee simple, regardless of any forgery, but that, by section 82(2) of the 1925 Act, the court had power to rectify the charges register in a proper case even against a bona fide chargee and that on the basis of the assumed facts the court would have a discretion as to whether or not to order rectification. In delivering the judgment of the court, Slade LJ pointed out at the foot of p.152 that section 69(1) of the 1925 Act operated to confer protection even on a forger and those claiming through him, a result described on p.153 as being achieved by a kind of statutory magic. Slade LJ went on at p.154 to refer to a passage in Ruoff & Roper’s The Law and Practice of Registered Conveyancing where it was stated that although rectification could be granted against the proprietor of the land a charge created by the transferee in favour of a bona fide mortgagee would not be disturbed.

 

84. At p.156 of the report, the judgment concluded that once a person had been registered as the proprietor of freehold land, he had, so long as he remained so registered, the statutory power to create valid charges even though the purported transfer of the freehold under which he claimed was a forged instrument. Likewise, so long as he remained so registered, he had the power to transfer the freehold title itself. The court took account of the fact that the charge had been executed before the title had been registered, but considered the legal issues “on the assumptions that (a) the protection afforded by the 1925 Act to the respondent as mortgagee is no less effective than it would have been if the charge in its favour had been executed after the title of [B] as proprietors had been registered; and (b) that the protection in law afforded to mortgagees whose charges have been registered under the 1925 Act is no less effective than the protection afforded to freeholders whose title has been registered under that Act, even though it is common ground that the 1925 Act contains no explicit provisions relating to mortgagees precisely corresponding with section 69(1).”

 

85. Nevertheless, the court continued at the foot of p.156, “it is clear that any protection enjoyed by a proprietor or mortgagee under the 1925 Act is conferred subject to the provisions for rectification of the Register contained in section 82”. After setting out section 82(1), so far as material, the court concluded firstly that the jurisdiction to rectify plainly extended to the property register, the proprietorship register and the charges register. Secondly, it concluded, that on the assumed facts “the court would, in our judgment, have clear jurisdiction to rectify the proprietorship register of the house by substituting the name of [A] for that of [B]”. It went on to consider the position of C, and drew attention to the provisions of section 82(2) that the register could be rectified under that 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”. The court concluded at the foot of p.157 that this made it clear that the court had jurisdiction in a proper case to rectify the charges register even though the rectification may affect a charge acquired or protected by registration. It went on, at p.158 to draw attention to the provisions for an indemnity for innocent parties who were caused loss if the court directed that the register should be rectified or if it exercised a discretion not to rectify it. The court concluded at the foot of p.162 that a court always had at least theoretical discretion to rectify any part of the register, even as against innocent third parties, subject only to the limiting provisions of section 82(3).

 

86. The case then proceeded to trial, following which there was a further appeal to the Court of Appeal under the name of Norwich and Peterborough Building Society v Steed, [1993] Ch 116. By that time the forgery allegation had been abandoned, and a claim of non est factum also failed. The appeal against the latter finding was unsuccessful, with the result that the transfer was voidable only. It had not been avoided when C had advanced the money. The Court of Appeal declined to follow dicta in Argyle Building Society v Hammond to the effect that the court also had a discretionary power to rectify when the original transaction was voidable and not void, and as a result A was unsuccessful as against C. The leading judgment, with which the other members of the court agreed, was given by Scott LJ. At p.125A-C, he defined the issues as being whether the transfer was void or voidable. He continued by stating that if the transfer was held to be void, “there would, strictly, be an issue as to whether or not an order for rectification of the register, as against [C], 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 defendant’s rectification claim and [counsel for C] did not contend otherwise.”

 

87. After considering sections 82 and 83 of the 1925 Act, Scott LJ stated at p.132A-B that there was no doubt that if the forgery or non est factum plea had succeeded the case would have fallen squarely within paragraph (g) of section 82(1). He went on:

 

“In neither case, if the land had been unregistered, would [B or C] have obtained a legal estate. I cannot see any reasonable basis on which an order for rectification could have been withheld.”

 

88. Where the transfer was voidable only, however, with unregistered land title would have been lost and have become irrecoverable once it had passed to an innocent third party for valuable consideration. Scott LJ was unwilling to spell out of the provisions of section 82 an intention to allow even a discretionary power to rectify in such a case. Having analysed the provisions of section 82(1), he continued at p.134G:

 

“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…

 

Paragraph (h) is relied on by [counsel for A]. 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 [C’s] legal charge was not an error and was not made under a mistake. The legal charge was executed by [B], who were at the time transferees under a transfer executed by [the attorney for A]. The voidable transfer had not been set aside. The registration of B 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 registration cannot be brought under paragraph (h).”

 

89. The Law Commission and the Land Registry were well aware of these decisions, and they are referred to in the first of the above reports. It is plain that they did not intend to alter the law as set out in them except in the relatively minor respects identified by them. It is equally plain that their efforts to achieve clarity by the redrafting of the provisions has had the opposite effect. There have been a number of cases where conflicting views as to the effect of the changes have been expressed.

 

Decisions as to the law under the 2002 Act

 

90. I turn first to the decision of Blackburne J in Pinto v Lim, [2005] EWHC 630 (Ch), another case of a forged disposition. In this case, in September 1999, one of two joint proprietors of a property forged the signature of the other to a transfer by which the property was purportedly transferred into the forger’s sole name. The forger was duly registered as sole proprietor. Some months later she transferred the property to her brother for £119,000, part of which was provided by a building society on mortgage. The brother was then duly registered as proprietor and the building society as chargee. It was common ground that the brother purchased in good faith and for a proper price. The original proprietor whose signature was forged claimed rectification of the register. As the proceedings commenced before 13 October 2003, it was common ground that the question of rectification was to be governed by the 1925 Act, although in due course any question of indemnity would be governed by schedule 8 to the 2002 Act, and not by section 83 of the 1925 Act.

 

91. It was common ground that the application fell within at least one of the grounds in section 82(1) of the 1925 Act, the most obvious case being paragraph (g). As the person against whom rectification was sought (the brother) was in possession of the property, the discretion had to be exercised giving special weight to the fact of possession (see paragraphs 84-87). There was, however, no suggestion that the fact that the original fraudster was no longer on the register made any difference at all.

 

92. In exercising his discretion, Blackburne J also had regard to the provisions for indemnity in schedule 8 to the 2002 Act. It is sufficient for present purposes to note that Blackburne J clearly proceeded on the basis that the unsuccessful party would be entitled to an indemnity. In deciding to exercise his discretion to refuse rectification, he pointed out in paragraph 100 that paragraphs 1(1)(a) and 1(1)(b) of schedule 8 to the 2002 Act were the converse of each other. He continued:

 

“100. … If a mistake (ie an error or omission) has been made which entitles the court, in the exercise of its discretion, to order rectification of the [brother’s] registration as proprietor of the property … it is difficult to see why, if the court declines in the exercise of that discretion to make the order sought, the claimant who can show that, as a result of the mistake, he has suffered a loss should not be entitled to an indemnity for that loss (provided only that the loss has not resulted, wholly or partly, from his own fraud or lack of proper care). In the instant case, [the original owner] has, by the registration of the [brother] as sole proprietor of the property been deprived of his beneficial interest in the property. This occurred without fault on his part. It is not relevant that, had he made his claim at the time when [the forger] was still registered as proprietor (ie prior to the [brother] purchasing the property from her and becoming proprietor in her place) he would have been seeking rectification of a different mistake (namely the registration of [the forger] as proprietor).”

