The current system of land registration offers a guarantee of registered title meaning the registered proprietor and anyone dealing with the registered proprietor can rely on the title as registered. Compensation underpins the aforementioned guarantee if the title is in fact other than as registered. Essentially, a person is entitled to be indemnified by the Chief Land Registrar if they “suffer loss by reason of rectification of the register” (paragraph 1(1)(a), Schedule 8 Land Registration Act 2002 (LRA 2002)). However, with the cost of property title fraud costing the Land Registry millions each year, it does, on occasion, argue that the compensation obligation does not apply. One such occasion arose in Swift 1st Ltd v Chief Land Registrar [2015] EWCA Civ 15.
In 2006, Swift 1st Limited (Swift) received a mortgage application purportedly signed by Mrs Rani who was the sole registered proprietor of a residential property (“the Property”). Following, Swift released monies to Mrs Rani, which were never received and registered the legal charge over the Property at the land registry. Following default Swift issued proceedings for possession. Mrs Rani defended the proceedings on the basis that the charge was a forgery and as a result Swift discontinued its possession claim.
Subsequently, Swift claimed an indemnity from the Land Registry. The Chief Land Registrar argued that there had been no rectification of the register within the meaning of Schedule 8 LRA2002. The High Court disagreed and held that Swift was entitled to an indemnity. The Chief Land Registrar appealed arguing the following:
- Mrs Rani had the right to have the forged disposition set aside as she remained the beneficial owner of the Property
- Mrs Rani’s right was an overriding interest and as such Swift’s charge took effect subject to it.
- As the charge was not enforceable against the registered title the cancellation of the entry was not prejudicial.
- The alteration did not amount to “rectification” under the LRA 2002 as it did not prejudicially affect Swift’s title to the registered charge and did not cause loss.
The appeal was dismissed. It was decided that the intention of paragraph 1(2)(b) was to treat the proprietor of a registered charge, under a forged disposition acting in good faith, as having suffered loss from the rectification. Although Swift’s charge took effect subject to the overriding interest it did not negate the ability of a proprietor of a registered charge claiming in good faith under a forged disposition the indemnity provided by paragraph 1(2)(b) of the Act.
This decision will clearly be welcomed by mortgagees who find their charge is removed from the register as a result of fraud. However, it ultimately leaves the taxpayer to foot the bill.
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