B e f o r e :
LORD JUSTICE SCHIEMANN LORD JUSTICE CLARKE and LADY JUSTICE ARDEN ____________________
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(Transcript of the Handed Down Judgment of Smith Bernal Reporting Limited, 190 Fleet Street London EC4A 2AG Tel No: 020 7421 4040, Fax No: 020 7831 8838 Official Shorthand Writers to the Court)
Mr J Martin QC and Mr R Oughton instructed by Aziz Saunders for the Appellants Mr John Dagnall instructed by Pannone & Partners for the 1st Respondent Mr N Caddick instructed by the Treasury Solicitor for the Chief Land Registrar ____________________
HTML VERSION OF JUDGMENT AS APPROVED BY THE COURT ____________________
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Lady Justice Arden:
This is an appeal, with the limited permission of the judge and this Court, by the first defendant in this action, Cheshire Homes (UK) Ltd, whom I shall call “Cheshire”. The action was heard by His Honour Judge Maddocks, sitting as a Deputy Judge of the High Court of Justice in the Chancery Division (Manchester District Registry). On 23 February 2001 he made an order as follows:-
Background
The action was for rectification of the land register under section 82 of the Land Registration Act 1925 as amended by the Administration of Justice Act 1977. I will refer to the Act of 1925, as now in force, as “the LRA”. Sections 82 and 83 of the LRA provide the material part as follows:-
The land in question (“the rear land”) is a development site behind a block of flats numbered 16 to 28 Wilbraham Road, Fallowfield, Manchester (“Hometel flats”). It backs on to Platts Fields, and according to the appellant is close to one of the sites for the XVIIth Commonwealth Games to be held in Manchester in July and August 2002.
At the date of the trial, the rear land was registered under title GM723895 and the registered proprietor was stated to be Cheshire as from 12 January 1999. The first respondent, Malory Enterprises Ltd, (“Malory BVI”) is a company incorporated in the British Virgin Isles in 1993 for the purpose of acquiring the rear land. It became the registered proprietor of the rear land on 23 August 1993 under title number GM341218.
The circumstances in which Cheshire became registered proprietor are as follows. In 1996, a company was dishonestly set up in the United Kingdom with the name Malory Enterprises Ltd (“Malory UK”). By deception this company obtained from H.M. Land Registry a new land certificate in which the name of the proprietor was stated to be “Malory Enterprises Limited” of a new address. It then sold and executed a transfer of the rear land to Cheshire, which was then registered as proprietor on 12 January 1999.
In the action Malory BVI claimed that at all material times it was in actual occupation of the rear land so as to have an overriding interest which prevailed against the registered title of Cheshire by virtue of section 70 (1) (g) of the LRA. It claimed that accordingly the register should be rectified. In addition, it claimed that Malory UK had had no power to deal with the title and that the transfer to Cheshire was a nullity, that rectification should follow as a matter of course and that Cheshire could not take advantage of section 82 (3) as it did not have possession of the rear land. If Cheshire was in possession, Malory BVI contended that Cheshire had caused or contributed to the error by lack of proper care and that it would be unjust not to rectify the register in favour of Malory BVI as an innocent and properly registered proprietor which had not executed any transfer. It also contended that the order for rectification should relate back to the date of Cheshire’s registration or at the latest the date when the dispute arose in July 1999.
There is a block of flats, known as the Hometel flats, built on 16 to 28, Wilbraham Road. This comprises 32 flats with parking spaces at the front. On the rear land stands the derelict structure of a block of flats begun in the early 1980s, but never completed. The front land and the rear land were originally one plot, but by a transfer dated 17 December 1984 the front land was transferred separately from the rear land and became separately registered at the Land Registry under title no. GM365889. The registered proprietor of the front land is Hometel Ltd, a company under the same ownership and control as Malory BVI.
As a result of the fraud of Malory UK, a new title GM723895 was given to the rear land and the entries in the proprietorship register were changed so as to show Malory Enterprises Ltd with its address as the proprietor.
The rear land and the front land were managed by the same company, Hometel Management Ltd, which was controlled by Mrs Chang who also controlled Hometel Ltd and Malory BVI.
