Guy v Barclays Bank Plc

In registered land, a forged or void transfer may be ineffective between the original parties, but registration can confer title capable of supporting a later charge. To remove that charge by rectification under Schedule 4 to the Land Registration Act 2002, the claimant must show that registration of the charge was itself a mistake. A defect in the mortgagor’s title is insufficient by itself. At minimum, the chargee must have had actual notice, or blind-eye notice, of that defect. General evidence that the mortgagor was untrustworthy does not establish such notice of the particular transaction.

The appellant alleged that a transfer of development land to Ten Acre Limited had been forged or procured by fraud. Ten Acre became registered proprietor and granted Barclays a registered charge securing substantial indebtedness. The Chancery Division granted Barclays summary judgment and declared that it could sell the land free from the appellant’s claimed interest.

The appellant renewed orally his application for permission to appeal. He sought rectification of the register to remove the charge, arguing that Barclays knew, or should have known, that Ten Acre’s title was defective. The central issue was whether those allegations disclosed an arguable basis for rectification where the charge itself was properly executed.

Application refused. Lord Justice Lloyd gave the reasons, with Lord Justice Carnwath agreeing.

1. For present purposes, the court was prepared to assume that the transfer to Ten Acre Limited was forged and therefore void, with no dispositive effect. However, section 58 of the Land Registration Act 2002 made the register conclusive, subject to statutory rectification. Ten Acre’s registered title therefore enabled it to grant a charge, and the appellant had to establish a basis for removing that charge from the register.
2. Schedule 4 treated removal of the charge as rectification because it would correct a mistake and prejudicially affect the registered proprietor’s title. Paragraph 2 gave power to alter the register to correct a mistake. Paragraph 3(2) imposed further restrictions where alteration affected the title of a proprietor in possession. Alleged fraud by Ten Acre could satisfy the relevant exception against Ten Acre, but the crucial question against Barclays was whether registration of the charge was itself a mistake.
3. The court distinguished between the allegedly defective transfer and the charge. The charge was properly executed, in proper form, and contained no intrinsic defect. A defect in the mortgagor’s title did not, without more, make registration of the charge a mistake. At least, the appellant had to show that Barclays had actual notice, or equivalent blind-eye notice, of the defect in Ten Acre’s title.
4. The auditors’ statement relied upon by the appellant showed that Mr Luqman was generally untrustworthy and warranted careful scrutiny of his dealings. It did not show that Barclays knew, or deliberately disregarded knowledge, that this particular transfer had been procured by fraud or forgery. The appellant therefore had no reasonably arguable case for rectification against Barclays. His failure to secure a timely unilateral notice was relevant, but did not provide an alternative route to relief. No further stay or injunction arose.

1. Court of Appeal (Civil Division): Lord Justice Lloyd refused permission on the papers on 14 February. On oral renewal, Lloyd LJ and Carnwath LJ refused the application in [2008] EWCA Civ 452.
2. High Court of Justice, Chancery Division: Mr T Mowschenson QC, sitting as a deputy judge, granted Barclays summary judgment on 16 January 2008 and declared that it could sell under the charge, with a purchaser taking free of the appellant’s claim. Permission to appeal was refused below; time was extended and a stay concerning costs was granted pending the permission application.