“In my judgment, when viewed in that light together with the evidence of Grahame Ralph and what in actual fact happened or did not happen on the27th July 2009 , it is right to find and conclude that Grahame Ralph was the mastermind or orchestrator of not only the enfranchisement of the freehold, which strictly is not directly relevant to the issues I have to determine but forms part of the background, but also to closure of the leases and, there being no evidence that actual money changed hands from Insignia to Matthew Ralph and then from Lavender to Insignia and then from Gold Harp to Insignia and that it was Grahame Ralph who was the person instructing all parties’ solicitor Christopher Evans, that in reality it is right to find that all transactions were orchestrated by and linked by the common thread of Grahame Ralph.”
“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. Section 29 reads (again, so far as relevant): “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)-(4) ...”
“(1) A notice is an entry in the register in respect of the burden of an interest affecting a registered estate or charge. (2) The entry of a notice is to be made in relation to the registered estate or charge affected by the interest concerned. (3) The fact that an interest is the subject of a notice does not necessarily mean that the interest is valid, but does mean that the priority of the interest, if valid, is protected for the purposes of sections 29 and 30.”
“1. In this Schedule, references to rectification, in relation to alteration of the register, are to alteration which – (a) involves the correction of a mistake, and (b) prejudicially affects the title of a registered proprietor.” (2) Paragraphs 2-4 are headed “Alteration pursuant to a court order”
“2. (1) The court may 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. (2) An order under this paragraph has effect when served on the registrar to impose a duty on him to give effect to it. 3. (1) This paragraph applies to the power under paragraph 2, so far as relating to rectification. (2) If alteration affects the title of the proprietor of a registered estate in land, no order may be made under paragraph 2 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. (3) If in any proceedings the court has power to make an order under paragraph 2, it must do so, unless there are exceptional circumstances which justify its not doing so. (4) In sub-paragraph (2), the reference to the title of the proprietor of a registered estate in land includes his title to any registered estate which subsists for the benefit of the estate in land.” (3) Paragraphs 5-7 are concerned with alterations to the Register by the Registrar rather than the Court. Its provisions are essentially identical to paragraphs 2-4 and I need not set them out. (4) Paragraph 8, which is also central to this appeal, is headed “Rectification and derivative interests”
“The powers under this Schedule to alter the register, so far as relating to rectification, extend to changing for the future the priority of any interest affecting the registered estate or charge concerned.”
“The register may be rectified under this section, notwithstanding that the rectification may affect any estates, rights, charges, or interests acquired or protected by registration, or by any entry on the register, or otherwise.”
“It appears to me that the general scheme of the Act is that one obtains priority according to the date of registration, and one is subject, or not subject, to matters appearing on the register according to whether they were there before or after one took one's interest, whatever that interest might be. That seems to me to be the only sensible way in which the provisions of the Act can all be made to mesh together.”
“... [T]he Act is clear ... [that] ... it is only matters that are actually registered at the time that the disposition is made which affect the person who derives title under the registered proprietor.”
“For the reasons already given, there is no doubt whatever that in the present case, on the basis of the assumed facts, the court would have jurisdiction, in the proper exercise of its discretion, to rectify the charges register as against the charges. … [S]ection 82 (2) makes it clear that the jurisdiction is exercisable against persons claiming through a registered proprietor.”
“Accordingly, in my judgment there is no power to order that rectification should take effect from a past date ... . Parliament would not have created such a power without giving power to protect the position of third parties, which it has not done. Such a power is necessary not only to counteract unfairness but also to produce certainty so far as possible in transactions conducted on the faith of the register. I do not consider that section 82 contains such a power.”
“For my part, I would prefer to reserve a decision on [the issue of retrospective rectification] until it arises for decision on the facts of a particular case. I would only say that, while I see the force of Arden LJ's reasoning on it, it seems to me that, if the word “rectification” is given its ordinary meaning it is wide enough to include rectification with retrospective effect. Indeed, to my mind, as in the case of the rectification of instruments and contracts, it naturally has that meaning, since otherwise the rectification would be less than complete. However, since the question does not arise for decision in this case, I would prefer to do no more than reserve my opinion on the point.”
