Competing equitable interests and the Land Registration Act 2002

In Halifax plc v Curry Popeck ([2008] EWHC 1692 (Ch)) T and J were fraudsters. They were the registered owners of a bungalow (‘the Property’). They entered into a complex chain of transactions designed to defraud lenders with the help of an allegedly incompetent or dishonest conveyancing clerk. T borrowed money from Halifax who thought they were getting a charge in return but no charge over the Property was executed. The Property was later transferred by T and J to T. T later borrowed money from Bank of Scotland who, again, thought they would have a charge over the Property but again no charge over the whole of the Property in their favour was executed. It was accepted that Halifax had an interest based on proprietary estoppel (they thought they were getting a charge and provided a loan in reliance on this). Bank of Scotland obtained a charging order over the Property and this took effect as an equitable charge. The question was whether the proprietary estoppel had priority over the charging order or vice versa.

It was held that the proprietary estoppel claim had priority. Section 28 of the English Land Registration Act 2002 confirms the rule that competing equitable interests rank in order of date of creation. The exception in section 29 that wipes the slate clean of most equitable interests when there has been a ‘registrable disposition’ for ‘valuable consideration’ did not apply. The transfer to T was not for valuable consideration since it was part of a fraudulent enterprise and there had been no true transaction at all ([43] and [46]).

The judge said that if he were wrong in this then the priorities would be reversed. The fact that T (subject to the proprietary estoppel) was also the disponee under the transfer did not stop section 29 from taking effect. This would not deprive Halifax  of any claim to a personal remedy as against T.

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