REF/2008/1081/1082/1083

ADJUDICATOR TO HER MAJESTY’S LAND REGISTRY
LAND REGISTRATION ACT 2002

IN THE MATTER OF A REFERENCE FROM HM LAND REGISTRY

BETWEEN
DUSAN IJACIC 
Executor of the estate of the late CETKO TRIPKOVIC
APPLICANT
and
(1) GAME DEVELOPMENTS LIMITED
(2) LINK LENDING LIMITED
RESPONDENTS

Property Address: 40 Minford Gardens, London W14 0AN

Title Number: 148095

Before: Mr Simon Brilliant sitting as Deputy Adjudicator to HM Land Registry

Sitting at: Victory House, 30-34 Kingsway, London WC2B 6EX 

On: 15 and 16 September 2009

Applicant’s Representation:		Mr G Hamilton of counsel.

First Respondent’s Representation:	Mr E Price of counsel.

Second Respondent’s Representation:	Did not attend.

DECISION

Rectification and alteration of the register – mortgage fraud – forged charge of the applicant’s house to secure loan advanced by the second respondent – loan not repaid and the house sold by the second respondent to the first respondent under a power of sale – application by the applicant to alter the register by removing the second respondent’s charge –– application by the first respondent to be registered as the proprietor of the house – issue as to dates of and priority of the applications. 

Pinto v Lim [2005] EWHC 630 (Ch), Barclays Bank plc v Guy [2008] EWCA Civ 452, Ajibade v Bank of Scotland plc 2006/0163/0174, Odogwu v Vastguide Ltd [2008] EWHC 3565 (Ch), Guy v Pannone LLP [2009] EWCA Civ 30, Quinto v Santiago Castillo Ltd [2009] UKPC 15.

Introduction

1.	At the time of his death on 6 October 2006, at the age of 80, Mr Cetko Tripkovic was the unencumbered freehold owner of 40 Minford Gardens, London W14 0AN (“the property”), which is registered at HM Land Registry under title number 148095.  The property is a substantial terraced house situated in Shepherd’s Bush.

2.	Following the death of Mr Tripkovic, probate of his estate was granted to his executor Mr Ijacic, the applicant, on 4 October 2007.  On the death of a sole registered proprietor the legal estate vests automatically in the executor without any need for a change in the register. A personal representative of a deceased registered proprietor does not have to apply for registration himself, but may execute a transfer or assent or vesting assent in favour of the person entitled to the legal estate.

3.	Mr Ijacic had not disposed of the property prior to the events giving rise to the references before me and had not chosen to become registered as proprietor of the property in place of Mr Tripkovic.  Mr Tripkovic’s name remains on the register as the proprietor.

4.	On 5 December 2007 a fraudster, purporting to be Mr Tripkovic, applied to Link Lending Limited (“Link”), the second respondent, for a three months’ bridging loan of £400,000 to be secured by a first charge on the property.  On 17 December 2007 the fraudster purportedly executed a charge over the property to secure repayment to Link of a loan of £419,750 (“the charge”).  On 21 December 2007 Link was registered as the proprietor of the charge.

5.	The loan was due to be repaid on 17 March 2008.  It was not repaid.  On Wednesday 26 March 2008 Link sold the property, under its power of sale, to Game Developments Ltd (“Game”), the second respondent, for £500,000 cash.  The sale was completed by a transfer in form TR2 (“the transfer”).

6.	Mr Ijacic’s solicitors became aware of the fraud on Thursday 27 March 2008.  Mr Ijacic had put the property on the market and an agent viewing the property could not gain access.  It was then discovered that Link’s agents had secured the property. 

The original applications

7.	Mr Ijacic has applied to Land Registry to alter the register by removing the charge (“Mr Ijacic’s original application”).  There is an issue I have to decide as to when Mr Ijacic’s original application was made.  Mr Ijacic says it is dated Friday 28 March 2008.  Game says it is dated no earlier than 19 May 2008.  

8.	Game objected to Mr Ijacic’s original application by a letter dated 5 June 2008.  The dispute was referred to the adjudicator under section 73(7) of the Land Registration Act 2002 on 11 August 2008, and became reference 2008/1082.

9.	Link also objected to Mr Ijacic’s original application by a letter dated 28 May 2008.  The dispute was referred to the adjudicator under section 73(7) of the Land Registration Act 2002 on 11 August 2008, and became reference 2008/1083.  Link served a statement of case, as directed by the adjudicator, but has not taken part in the hearing.

10.	Game applied to Land Registry on Tuesday 1 April 2008 to be registered as proprietor of the property following the transfer (“Game’s original application”).  Mr Ijacic objected to Game’s original application by a letter dated 18 April 2008. The dispute was referred to the adjudicator under section 73(7) of the Land Registration Act 2002 on 11 August 2008, and became reference 2008/1081.  