“As far as the powers of rectification are concerned, we adopt the principal suggestion of the working paper which was, in effect, that rectification should be available whenever the register does not accurately reflect the title to the land according to the otherwise established rules of land law … and rectification would be just in all the circumstances (in particular if it is shown that there has been fraud in the obtaining of an entry in the register, or if the transferee or grantee lacked good faith or did not give value). This should be the basic position in relation to all claims however arising. This jurisdiction and its limits are in fact all present in section 82 at the moment and we see no reason for any very substantial amendment of that section except in so far as necessary to present the principles clearly.”
“The power to rectify was considered in Freer v. Unwins Ltd., where Walton J. held that it cannot be exercised with retrospective effect. Consequently, a lessee under a lease constituting an overriding interest was not affected by notice of restrictive covenants entered by virtue of a rectification after the lease had been granted. Quite apart from the fact that we do not think that this should be the law, it is not clear that the power of rectification is at present so limited.”
“In Freer v. Unwins Ltd. it was emphasised that only matters actually registered at the time of the disposition, in that case the lease, affect the person deriving title from the registered proprietor. However, section 82 (2) was not apparently cited to the court, and it seems unacceptable for rectification to affect a registered leasehold title retrospectively but not an overriding interest. We consider that the court and the Registrar should have as full and ample a power of rectification as is needed to achieve justice.”
“The power to rectify was also considered by the Court of Appeal in Argyle B.S. v. Hammond. It was held that the jurisdiction is exercisable against persons claiming through a registered proprietor (even a bona fide mortgagee) and that therefore, in a proper case, the charges register may be rectified. Bearing in mind that an order for rectification remains discretionary and that the complementary remedy of indemnity should be available to such persons suffering not dispossession but financial loss, we are quite content to make no recommendation here; i.e. we would leave the law as it is.”
“There were attempts in two cases [Freer v Unwins and Clark] to persuade the courts that rectification of the register - like rectification of a document - was retrospective to the time when the mistake was made, so that any derivative interest created after the time of the error or omission would be affected by the rectification. In neither case was the court willing to sanction such a rectification, and in the second of them, the court doubted whether it had power to do so. In the light of section 82 (2), we consider that any power to rectify the register retrospectively is unnecessary.”
“We consider that the substance ofsection 82 (2) of the Land Registration Act 1925 , which enables the register to be rectified, “notwithstanding that the rectification may affect any estates, rights, charges, or interests acquired or protected by registration, or by entry on the register, or otherwise”, should be retained. However, we consider that the legislation should make it clear that when the register is rectified against a registered proprietor, the court or registrar may direct that the rectification should be binding on any person having an overriding interest in the land (such as a tenant under a lease granted for 21 years or less, or a person in actual occupation who has some proprietary right in the land). At present there is some doubt about this. As a correlative of this, we consider that it should remain the case that rectification is effective from the date of the application for rectification and cannot be made retrospective.”
“The Bill makes it clear that- (1) rectification of the register, whether by order of the court or by the register can (as now[28]) affect derivative interests; but (2) any such changes are prospective only,[29] which accords with the manner in which the analogous provisions of theLand Registration Act 1925 have been interpreted.[30]”
“[The] skeleton argument [of counsel for Olympia] sought to argue that since rectification of the register operates only from the date of the rectification, Olympia took free from such rights as the rectification would seek to protect because Olympia had become the registered owner of the gas board site at a time when the interest was not registered. Registration was not retrospective. In this respect he relied on Freer v Unwins[1976] Ch. 288 as setting out the law under the 1925 Act, and Sch. 4 paragraph 8 of the 2002 Act as codifying it. He also relied on a passage in Ruoff & Roper at paras 47.017 and 47.018.”