Judgment of HHJ Maddocks
The judge held that the title of Malory BVI was not displaced by the actions of Malory UK. Accordingly Malory BVI remained in possession of the land. The judge held that if he was wrong in that view, Malory BVI remained the true beneficial owner and its possession was not disturbed in fact. The judge’s conclusion in this regard was largely based on evidence about fencing round the rear land. Originally there was a concrete panel on the rear boundary and on the east boundary. The west boundary was open and there was no fence between the rear land and the front land on the boundary where they abutted. However, in September 1996 the openings on the west boundary were closed up by a Mr Neil Donald, a joiner. In addition, in August 1996 Mr Donald boarded up the openings on the ground floor of the rear building and put up ‘No trespassing’ signs. In December 1996 he erected a low fence between the buildings: a post and rail fence with wooden uprights about three feet high. The rear land was, however, subject to vandalism and the wooden fence proved inadequate. Accordingly, in July 1997 Mrs Chang arranged for the erection of a high security steel fence in the gap between the buildings and in front of the low wooden fence. This was almost six feet high and was topped with razor wire. At a later stage, a gate was put into the fence held by a latch on the inside and locked in place by a padlock. In due course, it was found that the latch had been cut off and a new chain and padlock put on at ground level which could be accessed from the outside of the rear land. The judge found that this must have happened at or about the time of completion of the transaction between Malory UK and Cheshire in January 1999.
The judge then considered whether the possession by Malory BVI amounted to “actual occupation” within section 70(1)(g). On this the judge’s findings were as follows:-
Having so found, the judge concluded that Cheshire’s title was subject to the rights of BVI, that is its continuing rights as the true beneficial owner and its consequential right to be restored as the legal proprietor. He considered that no purpose would be served by refusing rectification. Cheshire would simply be holding the legal estate for the purpose of giving effect to the interest of Malory BVI and could indeed be called upon the execute a transfer.
The judge then considered the position on the basis that he was wrong in his conclusion about Malory BVI’s actual occupation. He held that Cheshire was not in possession of the rear land. In particular, Cheshire never fenced off the boundary between the front land and the rear land and never closed off the Hometel access from the launderette. At the time of the transfer by Malory UK to Cheshire, Malory BVI was already in possession and Cheshire never displaced Malory BVI’s possession. Accordingly, Cheshire was not entitled to the protection afforded to a proprietor of possession by section 82(3) or to the general protection which would be afforded where section 82(3) was on other grounds not available.
The judge also considered whether, if Cheshire had been in possession, it caused or contributed to the error in the register by lack of proper care. The judge held that the facts on balance fell short of establishing that Cheshire substantially contributed to the error. The judge also rejected the argument that Cheshire was a party to the fraud.
The judge held that if section 82(3)(c) applied it would be unjust not to rectify the register. In the circumstances, the judge observed
Accordingly, the judge ordered rectification.
On the question of the effective date of rectification, the judge said this:-
The judge did not, in his judgment, deal expressly with the question of liability for trespass but his order contains provisions with respect to liability for trespass as set out above as a result of an exchange during the discussion after judgment. In this discussion the judge made it clear that liability in trespass arose from the fact that Malory BVI was in possession. This is an important question because, after the dispute arose, Cheshire entered the rear land and took steps to demolish the structure on the rear land in part.
Appellant’s arguments
Mr John Martin QC for the appellant submits that the effect of the decision that the first respondent had an overriding interest under section 70(1)(g) of the LRA may have been to deprive the appellant of all right to an indemnity. He accepts that section 83 (4) of the LRA may apply but submits that there is a risk that the appellant will be held to have suffered no loss “by reason of the rectification” as required by section 83 of the LRA. This was the view taken by Clauson J in Re Chowood’s Registered Land [1933] 1 Ch. 574 at 582 where the purchaser had bought land from a person who had no title.
The appellant’s submissions relate to
i) whether the first respondent had an overriding interest;
ii) whether the court had jurisdiction to make an order for rectification from a prior date, and if that jurisdiction existed, whether the judge took into account the right factors;
iii) whether the judge was right to conclude that Cheshire was liable in damages for trespass.
The appellant challenges the finding of trespass, the finding that Malory BVI had the beneficial ownership in the rear land from 17 July 1999 and the finding that Malory BVI was entitled to possession of the land from 17 July 1999. On the appellant’s submission, at all material times from and after the registration of Cheshire up to the date of rectification the entire beneficial ownership and legal interest in the rear land and the right to possession of the rear land were vested in Cheshire.
The appellant does not dispute that an order for rectification should be made. Its principal concern is to establish who has a better right to possession of the rear land between the date of registration and the date of rectification so as to avoid any liability for trespass. It also seeks to safeguard its position so that it will be able to claim an indemnity from the Land Registry under section 83 of the LRA. If Malory BVI has an overriding interest, it will necessarily have a better right to possession.
(i) Overriding Interest
Section 70 (1) of the LRA provides in material part as follows:-
Before the judge Cheshire conceded that the right which BVI had to seek rectification under section 82 was a right which was capable of being an over-riding interest. Mr Martin seeks to withdraw that concession.
In the course of argument, the court indicated that it would hear the argument and then decide whether to allow the concession to be withdrawn at the end of the appeal.
