Fraud at the Land Registry - who takes the risk?

shutterstock_147904664The High Court held that a fraudulent charge by an unknown should be set aside and the Land Registry cancel the charge on the register. Swift applied to the Chief Land Registrar for an indemnity. The High Court decided Swift was entitled to an indemnity. The Chief Land Registrar appealed. The Court of Appeal confirmed that Swift was entitled to an indemnity.

 

Case Name:

Swift 1st v Chief Land Registrar [2015] EWCA Civ 330

Facts:

Mrs Rani owned and occupied a property. Unbeknownst to her in April 2006n an unknown party executed a charge over the property in favour of GE Money Lending Limited (GE) for a supposed loan of £32k to Mrs rani.  The charge was registered. In May 2006 a further fraudulent charge was registered in favour of Swift for £64k who paid GE £34k and the balance to Mrs Rani who never received the money. The charge to Swift was registered. Interest instalments on the loan were not paid and in May 2007 proceedings were commenced against Mrs Rani for possession. She defended the proceedings on the basis that both the GE and Swift charges were fraudulent. Swift accepted this and a consent order was made in January 2009 directing the land registry to delete the entry of the charges on the register. Swift then brought a claim against the Land Registry for indemnity under LRA 2002, Sch 8 for its loss. The High Court decided Swift was entitled to an indemnity. The Registrar appealed to the Court of Appeal.

What were the issues involved?

The issues on appeal were:

  • whether the proprietor of a registered charge which turns out to have been a forged disposition is entitled to payment by way of indemnity under LRA 2002, Sch 8 in circumstances where the registered proprietor and rightful owner of the property was in actual occupation at the date of the disposition;
  • whether the much-debated decision of the Court of Appeal in Malory (Malory) was decided per incuriam (through want of care) insofar as the court held that the innocent victim of a forged disposition acquired only the legal estate and not the beneficial ownership of the property Malory Enterprises v Cheshire Homes (UK) [2002] EWCA Civ 151, [2002] All ER (D) 319 (Feb)

Decision:

The Court of Appeal found that Swift was entitled to an indemnity from the land registry dismissed the Registrar’s appeal. Swift was entitled to an indemnity as it was deemed to have suffered loss from the cancellation of the charge in the registry as if the charge had not been forged. Mrs Rani’s overriding interest could not defeat the claim.

Interestingly, the Court did indeed hold that Malory was decided per incuriam. This seemed to be driven by questions of policy and practicality as much as black letter law, with the Court citing concerns about the effect of Malory on the integrity of the title register and the facilitation of e-conveyancing.

Filed Under: Property

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