"This point was not much pressed in oral argument, and in my view rightly so. It is not a good point. What Freer v Unwins decides is that where A gets registered as proprietor, then makes a registered disposition to B, and A's title is then rectified to reflect some third party interest, the rectification does not bind B because B took from a registered proprietor at a time when the third party interest was not protected. It does not purport to deal (or deal fully) with how the interest affects A and A's estate. It presupposes that for the future A's estate will be affected by the third party interest, and that therefore A is affected by it for the future. If [counsel's] argument were right it is hard to see how there could ever be a useful rectification. The proprietor could always say that he took his title free from the interest because it was not protected by registration when he was registered with his title; the rectification is not retrospective; therefore it cannot bind him. That cannot be right. In cases such as the present the question is whether the proprietor should have been registered free from the interest in the first place. Rectification is allowed to bring the situation into line with what it should have been had the mistake not been made at the time of registration. To allow the registration itself to bar the effect of that would be to let the tail wag the dog. The non-retrospective aspect of rectification means that pending rectification the land is treated as not being subject to the relevant interest, so that those relying on the state of the register at that time would not be bound by it; but it is not saying any more than that. Once registration takes place the land, and the proprietor against whom it is ordered, is bound. Accordingly, rectification prevents Olympia from saying that it now holds the land free from the relevant rights. It is now that matters."
“It ... 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.”
“…[I]t contends that whether or not the transfer in favour of Mr Abiola was a nullity, its second charge must remain on the register, even if the Applicant succeeds in having herself restored as proprietor. Essentially, it contends that Mr Abiola, once registered as proprietor, albeit by virtue of a fraudulent transaction, was entitled to charge the property to Endeavour, and consequently there is no "mistake" within the meaning of Schedule 4 Paragraph 5 to relieve against.”
“In one sense, the arguments addressed to me by both the Applicant and Endeavour have been focussed on the wrong word – namely “mistake”
“Thus if the register is altered by reinstating the Applicant’s charge, that charge will acquire priority over interests whose priority is not protected at the time of the alteration. Its priority may therefore be changed in that it will acquire priority over unregistered interests to which it was subject prior to the alteration. It is implicit in paragraph 8 that the powers under Schedule 4 to rectify the register do not extend to changing retrospectively the priority of an interest affecting the registered estate. By stating that the powers extend to changing for the future the priority of any interest affecting the registered estate, Parliament was stating that the powers do not extend to changing the priority of an interest retrospectively. In this case, the priorities as between the Applicant’s charge and the Respondent’s charge were determined when the Respondent’s charge was registered. Under section 29, the Applicant’s charge was postponed to the Respondent’s charge at the date of the registration of the Respondent’s charge. To change the priorities as between those charges now would be to do so retrospectively and would thus be beyond the limitation on the registrar’s powers imposed by paragraph 8 of Schedule 4.”
“It seems clear to me that the effect of sections 58, 23, 24 and 132 of the Act is that the [fraudster], 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 [fraudster] 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”
“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.”
“The central issue was the extent of the power, under para 5 (a) of Schedule 4 to the 2002 Act, to alter the register for the purpose of “correcting a mistake” and whether it extended to restoring the applicant's title to the disputed land against the first respondent as an innocent purchaser from a vendor in whom the registered title had vested at the time of sale.”
“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.”
“The Law Commission and the Land Registry were well aware of these decisions [that is, Argyle Building Society v Hammond and Norwich Building Society v Steed] 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.”
“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 para 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 that gives effect to the intention of the Law Commission in its bill and that 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 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 that 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) 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 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 on such a distinction but rather on a proper construction of para 5 (a) of Schedule 4 in accordance with the intentions of the Law Commission and the Land Registry.”
“B owns Whiteacre. A forges a transfer of Whiteacre to himself and is registered as freehold proprietor. The effect of registration is that the freehold is deemed to be vested in him: see LRA 2002, s 58(1). Subsequently, A charges Whiteacre as security for a£1M loan from C Bank Ltd. B applies to alter the register by removing A as proprietor and restoring his name as proprietor. This he can do. But can he remove C Bank Ltd's charge? C Bank Ltd argues that because the freehold was deemed to be vested in A at the time of the charge, there has been no mistake. Land Registry no longer accepts that argument and will now accept an application by A to remove C Bank's Ltd charge on the basis that either: • the registration of the charge directly flows from the original mistake; • the charge needs to be removed in order fully to correct the mistake. In Knights Construction (March) Ltd v Roberto Mac Ltd [2011] EWLandRA 2009/1459, the Adjudicator carried out a detailed review of several recent conflicting authorities and adopted the same approach. This can now be taken to be the correct view.”