Mr Martin submits that the jurisdiction to rectify is entirely discretionary. Accordingly, there can be no right to have the register rectified, only the right to ask the court to exercise its discretion in the applicant’s favour. He submits that Malory BVI did not have a legal or beneficial interest in the rear land prior to rectification but merely a hope of recovering something it had lost. Without any interest in the land Malory BVI’s right to invoke section 82 cannot be regarded as a right capable of binding the land as an overriding interest. Moreover, the fact that section 82(3) prohibits rectification of the register except in four specific cases, including an overriding interest, suggests that a mere right to apply to the court for rectification cannot constitute an overriding interest. Mr Martin also submits that since Malory BVI remained the registered proprietor until Cheshire was registered, until the moment of Cheshire’s registration there was nothing to rectify and no right to rectification. Even if Malory BVI was in occupation at that moment it had no right to rectify until it was too late for its right to bind Cheshire.
Mr Martin distinguishes Blacklocks v J B Developments (Godalming) Ltd [1982] Ch. 183. Although it is commonly asserted that this case concerns the right to rectify the register it is clear on examination that the case concerns only rectification of an instrument. This was accepted by Neuberger J in Nurdin & Peacock plc v D B Ramsden [1999] 1 EGLR 119 at 124 – 6.
Mr Martin distinguishes National Provincial Bank Ltd v Ainsworth [1965] AC 1176, in which the House of Lords held that section 70 of the LRA in all its parts was dealing with rights in reference to land which had the quality of being capable of enduring through different ownerships of the land according to normal conceptions of title to real property. Mr Martin submits that the right to rectify the register would not be transmissible. However, he cites no authority for this position.
Mr Martin submits that the effect of section 69(1) of the LRA is that if the legal estate is registered in the name of a person, that person acquires the beneficial interest. Mr Martin submits that Kingsalton Ltd v Thames Water Development Ltd , [2001] EWCA (Civ) 20 , supports this submission.
Mr Martin submits that in any event Cheshire can bring itself within section 20 of the LRA if section 69 does not apply. In the interim period, Malory BVI could have invoked section 82 or applied for an interim injunction. It could have made this application even if it did not have an overriding interest to which registration took subject. However, if a third party trespassed on the rear land in the meantime, Cheshire could have sued.
Mr Martin accepts that the transfer to Cheshire was not a valid transfer and that accordingly the relevant date for determining whether a right was an overriding interest was the date of registration of Cheshire’s title.
Mr Martin challenges the judge’s conclusion that Malory BVI was in actual occupation at that date. He submits that occupation was purely a question of fact. The judge dismissed actual activity on the land and held that storage was not significant. He attached significance to the fence but Mr Martin submits that if enclosure is in itself enough all the cases would have been decided differently. Moreover, the judge considered the back and front land together. This was incorrect because occupation has to be the occupation of Malory BVI. The front and rear land were in separate ownership. They had the same managers, but there was little management involved in the rear land. Hometel was also the owner of the front land.
Mr Martin examined the judge’s findings on the actions of Malory BVI with respect to the rear land. There were two instances of boarding up window openings which led to minor expenses. The key was the fencing. It was not, however, correct that the only access was through the launderette since there was also a gate. Furthermore, the means of enclosure is separate from the question of the activity inside. The critical question was who was occupying the land within the enclosure.
Mr Martin submits that the judge failed to give weight to the following factors:-
i) no-one was living on the land;
ii) no-one could carry on a business there;
iii) no-one was parking a vehicle there;
iv) no-one was cultivating plants and no-one was mowing a lawn or doing any similar act;
v) there were no signs with the name of the owner; and
vi) no-one was carrying on building work on the land.
It was the lack of activity which enabled Malory UK to carry out the fraud without Cheshire spotting it.
The judge relied on four matters, namely the storage of concrete panels, the storage of window frames, mattresses and so forth, fencing and the application of weed killer.
Mr Martin relies on Strand SecuritiesLtd v Caswell [1965] Ch 958 , where the Court of Appeal held that leaving one’s furniture in a flat or having a key to the flat or making occasional use of it was not enough to constitute actual occupation; Lloyds Bank v Rosset [1989] 1 Ch. 350 reversed on other grounds [1991] 1 AC 107 , where it was held that the presence of the owners’ builders on partly derelict propery could constitute occupation by the owners; Abbey National BS v Cann [1991] 1 AC 56 affirming (1989) 57 P&CR 381; and Stockholm Finance v Garden Holdings Inc. [1995] NPC 162.
Mr Martin submits that the judge failed to have regard to the remarks of Lord Wilberforce in Williams Glyns Bank v Boland [1981] 1 AC 487 at 505 B-C that on the plain meaning of the words “actual occupation”, what is required is “physical presence, not some entitlement at law”.
Mr Martin also relies on Secretary of State v Baylis (2000) 80 P&CR 324 at 339-40, where Mr Kim Lewison QC sitting as a deputy judge of the Chancery Division held that minor acts of mowing did not amount to “actual occupation”, and Goodger v Willis [1999] EGCS 32.