 

93. It is plain that Blackburne J regarded there as being two mistakes – the initial registration of the forger and the subsequent registration of the brother. Immediately thereafter he cited a passage from the 1986 edition of Ruoff and Roper setting out the legal position following Argyle Building Society v Hammond as an accurate statement of the 1925 Act, overlooking that in relation to voidable titles the Court of Appeal in Norwich and Peterborough Building Society v Steed had held that the dicta in that case were incorrect.

 

94. The passage in Ruoff and Roper approved by Blackburne J did, however, contain the following proposition in relation to a void transaction:

 

“Thus, for example, if a forger succeeds in getting himself registered as the proprietor and thereafter executes a disposition for value in favour of a bona fide purchaser or mortgagee who completes the disposition by registration, then without a judicial hearing, that purchaser or mortgagee will not be deprived of his registered estate or interest in favour of the true original owner … However, there will, in such circumstances, be grounds on which the register may be rectified and the Court will have a discretion, subject to the limitation on its powers, to order rectification where this is considered proper having regard to the balance of equities.”

 

95. Blackburne J concluded by holding that that passage “illustrates that where … the court could, as a matter of discretion, have ordered rectification but declines to do so, the claimant will be compensated notwithstanding that the forger has subsequently disposed of the property for valuable consideration to a wholly innocent purchaser who has since become registered as its proprietor.” He clearly proceeded on the basis that this was a case where the court had a discretion to order rectification and that in the event of rectification being refused the entry of the bona fide purchaser was a mistake for the purposes of schedule 8 to the 2002 Act whose correction would involve rectification of the register.

 

96. Paragraph 19 of Schedule 12 to the 2002 Act provides that Schedule 8 “applies in relation to claims made before the commencement of that Schedule which have not been settled by agreement or finally determined by that time (as well as to claims for indemnity made after the commencement of that Schedule).” It would to my mind be an extraordinary lacuna if the references to a mistake whose correction would involve rectification of the register would exclude from compensation cases which had arisen before the Act came into force that did not fall within section 82(1)(h). It would also be wrong to construe Schedule 8, unless compelled to do so, in a way that would deprive the original owner of an existing, pre-October 2003, statutory property right, the right to an indemnity, in breach of Article 1 of Protocol 1 to the Convention on Human Rights.

 

97. Although the decision in Pinto v Lim was given after the 2002 Act came into effect, the passage in Ruoff and Roper, corrected in a later edition following the Court of Appeal decision in Norwich Building Society v Steed, must have been known to the Law Commission and the Law Society when putting forward proposals for reform, and had they wanted to propose the removal of the right to rectification and indemnity once the original invalid transaction was no longer recorded on the register, they could have done so.

 

98. The next decision was that of Mr Terence Mowschenson QC, sitting as a judge of the Chancery Division of the High Court in Barclays Bank v Guy, [2008] EWHC 893 (Ch). In that case, on an application by the Bank for summary judgment, there was an issue whether a transfer was void or voidable. The judge concluded that it was voidable only, and on that basis the judge followed the decision of the Court of Appeal in Norwich Building Society v Steed [1993] Ch 116. He set out the position in paragraphs 16-27 as follows:

 

15.  The claimant contends that assuming in the defendant's favour that the transfer was fraudulently procured by Ten Acre, …, that cannot affect the claimant's right as registered chargee. It does not provide the defendant with any basis for rectification of the register as against the claimant.

 

16.  The grounds for rectification of the register pursuant to 65 of the Land Registration Act 2002, which I shall refer to as the 2002 Act, are set out in section 65 and paragraph 2 of schedule 4 and include the alteration of the register for the purposes of correcting a mistake. By paragraph 1 of schedule 4, references to rectification of the register, in relation to alteration of the register are to alterations which involve the correction of a mistake and which prejudicially affects the title of a registered proprietor.

 

17.  The starting point is that at the date of the charge and its registration against the property Ten Acre was the registered proprietor of the property. It was entitled to exercise its power to charge the property. By sections 23 sub-section 1 and section 24 of the 2002 Act the registered proprietor of a registered estate is entitled to make a disposition of any kind permitted by the general law, subject to various exceptions. This includes under section 23 (1) (b) a power to charge the estate at law with the payment of money, Section 58 sub-section 1 of the 2002 provides under the heading "Conclusiveness": "If on the entry of a person on the register as the proprietor of a legal estate the legal estate would not otherwise be vested in him, it shall be deemed to have been vested in him as a result of the registration."

 

18.  It follows that at the time the property was charged to the claimant Ten Acre was the registered proprietor. The legal estate was deemed to be vested in it, and it was entitled to exercise its owner's powers to charge the property. It follows that there can be no mistake in the claimant's registration as chargee. I refer to the decision of Scott LJ in Norwich Building Society v Steed [1993] Ch 116 at page 135 between letters A to H.

 

“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).”

 

19.  Until the chargor's title is avoided, his title as the person on the register is a real registration carrying with it all the incidents of the proprietor of the property which registration carries with it.

 

20.  The claimant contends that for the purpose of a rectification claim no further investigation is required or is relevant. It matters not whether the transfer is ultimately found to be fraudulently procured or whether the transfer is void or voidable, and I was referred to Ruoff & Roper on the Law and Practice of Registered Conveyancing at paragraphs 46.028 to 46.030 on the law and which conveniently consider the position where the transfer to the chargor is void, in example 1.2 at 46.028.

 

"Example 1.2. R1 is the proprietor of a registered freehold estate in land. R2 forges R1's signature on a form of transfer and is registered as the new proprietor of the estate. R2 then grants a legal mortgage charge over the land to M1, which is duly registered. R1 applies for rectification so that R2's may be removed from the proprietorship register and his own name replaced, and the charge to M1 deleted from the charges register. The registrar will rectify the proprietorship register against R2, as in Example 1.1 above. He will not rectify the charges register against M1. R1 will hold the freehold estate subject to M1's charge. The legal estate is "deemed to be vested" in R2 when he was registered as its proprietor, even though it would not otherwise have vested in him owing to invalidity of the purported disposition from R1 to R2. No special significance attaches to the use of the expression "deemed to be vested", which in this context simply means that the estate is actually vested in R2. The consequence is that R2 had full owner's powers of disposition over the estate, including the power to grant the mortgage charge to M1, since he was the registered proprietor. His powers of disposition remained unqualified so long as his registration as proprietor remained effective. It cannot be said therefore that the disposition by way of legal mortgage to M1 was in any way invalid, nor that the registration of that mortgage was a mistake. Accordingly, R1 has no right to have the register rectified as against M1. R1 could have prevented this result by applying to the registrar to enter a restriction on R2's powers of disposition as soon as he discovered that a forgery had taken place. R2 could be restricted from making a registered disposition of the estate without the consent of the court or registrar. This result is different from what would have been happened with unregistered conveyances, where the title of R2 and M1 would have depended on the rule nemo dat quod non habet. It also differs from what might have been the result under the rectification provisions of the former Land Registration Act 1925. Under that Act, there was equivocal authority that rectification would have been ordered against a third party transferee or chargee of an registered estate, where the original disposition which transferred the estate was void. The power to rectify would exist, though the court, in its discretion, might refuse to exercise it. One of the reasons for this result was the courts' wish to achieve by rectification the same result as would have followed according to the principles of unregistered conveyancing. It is submitted, however, that this approach is not justifiable under the 2002 Act. First, it was the explicit policy of HM Land Registry and the Law Commission in the consultation paper that preceded 2002 Act that, in the absence of some error on the register, the principles of unregistered land should not determine whether the register should be rectified. Any other result would undermine the general aim of the Act that the register should indicate accurately and comprehensively the state of the registered proprietor's title. A registered proprietor cannot be deemed to lack powers of disposition which the fact of registration indicates that he actually has. Secondly, the 2002 Act has narrowed the grounds of rectification provided in the 1925 Act so that it no longer allows rectification where the proprietor of a legal estate would not have been the estate owner if the land had been unregistered. The applicant for rectification must prove some error in registration."