“Paragraph 2 makes it clear that the statutory power is a power to order rectification of the register. It is not a statutory power to rectify underlying documents. In my judgment whether the charge is to be interpreted as containing (or as not containing) the extension of the power of sale, there is nothing on the register that needs to be rectified. The entries which identify the registered charge and the proprietor of the registered charge will remain the same. So in my judgment the statutory power of rectification does not bear on this case. Paragraph 8 makes it clear that even if the register is rectified, it operates prospectively only. Thus it respects the rules of priority.”
“As to the effect of rectification, an issue of retrospectivity arising under the 1925 Act provisions has not necessarily been resolved by the 2002 Act.”
“46.017. When the register is rectified, the change takes effect for the future only [paragraph 8 of Schedule 4]. Rectification does not operate retrospectively from the time of the original error. The priority of interests affecting the registered estate or charge in the period between the original error and the order for rectification is unchanged. In this, the 2002 Act continues the generally held view of rectification under the 1925 Act [Freer v Unwins]. 46.018. The rule that rectification operates prospectively is consistent with the policy of the 2002 Act that the register should be as complete and accurate a reflection of the registered title as possible. The interests of third persons who relied on the state of the register would be prejudiced if a retrospective rectification of the register were to change the priority of their interests. Similarly, the effect of retrospective rectification would be that official searches of the register might later become inaccurate, even though they were in fact correct at the time that they were issued. As a result, a third party who acquires an interest in the registered estate before the register is rectified by recording some mistakenly omitted right against that estate cannot be bound by the new right. His interest takes priority over the newly recorded right according to the usual rules of priority in the 2002 Act. But the registered proprietor against whom rectification is ordered would be bound by the newly recorded right, though only with effect from the time that the register was rectified against him [Sainsbury’s v Olympia]. Any indemnity to which he became entitled would reflect the fact that his loss accrued then. For example, a registered proprietor of a freehold estate might grant a lease to a tenant. If the registered freehold estate were later rectified by noting the burden of a restrictive covenant which had been mistakenly omitted when the freehold was first registered, then the tenant would not be bound by the covenant. His lease would take priority over the covenant. But the freeholder himself could not take free from the covenant from that time onwards by claiming that it was not recorded against his title when the estate was first registered. The covenant would bind him from then on, in the same way as any other restrictive covenant that he might enter into once he became the registered proprietor.”
“It is submitted, however, that this approach is not justifiable under the 2002 Act. It was the explicit policy of HM Land Registry and the Law Commission in the consultation paper that preceded the 2002 Act that, in the absence of some mistake in 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 2002 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 confirms that he actually has. The applicant for rectification must prove some mistake in registration.”
“However, if such a mistake is proved, the full correction of that mistake may involve the correction of both the original mistake itself and the consequences of that mistake arising from the fact that the registered proprietor (albeit that his registration as proprietor was a mistake) exercised the powers of disposition which his mistaken registration as proprietor had conferred upon him.”
“The powers relating to rectification extend to changing for the future the priority of any interest affecting the registered estate or charge concerned. Because the effect of rectification is therefore prospective from the date of the order, where the court orders rectification of the register: (i) It affects the proprietor of the registered estate or charge from the time that rectification is ordered. (ii) It affects the priority of any interest affecting the registered estate or charge concerned that is created or arises after rectification is ordered. (iii) It does not affect the priority of derivative estates and interests that were created between the time of the mistake and the order for rectification.”
“Retrospective rectification would do violence to the integrity of the register and therefore, in this respect, rectification of the register differs from rectification of an instrument, which is retrospective to the making of the instrument: … . The better view is that the law was the same under LRA 1925: see the judgment of Arden LJ in [Malory] … at [71]-[79]; [… cf. Clarke and Schiemann LJJ, at [87], [89]; … .”
“… I do not think that is sufficient to amount to an exceptional circumstance because the planning position has not actually been tested by Mr Byrne or Mr Briars making a planning application, so far as I am aware and, in any event, the mere fact that planning permission may at this point in time be unlikely, if does not mean that the rightful owner should be excluded and therefore prevented from the possibility of applying for planning permission or perhaps doing a deal with the freeholder, or the now intermediary lessee, Gold Harp Property Limited.”