In short Mr Martin submits that the acts found by the judge to constitute actual occupation were not capable of amounting to occupation and amounted to a misuse of that term.
(2) Retrospectivity of Rectification
Mr Martin submits that nothing in the Act warrants retrospective rectification. Indeed, the amendment to section 83 made by the Land Registration Act 1997 (being so far as material the insertion of subsection (1)(b), above) indicates that rectification was not intended to be retrospective. If there is an overriding interest, registration is subject to it and there is no need for retrospective rectification. If there is not, it amounts to rewriting history. It was assumed in Freer v Unwins [1976] Ch.288 that rectification could not be retrospective and in Clark v Chief Land Registrar [1993] Ch.294, Ferris J doubted whether such a power existed.
Mr Martin submits that sometimes rectification will affect unregistered interests. The words “or otherwise” can be given effect without retrospective rectification.
If there was no overriding interest, there is no doubt that the question of retrospectivity is relevant. The judge merely relied on the analogy with contract cases. This is entirely unsatisfactory as different discretionary criteria apply. Moreover, the Court of Appeal held in the Kingsalton case when granting rectification that the court could not impose conditions.
If rectification can be ordered on a retrospective basis, the court should have regard to the policy of the Act which is to give the registered proprietor the status of absolute owner. Mr Martin submits that the court should approach any such exercise of discretion with a presumption against rectification with a retrospective effect and bearing in mind the availability or non-availability to either party of an indemnity. Mr Martin submits that any indemnity available to Cheshire is limited. The court should bear in mind the rights conferred by Article 1 of the First Protocol to the European Convention on Human Rights.
(3) Trespass
The question here is who has the better right to possession. Until Cheshire went on to the land and carried works of demolition, no problem arose. However, the question of liability for trespass did arise in the period after the registration of Cheshire and before rectification. The judge’s order deprived Cheshire of its paper title retrospectively. If the order had not been retrospective, Mr Martin submits that Cheshire would have had a better title unless Malory BVI had an overriding interest: see Argyle BS v Hammond (1985) 49 P & CR 148, at pages 152, 155 and 156.
Mr Martin submits that the appropriate liability was for breach of trust rather than in trespass. Liability would not therefore arise unless there was notice.
Respondent’s Submissions
Mr Dagnall for Malory BVI, makes the following submissions. He submits that Malory BVI has a damages claim against Cheshire and an indemnity claim against HM Land Registry. The Land Registry contends that there was a warning prior to entry and therefore a break in the chain of causation. If the Court finds that there is no damages claim it should declare that this was because of an error in the register.
Mr Dagnall submits that to see the interaction between the two remedies it is necessary to examine how the indemnity works in this case. Mr Dagnall submits that Cheshire will be able to claim an indemnity against loss under s.83(4) of the LRA.
Mr Dagnall relies on the critical differences between section 20(1) and section 69 of the LRA. The difference applies where a party seeks to rely on the register as opposed to relying on a transfer. Section 69 does not deal with beneficial interest and accordingly Cheshire is bound by the beneficial interest and therefore cannot have a better right to possession in any event. An action for trespass by Cheshire against Malory BVI would not succeed. All that Cheshire obtained was a piece of paper signed by a person purporting to be Malory BVI. Cheshire became the registered proprietor but cannot claim the beneficial interest.
As regards overriding interest, Mr Dagnall submits that Malory BVI’s right to obtain rectification is a right which is capable of being an overriding interest in one of two ways. Under the first way, it is a beneficial interest in property within section 70(1)(g). The relevant time is the time that entry was deleted. In this connection the party claiming an overriding interest must be in actual occupation and cannot sell unless he has legal title despite section 71. However, he does not require a retrospective order or indeed any order for rectification to succeed in an action for trespass. However, he could lose his beneficial interest if he takes no action: compare the Kingsalton case. The alternative route is that the right to rectify is an overriding interest and a transmissible right arising from the beneficial interest. The restriction on rectification in section 82(3) is disapplied as respects overriding interests. The fact that rectification is discretionary does not matter. Proprietary estoppel gives rise to a proprietary interest capable of being an overriding interest even though the nature of the interest is subject to the exercise by the Court of its discretion: see Ives v High [1967] 2 QB 379 .
Mr Dagnall submits that it is not inconsistent to claim both bases of an over-riding interest. The right to rectify has to mature to enable the claimant to obtain a legal interest. However, his preferred way of putting the point is that there is a beneficial interest. It requires rectification to mature into a legal interest but would disappear if rectification were refused.
