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Case name Neutral citation Legal points Case summary Facts Held Comment Sharma v Santander UK Plc [2016] EWLandRA 2015 First Tier Tribunal, Property Chamber, Land Registration Division 26th Oct 2016 Alteration of register – forgery – TR1 and mortgage – extent to which Tribunal had power to remove mortgage The register would be altered to remove the effect of a forged TR1, and consequentially a mortgage. Following separation, the former jointly owned matrimonial home which was subject to a mortgage in favour of Alliance & Leicester Building Society, was transferred into husband’s sole name and he mortgaged it to Santander. Wife applied to HM Land Registry to set the transfer aside on the ground of forgery and for consequential alteration of the register including the removal of Santander’s mortgage. Santander opposed the application but sought to rely on subrogation in the alternative, having paid off Alliance & Leicester. On the evidence, which included forensic handwriting evidence, the tribunal was satisfied that the wife did not sign the transfer. The removal of her name from the proprietorship register was a mistake which the registrar has power to correct under Land Registration Act 2002, Schedule 4, para 5. As to the limitations in para 6 (no correction to prejudicially affect title of registered proprietor in possession) the husband had caused the mistake by his own fraud, and there were no exceptional circumstances which justified not making the alteration. Applying Gold Harp Properties Ltd v McLeod [2014] EWCA Civ 1084, the power to correct a mistake extends to correcting the consequences of that mistake. The removal of Santander’s mortgage was required as part of correcting the mistaken removal of the wife from the proprietorship register. Santander’s alternative claim based on subrogation was not a matter for the Tribunal to determine. Santander ran all the right arguments – that the recipient of a forged transfer is entitled to be registered as proprietor and is entitled to exercise owner’s powers including the power to charge the estate with the repayment of money under s 23(1)(b), so that the registration of the charge was not a mistake, this has been overtaken by authority. HMLR will unravel the charge in consequence of a mistake when registering the transfer. The Tribunal is unlikely to have been able to grant any substantive relief in respect of Santander’s subrogation claim. Nor did the Tribunal consider any application by Santander for an indemnity under Sch 8 Land Registration Act 2002, following the principles in Swift 1st Limited v Chief Land Registrar [2015] EWCA Civ 330. As to costs, the Tribunal ordered the husband and Santander to pay the wife’s costs of the application.
Case name Neutral citation Legal points Case summary Facts Held McLean v Berry and Chadwick [2016] EWHC 2650 (Ch) Secured lending – bank and private investor – marshalling - subrogation A private investor with security over asset A was entitled to invoke the principle of marshalling against a bank with security over Assets A and B A bank provided loan facilities to a partnership (and company), secured by a charge over the partnership assets, and third party charges over property operated by the partnership (as well as a charge over the company’s assets). A private investor provided loan facilities to the partnership (and company) secured by charges over the property operated by the partnership. The bank sought to realise the partnership property in preference to its company security, thereby depriving the private investor of funds to discharge her indebtedness. The administrators of the partnership applied for directions as to the application of the proceeds of sale. The private investor was entitled to invoke the equitable principle of marshalling, applying the law as summarised by Lewison LJ in Highbury Pension Fund Management v Zirfin [2014] Ch 359. The bank had access to other security to reduce its debt. The principle of marshalling fastens on the conduct and the conscience of the double-secured lender, and the equity it creates arises between the two creditors (not between the creditor and the debtor). This could be shaped by any contract between the two creditors, such as a Deed of Priority, which in this case reinforced rather than limited the ordinary operation of the principle of marshalling. Even in the absence of such a bargain, when considering secured claims the equity requires the first mortgagee to be treated as if he had had recourse to the fund which was unavailable to the singly-secured creditor. The principle of marshalling is not identical to the doctrine of subrogation. As Lewison LJ explained, the principle is that the second mortgagee ‘is entitled to stand pro tanto in the place of the first mortgagee in relation to the property over which the second mortgagee has no security, and it is in that sense that we say that the second mortgagee is in effect subrogated to the rights of the first mortgagee. The trustees in bankruptcy were not entitled to claim in the administration of the partnership by operation of the doctrine of subrogation – being a restitutionary subrogation by operation of law rather than a contract-based subrogation, applying Menelaou v Bank of Cyprus UK Ltd [2016] AC 176. The trustees in bankruptcy were claiming in right of the partners themselves, but they were not entitled to prove in competition with creditors of the firm. In any event, even if there was any enrichment, it was not at the expense of the partners, nor was it unjust.
Publication Following the decision in Cardiff CC v Lee [2016] EWCA Civ 1034 the Civil Procedure Rules Committee has introduced new Forms N325 Request for warrant of possession of land following a suspended order for possession and N445 Request for reissue of warrant. The amended forms now make provision for a statement of the payments due and made under the judgment or order to be attached to the request. Pending a review of the application of the rules/forms, this should permit lenders to continue to use the standard form requests following non-payment of money under suspended orders.
Publication The FCA is updating the information sheets that lenders must attach when notifying consumers that they are in arrears or default pursuant to s 86A Consumer Credit Act 1974. The new versions have been published on the FCA website and will become current on 14th April 2017.