Rees v 82 Portland Place Investments LLP & Anor

Rectification under Schedule 4 to the Land Registration Act 2002 may include consequential orders necessary to correct the effects of a registration mistake, including altering priority or deeming statutory provisions to have operated.

Where the registered proprietor is in possession, rectification requires more than proof of a mistake. The applicant must show that it would positively be unjust not to rectify. The financial value of the lost interest, actual knowledge of an unprotected interest, and the mere fact of a registration error do not necessarily satisfy that test. A windfall arising from a transaction that never reflected the relevant interest may, however, support rectification.

Serena Rees appealed against the dismissal of her claim for rectification of the register concerning Flat K, pursuant to Schedule 4 to the Land Registration Act 2002. The Land Registry had mistakenly refused to register a unilateral notice protecting a statutory lease-extension notice under section 42 of the Leasehold Reform, Housing and Urban Development Act 1993.

After a collective enfranchisement, the respondents acquired the relevant freehold and superior lease. The original section 42 notice was treated as unprotected, and Ms Rees served a later notice involving a substantially higher premium. Permission to appeal was granted only on whether it would be unjust not to rectify the register. The respondents also challenged the court’s power to make consequential orders restoring the practical effect of the original notice.

1. Power to make consequential orders. The appeal on the respondents’ notice failed. Following MacLeod v Gold Harp [2015] 1 WLR 1249, the court’s power under Schedule 4 extends beyond correcting the register in form. It includes ancillary orders correcting the consequences of the mistake and, where necessary, changing priority so that the affected interest receives the priority it should have had.

2. That power could include an order deeming the relevant statutory fiction under section 19(3) of the Leasehold Reform, Housing and Urban Development Act 1993 to have operated. The same principle applied to a section 42 notice, whose effect under section 43 was comparable to rights and obligations under a freely negotiated leasing contract.

3. The passing observations in NRAM v Evans [2018] 1 WLR 639 concerning the inability to backdate priority were obiter and could not govern the rectification issue. The court followed Gold Harp.

4. Unjustness under paragraph 3(2)(b). Because the second defendant was in possession through the landlord-and-tenant relationship recognised by section 131 of the Land Registration Act 2002, the enhanced protection in paragraph 3(2) applied. The general presumption in paragraph 3(3) therefore did not determine the case. Ms Rees had to show that it would be positively unjust not to rectify.

5. The Land Registry’s mistake was the essential basis of rectification and added nothing to the paragraph 3(2)(b) assessment. The respondents’ limited knowledge that the section 42 notice existed but was unprotected did not justify rectification. The likely £1.8 million difference in premium was not sufficient: it reflected the ordinary consequences of non-registration and was matched by the respondents’ corresponding loss if rectification were granted. Unlike Sainsbury’s Supermarkets Ltd v Olympia Homes Ltd [2016] 1 P&CR 17, the respondents had not acquired a windfall contrary to the parties’ bargain.

6. Potential indemnity and negligence claims, and Ms Rees’s failure to challenge the original Land Registry decision, were neutral on the evidence. The appeal was dismissed.

• High Court (Chancery Division): The appeal from the order of HHJ Gerald in the Central London County Court dated 4 October 2018 was dismissed. Permission had been granted only on the issue under paragraph 3(2)(b) of Schedule 4.