Section 70(1)(g) protects the property rights of the actual occupier. This is a policy consideration which furthers the Act. In reliance on Abbey National Building Society v Cann, above, at page 93G Mr Dagnall submits that actual occupation is a question of fact which depends on all the circumstances including the nature of the property. In this case the property was uninhabitable. There must be some physical presence and continuity. The court should look at the totality of the situation including the fact of enclosure. The property was vacant and unoccupied and enclosure is something an occupier can be expected to do. There were also acts of fencing, killing weeds and storage. The judge was entitled to come to his conclusion.
Mr Dagnall contrasts Epps v Esso Petroleum [1973] l WLR 1071. The judge was not wrong to approach the matter from the point of view of legal possession. It was common ground that if there was an overriding interest then there was a better right to possession.
As regards retrospectivity, Mr Dagnall submitted that the jurisdiction was general. He accepted that rectification cannot be made on terms (see the Kingsalton case, above, at paragraphs 31 and 46). He submits that this does not prevent the court from ordering that rectification should not affect a particular party because such an order was not a “term” of rectification. Mr Dagnall submits that whether to order rectification retrospectively is a matter for the court’s discretion. The words “or otherwise” in section 83(2) extend to overriding interests, which are protected by the right to seek rectification.
Section 82(1) confers a jurisdiction to rectify. An error in the register should be undone fully. The judge made the right order. Alternatively, he should have made an order retrospective to 17 July 1999 when Malory BVI discovered the fraud. Rectification should delete the deletion of the name of Malory BVI and delete the entry relating to Cheshire. Intermediate interests are not affected because the mortgage raised by Cheshire has been redeemed.
If the order for rectification is prospective, a person acquiring title through fraud could then destroy the land with impunity until rectification. There might be a delay in obtaining an interim injunction. The owner might not know they were trespassing. The injunction could be conditional upon giving an undertaking and incurring legal costs.
As regards trespass, it was wrong for Cheshire to put in bulldozers. Cheshire does not have a better right to possession. Its registration was subject to a potential claim to rectification. Malory BVI was already in possession. Mr Dagnall relies on Chowood v Lyall No.2 [1930] 2 Ch. 156 at pages 163-4 for the proposition that Cheshire cannot assert a better right to possession because it takes subject to Malory BVI’s right to rectify the register, which is now fulfilled.
Submissions of the Chief Land Registrar
Mr Caddick, for the Chief Land Registrar (appearing on this appeal pursuant to directions given by Chadwick LJ) submits that it was crucial to ascertain what rights Cheshire obtained. He submits that Malory BVI had a beneficial interest and that Cheshire was registered subject to that beneficial interest. Section 70 (1) is in general concerned with legal interests. However, the right of a beneficiary can fall under section 70 (1)(g). The right to seek rectification in these circumstances would also be an overriding interest but there is no clear authority on that point. Mr Caddick also refers to Grey, Elements of Land Law , (3 rd ed) (2001) page 1077. He submits that the right has to be proprietary as in the case of an equity arising by estoppel or acquiescence. The right to rectify is similar because the right must have reference to land. Moreover an interest in proceeds of sale constitutes an interest in land.
Mr Caddick accepts that in the present case the right was protected by actual occupation and supports Malory BVI’s submissions.
Mr Caddick submits that the nature of an occupation is important. Occasional use is not enough: see the Epps case, above.
Mr Caddick submits that Malory BVI had a better claim to possession than Cheshire: see Chowood v Lyall (No.2) [1930] 2 Ch. 156, C.A.
As set out above, there is no dispute that the judge was entitled to order rectification of the register. However, Mr Caddick submits that the judge was wrong to order that such rectification be backdated to show Malory as having been the registered proprietor since 12 January 1999. He submits that there is no jurisdiction to backdate an entry on the register in this way. Further, it is submitted that this is so whether or not the interest of the person seeking rectification is an overriding interest. The scheme of the LRA 1925 and of the Land Registration Rules 1925 (“LRR”) suggests that rectification cannot or should not be backdated.
Conclusions
The starting point is the material parts of sections 5, 20 and 69 of the Land Registration Act 1925:-
Although Malory UK had no title to convey to Cheshire, the position of Cheshire once it is registered as proprietor is governed by section 69 of the LRA. Accordingly, when it became the registered proprietor of the rear land, Cheshire was deemed to have vested in it “the legal estate in fee simple in possession”.
However, section 69 deals only with the legal estate. Unlike section 5, which deals with first registration, that registered estate is not vested in Cheshire “together with all rights, privileges and appurtenances....”. Moreoever, since the transfer to Cheshire could not in law be of any effect in itself, in my judgment it cannot constitute a “disposition” of the rear land and accordingly section 20 cannot apply. In those circumstances, Cheshire’s status as registered proprietor is subject to the rights of Malory BVI as beneficial owner. On this point I accept the submissions of Mr Dagnall and reject those of Mr Martin. It follows that I accept that Malory BVI has sufficient standing to sue for trespass even without seeking rectification of the register because it is the true owner and has a better right to possession. (See Chowood v Lyall (No.2) [1930] 2 Ch. 156, 163-164, C.A.).