21.  Obviously, where the title of the proprietor is voidable then the example is even stronger, and I was referred in the claimant's helpful skeleton argument to a passage by Charles Harpum and Janet Bignell in Registered Land: Law and practice under the Land Registration Act 20032 (2004) at 15.1 where they comment on Section 58 under the Land Registration Act 2002 at paragraph 15.1,

 

                                      i.      "It is a fundamental principle of registered conveyancing that it is registration that vests the legal estate in the registered proprietor (cf. LRA 1925, s 69(1)). In accordance with this principle, the LRA 2002 provides that if on the entry of a person in the register as the proprietor of the legal estate, the legal estate would not otherwise be vested in that person, the legal estate will be deemed to be vested in him as a result of the registration (LRA 2002, s 58(1)). What this means is that the legal estate will vest in a person even if he is registered as proprietor on the basis of a forged transfer – which is itself a nullity (See (2001) Law Com No 271, para 9.4)."

22.  I am satisfied that the transfer to Ten Acre was voidable and not void. …At the date that the charge was taken and registered the transfer had not been avoided. Indeed, as I understand it from the argument that was put forward by the defendant, it is not suggested that any attempt has been made to avoid it.

 

23.  In Norwich & Peterborough Building Society v Steed the Court of Appeal held that where a power of attorney had been validly granted, and a transaction entered into in excess of that authority by fraud, the transaction was voidable and not void. Scott LJ agreed with the judge (Knox J):

"The judge dealt very shortly with the ultra vires point. He said: "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."

 

24.  Accordingly, this is not a case of forgery or non est factum and there has been no suggestion by Mr Guy that he lacked capacity or title. …

 

25.  … In effect, regrettably, Mr Guy knowingly signed a document which he knew could have the effect of transferring the property to Ten Acre. As at the time the charge was granted the voidable transfer had not been set aside and the register had not been rectified as against Ten Acre. No such rectification could affect the claimant in this case.

 

26.  ….

 

27.  In the light of my holding that the transfer was voidable and not void I do not need to address the question of whether the transfer, the charge, would have been effective if the transfer was void. ....” [emphasis provided]

 

99. It is clear, in particular from paragraph 27 of his decision, that the deputy judge decided this case purely on the basis that the transaction was voidable, and did not consider the position if the transaction was void. It is also clear that the editors of Ruoff and Roper were wrong to describe the two Court of Appeal cases to which I have referred as equivocal authority as to the rectification of void transactions, and were wrong as to the intentions of the Law Commission with regard to the scope of rectification under the 2002 Act. When, however, the Court of Appeal refused Mr Guy permission to appeal (Guy v Barclays Bank, [2008] EWCA Civ 452), Lloyd LJ, with whom Carnwath LJ agreed, said this:

 

“…while the scope of the phrase "correcting a mistake" is no doubt something that requires to be explored and discussed and developed in the course of future litigation, which will be decided upon the facts and upon the merits of each case, I cannot see that it is arguable that the registration of the charge can be said to have been a mistake, or the result of a mistake, unless at the least Mr Guy can go so far as to show that the bank, the mortgagee, had either actual notice, or what amounts to the same, what is referred to as "Nelsonian" or "blind eye notice", of the defect in the title of the mortgagor, Ten Acre Limited in the present case. I simply cannot see how it could be argued that if the purchaser or chargee knows nothing of the problem underlying the intermediate owner's title, that the registration of the charge or sale to the ultimate purchaser or chargee can be said to be a mistake. That seems to me inconsistent with the structure and terms of the 2002 Act. So the question is whether Mr Guy can show an arguable case, on the evidence, for saying that Barclays Bank had actual notice or was turning a blind eye to matters that it knew, which would if it addressed them properly, have shown it that Ten Acre Limited did not have a good title to the property.”

 

101. Mr Guy was unrepresented at that hearing, and the decision refusing leave does not constitute a binding decision of the Court of Appeal by way of precedent, as was pointed out by Lloyd LJ himself in Guy v Pannone llp, [2009] EWCA Civ 30, para.28.

 

102. Following criticisms of the decision of Mr. Mowschenson and of the dicta in the Court of Appeal, Mr. Guy attempted to renew his application for permission to appeal, and that attempt was heard by a three judge Court of Appeal last December, when Mr. Guy was represented by leading and junior counsel. The attempt failed as being too late, but in the course of his judgment, with whom the other two members of the court agreed, Lord Neuberger MR observed as follows:

 

“14. In order to understand the arguments advanced on behalf of Mr Guy, it is necessary to explain briefly the relevant law relating to the substantive issue which Mr Guy wishes to raise on his projected appeal. As the Bank's application for judgment was under CPR 24, the facts were assumed to be as Mr Guy contended, and, at least before Carnwath and Lloyd LJJ, it was accepted that, on this basis, the purported transfer to TAL was void (although Mr Nugee has made it clear on behalf of the Bank that, if this application succeeds, and the judgment of Mr Mowschenson is set aside, Mr Guy's case on the facts is likely to be challenged).

15. Even assuming that the Transfer was void, the Bank's case is and was that, as the Charge was nonetheless a valid and genuine charge executed by the registered proprietor of the land, TAL, to secure monies owing to the Bank, and as the Charge was duly registered by the Bank, the Bank's rights as a registered chargee are unassailable by Mr Guy.

16. There is no doubt that, under the provisions of the Land Registration Act 2002, registration is normally conclusive in the sense of irrebuttably establishing title (see e.g. sections 23 to 26 and 58). However, paragraph 2(1)(a) of schedule 4 to the Act enables the court to "make an order for alteration of the register for the purpose of … correcting a mistake." The central issue is, therefore, whether Mr Guy could get the registration of the Bank as chargee in the charges register relating to the Land removed under the provisions of this paragraph.

17. This issue can fairly be said to turn on whether the concept of "correcting a mistake" is given a wide or a narrow meaning. [Lord Neuberger then cited passages from the judgment of Lloyd LJ in [2008] EWCA Civ 452].

….

 

20. Mr Stewart argued that the question whether Mr Guy could invoke paragraph 2(1)(a) of schedule 4 to the 2002 Act for the purpose of removing the registration of the Charge raised a difficult point of law, for which permission to appeal should have been given.

…

         

22. … this is not a case where the court proceeded on 9 April 2008 in ignorance of any relevant cases, articles or textbooks. As Lloyd LJ said at [2008] EWCA Civ 452, para 22, there were differing views expressed on the point at issue in the then-current editions of two leading textbooks, Ruoff and Roper on Registered Conveyancing (which, as Lloyd LJ said, "took the view that the reading of 'a mistake' is narrow and the concept of mistake is restricted to mistake in registration"), and Emmet and Farrand on Title, (which, he said, "expresses a different view"). Lloyd LJ also considered an interlocutory decision of His Honour Judge Peter Langan QC, Fretwell v Graves, handed down in the Leeds District Registry of the High Court on 16 March 2005, in which the point was held to be arguable either way.

