Norwich & Peterborough Building Society v Steed

A plea of non est factum is confined to cases where consent is wholly absent because the signed transaction is essentially different in substance or kind from that intended. The signer bears a heavy burden and must have exercised care appropriate to the circumstances.

Section 82(1) of the Land Registration Act 1925 confers powers of rectification only within its specified paragraphs. It supplies remedies for established proprietary rights and errors in the register. It creates neither a general discretion to rectify nor new substantive rights against an innocent registered purchaser or chargee. Fraud inducing a voidable disposition is not, without fraud in procuring registration, enough to permit removal of an innocent chargee's entry.

The registered proprietor appointed his mother as attorney with power to sell his house. Acting as attorney, she signed a transfer to other family members who fraudulently used the property to secure an advance from an innocent building society. The transfer was registered, together with the society's charge.

After abandoning an allegation of forgery, the proprietor contended that the transfer was void under non est factum or because it exceeded the power of attorney. Knox J rejected those contentions. He restored the proprietor's name because the transfer was voidable for fraud, but declined to remove the society's charge.

The appeal concerned whether the transfer was void and, if it was merely voidable, whether section 82 of the Land Registration Act 1925 empowered the court to rectify the charges register against an innocent chargee.

1. Appeal dismissed unanimously. Scott LJ delivered the leading judgment. Butler-Sloss LJ agreed, and Purchas LJ agreed with additional observations.

2. The plea of non est factum failed. Applying Gallie v Lee [1971] AC 1004, a signed document is void only where consent is wholly absent because the transaction is essentially different in substance or kind from that intended. The party seeking repudiation bears a heavy burden and must have taken ordinary precautions. The evidence established at most that the attorney trusted her daughter and signed without discovering the document's nature. The proprietor's failure to inform his attorney of her appointment was also a want of care which required the innocent building society to be preferred.

3. The transfer did not exceed the power of attorney. It purported to complete a sale for a stated price, and execution of such a transfer fell within the attorney's actual authority. The price remained legally recoverable despite not having been paid. The fraud therefore made the transfer voidable, rather than a nullity. A purchaser relying upon a deed executed by an attorney apparently within the power need not investigate the transaction's underlying substance. The building society had also advanced its money in reliance upon the transfer as a transfer on sale.

4. Section 82(1) of the Land Registration Act 1925 contains no general power to order rectification whenever justice appears to require it. The word “may” permits rectification to be refused after a statutory gateway is established; it does not enlarge the gateways. Paragraphs (a) and (b) provide remedies for proprietary rights established under substantive law. They do not create a cause of action against an innocent registered purchaser or chargee.

5. Paragraph (d) concerns fraud used to obtain the registration itself, rather than fraud which merely induced a voidable disposition. Paragraph (g) would have applied to a forged transfer or a successful non est factum plea, but did not apply to this valid yet voidable transfer. Paragraph (h) is a residual means of correcting errors, omissions and mistaken entries. The society's charge was correctly registered while the transfer remained effective, so its entry was neither erroneous nor mistaken.

6. The earlier same-litigation observations suggesting a discretion to remove an innocent chargee after a merely voidable transfer were obiter, rested upon an incorrect construction of section 82(1), and were not followed. As no statutory gateway applied, the court had no power to remove the society's charge. The appeal was dismissed with costs, subject to the stated legal-aid qualifications.

1. Court of Appeal: The present court dismissed the proprietor's appeal and upheld the continued registration of the building society's charge: [1993] Ch 116; [1992] EWCA Civ 5.

2. High Court, Chancery Division: Knox J rejected the pleas of non est factum and excess of authority. He rectified the proprietorship register in the proprietor's favour because the transfer was voidable, but refused to remove the building society's charge.

3. Earlier Court of Appeal proceedings: On the assumed fact that the transfer was forged, the court set aside the possession order against the proprietor and transferred the proceedings for trial in the Chancery Division. The decision was reported as Argyle Building Society v Hammond, 49 P & CR 148.

4. County court: The building society obtained a possession order. The county court held that it was entitled to possession against the proprietor even if the transfer were forged.