As it is common ground on this appeal that the register should be rectified (though Mr Dagnall’s preferred case is that such rectification should be retrospective), no further issues, apart from the issue of actual occupation, need to be determined, but as they were all argued, I propose to express my view on them. The first question is whether Malory BVI has an overriding interest by virtue only of its right to seek rectification. It will be recalled that Cheshire conceded this point below. As the question whether a right to apply for rectification is a right for the purposes of section 70 (1)(g) is a question of law, I would permit Cheshire’s concession that such a right is an overriding interest to be withdrawn.
Mr Martin submits that the right cannot constitute an overriding interest because it is only discretionary. In my judgment, a distinction is to be drawn between a right to seek rectification and the fulfilment of that right. The exercise by the court of its discretion is necessary for the fulfilment of the right (and if exercised in a manner which is adverse to the holder will result in extinction of the right) but the exercise by the court of its discretion is not necessary to bring the right into existence.
In my judgment, the right to seek rectification to reflect a proprietary interest in land fulfils the criteria approved in Williams & Glyns v Boland , above, namely that it is a right in reference to land which is capable of transmission through different ownerships of land. There is no reason why the sale by Malory BVI of its beneficial interest in the rear land with any rights attaching thereto should not be effective to vest in the purchaser the right to apply to the court for rectification of the register. Berkeley Leisure Group Ltd v Williamson [1996] EGCS 18 (Beldam and Morritt LJJ) (30 January 1996), which is cited by Megarry & Wade, Law of Real Property, 6 th ed (2000) para. 6 – 128, supports this conclusion. In that case the Court of Appeal held that the equity to claim rectification of an agreement for the sale of registered land could pass on sale by the vendor of adjoining land to the purchaser of the adjoining land as a result of the operation of section 63 of the Law of Property 1925 (which applies to all conveyances of land). (In that case the land and the adjoining land are previously part of a single property within the same title and a mistake had been made with respect to the boundary between the subdivided plots.) As respects transmissibility there can be no distinction between the equity of rectification of a document and a claim for rectification under section 82. Moreover in this case the right cannot be exercised in isolation from the interest in the land Malory BVI has, and thus in my judgment is a right in reference to land.
Nor do I accept the argument that the right to seek rectification comes into existence only after Cheshire is registered. The registration of Cheshire gives rise to the right to seek rectification at the same time as, and as part of, the same transaction. I do not consider that the registration can be treated as predating the right to seek rectification in this way.
Mr Martin also submits that the reference in s.82(3) to overriding interests is inconsistent with the notion that a claim to rectification is itself an overriding interest. The answer to this point is, as I see it, that the right to claim rectification must be coupled with actual occupation for the saving in section 82(3) to apply. Section 82(3) is, therefore, not rendered circular by construing section 70(1)(g) so that overriding interest is capable of including a claim to rectification. Accordingly, the interpretation of “overriding interest”which I prefer is not precluded by section 82(3). Even rectification with no retrospective effect may affect the enjoyment of estates and interests in land for the future. This, in my judgment, is the reason why section 82(2) states that rectification may affect any such interest For example, the estate vested in Cheshire by virtue of section 69 of the LRA is affected by the order for rectification in this case even if it is not retrospective. The words “or otherwise” at the end of section 82(2) would appear to include overriding interests, which are protected only by the right to seek rectification.
I now turn to the question whether the court has jurisdiction to order rectification under s.82 with retrospective effect (that is, with effect from a date prior to that of the application to the registrar: see rule 83(3) of LRR to which I refer below).
We have been referred to two reported authorities on the question whether section 82 permits an order for rectification to be made with retrospective effect. The first is the decision of Walton J in Freer v Unwins Ltd [1976] Ch. 288. In that case, if the rectification there carried out by the Land Registry (entry of a restrictive covenant) had had retrospective effect, it would have rendered a licence in breach of a covenant in the lease under which the licence had been granted. Walton J did not consider that the rectification could have effect from the date when registration of the covenant should have been made. Walton J said this:
Likewise in Clark v Chief Land Registrar [1993] Ch 294 , Ferris J expressed doubts as to whether the register could be rectified with retrospective effect. In fact he also held that if he had any discretion in the matter he would not have exercised it in favour of such rectification because inter alia it would merely have substituted another party as claimant for the statutory indemnity in place of the plaintiffs. Ferris J stated that he preferred to place his decision on the basis of discretion. The Chief Land Registrar appealed but abandoned his appeal on this point during the hearing of the appeal. Nourse LJ, with whom Kennedy and Roch LJJ agreed, commented obiter that the decision of Ferris J on the rectification point was correct (see [1994] Ch 370 , 378, 385).
