Swift 1st Ltd v The Chief Land Registrar

A registered proprietor who claims in good faith under a forged disposition is deemed by paragraph 1(2)(b) of Schedule 8 to the Land Registration Act 2002 to suffer loss when the register is rectified, as if the disposition had not been forged. This applies even where the victim of the forgery was in actual occupation and had an overriding right to have the disposition set aside.

Registration confers substantive title notwithstanding the forgery. The contrary conclusion in Malory Enterprises Ltd v Cheshire Homes (UK) Ltd [2002] EWCA Civ 151, that registration transferred only the legal estate while beneficial ownership remained with the original proprietor, was decided per incuriam. Malory remains authoritative that a right to seek rectification can constitute an overriding interest.

An unknown third party forged two charges over a registered proprietor’s home. Swift advanced money under the second charge, redeemed the first charge and became registered as chargee. The proprietor had remained in actual occupation and successfully asserted that the charges were forged. By consent order, Swift’s charge was deleted from the register.

Swift claimed an indemnity under Schedule 8 to the Land Registration Act 2002. A deputy High Court judge ordered the Chief Land Registrar to pay £90,658.99. The Registrar appealed, contending that deletion was not rectification because the proprietor’s overriding right to set aside the forgery had always bound Swift’s charge. The central issues were whether paragraph 1(2)(b) deemed Swift to have suffered loss despite that overriding interest and whether Malory Enterprises Ltd v Cheshire Homes (UK) Ltd [2002] EWCA Civ 151 had been decided per incuriam on beneficial ownership.

1. The appeal was dismissed. Paragraph 1(2)(b) of Schedule 8 to the Land Registration Act 2002 applied where a registered proprietor claiming in good faith under a forged disposition lost its registered charge through rectification. The proprietor was deemed to have suffered loss as if the disposition had not been forged. The provision operated despite the original proprietor’s actual occupation and overriding right to have the forged charge removed.

2. Ordinarily, alteration of the register to give effect to an overriding interest does not prejudicially affect a registered title and causes no indemnifiable loss. That was the principle established by Re Chowood’s Registered Land [1933] 1 Ch 574. In a forgery case within paragraph 1(2)(b), however, applying that principle to deny loss would directly contradict the statutory presumption. Clearer statutory language would have been needed to create an exception whenever the right arising from the forgery also qualified as an overriding interest.

3. Registration confers substantive rights even where the underlying transfer or charge was forged. The beneficial-ownership conclusion in Malory Enterprises Ltd v Cheshire Homes (UK) Ltd [2002] EWCA Civ 151 was inconsistent with the registration scheme and overlooked section 114 of the Land Registration Act 1925. Section 114 made fraudulent dispositions subject to the Act’s provisions governing registered dispositions for value, including section 20. The earlier decision in Argyle Building Society v Hammond (1984) 49 P & CR 148 also recognised that registration vested title notwithstanding a forged transfer.

4. Malory was therefore decided per incuriam and was wrong insofar as it held that registration under a forged disposition transferred only the legal estate while leaving beneficial ownership with the original proprietor. The court remained bound by Malory’s separate determination that a right to seek rectification could subsist as an overriding interest.

5. Patten LJ gave the judgment. Tomlinson and Moore-Bick LJJ agreed.

1. Court of Appeal (Civil Division): By judgment dated 1 April 2015, the court dismissed the Chief Land Registrar’s appeal and upheld Swift’s entitlement to an indemnity under Schedule 8 to the Land Registration Act 2002: [2015] EWCA Civ 330.
2. High Court of Justice, Chancery Division: On 31 January 2014, Richard Sheldon QC, sitting as a deputy High Court judge, ordered the Registrar to pay Swift £90,658.99 by way of indemnity. No neutral citation is stated in the judgment.