 

23. Nor is this a case where the applicant is able to refer to any subsequent decision of this court or of the Supreme Court in which it has been suggested, let alone held, that the conclusion reached by Lloyd LJ was wrong. The material we were referred to by Mr Stewart which post-dates the 9 April 2008 hearing consisted of a more recent edition of Emmet and Farrand (in which the editors adhere to their view and criticise the decision of 9 April 2008), a decision of Mr Owen Rhys, a Deputy Adjudicator of the Registry, in Ajibade v Bank of Scotland PLC (REF/2006/0163/0174, 8 April 2008), and a concession made by the Chief Land Registrar in the High Court Registry, Odogwu v Vastguide. Not only do those documents not contain anything which is binding on this court, but they do not include material which seems likely to have taken matters further than they were on 9 April 2008.

 

103. After explaining why the appeal could not be re-opened, Lord Neuberger continued at paragraphs 33-35 as follows:

 

“33. It is fair to say that Mr Stewart has advanced Mr Guy's case, in so far as it relies on para 2(1) of schedule 4 to the 2002 Act, much more strongly than it appears to have been argued on 9 April 2008, and on at least one basis which does not seem to have been raised on that date.

 

34. The skeleton argument produced on behalf of Mr Guy for the 9 April 2008 hearing seems, albeit impliedly, to concede the point which he is now raising, and really puts his case on the alleged blind eye knowledge which the Bank had of the wrongful registration of TAL as proprietor. On that basis, it appears to me that, on 9 April 2008, Lloyd LJ could have been forgiven for assuming that the point now raised was not being strongly advanced.

 

35. It also seems clear that Lloyd LJ's analysis proceeded on the basis that the alleged "mistake" for the purposes of para 2(1) of schedule 4 to the 2002 Act was the registration of the Charge in the charges registers. However, there are other ways of putting Mr Guy's case, namely (a) that the removal of his name from the proprietorship register was a mistake, and, in order to correct that mistake, the Charge would have to be removed from the charges register, or (b) that the registration of the Charge flowed from the mistake of registering the Transfer, and therefore should be treated as part and parcel of that mistake.”

 

104.          A few weeks after the decision of Mr. Mowschenson in Barclays Bank v Guy, and well before the hearing of the initial application for permission to appeal, a similar issue arose in Ajibade v Bank of Scotland, REF/2006/163 and 174, to which I have already referred, and to which reference was made by Lord Neuberger in the passage quoted above. In that case, the Applicant had been the registered proprietor of a property. By means of a forged power of attorney, the Applicant’s sister had transferred that property to her own husband, who was registered as proprietor. The transfer was a purported sale, partly funded by an advance from a bank, which was duly registered in the charges register. The husband then borrowed further money from the Second Respondent, Endeavour Personal Finance Limited, and that advance was secured by a second charge which was also registered in the charges register. The Applicant sought that she should be re-instated as proprietor and that both charges should be removed from the register. Once it was established that the transfer to the forger’s husband was a nullity, there appears to have been no question but that the Applicant should be restored as proprietor. In addition the Bank of Scotland, the first chargee, conceded that the entry relating to its charge should be cancelled, that charge having been granted before the transfer to the husband was registered. The second chargee, however, contended that its charge should remain on the register because there was no mistake in its registration.

 

105.          In paragraph 4 of his decision, Mr. Rhys set out, and dealt with, the contentions of counsel for the Second Respondent as follows:

 

“Endeavour's argument is as follows. It contends that at the time its charge was created and registered, Mr Abiola was in fact the registered proprietor, with all that that entails. In particular:

4.1 he was at that time deemed conclusively to be the proprietor of the legal estate in the Property under section 58 of the 2002 Act

4.2 in that capacity he had the power to charge the estate at law with the payment of money - see sections 23(1) and 24 of the 2002 Act

4.3 this was so irrespective of whether he was registered as proprietor by virtue of a mistake - see section 26 of the 2002 Act.

For my part, I entirely accept the propositions at 4.1 and 4.2. However, I must question whether section 26 of the 2002 Act does in fact support the proposition at 4.3. Section 26 is entitled "Protection of disponees" and is in these terms:

"(1) Subject to subsection (2), a person's right to exercise owner's powers in relation to a registered estate or charge is to be taken free from any limitation affecting the validity of a disposition.

(2) Subsection (1) does not apply to a limitation -

(a) reflected by an entry in the register, or

(b) imposed by, or under, the Act.

(3) This section has effect only for the purpose of preventing the title of a disponee being

questioned (and so does not affect the lawfulness of a disposition).”

 

5. Clearly, section 26 does not in terms refer to registration as a result of a mistake: it refers to "limitations affecting the validity of a disposition". In my view, this expression is not apt to cover a situation where the owner has been registered as a result of a mistake, because "limitations affecting the validity of a disposition" more naturally refers to express or implied limitations which fetter an owner's powers - typically, the requirement to obtain the consent of a beneficiary or other person to a trustees' sale. Furthermore, the power to alter or rectify the register under Section 65 expressly applies in cases of mistake - see Schedule 4 paragraph 5(1)(a). Accordingly, section 26 does not in my view assist at all in determining whether Endeavour's charge should be removed. All it purports to do is to protect a disponee where he or she has taken an interest in land as a result of a disposition which is beyond the powers of the "disponors" because their powers are subject to specified limitations. In effect, it supplements the provisions of sections 23 and 24, but has no bearing, it seems to me, on the power to correct a mistake in the register.

 

6. Mr Greville Healey, who appeared for Endeavour, supported the arguments outlined above by reference both to the Law Commission Report Number 271 ("the Report") which gave rise to the repeal of the Land Registration Act 1925 (“the 1925 Act”) and the enactment of the 2002 Act, and to a passage in Ruoff & Roper’s Registered Conveyancing. With regard to the Report, he cited two particular passages, at 9.4 and 4.10. Paragraph 9.4 reads as follows:

"One of the most fundamental principles of registered conveyancing is that it is registration that vests the legal estate in the registered proprietor. Clause 58(1) of the Bill provides accordingly that if, on the entry of a person in the register as the proprietor of a legal estate, the legal estate would not otherwise be vested in him or her, it shall be deemed to be vested in him or her as a result of registration. Thus, for example, if a person is registered as proprietor on the strength of a forged transfer, the legal estate will vest in that transferee even though the transfer was a nullity"

This passage is incontrovertible and uncontroversial - it expresses the underlying principle of land registration as embodied both in the 1925 and 2002 Acts, that which has been described as “the statutory magic”. However, this passage in itself does not take the matter any further, since although a person may become the legal estate owner through registration where he would not have done so in unregistered conveyancing, this registration is still subject to the Court's and the registrar's curative powers under Section 65 and Schedule 4. This passage does not - and could not - claim that a person once registered as a proprietor is safe from any challenge to his title, since all registrations are subject to Section 65 and Schedule 4.

 

7. Mr Healey also referred me to paragraph 4.10 of the Report, which is to be found in the section which explains the rationale for Clause 26 - which became section 26 of the 2002 Act - which deals with "Protection for disponees" and which is set out in full above. Interestingly, the specific example given by the Law Commission to illustrate the operation of Clause 26 is the case where:

"(1) W and X held land on a bare trust as nominee for Y, on terms that they could not make any disposition of land without Y's written consent;

(2) Y, who was in actual occupation of the land held in trust, did not protect her interest by the entry of a restriction; and

(3) W and X fraudulently charged the land to Z without Y's consent in breach of trust."