In its third report on Land Registration (Law Com No 158) (1987), paragraph 3.8, the Law Commission expressed doubts as to whether Walton J was correct in concluding that section 82 did not confer power to rectify the register with retrospective effect. It referred to the wide terms of section 82(3) (considered below). However in Land Registration for the Twenty-first Century (Law Com No 254) (1998), a joint consultation document with HM Land Registry, the view was expressed obiter that a power to alter the register retrospectively was unnecessary in view of the provisions of section 82(2). The issue is not mentioned in the final report (Law Com. No.271)(2001).
As Mr Caddick submits, there are indications in other sections that Parliament did not intend to confer power to order rectification with retrospective effect. The LRA does not require any entry to be dated in the first place. The effect of retrospective rectification (if within section 82) may be to render official copies of entries of the register inaccurate. Yet section 113 of the LRA states without qualification that such copies are admissible in evidence and gives a right of indemnity to any person who suffers loss as a result of their inaccuracy. Likewise it is not clear from the LRA what effect retrospective rectification would have where as in the case of charges whose priority depends not on the date of registration but on the order in which entries are made in the register (see section 29 of the LRA). This was the very problem that arose in Clark v Chief Land Registrar (above) and was a further reason why Ferris J decided in the exercise of his discretion not in any event to order rectification with retrospective effect. If Parliament really contemplated that that form of rectification might be necessary it is anomalous that it should not have provided a solution for the situation where priority depends on the order the entries were made in the register as well. Furthermore, the power to order retrospective rectification is inconsistent with rule 83(3) of the LRR which provides for an application to be “completed by registration as of the day on which .... it is deemed to be received”. The application referred to in this rule is an application to the registrar. If it is the court which makes an order for rectification, section 82(5) (above) applies but I anticipate that for this purpose the registrar requires an application to be made to him for registration of the court’s order in which case rule 83(3) will apply to that application.
Moreover, if the court has power to determine that rectification should take effect from a prior date, it would in my judgment require power to do so on terms so that third parties including those whose interests did not require registration are not prejudiced by rectification with retrospective effect. A contrast here can be drawn between the powers conferred by section 82 of the LRA and the power of the court to rectify the register of charges maintained at Companies House pursuant to the Companies Acts. Under this legislation charges are void as against the company if they are not registered within twenty-one days of creation. (Unlike registration under the LRA, registration under the Companies Acts does not govern the priority of charges). Section 404 of the Companies Act 1985 provides that if the charge is not registered in time, the holder of the charge may apply to the court for an order extending the time for registration or rectifying an error in the register. (Moreover, the section expressly states that the court may make the requisite order "on such terms or conditions as seems to the court just and expedient".) It is hardly surprising that it is the practice of the court when making such orders to add terms for the protection of creditors since the effect of the court's order will be to prevent an unregistered charge from being void for non-registration. The usual term is a saving for the rights of parties acquired prior to the time when registration is in fact made. Several examples of the terms which the court has imposed are given in Buckley on the Companies Acts ,15 ed (2000), paragraphs 404.04, 404.11- 404.15 and 404.16. It is difficult to see how the court could properly make an order for rectification of the register maintained under the LRA without also doing so on terms.
Furthermore, in Kingsalton Ltd v Thames Water Developments [2001] EWCA (Civ) 20 , this Court held that terms could not be imposed when granting or refusing an order for rectification under section 82 of the LRA.
Lastly, Parliament has now amended section 83 so that a person who is successful in obtaining an order for rectification but suffers loss (as in Freer v Unwins ) may nonetheless be eligible for an indemnity (see the Land Registration Act 1997, section 2). Section 83, as amended, is set out above. This may be said to provide some support for the view that section 82 does not confer a power to rectify the register with retrospective effect.
Accordingly, in my judgment there is no power to order that rectification should take effect from a past date (that is, in a case where rule 83(3) of the LRR applies, a date prior to the date of the application). Parliament would not have created such a power without giving power to protect the position of third parties, which it has not done. Such a power is necessary not only to counteract unfairness but also to produce certainty so far as possible in transactions conducted on the faith of the register. I do not consider that section 82 contains such a power.
That leaves the question whether the judge’s finding that Malory BVI was in “actual occupation” of the rear land is susceptible to review on appeal. The judge’s finding involves questions of primary fact and the application of the correct principles to the facts. What constitutes actual occupation of property depends on the nature and state of the property in question, and the judge adopted that approach. If a site is uninhabitable, as the rear land was, residence is not required, but there must be some physical presence, with some degree of permanence and continuity (cf. Strand Securities Ltd v Caswell, above). As Lord Oliver said in Abbey National Building Society v Cann, above, at page 93:
The requisite physical presence must, as it seems to me, in fairness be such as to put a person inspecting the land on notice that there was some person in occupation. (See generally per Lord Oliver in the Cann case, at page 87). None of the authorities which we have been shown deal with completely derelict land.