11.	At the commencement of the hearing, I directed that all three references should be consolidated. This was to enable all the evidence and all the arguments to be dealt with together.  It does not alter the fact that Mr Ijacic’s original application and Game’s original application are distinct applications.

The witnesses

12.	Mr Ijacic gave oral evidence.  He called:

(1)	Mr Schindler, a licensed conveyancer working for Mr Ijacic’s solicitors, Myers, Ebner & Deaner (“MED”).

(2)	Ms Oladele, a solicitor employed by MED.

(3)	Ms Aderibigbe, a probate executive employed by MED.

13.	Although Link took no part in the hearing, it had served a witness statement of Mr MacLean.  He is a shareholder in Link and, although now no longer working for it, was the managing director of it at the material time.  Mr MacLean attended the hearing and gave oral evidence.

14.	Game called Mr Lodge, its managing director, to give oral evidence.  Mr Robinson, Game’s solicitor made a witness statement, but he was not required to attend for cross-examination.

The events up to and including Wednesday 26 March 2008

15.	I must now set out the sequence of events in more detail.

16.	In August 2006 Mr Tripkovic was living at the property, but wanted to sell it.  It was described by estate agents then as:

 A totally unmodernised and very spacious house that offers huge potential for the incoming buyer.  The property currently comprises bedsits on the upper floors and a self contained flat on the lower ground floor.  

It was put on the market at £850,000.  A sale was agreed, subject to contract, at £780,000.  The sale failed to proceed, possibly because of the death of Mr Tripkovic.

17.	Mr Tripkovic was still living at the property at the date of his death.  When the grant of probate was obtained the value of the estate in the United Kingdom was sworn at £712,774 gross. Mr Ijacic says the estate comprised primarily some monies abroad and the property.  The estate had valued the property at £600,000 at the date of death.  Subsequently the district valuer challenged this figure, contending it should be £780,000, being the price at which the property was under offer at the date of death.  

18.	Mr Ijacic is not a beneficiary under Mr Tripkovic’s will dated 15 August 1986.  The beneficiaries live abroad.  Mr Ijacic’s instructions to MED were to obtain a grant of probate, administer the estate, sell the property and account to the beneficiaries.  Offers were received of £680,000 and £700,000.  Then, on 1 February 2008, an offer was made of £750,000 and a contract was sent out to the intended purchasers’ solicitors.  MED arranged for access to the property to be available on Thursday 27 March 2008 for a valuation inspection. 

19.	Starting in January 2008 Ms Oladele, then a trainee, used to visit the property periodically, about once a week, to check that nothing untoward was happening.

20.	Meanwhile, whilst these offers were being made, events wholly unknown to Mr Ijacic or MED had taken place.  Link is a company which, for just over three years, has specialised in substantial bridging loans.  The average loan is between £250,000 and £350,000.  It lends about £100M per year.  Potential borrowers are introduced to Link through brokers.

21.	On 5 December 2007, two months after the grant of probate, an application form for a bridging loan of £400,000 over three months was submitted to Link by a fraudster purporting to be Mr Tripkovic.  He gave addresses in Central London and Alicante, Spain.  The property was said not to be occupied.  The solicitors acting for him were said to be Fernando & Co of Tooting Bec.  His annual income was said to be £220,000, as a management consultant, and £50,000, by way of rental income.  He gave details of a Barclays Bank account.  The property was estimated to be worth £800,000.

22.	Link was then supplied with what purported to be a copy of a page of Mr Tripkovic’s passport, and a copy of Mr Tripkovic’s driving licence and counterpart driving licence.  All were apparently certified by Mr Rajoo of Fernando & Co.  Copies of recent utility bills, stamped by National Westminster Bank, and a recent Barclays Bank statement, all addressed to the property, were also supplied. The statement related to a different account to that referred to in the application form. 

23.	On 11 December 2007 Link made a mortgage offer to the fraudster. It was for a secured bridging loan of £419,750 for a term of three months, with the interest being paid monthly from the loan. In a side letter it was agreed that the monthly payments would be made at the end of the three month period and that two monthly interest payments would be deducted from the advance and retained.  In this way only the final interest payment needed to be made, with the repayment of the capital, on the redemption day.

24.	On 17 December 2007 the fraudster, purporting to be Mr Tripcovic, executed a mortgage deed charging the property to Link to secure repayment of the loan of £419,750 on 17 March 2008.  The net amount paid to the fraudster was £399,788.50, which sum was transferred to Fernando & Co.  On 21 December 2007 Link was registered as the proprietor of the charge.