The Law Commission states that in these circumstances "Z's charge would be valid and could not be called into question by Y". This is entirely right, and consistent with my understanding of the operation of section 26 of the 2002 Act, namely that it is directed to a disposition that would otherwise be invalidated by a failure to comply with the terms of the power of disposal. Again, however, it does not assist in understanding the scope of the power to correct a mistake.”

 

106.          Mr. Rhys then set out the arguments for the Second Respondent that “the original mistake – the registration of Mr. Abiola pursuant to a forged disposition – is no longer operative once he has become registered as proprietor. Although he was first registered due to a mistake, once he is registered he is entitled to deal with the property in the same way as any registered proprietor. Since he was entitled to charge the property… there is no operative mistake in respect of which the registrar may exercise his powers.” Counsel for Ms Ajibade, on the other hand, contended that fraud unravelled all and that the power to alter the register for the purpose of correcting a mistake was not to be limited so as to exclude the removal of the second charge.

 

107.          Mr. Rhys drew attention to the scope of the right of the unsuccessful party to apply for an indemnity under schedule 8 to the 2002 Act, but held that this could not apply to Ms Ajibade if, as the Second Respondent contended, the registration of the second charge was not a mistake and there was not even the possibility of rectification. He continued:

 

“11. The case turns, quite simply, on the meaning of the phrase "correcting a mistake….." as it appears in Schedule 4 paragraph 5. … In reaching my conclusion I have regard to the following points (among others):

11.1 Although obviously the underlying purpose and intention of our system of land registration is to make a title, once registered, as secure as possible, it has always been recognised that there must be a power in the Court and the registrar to rectify the register where a mistake has been made. A registered title is not, therefore, absolutely guaranteed by the State – it is always subject to rectification on proper grounds.

11.2 However, where rectification has taken place, or where it has been refused notwithstanding the existence of a mistake, indemnity may be payable by the Land Registry to compensate for any loss. In the present case, however, if the arguments of Endeavour are accepted, it would appear that indemnity is not payable to the Applicant if rectification is refused.

11.3 The phrase “correcting a mistake” in Schedule 4 is not defined.

11.4 I have found that Mr Abiola was registered as proprietor due to a fraud on the Applicant. Mr Abiola did not object to the rectification, has taken no part in this adjudication and it is entirely possible that he was party to the fraud carried out by his wife.

 

12. In one sense, the arguments addressed to me by both the Applicant and Endeavour have been focussed on the wrong word – namely “mistake”. The Applicant contends that the registration of Endeavour is, in effect, a mistake. Endeavour contends that is not. However, it is manifest, and not disputed, that there was an operative mistake when the Land Registry registered Mr Abiola as proprietor of the Property. The real question, it seems to me, is to decide how far the registrar can go in “correcting” that mistake. It is accepted that Mr Abiola should be removed from the register and the Applicant replaced as proprietor in the Proprietorship Register. It is also accepted that Halifax Plc should be removed from the Charges Register. Would these steps entirely correct the original mistake? The Property would still remain subject to the second charge created by the fraudulently-registered Mr Abiola, and the Applicant would regain her title but encumbered by this charge. It does not seem to me that, in such circumstances, the mistake has been fully corrected. Certainly, all the consequences of the mistake would not have been corrected, even though it would be open to the registrar to so by rectifying the Charges Register by removing Endeavour’s charge. In my judgment, there is no basis for construing the expression “correcting a mistake” in such a restrictive way. It seems to me that this formulation is intended to give the registrar wide scope to exercise the discretion to rectify in a fair and just way. It would have been possible to have imposed express limitations on the power in the sense contended for by Endeavour if this had been the intention. – as indeed limitations have been imposed in regard to proprietors in possession (see Schedule 4 Paragraph 6). It seems to me that it would be perverse to limit the registrar’s power to rectify the register to the correction of only one consequence of the mistake, leaving uncorrected the other direct consequences of the original mistake. Protection for parties in the position of Endeavour is to be found both in the undoubted requirement that the registrar should exercise his power in a fair and just way, and in the existence of an indemnity from the Land Registry.

 

13. It may be argued that the ability of the registrar to correct not just the original mistake but also the consequences of a mistake could lead to an undermining of the “sanctity” of a registered title. It might be said that this power could be used to rectify the register against purchasers at several removes from the original fraudster. However, in practice this would not be a problem in my view. In particular, the restrictions contained in Paragraph 6 – in respect of proprietors in possession – operate to limit very substantially the ability to rectify against successors in title. Furthermore, there is no suggestion that the more numerous grounds for rectification of the register as set out in section 82 of the 1925 Act undermined confidence in the operation of the land registration system under the previous regime. The power to rectify will necessarily be used sparingly, but the exercise of the power is a matter for the Court or the registrar. It may be noted that the Court of Appeal in Argyle Building Society v Hammond (1985) 45 P & CR 148 made it clear that the power to rectify under the 1925 Act was not to be construed restrictively, but was a discretion to be exercised in accordance with all relevant circumstances. In doing so the court expressly disagreed with the analysis in the then current edition of Ruoff & Roper which – as is the case today – sought to construe the power to rectify under section 82 in a restrictive way.”

 

108.          Despite the fact that counsel appears not to have drawn Mr. Rhys’ attention to the passages in the two Law Commission Reports which I have had cited to me, Mr. Rhys’ approach does, in my view accurately reflect the intended effect of paragraph 5 of Schedule 4 as explained in those passages. It also draws attention to the potential result of the construction put forward on behalf of the second chargee that the original owner, deprived of his title by the effect of the legislation, could get neither rectification nor indemnity. Mr. Rhys did not have Mr. Mowschenson’s decision in Barclays Bank v Guy cited to him, but the issue before him was not addressed in that case, and it is difficult to see how it could have assisted him beyond drawing his attention to the passage cited from Ruoff and Roper upon which I have already commented.

 

109.          The next decision is that of Sir Donald Rattee in Odogwu v Vastguide Limited, [2008] EWHC 3565 (Ch), a case where the Chief Land Registrar was added as a Defendant. In that case, the Claimant, who lived in Nigeria, was the registered proprietor of a property. It was alleged that a fraudster had forged the Claimant’s signature on a charge to secure a loan to the fraudster of some £750,000. The charge was registered. In due course the chargee appointed a receiver and sold the property to Vastguide in the exercise of its power of sale. Following the sale, the charge was removed from the register. Vastguide was registered as proprietor and there was also registered a charge granted by Vastguide to the Second Defendant, Investec Bank UK Limited, to secure repayment of sums loaned to it by that bank. The Claimant applied to rectify the register pursuant to Schedule 4 to the 2002 Act to remove Vastguide as proprietor and the bank as chargee. A preliminary issue was directed as to whether the court had jurisdiction to remove the registration of Vastguide and its chargee on the assumption that the original charge was a forgery.

 

110.          The preliminary issue was never heard because all the Defendants conceded that the court had jurisdiction to rectify the charges register. At the trial, Vastguide sought to resile from this concession, but was held to be estopped from doing so. Investec was not represented at the trial following a concession by the Claimant that if the claim against Vastguide failed, then the claim against Investec would also fail. Investec did not seek to resile from the concession as to jurisdiction, and was not represented at the trial.

 

111.          Vastguide accepted that it was estopped from contending that there was no jurisdiction to rectify, but sought to contend that the jurisdiction arose not because the entry of Vastguide on the register was a mistake but because the jurisdiction under paragraph 2 of Schedule 4 to the 2002 Act included jurisdiction to make an order for the alteration of the register for the purpose of correcting not only a mistake on the register, but the consequences of such a mistake (see paragraph 50 of the decision). The judge held that the concession was that the registration of Vastguide was a mistake, and that it could no longer, therefore, contend that the jurisdiction arose on another basis (paragraph 54).

