Dhillon v Barclays Bank plc

The Court of Appeal dismissed the appeal against the High Court's refusal to rectify the Land Register by removing a charge in favour of Barclays Bank. The central legal principle applied was paragraph 3(3) of Schedule 4 to the Land Registration Act 2002: the court must order rectification to correct a mistake unless there are exceptional circumstances justifying not doing so. The judge found such exceptional circumstances here because the claimant’s position derived from a void, forged transfer she never authorised, she could not have afforded the purchase absent immediate resale, and the title vested in her by Master Moncaster placed her in no better position than the dissolved registered proprietor (Crayford Estates Limited) whose title remained subject to the bank's registered charge.

The court also considered, but did not decide, subsidiary jurisdictional points about whether the removal of the charge would correct the relevant mistake and whether illegality principles barred the claim; both were treated as matters relevant to the exceptional-circumstances inquiry rather than jurisdiction. The possibility of an indemnity from the Chief Land Registrar to the mortgagee under Schedule 8 was discussed and held not to be decisive, was not properly pleaded as part of the appellant's case, and in any event would not automatically defeat a finding of exceptional circumstances.

Background and parties: The appellant (Mrs Dhillon) sought rectification of the Land Register to remove a Barclays Bank charge granted in 2002 by Crayford Estates Limited (CEL) over 47 Moresby Road. The High Court (His Honour Judge Pelling QC) dismissed the claim. The appellant lived at the property since 1993; transfers in 2002 (from Hackney to the appellant, and then from the appellant to CEL) were found to have been effected by forged signatures and therefore void. CEL later granted a mortgage to Woolwich Plc (now Barclays) which was registered on 20 November 2002. CEL was struck off and the Crown treatment of the land culminated in an application under s.181 Insolvency Act 1986 resulting in Master Moncaster vesting CEL’s estate in the appellant, subject to the registered Barclays charge.

Nature of the claim: The appellant sought rectification of the Register under Schedule 4 to the Land Registration Act 2002 to remove the Barclays charge.

Issues framed by the court: (i) Whether the court should order rectification under paragraph 3(3) of Schedule 4 (the two-stage test of whether exceptional circumstances exist and whether they justify non-rectification); (ii) subsidiary jurisdictional points whether removal of the charge would correct the relevant mistake and whether illegality principles applied; (iii) the relevance and effect of any indemnity payable by the Chief Land Registrar under Schedule 8; and (iv) the nature of the appellant’s title after the Moncaster order (whether she took CEL’s title subject to the charge).

Court’s reasoning and conclusions: The Court of Appeal accepted the judge’s factual findings (forgery of signatures, appellant could not have afforded the purchase, CEL’s title vested in the appellant by the Moncaster order subject to the registered charge). Applying the two-stage test from Paton v Todd, the court held that the factual combination presented exceptional circumstances (occupation without ever having paid for the property, inability to have funded the purchase, reliance on a forged transfer to claim a better position, and the effect of the Moncaster vesting order). Those exceptional circumstances justified not ordering rectification because rectification would unjustly confer a windfall on the appellant by extinguishing a bona fide lender’s security and leaving her with an unencumbered million‑pound freehold she had not paid for. The discussion of indemnity under Schedule 8 established that any indemnity question was not determinative of the Schedule 4 inquiry in this case and was not properly before the court as a pleaded issue.

Appeal dismissed. The Court of Appeal upheld the High Court’s finding that there were exceptional circumstances within paragraph 3(3) of Schedule 4 to the Land Registration Act 2002 which justified not rectifying the Register. The appellant’s title derived from the vesting order and was no better than CEL’s, the transfers had been forged, the appellant could not have afforded the purchase absent immediate resale, and rectification would produce an unjust windfall. Subsidiary points about jurisdiction, illegality and any indemnity were unnecessary to decide or were not determinative on the pleaded case.

Appeal from High Court (Business and Property Courts, Property, Trusts and Probate List (Ch D), HHJ Pelling QC) [2019] EWHC 475 (Ch) to the Court of Appeal [2020] EWCA Civ 619.