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March 2019

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Dhillon v Barclays Bank Plc [2019] EWHC 475 (Ch) Forged dispositions – mistake - rectification – exceptional circumstances Devon Commercial Property Ltd v Barnett [2019] EWHC 700 (Ch) LPA Receivers – sale at undervalue – good faith – proper purpose – special purchaser – expert evidence Taurusbuild Ltd v McQue [2019] UKUT 81 (LC) Legal mortgage – implied grant of right to park and right of way Update: FCA confirm increase in Ombudsman award limits
Case name Neutral citation Legal points Case summary Facts Held Comment Dhillon v Barclays Bank Plc [2019] EWHC 475 (Ch) Forged dispositions – mistake - rectification – exceptional circumstances Despite finding that a mortgage had been registered by mistake in consequence of a forged transfer, which gave rise to a right to rectification, the High Court refused to direct the removal of the charge since there were exceptional circumstances which justified it in not doing so. D, a secure tenant, sought to exercise a right to buy her council property, but her application was fraudulently hijacked by her husband, H. The property was purportedly transferred to D, subject to bridging finance to raise the £167,000 purchase price, but shortly after the property was transferred to a company, CEL, subject to further bridging finance to pay the (further) purchase price of £250,000. The bridging loan was subsequently refinanced with a loan from Barclays Bank. Thus, CEL became the registered proprietor of the property, subject to a registered charge in favour of BB. H was subsequently convicted of offences arising out of the property transaction. CEL was subsequently struck off the register and dissolved, so that the property vested in the Crown who subsequently disclaimed title. In subsequent proceedings against the Crown Estate Commissioners (the title transfer proceedings), it was ordered that the property be transferred to D. Thus, D became the registered proprietor of the property, subject to BB’s charge. D then sought rectification of the register to delete the entry relating to BB’s charge. She did so on the basis that the initial transfer, and the subsequent transfer, both of which purported to contain her signatures, were forged transfers and therefore void dispositions. Following an assessment of the evidence, the judge made findings of fact that D did not sign either of the transfers. The judge also dismissed an argument by BB that D’s claim should be struck out as an abuse of process for not having been brought in the title transfer proceedings. As to the entitlement to rectification for the purposes of Paras 1 and 2, Sched 4, Land Registration Act 2002 (alteration which involves the correction of a mistake and which prejudicially affects the title of a registered proprietor), it was common ground that a ‘mistake’ includes the case where a person has been registered as proprietor pursuant to a void disposition such as a forged transfer (NRAM v Evans [2018] 1 WLR 639; Antoine v Barclays Bank Plc [2018] EWCA Civ 2846). It also included the power to correct ‘derivative’ mistakes, where there is a void disposition from A to B, with B granting a legal charge to C – the power extends to removing not merely the registration of B’s name from the register, but also C’s legal charge (Barclays Bank Plc v Guy [2010] EWCA Civ 1396; Macleod v Gold Harp Properties Ltd [2014] EWCA Civ 1084). Thus, in principle, on the basis that both transfers were forged, and that registration of CEL was a mistake, the register would be altered by removing also the BB charge. Under Para 3(3), Sched 4, LRA 2002, where the court has power to make an order for alteration which affects the title of the proprietor of a registered estate, then subject to the requirements of Para 3(2), it must do so, unless there are exceptional circumstances which justify its not doing so. What constitutes exceptional circumstances is set out in Paton v Todd [2012] 2 EGLR 19. This is a question of fact. The effect of the order made in the title transfer proceedings was to place D in no better position than CEL would have been in. Any alteration would place her in a better position. By not ordering alteration, D will be left in much the same position she would have been in had she exercised her right to buy. She would have been left with a property subject to a charge to fund the purchase price. There are thus exceptional circumstances which justify not altering the register by removing the BB charge. The court also dismissed an argument by the Chief Land Registrar that there was no prejudicial effect in altering the charges register by removing BB’s charge because D was in actual occupation so that her right to claim alteration was an overriding interest, since this was contrary to the Court of Appeal decision in Swift 1st Ltd v Chief Land Registrar [2015] EWCA Civ 330. This is a fairly complicated case which largely turns on its own facts, although it does contain a helpful review of the statutory scheme of the LRA 2002 and the caselaw, concerning rectification in respect of ‘derivative’ mistakes and some of the consequential considerations. They key point is that the court exercised its powers under Para 3(3), Sched 4, LRA 2002 not to order rectification by the removal of a registered charge because there were exceptional circumstances which justified it not doing so, and which largely turned on an assessment of the claimant’s ‘before’ and ‘after’ positions, and the fact that the removal of the charge would land her with a windfall.