 

112.          The judge went on, however, to consider the new argument in case he was wrong as to the estoppel point. He continued as follows:

 

“56. The relevant jurisdiction of the court is that conferred by paragraph 2(1)(a) of Schedule 4 to the Act, namely "to make an order for alteration of the register for the purpose of correcting a mistake." In my judgment the reference in that quotation from paragraph 2(1) to a mistake must be to a mistake on the register, so that it can be corrected by an alteration of the register. I accept the submission of counsel for the Claimant that a fundamental objection to Vastguide's argument is that the Credit & Mercantile charge, which Vastguide argues is the relevant mistake, is no longer on the register. It was deleted on completion of the sale to Vastguide when Credit & Mercantile was paid its debt.

 

57. Counsel for Vastguide sought to overcome this initial obstacle by submitting that, for this purpose, the register is not limited to the current edition of the register showing currently effective entries, which admittedly does not show the charge, but extends to the records still held by the Land Registry showing all previous entries, including those since deleted. I find this argument misconceived. In my judgment the reference in paragraph 2 of schedule 4 to the Act to a mistake is to a mistake appearing on the current edition of the register which shows subsisting entries. Only such a conclusion makes sense in the context of the jurisdiction in paragraph 2 to alter of register for the purpose of correcting a mistake. I cannot see what purpose would be served by making an alteration to a previous edition of the register to remove an entry such as the Credit & Mercantile charge which has already been deleted.

 

58. In my judgment Vastguide's new argument is bad for this reason alone. However, quite apart from this point it does not seem to me obvious that the reference to "correcting a mistake" in paragraph 2(1)(a) of Schedule 4 to the Act can properly be construed as including a reference to correcting the consequences of the mistake, which is the next step in Vastguide's argument. However, counsel for Vastguide relied in this context on a recent decision of a Land Registry Adjudicator in Ajibade v. Bank of Scotland plc in the course of which the Adjudicator seems to have taken the view that the correction of a mistake by rectification of the register could extend beyond the correction of an entry on the register to include the correction of the consequences of such a mistake. As it is not necessary for me to decide this point in this case in the light of my rejection of Vastguide's argument on the ground that the Credit & Mercantile charge has already been deleted from the register (a point that did not arise in the Ajibade case) I do not think it appropriate that I express any conclusion on it.

 

59. Thus, even if I had not concluded that Vastguide is estopped from relying on the argument I have just been considering, I would have rejected the argument as misconceived. Counsel for Vastguide accepted that, if he failed on that argument, Vastguide would be estopped by the concession recited in the consent order from denying that the entry in the register of Vastguide as proprietor was a mistake within the meaning of Schedule 4 to the Act, since that would then be the only ground on which the court would have the jurisdiction which Vastguide had accepted by its concession. It is accordingly unnecessary, and therefore inappropriate, for me to express any conclusion on the question whether, as a matter of law, the entry of Vastguide as proprietor is capable of being such a mistake. I proceed to consider the parties' cases on the footing that it is such a mistake which the court has jurisdiction in these proceedings to rectify by removing that entry from the register, subject to the provisions of paragraph 3 of schedule 4.”

 

113.          While not making any findings as to the correctness of the decision of Mr Rhys in Ajibade, therefore, the judge concluded that if the registration of Vastguide was not itself a mistake, he would not have held that he had jurisdiction to correct it at a time when the original mistake, the registration of the forged charge, had already been removed from the register. In Ajibade, the original mistake was still on the register. The judge’s reasoning was that only this made sense in the context of a provision permitting and alteration for the purpose of correcting a mistake, which he construed as meaning a mistake on the current edition of the register. If this is correct, it would involve either a substantial change from the law under the 1925 Act or disagreement with the decision of Blackburne J in Pinto v Lim that the subsequent registration of the purchaser was also a mistake for this purpose. It would also mean that, if the original mistake had been removed from the register already, and the new entry was not a mistake itself (the judge carefully refrained from expressing any view on this point), then there would be difficulties in seeing how the provisions of Schedule 8 to the 2002 Act would entitle the original owner to indemnity – a point that was not considered by the judge. So far as appears from the decision, none of the relevant provisions of the Law Commission’s reports, the human rights issues and Pinto v Lim appear to have been drawn to the judge’s attention.

 

114.          Finally, I turn to a recent decision by another Deputy Adjudicator, Mr. David Holland, in Stewart v Lancashire Mortgage Corporation Limited, REF/2009/ 0086 and 1556. In that case the Applicant, Ms Stewart, lived abroad. The dispute concerned industrial premises which had been purchased in the name of Ms Stewart, but was occupied by her half brother under a family arrangement. The brother claimed that Ms Stewart held the property as bare trustee for him. A solicitor drafted a form TR1 by which on its face Ms Stewart appointed the brother as joint trustee and Ms Stewart and her brother then transferred the property to the brother alone. Although what purported to be Ms Stewart’s signature appeared on the TR1, it was common ground before Mr Holland that it was a forgery. The solicitor, in ignorance of the forgery, sent the TR1 to the Land Registry and the brother was registered as sole proprietor of the property on 21 November 2005, on which date a charge was also registered in favour of Lloyds TSB to secure repayment of £18000.

 

115.          In May 2008, the brother redeemed the original charge, which was removed from the register, and charged the property to the Respondent to secure repayment of a loan of over £57,000. He also executed a further charge on 6 June 2008 to secure repayment of further advances. The Respondent applied to register the first of these charges on 19 May 2008. On 7 June 2008, the brother was killed in a road accident. The application to register the second charge was made on 10 June 2008. Objection was made to the registration of the charges initially by the father of Ms Stewart and her brother, and in due course Ms Stewart applied to alter the register to remove her brother as registered proprietor and to restore her name as such. The matter was referred to the Adjudicator and came on for hearing, when Ms Stewart was represented by one of the administrators of the estate of her deceased brother (a non-legal representative) and the Respondent was represented by counsel. There was no dispute that Ms Stewart was entitled to be restored to the register. The issue was whether the Respondent’s charges ought to be registered and to remain on the register.

 

116.          Mr. Holland found that the brother was intended to have a substantial beneficial interest in the property but that it had been put into Ms Stewart’s name to prevent him disposing of it without the consent of Ms Stewart and their father. He did not decide if she was a bare trustee, but did find that if she had an interest, then she and the brother were tenants in common, so that no question of survivorship arose.

 

117.          Mr. Holland went on to find that he should at least notionally give effect to the Respondent’s application to register the charges, with the result that Ms Stewart, in order to remove the charges, had the burden of bringing herself within the terms of Schedule 4 to the 2002 Act. He continued, in paragraph 51 by setting out the submissions of counsel for the Respondent:

 

“Miss Tozer’s principle submission is that, by paragraph 5 to Schedule 4 to the act, the Registrar only has (relevantly) power to alter the register to correct a “mistake”. The registration of the Respondent’s charges was not a mistake therefore the entries cannot be removed. She submits that the effect of the provisions of the act set out above, particularly section 58, is to vest in the son both the title and the power to create a valid charge. He was the registered proprietor at the date the charges were created. He remained and remains the registered proprietor until a successful application is made to alter the register. Thus at the date they were created and (at least notionally) registered the charges were lawfully created. Indeed the Registrar could not have refused to register them. Thus, she submits, the effect of the act is that, even though the registration of the son as freehold proprietor could be said to be a mistake, any subsequent dispositions by him are deemed to be lawful and the registration of them cannot be a mistake.”

