Knightsbridge Property Development Corporation (UK) Ltd v South Chelsea Properties Ltd & Anor

Unauthorised dispositions of registered land may constitute a mistake in the register, permitting rectification under Schedule 4 to the Land Registration Act 2002. A void disposition is capable of generating such a mistake immediately. A voidable disposition does not do so unless and until it is rescinded, after which alteration may be ordered to bring the register up to date.

A purported release of secured indebtedness is ineffective without consideration unless made by deed. Where an agent acts without authority, and the counterparty knows of the lack of authority, the disposition is not binding on the principal. A breach of the statutory duty to declare an interest makes a transaction voidable, rather than void. An inadequately investigated illegality allegation will not defeat a company’s claim where the impugned conduct is background and the relief would not harm the public interest.

Knightsbridge Property Development Corporation (UK) Ltd challenged the transfer of land at Alder Road from it to South Chelsea Properties Ltd and the removal of its registered charge over land at Bordean. It alleged that the transactions had not been authorised and that the register should be altered under the Land Registration Act 2002.

The defendants relied on an alleged general settlement between the parties. They also argued that the claimant should be denied relief for illegality and disputed the consequences of the transactions under company and agency law. The central issues were whether the transactions had been agreed or authorised, whether the register contained mistakes, and whether rectification should be ordered.

1. Claim succeeded. The court rejected the alleged 2013 general settlement. The transfer of the Alder Road Land and the release of the KPDC Charge were not agreed with Mr Mathieson. Mr Brazell Junior probably signed both documents while aware that Mr Foote-Forster had ceased to be secretary and that Mr Mathieson had not approved the transactions.

2. The release of the KPDC Charge was ineffective. No part of the secured debt had been paid and there was no settlement agreement. In the absence of a deed, release of a debt required consideration. The register therefore contained a mistake when the charge was removed.

3. Under paragraph 2(1)(a) of Schedule 4 to the Land Registration Act 2002, “mistake” is broadly construed. The court applied Baxter v Mannion [2011] EWCA Civ 120 and the distinction explained in NRAM Ltd v Evans [2017] EWCA Civ 1013. The void/voidable distinction did not prevent rectification of the Bordean titles because KPDC had never entered into a valid release.

4. The court ordered rectification because there was no evidence that the relevant land was in the registered proprietors’ physical possession and no exceptional circumstances justified refusing relief. The KPDC Charge was to bind the registered proprietor and take priority over the Socao Charge. Judgment was also entered for the debt secured by the charge. The effect of a change in priority was prospective, as explained in MacLeod v Gold Harp Properties Ltd [2014] EWCA Civ 1084.

5. Section 190 of the Companies Act 2006 did not apply because South Chelsea was no longer connected with Mr Brazell Junior when he probably signed the transfer. Section 177 was breached because he was interested in the transaction and had not declared that interest. That breach made the transaction voidable, not void. Independently, he lacked authority to bind KPDC, South Chelsea knew or ought to have known that, and registration of the transfer was therefore a mistake justifying rectification.

6. The illegality defence was rejected. The alleged tax misconduct had not been properly investigated, the claims were brought by KPDC rather than Mr Mathieson, and the challenged transactions were not themselves undertaken to evade tax.