Posts Tagged ‘Land Registration Act 2002’

The limited role of admissible background in the case of registered documents

February 10, 2014

In Cherry Tree Investments Ltd v Landmain Limited ([2012] EWCA Civ 736, CA (Eng)) C had granted a charge of property to D pursuant to the terms of a facility agreement. The facility agreement extended the statutory power of sale in section 101(3) of the Law of Property Act 1925 by providing that the power of sale could be exercised at any time after the execution of the charge. This extension of the statutory power of sale did not appear in the charge. The charge was registered at the Land Registry but the facility agreement was not registered. D sold the property to L in exercise of the power of sale. It could only do so if the statutory power of sale had been extended as set out in the facility agreement. No claim was made for rectification of the charge. The primary question was whether the power of sale implied into the charge could be ‘interpreted’ in such a way as to include the extension found in the facility agreement. The English Court of Appeal decided (Arden LJ dissenting) that the charge could not be so interpreted.

Lewison LJ thought that he was bound to hold that the facility letter was admissible evidence for the purposes of interpreting the charge. But it was still necessary to consider the effect of this: what use could be made of the facility letter ([104] and [128])? The fact that the charge was a document that would be registered at the Land Registry was highly significant. The factual background carries a different weight in such cases than it would in other sorts of contract:

‘The reasonable reader’s background knowledge would, of course, include the knowledge that the charge would be registered in a publicly accessible register upon which third parties might be expected to rely. In other words a publicly registered document is addressed to anyone who wishes to inspect it. His knowledge would include the knowledge that in so far as documents or copy documents were retained by the registrar they were to be taken as containing all material terms, and that a person inspecting the register could not call for originals. The reasonable reader would also understand that the parties had a choice about what they put into the public domain and what they kept private. He would conclude that matters which the parties chose to keep private should not influence the parts of the bargain that they chose to make public.’ ([130])

A little later, Lewison LJ observed:

‘Even the staunchest advocates of the court’s ability to consider extrinsic evidence stop short at saying that by the process of interpretation the court can insert whole clauses that the parties have mistakenly failed to include.’ ([132]).

The charge could not be interpreted in such a way as to confer the more expansive power of sale contained in the facility agreement.

Longmore LJ agreed with the conclusion and reasoning of Lewison LJ ([150]).

Michael Lower

Competing equitable interests and the Land Registration Act 2002

May 7, 2012

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.