 

118.          Mr. Holland then referred to passages from Ruoff and Roper and from another text book which supported counsel’s contentions and continued in paragraph 53:

 

“More importantly this view derives support from the decision of Mr Terence Mowschenson QC sitting as a Deputy Judge of the Chancery Division in BARCLAYS BANK V GUY [2008] EWHC 893 (Ch). The relevant facts of that case are very similar to those of this case save that it was alleged that the transfer which resulted in the registration of the person who then charged the freehold was said to have been procured by some form of fraudulent misrepresentation or undue influence such that it was at law voidable rather than void (the latter of which is the effect at law of a forged transfer such as one has in this case).”

 

119.          Mr. Holland then continued by quoting from paragraphs 17-20 of that decision. I have already cited the relevant passages. However, he ends with only a portion of paragraph 20 reading “… It matters not whether the transfer is ultimately found to be fraudulently procured or whether the transfer is void or voidable…”. This omits the initial sentence of that paragraph “The claimant contends that for the purpose of a rectification claim no further investigation is required or is relevant.” If there is any doubt whether the sentence quoted is more than a recital of counsel’s submissions and not a finding by the judge, that doubt is dispelled by paragraph 27 where the judge says that in the light of his holding that the transfer was voidable and not void, he did not need to address the question of whether the transfer, the charge, would have been effective if the transfer was void. It is abundantly plain that the judge, who essentially based his decision on Norwich Building Society v Steed, was not making any findings as to the position if the original transfer had been void and not voidable. Mr. Holland is plainly wrong in finding that this decision assisted in any way in relation to a forged transfer.

 

120.          Mr. Holland then went on to consider the views of the Court of Appeal when permission to appeal was first sought by Mr. Guy, while acknowledging that, as pointed out by Lloyd LJ in Guy v Pannone, it could not be cited and was not authority, a proposition which, it is apparent from paragraph 57 of his decision, caused him some difficulty. In the end, however, he concluded that the most that could be said was that there was nothing in either judgment of Lloyd LJ which would indicate that he thought that the approach and conclusions of Mr. Mowschenson QC at first instance were incorrect.

 

121.          After finding that other cases including Odugwu v Vastguide were not relevant, he went on to consider Norwich Building Society v Steed and Pinto v Lim, but only in relation to the findings in both cases that under the 1925 Act (1) the registration of the voidable transaction and the accompanying charge in Norwich Building Society v Steed were not mistakes and could not be brought under section 82(1)(h) of that Act and (2) the registration of the purchaser from the fraudster in Pinto v Lim also did not fall under that subsection. He continues at paragraph 65 “Thus both of these cases support the view that a narrow interpretation equivalent to that favoured by the Respondent was placed on the equivalent provision in the 1925 legislation.”

 

122.          This ignores the analysis of Scott LJ at p.134G of the report of the Norwich Building Society case, which I have cited above, which points out that all the provisions of section 82(1)(d) to (h) deal with the correction of errors. It also ignores the provisions in the Law Commission and Land Registry Reports which make it clear that paragraph 2(1)(a) of Schedule 4 to the 2002 Act was intended to cover all the cases of mistake in section 82(1). It was not an equivalent provision to section 82(1)(h) alone. In this respect also, I am satisfied that Mr. Holland was wrong in his approach.

 

123.          At paragraph 72, Mr. Holland concluded that he had two conflicting first instance decisions, Guy and Ajibade, and that he had to decide which to follow. This is also plainly wrong for two reasons – the decisions do not conflict for the reasons I have given, and if they had conflicted, then subject to the usual exceptions under the doctrine of precedent, he would have been obliged to follow the decision of the High Court, the court to which appeals lie from the Adjudicator. In my judgment a decision of the High Court at first instance is as much binding on the Adjudicator as a decision on appeal from the Adjudicator.

 

124.          Mr. Holland then goes on to give his reasons for not following the decision of Mr. Rhys in Ajibade. At paragraph 73, he states:

 

“It seems clear to me that the effect of sections 58, 23, 24 and 132 of the act is that the son, as the person entered on the register as the registered freehold proprietor of the unit, could lawfully charge the freehold interest. The clear intention of Parliament was to give owner’s powers to the person who happened to be registered as freehold proprietor even if this registration was as a result of fraud. The son remained the registered proprietor until a successful application was made to alter the register. Thus at the date they were created and (at least notionally) registered the charges were lawfully created. Indeed the Registrar could not have refused to register them. As such it is difficult to see how the registration of the charges could be described as a “mistake”. They were lawfully created and lawfully registered. As is clear from paragraph 1.5 of the Law Commission report (cited above), the fundamental objective of the act was that the register should be a complete and accurate reflection of the state of the title to land at any given time. This was intended to facilitate the move to electronic conveyancing. It was intended to allow investigation of title on line “with the absolute minimum of additional enquiries and inspections”. To allow ex post facto removal of entries which were at the time lawfully made to reflect lawful dispositions would, it seems to me, undermine this intention. Section 58 reflects a balance struck by Parliament which preferred certainty of title over the property rights of those who had been the victims of fraud. They are to have their remedy by way of indemnity under Schedule 8.”

 

125.          The principal objection to this approach is that there were equivalent provisions to sections 58, 23, 24 and 132 in the 1925 Act, and much had been said in relation to that Act about the sanctity of the register. Nevertheless, the statutory magic had been held in Argyle to be subject to the provisions as to rectification. Further, paragraph 1.5 of the Law Commission Report should not be read in isolation. The provisions of the Report, and of the Consultative Report, to which I have already referred in detail, clearly show that no substantial changes were intended in this respect by the Law Commission.

 

126.          Mr. Holland suggests that the wronged original owner would have his remedy by way indemnity under Schedule 8. That suggestion was also reflected in the submissions made to me by Mr. Jones for Roberto Mac. One problem with that is that it would not accord with the intentions of the Law Commission (see in particular the consultative Report, para.8.40(1) to which I have already referred, as to when indemnity was to be available). Also as Mr. Gore pointed out for Knights Construction, that paragraph 8(3) provides that “No indemnity under sub-paragraph (1)(b) is payable until a decision has been made about whether to alter the register for the purpose of correcting the mistake; and the loss suffered by reason of the mistake is to be determined in the light of that decision.” This would presumably involve an application to the registrar to decide whether to alter the register, even though it was clear to all that there was no power for him to do so. There would have to be, for the purposes of paragraph 1(1)(b), a loss suffered by the applicant by reason of a mistake whose correction would involve rectification of the register. But if the only mistake was the original registration of the fraudster, and the correction of the mistake would involve rectification of the register for the purposes of Schedule 8, it becomes difficult to see why, under Schedule 4, there should be no power to rectify the register for the purpose of correcting that mistake.

 

127.          While such an artificial construction may be possible, if there was no jurisdiction to rectify under Schedule 4, to ensure that an innocent original owner did not lose his property as a result of the provisions of the legislation concerning registered land without compensation, it seems to me that such a construction could only be justified under the extended rules of construction for the purposes of ensuring compliance with the Human Rights legislation as stated by the House of Lords in Ghaidan v. Godin Mendoza, [2004] UKHL 30, [2004] 2 AC 557.

