Gold Harp Properties Ltd v Macleod & Ors

Under Schedule 4 to the Land Registration Act 2002, a court correcting the mistaken removal of a registered interest may restore that interest and change, for the future, its priority against an interest created during the period of error. The phrase does not prevent the court from restoring the priority which the interest would have enjoyed but for the mistake. It means that the restored priority governs the future exercise of rights only. It does not create rights or liabilities for the period before rectification.

Where paragraph 3(3) applies, rectification must be ordered unless exceptional circumstances justify refusal. Delay alone will rarely be exceptional without substantial identifiable prejudice.

The claimants held long leases of separate parts of an unconverted roofspace. Their registered leasehold titles and entries in the freehold leases schedule were removed after an alleged forfeiture for unpaid rent. The County Court held that there had been no effective forfeiture and that the removals were mistakes.

HHJ Gerald ordered reinstatement of the leases and alteration of the register so that they ranked in priority to a later lease granted during their mistaken deregistration. Gold Harp, the later leaseholder, appealed. It argued that Schedule 4 to the Land Registration Act 2002 permitted changes of priority only prospectively and that exceptional circumstances justified withholding rectification.

1. Appeal dismissed. HHJ Gerald was entitled to direct that the reinstated leases rank ahead of Gold Harp’s later lease.

2. Paragraph 8 of Schedule 4 to the Land Registration Act 2002 applies where a mistakenly removed derivative interest is restored and a later-created derivative interest would otherwise have priority. Its primary function is to permit a change in that priority. Construing the words for the future to prevent such a change whenever the competing interest had already been registered would deprive the provision of meaningful operation.

3. The phrase means that the beneficiary of rectification may exercise its restored rights in priority from the date of the order. It does not confer an entitlement to treat those rights as having been exercisable before the order, or to claim remedies for that earlier period. The power to correct a mistake extends to correcting its consequences. This construction was consistent with the survival of the principle in Argyle Building Society v Hammond (1984) 49 P&CR 148 and with the legislative history of the 2002 Act.

4. The statutory scheme accepts qualified, rather than absolute, indefeasibility of the register. It balances the interests of a person prejudiced by rectification through the protections for a proprietor in possession and the indemnity regime.

5. There were no exceptional circumstances under paragraph 3(3). The claimants’ delay in expressly seeking rectification had caused no substantial identifiable prejudice. The evidence about the relative development potential of the roofspace did not establish a sufficient basis to refuse rectification, particularly as planning permission had not been tested and Gold Harp had neither given value nor acted independently of Mr Ralph.

• Court of Appeal (Civil Division). Dismissed Gold Harp’s appeal and upheld the order that the claimants’ reinstated leases rank in priority to Gold Harp’s later lease.
• Central London County Court, HHJ Gerald. Held on 22 March 2013 that there had been no effective forfeiture. On 28 May 2013 ordered the leasehold titles reinstated and the freehold register altered so that those leases ranked ahead of the later lease.