For my own part, I am not persuaded by Mr Martin’s arguments that the judge directed himself otherwise than in accordance with the principles which must be applied when determining “actual occupation”. I do not consider that the judge confused actual occupation with possession or occupation of the front land with occupation of the rear land. Nor do I consider that he was wrong in the circumstances to attach significance to the fencing of the rear land. In this particular case, the fencing cannot be regarded as wholly separate from occupation of the rear land. The fencing was one of the factors relevant to be taken into account. The judge was also right in my judgment to attach significance to the access permitted from the front land. Even though there was another gate, the access from the front land supported the notion that some person connected with the front land claimed a right to be on the rear land. On that basis the question of whether applying those principles there was “actual occupation” was essentially a question of fact for the judge. At the relevant time, there were derelict buildings on the rear land which meant that it was not possible to occupy it by living in those buildings or by cultivating the land or by using the land for recreation. The judge had to consider other acts denoting occupation such as boarding up the windows of the building and fencing the site (in both cases) to keep vandals and trespassers out, and also using the land for storage. In my judgment, the judge was entitled to draw the conclusion that Malory BVI was in occupation from the facts as found by him, and accordingly, his conclusion cannot be disturbed by this court. Moreover, no-one visiting the rear land at the time of the sale to Cheshire could have drawn the conclusion that the land and buildings on the rear land had been abandoned; the evidence of activity on the site clearly indicated that someone claimed to be entitled to be on it.
Finally, some submissions were directed to the rights of the parties to claim an indemnity from the Chief Land Registrar. However, there are clearly matters for argument on the application of the statutory provisions, and while I have taken into account that the right of either party to a full indemnity is not assured, I express no view on the submissions that have been made as to the effect of the statutory provisions in that regard. Nor do I consider it would be right for the court to tailor the form of order simply to improve the position of a party seeking an indemnity.
Accordingly, I would allow this appeal for the limited purpose of removing from paragraph 2 of the judge’s order set out above the words “with such rectification to be (insofar as necessary) retrospective to 12 January 1999)”. I would dismiss the appeal in all other respects.
Lord Justice Clarke:
Subject to one potentially significant reservation for the future, I agree with the reasoning and conclusions of Arden LJ in her very full judgment. Thus I entirely agree with her:
i) that Cheshire’s status as registered proprietor was subject to the rights of Malory BVI as beneficial owner because section 69 of the LRA only has the effect of vesting in Cheshire “the legal estate in fee simple in possession”;
ii) that Malory BVI has an overriding interest by virtue of its right to claim rectification;
iii) that the judge’s conclusion that Malory BVI was in “actual occupation” of the rear land within the meaning of section 70(1)(g) of the LRA should not be disturbed, with the result that any rights of Cheshire were subject to Malory BVI’s overriding interest; and
iv) that Malory BVI throughout had a sufficient possessory interest in the rear land to maintain an action in trespass against Cheshire.
In these circumstances, as I see it, the views expressed by Arden LJ on the question whether rectification of the register can be ordered retrospectively are not necessary, either for the decision in this appeal or in order to resolve any issue of compensation between Cheshire and the Chief Land Registrar, and are obiter dicta.
For my part, I would prefer to reserve a decision on that question until it arises for decision on the facts of a particular case. I would only say that, while I see the force of Arden LJ’s reasoning on it, it seems to me that, if the word rectification is given its ordinary meaning it is wide enough to include rectification with retrospective effect. Indeed, to my mind, as in the case of the rectification of instruments and contracts, it naturally has that meaning, since otherwise the rectification would be less than complete. However, since the question does not arise for decision in this case, I would prefer to do no more than reserve my opinion on the point.
It follows that I would dismiss the appeal. However, I agree that it would be appropriate to vary the order as proposed by Arden LJ in paragraph 84. It seems to me that the effect of the conclusion in paragraph 85(iv) above, namely that Malory BVI throughout had a sufficient possessory interest in the rear land to maintain an action in trespass against Cheshire, makes it unnecessary to order retrospective rectification. In those circumstances it is not, as I see it, necessary to vary the order. Nevertheless I see no objection to the variation suggested, not because I am at present persuaded that rectification cannot be retrospective, but because it is not necessary that it be retrospective on the facts of this case.
Lord Justice Schiemann:
Subject to the reservation mentioned by Clarke LJ, I also agree with the reasoning and conclusions of Arden LJ.
As to the reservation, since (i) a decision on the retrospectivity question is not necessary for our decision, (ii) the other members of the court differ as to the desirability of expressing a view and, perhaps, as to what that view should be, and (iii) I claim no particular expertise in this field, I think it best also to reserve my position for another day.