Summary

Where a former owner of a property alleged that the property had been fraudulently transferred to a party that had been registered as the proprietor, rectification of the land register would not be ordered against a subsequent chargee, as the chargee was entitled to take the register at face value.

Facts

The applicant bank (B) applied for summary judgment against the respondent (G), a former owner of a freehold property, seeking to sell the property free of G's possible interest. A transfer of the property by G to a company (T), according to G, had been fraudulently procured by T. G had allegedly signed the transfer form when it had no date and purchase price on it. T had registered the transfer at the land registry and then entered into an all monies charge with B under which the property was charged as security for debts in excess of £110 million. G issued separate proceedings against T for the alleged fraudulent transfer. Those proceedings were stayed after T went into administration. B sought to sell the property pursuant to its first registered charge. B submitted that, even if the transfer of the property had been fraudulently procured by T, it did not affect its rights as registered chargee. G argued that the transfer to T was void and that the register should be rectified in his favour. G argued that B ought to have known that the transfer to T had been procured by fraud.

Held

G had completed the transfer in the sense of signing it and delivering it to a solicitor to hold as his agent. Even though the solicitor may have released the transfer without authority, having been induced by fraud, the transfer was not void, but was voidable. However, the transfer had not been avoided at the date B's charge was taken and registered. The instant case was not one of forgery or non est factum and there was no suggestion that G had lacked capacity or title. His signature had been witnessed by his solicitor, and he knew the purpose of the form and that a sale in principle had been agreed with T. In those circumstances the transfer was a deed, and was sufficient to allow the land registry to transfer the title. Under the Land Registration Act 2002 s.58 the legal estate to the property was deemed to be vested in T once it was entered onto the register as proprietor. T was then entitled to exercise its owner's powers to charge the property. By virtue of Sch.4 para.1 and para.2, the grounds for rectification of the register included the alteration of the register to correct a mistake that prejudicially affected the title of a registered proprietor. Until T's title was avoided, its title was a real registration carrying with it all the rights of the proprietor that came with registration. Accordingly, there was no mistake in B's registration as chargee and G was not entitled to rectification against B, Norwich and Peterborough Building Society v Steed (No2) (1993) Ch 116 CA (Civ Div) applied. Had G registered a unilateral notice against the title as soon as he discovered that the transfer had taken place, B's charge would have been subject to G's right to rectify as against T. However, G had held off taking such action and B was entitled to take the proprietorship register at face value. The whole purpose of the register was that one did not have to make enquiries and go behind it. Even if B had actual knowledge that there were questions concerning T's title, that would not have provided an answer to G's claim as the actual notice of a competing claim did not outweigh the effect of the register.