News in property finance: Court orders rectification of the register

Facts

The case concerned a dispute between Knightsbridge Property Development Corporation (UK) Limited (KPDC) and South Chelsea Properties Limited (SCPL) in relation to two tracts of registered land, at Alder Road; and at Bordean.

In May 2014, a charge held by KPDC over Bordean was removed from the Land Registry, the Registry having been informed that the property was no longer charged. In November 2014, SCPL was registered as the new owner of Alder Road instead of KPDC, a transfer having been lodged at the Registry. KPDC disputed both the lifting of the charge and the change of ownership, alleging that the company's officers effecting these transactions were not authorised to do so. SCPL, however, asserted that these measures had been agreed in 2013 as part of a 'general settlement' between one of the Directors of KPDC and its former company secretary (Mr Foote-Forster), who had left KPDC's employment in 2014 following allegations of forgery.

KPDC sought rectification of title at the Land Registry, on the basis that the two transactions amounted to a mistake, i.e. restoration of the charge over Bordean, and a change to the Register to show that KPDC was the owner of Alder Road.

Rectification of title

Alteration of the Register which involves the correction of a mistake and prejudicially affects the title of a registered proprietor is known as rectification.

If a proprietor is in possession, there is a presumption against rectifying, but this is rebuttable if:

• [the registered proprietor] has by fraud or lack of proper care caused or substantially contributed to the mistake; or
• it would for any other reason be unjust for the alteration not to be made.

The power to rectify the Register extends to changing the priority of any interest affecting the property.

Judgment

Newey LJ decided on the facts that no 'general settlement' had been agreed.

He also accepted that the KPDC company officer who signed the transfer and the DS1 had been aware that: Mr Foote-Forster, with whom he was liaising, was no longer company secretary of KPDC; KPDC's managing director had not approved the transaction.

As regards Bordean, KPDC argued that the removal of the charge was a 'mistake' within the meaning of paragraph 2(1)(a) schedule 4 of the Land Registration Act 2002, because the indebtedness secured by the charge had not been repaid, and because the application had not been authorised by KPDC. KPDC cited Bowstead and Reynolds on Agency, which states that "No act done by an agent in excess of his actual authority is binding on the principal with respect to persons having notice that in doing the act the agent is exceeding his authority". Newey LJ agreed. He also agreed that the Alder Road transfer had not been authorised by KPDC.

The court therefore ordered that the Register be rectified to show KPDC's ownership of Alder Road; and KPDC's charge over Bordean, which would bind the registered proprietor and have priority over a subsequent charge.

Knightsbridge Property Development Corporation (UK) Limited v South Chelsea Properties Ltd & another [2017] EWHC 2730 Ch