In what circumstances can a court alter or rectify the land register where there has been a ‘mistake’?

It is well known that the governing principle of the Land Registration Act 2002 is to enable anyone to be aware of any interest affecting a piece of land by simply inspecting the land register (subject to some limited exceptions, e.g. where a person is in occupation and their interest is likely to be obvious from a reasonable inspection). If an interest affecting the land is not noted within the register then it ought not bind a subsequent registered proprietor.

It is a necessary consequence of this principle that the circumstances in which the register can be altered when the register is wrong are limited. Sch.4, para.2, Land Registration Act 2002 provides that a court may only make an order for the 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. Moreover, the fact that the rectification of the register may cause a person prejudice, e.g. because he has purchased land from someone who lacked good title or that is subject to an interest that he was unaware of, means a registered proprietor is generally entitled to an indemnity where he suffers loss as a result of the “rectification” of the register. Rectification is defined as an alteration to the register which involves the correction of a mistake and that prejudicially affects the title of a registered proprietor.

The meaning of “mistake”, which is not otherwise defined, has therefore become of crucial importance as it not only affords one of the ways in which the register can be altered, but also gives the registered proprietor an entitlement to an indemnity. It is also an issue that has not been free of controversy and attracted differing academic opinion. One such controversy has been the question of whether at the date that an entry is made on the register the mistaken disposition affecting the title must be void as opposed to voidable. The editors of Megarry and Wade Law of Real Property and Ruoff and Roper Registered Conveyancing took the view that a voidable disposition would not give rise to a mistake, whereas the editors of Emmett and Farrand on Title and the obiter comments of Jacob LJ in Baxter v Mannion [2011] EWCA Civ 120 took the view that there was no basis for such a distinction to exist.

In NRAM Ltd v Evans [2017] EWCA Civ 1013, the Court of Appeal considered whether a voidable disposition could amount to a mistake.

NRAM Ltd v Evans [2017] EWCA Civ 1013

In 2004, the borrowers were advanced a mortgage by the lender, which was registered by way of a legal charge. It was a term of the mortgage deed that the mortgage secured any further advances to the borrowers by the lender. In 2005, the lender advanced the borrowers a second mortgage which redeemed the first mortgage. No amendment was made to the Land Register. Subsequently, in 2014, the borrowers’ solicitor wrote to the lender and requested that the necessary steps be taken to remove the mortgage from the charges’ register as it had been redeemed in 2005. The letter did not mention the existence of the second loan. The lender subsequently applied to the Land Register for the charge to be released from the register by submitting the form e-DS1. Shortly afterwards the lender noticed the existence of the second mortgage and then made an application to the court for (1) the rescission of the e-DS1 on the grounds of mistake and (2) an order that the register be “be rectified &/or be brought up to date” by re-registration of the charge as it if had never been removed. The borrowers resisted the application.

The county court granted the lender’s application and ordered that the e-DS1 be rescinded for mistake and that the register be “rectified” to reinstate the lender’s charge. The borrowers appealed to the Court of Appeal on the basis that the court lacked jurisdiction to rectify the register and claimed, in the alternative, for an indemnity.

Meaning of mistake

The Court of Appeal dismissed the appeal. In doing so it gave guidance, and endorsed the views of the editors of Megarry and Wade and Rouff and Roper, as to the circumstances that will govern when the land register may be rectified. There will have been a mistake where the registrar (i) makes an entry in the register that he would not have made; (ii) makes an entry in the register that he would not have made in the form in which it was made; (iii) fails to make an entry in the register which he would otherwise have made; or (iv) deletes an entry which he would not have deleted; had he known the true state of affairs at the time of the entry or deletion. The mistake may consist of a mistaken entry in the register or the mistaken omission of an entry which should have been made. Whether an entry in the register is mistaken depends upon its effect at the time of registration. This means that an entry made in the register of an interest acquired under a void disposition is a mistake and may be rectified, because it should never have been made, whereas an entry made in the register of a voidable disposition is not a mistake if at the date of its entry there has been no election to void the disposition.

In the instant case, the removal of the charge had arisen from a voidable disposition and the disposition had not been rescinded at the date that the charge was removed. It followed that the court lacked the power to rectify the register. That said, once the e-DS1 had been rescinded, the court had the power to bring the register up to date by reinstating the lender’s charge. As the register had not been rectified the borrowers were not entitled to an indemnity.

Comment

This case appears to conclude the debate surrounding whether a disposition must be void to give rise to a mistake in the register. It does, however, beg another question: in what circumstances can a court order the register be altered to be brought up to date to reflect an existing interest that has not been registered? Evans (and the earlier case of Garwood v Bank of Scotland [2013] EWHC 415) make clear that where a voidable disposition, which disposed of an interest, is rescinded then the court can alter the register to reflect the fact that there is an existing charge that binds the land.

In Evans, it was obviously right that the register was brought up to date as otherwise the borrowers would have received a windfall from an administrative error that was induced by them. But what if the borrowers in this case had sold the land to a third party before the court had a chance to order that the e-DS1 be rescinded? Would the innocent third party be entitled to rely on the register at the date of purchase or would the register be brought up to date to reflect the existence of the charge? Neither Evans nor Garwood consider this point, but if the register was altered, the consequences for the new registered owner would be dire as he would not be entitled to an indemnity (as the register would not have been altered by rectification). It would be odd if this was possible as it would cut across the purpose of the Act which is to enable purchasers to trust the register with the knowledge that if it is altered retrospectively any loss will be protected by an indemnity. That said there does not appear to be anything, on the wording of the Act, that prevents the court from bringing the register up to date after a disposition to a third party has occurred.

This issue, and indeed all points concerning the rectification and alteration of the register, are clearly ripe for consideration by the Supreme Court.