 

128.          Further, as was pointed out by Mr. Morshead, if the approach favoured by Lloyd LJ, Sir Donald Rattee and Mr. Holland were correct, it would mean that if a fraudster forged a transfer to himself from the true owner, became registered as proprietor and then sold on, and the purchaser was then registered in place of the fraudster, rectification would not be possible because there was no longer the original mistake on the register to correct. Yet if the forger forged a transfer from the original owner to the same purchaser, who then became registered, that would be the original mistake on the register and rectification would be possible. No rational basis for such a distinction has been suggested to me. Further, that would seem to be the case on that interpretation even if the subsequent purchaser was on notice of the original forgery, at least if he was not a party to it and there was no notice or restriction on the register, since he would be entitled to rely on the integrity of the register. Mr. Morshead also suggested that the same would be the position if the purchaser were the fraudster’s accomplice, but in those circumstances it appears to me that the second fraudster would hold the property on trust for the original owner absolutely.

 

129.          So too, in the present case, there is still an error on the register in that property has been registered which ought not to have been registered. But if, instead of a new title being created, either because, as here, the land was previously unregistered, or because it was being transferred out of a larger plot of land registered under a different title, the whole of an existing title was being transferred, there would, on those arguments, be no remaining mistake to be corrected. I can see no logic in such a distinctions and no reason to attribute to Parliament an intention to limit the right to rectification in this way rather than in accordance with the proposals in the Report upon which the legislation is based.

 

130.          By contrast, there is nothing irrational in the system which operated under the 1925 Act and which the Law Commission intended should continue to operate under the 2002 Act.

 

Conclusion as to the construction of Schedule 4 to the 2002 Act

 

131.          As Lord Neuberger pointed out in paragraph 35 of his judgment in round 3 of Barclays Bank v Guy, there are various ways of approaching the construction of paragraph 2(1)(a) of Schedule 4 to the 2002 Act, and various approaches, none of them binding on me, have been put forward in the cases to which I have referred. I am satisfied that I can and should construe the provision in a manner which gives effect to the intention of the Law Commission in its Bill and which ensures that where a person is deprived by legislation of property to which they would otherwise have title, then they should be compensated appropriately at least if they are not at fault. That is so whether the person deprived is the original owner or the subsequent purchaser of registered land who finds that his title has been removed by rectification, and whether or not there is an error as to the amount of land included in the title. Any other result would fall foul of Article 1 of Protocol 1 of the Human Rights Convention unless the provisions of Schedule 8 were construed in a manner which would stretch them almost to breaking point. Schedule 4 and Schedule 8 need to be read together for this purpose.

 

132.          I am therefore satisfied that the remedy of rectification is available in the present case to Knights Construction. It would be so available whether, adapting the two possible interpretations suggested by Lord Neuberger, (a) the original registration of the Salvation Army was a mistake, and, in order to correct that mistake, which here persists, the register should be corrected by removing this part of the land, which should never have been registered at all, from the title, or (b) that the registration of Roberto Mac as proprietor of the land flowed from the mistake of including the land in the original title, and therefore should be treated as part and parcel of that mistake. It would also be available if Blackburne J is correct in Pinto v Lim in treating the registration of the second transfer as a mistake. It is unnecessary for me to decide which of these approaches is the correct one, as they produce the same result. Even if there had to be an existing mistake in the narrow sense suggested by Lloyd LJ, it would exist in the present case by reason of there being more land included in the title than ought to have been included. I would not, however, wish to base my decision upon such a distinction but rather on a proper construction of paragraph 5(a) of Schedule 4 in accordance with the intentions of the Law Commission and the Land Registry.

 

Are there exceptional circumstances which militate against rectification?

 

133.          On the basis that rectification is available to Knights Construction, Mr. Jones contends that there are exceptional circumstances in the present case which mean that I should refuse to order rectification. He says that the land has practical utility to Roberto Mac as it needs it in conjunction with the old chapel and that that practical utility is such that an indemnity under Schedule 8 would not provide adequate compensation. He also points out that Knights Construction has neglected the land over the years. It has not actually occupied the land or received rent and profits in respect of it. User of the land is by the lessees of the flats and shops and those rights are protected as overriding interests by Schedule 3 of the 2002 Act.

 

134.          Mr. Gore responds that there are no exceptional circumstances. The car park had not been maintained, but the tenants had no complaint about this. They could still use it to park their vehicles, and had had no maintenance charges. It had not been abandoned by Knights Construction. Its officers had used it to park when they wished, and also to access the garage/store under flat 1. It had responded promptly when it found out that Roberto Mac was seeking to take it over and had safeguarded its tenants’ rights. Roberto Mac was in no way misled by the lack of maintenance. If it had been better maintained, Roberto Mac would simply have assumed that the maintenance had been carried out by the Salvation Army. Mr. Gore also refers to the failure of Roberto Mac to make enquiries locally or to query the boundary of the car park and the highway, the difficulty of assessing compensation payable to Knights Construction, and the difficult position of the tenants in ascertaining and enforcing their rights.

 

135.          As to the rights of the tenants of the flats and shops over the land, if it remains in the ownership of Roberto Mac, Mr Gore referred me to the decision of the Court of Appeal in Nevill Long v Firmenich & Co, (1984) 47 P & CR 59, as establishing that Roberto Mac would take the disputed land subject to the tenants’ rights. That was a case in which the landlord had sold land over which he had granted tenants a right of way. The Court of Appeal concluded that notwithstanding the severance of the reversions, there continued in existence under each of the leases a single tenancy of the property thereby demised including the right of way.

 

136.          It does not appear to me that that addresses the problem in the present case, which is that section 29 of the 2002 Act provides that the disposition, when completed by registration, has the effect of postponing to the interest under the disposition any interest affecting the estate immediately before the disposition whose priority is not protected at the time of registration. So far as the various tenants are concerned their rights would be protected only in accordance with Schedule 3 and, where applicable, paragraph 9 of Schedule 12 to the 2002 Act. If there are any services running under the ground for the benefit of the demised flats, or the demise shops, it is highly probable that they will be protected by paragraph 3(2) of Schedule 3. That protection will also apply to parking rights and rights of way in each case where the right has been exercised in the period of one year ending with the day of the disposition. If there is any legal or prescriptive easement to keep the bins on the disputed land for the benefit of any of the properties, it appears to me that that also would be protected, as the presence of the bins used by the tenants was apparent on an inspection of the land. It is not appropriate for me to make any findings as to the extent to which the tenants’ rights survive, but it would appear that most of them would survive.

 

137.          It is normal for the purchaser of land to have a use for it, and particularly where it is only part of the land that may be removed from the title, it is common for that land to have a value to the purchaser in conjunction with the remainder of the land acquired that can be difficult to put a monetary value on and that may exceed for that purchaser, any compensation payable. In addition, while Knights Construction do not receive any rent for the land, it is being used as a car park for the rest of their property. Their tenants have rights over it under their leases, and some of them may lose those rights if the property is not restored to Knights Construction. Others may have greater difficulty in benefitting from the rights given to them. There will also be problems in dealing with rights under the leases where the rights are over land which Knights Construction has ceased to own. Informal assurances as to parking have also been given to the lessees of flats 1 and 15 by Knights Construction, which could be prejudiced and the ability of Knights Construction in future to let the shops will also be affected if parking rights cannot be granted at the same time. Finally, there was some evidence of limited user by Knights Construction itself, and if there is spare parking space that could be commercially let by it.

 

138.          I am therefore satisfied that there are no exceptional circumstances and that the register should be rectified to exclude from it the disputed land.

 

 

Dated this 9^th day of February 2011

 

 

 

By Order of the Adjudicator to HM Land Registry