In the case of Antoine v Barclays & the Chief Land Registrar, the Court of Appeal has upheld the High Court's decision that an entry on the Land Register pursuant to a Court Order which was obtained using forged documents, and which had not been set-aside at the time of registration, does not give rise to a 'mistake'. There was therefore no proper basis to rectify the Register.
Back in March this year, the High Court considered the novel issue of whether Court Orders obtained by fraud are void or voidable and, as a result, whether such Orders (which have been registered at the Land Registry) result in a 'mistake' so as to allow the Register to be altered under the Land Registration Act 2002 Sch.4 para 2(1)(a) (the 2002 Act).
The facts of this case are complicated. The key events are as follows:
It was universally accepted (by the High Court, Barclays and the Land Registrar) that the loan documents between Joseph and George were forgeries. However, this in itself is irrelevant to the main issue.
When George had applied to the Land Registry to transfer the Property into his name, the application was accepted based solely on the Vesting Order. The forged documents were not considered. The Land Registrar was obliged to register the Vesting Order and it was outside the Registrar's powers to explore the validity of the Vesting Order which was valid and effective at the time and hadn't been set aside.
As clarified in the case of NRAM v Evans:
In this case, the High Court considered that the Vesting Order was akin to a voidable transaction. As such, at the time of registration (and George becoming proprietor), it was not a mistake. The Vesting Order was eventually set aside, allowing Trevor to become proprietor. But the essential point is that during the time that George was proprietor, he was entitled to act as such (including charging the Property to Barclays) – in the circumstances, the charge over the Property was not a mistake.
Any right or equity that Trevor had to apply to set aside the Vesting Order was unprotected on the Register at the time the charge over the Property was registered. Further, the registration of the charge over the Property could not retrospectively be classed as a mistake.
The High Court decision was that the charge over the Property should therefore remain on the Register.
During the High Court proceedings, Trevor's legal representative argued that the Registrar made a mistake by not making a note on the Register that George's registration as proprietor was made pursuant to an Order which had been made at a hearing where Trevor was not present and was liable to be set aside.
The High Court found that this argument had no merit, given that the there is no duty on the Registrar to record such information. The point made by the High Court was that "any such duty would be tantamount to requiring the Registrar to go behind the terms of the order, the very thing that it is accepted by everyone that the Registrar may not do [and would] undermine the purpose of the legislation, in particular the conclusive nature of registration."
The sole ground of appeal was that the High Court Judge was wrong to find that the Vesting Order was not void and therefore George's registration as proprietor and the subsequent registration of the charge over the Property was not a mistake (and could therefore be rectified).
Trevor's representative sought to argue that the Vesting Order was void because it should be treated in the same way as the underlying transaction. Had registration taken place solely on the basis of the forged documents (and not as a result of a Court Order), the transaction would have been void and the registration would have been a mistake. He argued that section 9 of the LPA 1925 states that a vesting order should be treated in the same way as a conveyance, and therefore – given that the underlying documents were forgeries - the Vesting Order itself was void and made as a result of a mistake.
The Court of Appeal has dismissed these arguments, agreeing with the High Court Judge that the registration of a voidable disposition before it is rescinded is not a mistake. "Such a voidable disposition is valid until it is rescinded and the entry in the register of such a disposition before it is rescinded cannot properly be characterised as a mistake. It may be the case that the disposition was made by mistake but that does not render its entry on the register a mistake."
The Appeal Court made the following comments:
Although the facts of this case are fairly unique, the decision should bring some comfort to lenders in cases where fraud has been discovered but where their security was registered during the period of time that the borrower is validly registered as proprietor pursuant to a valid and effective Court Order.
The High Court accepted that Trevor – the victim of fraud - would suffer injustice in this case. The Appeal Court also accepted that the outcome for Trevor is unfortunate. While both courts had sympathy with Trevor's situation, this could not allow them to influence the application of the law.
Whilst permission to appeal has been refused by the Appeal Court, it will be interesting to see whether Trevor successfully applies to the Supreme Court for permission to appeal the decision. One to watch.
Contribution: Lynsey Robinson and Dawn Webber
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2019. Specific advice should be sought for specific cases. For more information see our terms & conditions.