Case name Neutral citation Legal points Case summary Facts Held Comment Devon Commercial Property Ltd v Barnett [2019] EWHC 700 (Ch) LPA Receivers – sale at undervalue – good faith – proper purpose – special purchaser – expert evidence The High Court dismissed a claim for damages for breach of duty against LPA Receivers who had sold commercial property to a special purchaser. The court also ruled as inadmissible, expert evidence from corporate rescue agents. In 2007, C mortgaged its freehold commercial premises to a company, who assigned it to another company, AM. Following default in payment of interest, AM appointed Ds as LPA Receivers. The balance due was approx. £3.46M. Ds marketed the premises and in May 2011 sold to a subsidiary of AM for £2.75M, leaving a substantial shortfall. C sued Ds for damages for various alleged breaches of duty – principally that they had failed to obtain the best price reasonably obtainable by selling it to a special purchaser, and that they had failed to act in good faith or for a proper purpose – to exercise their powers for the purpose of securing repayment of the debt and not to put themselves in a position of conflict. Ds denied any breach of duty. At trial the judge was faced with a substantial amount of witness and documentary evidence. He made some preliminary observations: (1) The burden of proof: In a case where the mortgagee sells to connected company, the burden of proof is upon the mortgagee to prove that the price paid was the best price reasonably obtainable. The same principle applies to receivers (Silven Properties Ltd v Royal Bank of Scotland Plc [2004] 1 WLR 997). But Silven does not show that the same applies where a receiver sells to a company in which the mortgagee has an interest. There is thus no self-dealing and no conflict of interest. Accordingly, the burden of proving allegations of bad faith remains upon C. (2) In accordance with permissions given at case management stage, the parties relied on expert evidence as to (a) valuation, and (b) the duties of LPA receivers – the permission being to adduce expert evidence in the field of ‘corporate rescue and recovery, in particular in relation to receivers, to address the issue relating to the alleged breaches of duty of the defendants’. However, the judge noted that Ds had not been appointed as ‘corporate rescue and recovery’ agents and should not be judged by the standards of such agents. With hindsight, the form of order was not a good idea. Permission to adduce expert evidence should always be tied to specific issues between the parties which arise on the statements of case. Here, the court had the written reports of two insolvency practitioners, but neither of them possessed sufficient appropriate expertise in the field of Law of Property Act receiverships. The court went on to make a number of observations about the function of expert evidence, but ultimately ruled that this particular evidence was inadmissible. As to valuation, the court weighed the expert evidence and made findings as to the market value of the property at the relevant times, and that its value to a special purchaser in May 2011 was £2.75M. The court then went on to consider a list of 17 issues, together with 20 particulars in which Ds were alleged to have acted in bad faith or for an improper purpose, but save for minor exceptions that court found that none of them had been proved. As to whether Ds had failed to take reasonable care to obtain a proper price, it was largely accepted that AM was a ‘special purchaser’ as defined in the RICS ‘Red Book’, but that overall there had been no breach of duty. Ds did not place themselves in a position of conflict, nor did they fail to treat AM as a special purchaser. Although it was not necessary, the court went on to consider the question of causation and loss. The court rejected Cs argument that where a defendant’s breach of duty is established but evidence of loss is absent or sparse, the court is entitled to presume against the defendant that the loss to be compensated is the ‘highest value’. This put the mater too high. Mere absence or sparseness of evidence of loss is not enough. However, if the claimant proves a breach of duty, but the actions of the defendant prevent the claimant from adducing evidence to prove the value of his loss, the burden can properly be put on the defendant to show that the value was zero; otherwise it can be presumed to be the highest possible price. On the evidence, even if Ds had been in breach of duty, such breach would not have caused any loss. Any loss was caused as a result of the damage done to the residential and commercial property markets by the financial crunch of 2008 and the economic crisis which followed it. C borrowed money secured against a valuation of the property in the good times, and found that it was no longer enough in the bad. That was not Ds fault. This is a lengthy judgment. It helpfully addresses some of the difficult issues which can arise in undervalue cases about (1) the particular duties of LPA receivers, (2) the burden of proof, and (3) the proper scope of expert evidence. Note especially that the court ruled as inadmissible, expert evidence from corporate recovery agent (which had been permitted at case management stage). Normally in undervalue cases, the expert evidence will be limited to (a) valuation, and (b) marketing. Where there are particular allegations about good faith or acting for a proper purpose, the court is unlikely to be assisted by expert evidence. In this case the judge held that it was not ‘reasonably required’ for the purposes of CPR 35.1 and referred to the dicta of Warren J in British Airways Plc v Spencer [2015] EWHC 2477 (Ch) at para [68].
Case name Neutral citation Legal points Case summary Facts Held Comment Taurusbuild Ltd v McQue [2019] UKUT 81 (LC) Legal mortgage – implied grant of right to park and right of way The Upper Tribunal (Lands Chamber) upheld a decision of the First-tier Tribunal, on different grounds, that an implied right to park and a right of way was capable of passing on the grant of a legal mortgage. Mr & Mrs M applied to HM Land Registry to register a right to use 2 x parking spaces in a car park at Dinsdale Hall (of which T had applied to become the registered proprietor) together with a right of access to their adjacent property. The entitlement was claimed as a result of a planning obligation in a planning permission which allowed the conversion of the Hall into a number of apartments and separate dwellings (of which M’s was one), subject to a requirement for car-parking. The First-tier Tribunal upheld the application on the basis that the arrangement gave rise to an equitable easement. T appealed. M had acquired title to their property pursuant to a power of sale contained in a registered charge. The transfer did not contain an express grant of a right to park or a right of way, but neither the transfer nor the charge excluded the operation of s 62 Law of Property Act 1925. On the facts, the right to park and the right of way was capable of being implied into the charge by reason of s 62 Law of Property Act 1925 and Wheeldon v Burrows. The judge had been wrong to reach his decision on the basis of an equitable easement. The rationale for this decision is that a legal mortgage is a conveyance within the meaning of s 205(1)(ii) Law of Property Act 1925 and is capable of expressly or impliedly granting or reserving easements.
Update On 8th March 2019 the FCA confirmed in a press release that as from 1st April 2019 the award limit for the Financial Ombudsman Service will increase from £150,000 to £350,000 for complaints about acts or omissions by firms after 1st April 2019, and to £160,000 for complaints about acts or omissions for firms before 1st April 2019 and which are referred to the Ombudsman service after that.

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