25.	Although the point was not conceded by Mr Price, I have had no trouble concluding on the evidence that the obtaining of the loan from Link was fraudulent, and no one has suggested otherwise.

26.	On 27 February 2008 Link wrote to the fraudster, asking for notification of the plans to repay the balance in full on 17 March 2008.  There was no response to that letter, so Link asked Oakes Corporate Property Services (“Oakes”), property asset managers, to assist in the likely repossession and sale of the property. They attended the property on 14 March 2008.  

27.	Oakes has a panel of property developers who are able to make offers in cash for repossessed properties they are managing on behalf of lenders.  One such developer is Game.  Mr Lodge told me that Game was in the fortunate position of having available cash at this time following earlier property sales.  He had dealt with Oakes before.  Mr Williams of Oakes informed Mr Lodge as early as 14 March 2008 that the property would be available to purchase.

28.	Oakes were unable to contact the man they believed to be Mr Tripkovic, and on 18 March 2008 the fraudster was sent a final demand on behalf of Link informing him that possession would be taken of the property on Tuesday 25 March 2008, if the full balance due of £426,728.81 was not then paid.

29.	Mr Lodge carried out a drive by assessment of the value of the property.  It appeared to him to be in a poor state of repair and possibly occupied by squatters.  He thought he might obtain £800,000 if fully refurbished and he decided to put in an offer, which he frankly described to me as “cheeky”, of £500,000.  This offer was accepted by Link.  Mr MacLean’s evidence was that property prices in the area had recently dropped 20%, and he did all he could to realise the property.

30.	Nothing further having been heard from the man purporting to be Mr Tripkovic, on Tuesday 25 March 2008 Oakes took possession of the property.  It put up a sign to that effect in a window at the property.  There is no dispute that, pursuant to clauses 31-34 of the conditions governing the charge, Link had the power to take possession of and sell the property in the events which have happened.

31.	At 9.28am on Wednesday 26 March 2008 Mr Robinson, on behalf of Game, made an official search of the property, giving priority until 7 May 2008.  At 3.50pm on the same day Link exchanged contracts with Game for the sale of the property at a price of £500,000.  It was agreed that completion would be the following day or earlier by agreement.  Under the contract Link sold as mortgagee in possession and transferred the property with limited title guarantee.  

32.	At 4.50pm later that day Mr Robinson spoke to Mr MacDonald at Moore Blatch, Link’s solicitors, who confirmed that the purchase moneys had arrived and that he would date the transfer with that day’s date and the matter could be treated as concluded.  The transfer in form TR2 is dated 26 March 2008 and executed by certain partners in Moore Blatch as attorneys for Link.  I am therefore satisfied that the transfer took place on Wednesday 26 March 2008.

The events from on and after Thursday 27 March 2008

33.	It was on the following day, Thursday 27 March 2008, that MED had arranged for access to the property to be available for a valuation inspection by the proposed purchaser, as already explained.  Ms Oladele was told by the valuer that the key provided by MED would not open the door of the property.  She immediately attended at the property and saw the sign that Oakes had put up in the window.  Oakes was contacted and the fraud came to light.  

34.	Later that afternoon MED sent a letter by fax notifying Oakes of the fraud.  MED also sent a letter by fax to Link, together with a copy of the letter sent to Oakes, requesting the immediate removal of the charge from the register.  MED also sent a letter by fax to Land Registry, which read:

	Further to our telephone call we confirm we are currently dealing with the estate of Mr Cetko Tripkovic who died in October 2006.  We enclose herewith certified copies of the Grant of Probate and death certificate.  A charge was registered in the favour of [Link] on 21 December 2007 which we believe was fraudulently obtained.  The beneficiary of the charge, [Link], has now taken possession of the property.  We should be grateful if you could kindly review your file and advise us of the next steps that need to be taken.

35.	On Friday 28 March 2008 MED sent a letter by fax to Land Registry:

	Further to your telephone call we enclose herewith the final page of Mr Tripcovic’s Will.  We are applying to rectify the register to remove the fraudulent charge dated 17 December 2007.  

36.	On the same day MED sent a letter by fax to Mr Robinson:

	We are currently applying to rectify the register to remove a charge dated 17 December 2007 in favour of [Link] which was fraudulently entered into by persons unknown at this stage.

37.	In the case summary prepared by Land Registry Mr Ijacic’s original application is described as follows:

	Application to remove charge from the register made by letter from [MED] dated 27 March 2008, confirmed by AP1 dated 19 May 2008.  The date of the application is 28 March 2008.

38.	This is inaccurate in so far as the letter dated Thursday 27 March 2008 simply asks for advice.  It is the letter dated Friday 28 March 2008 which first expressly mentions an application to rectify.  It may be that there is a typographical error, so that “27” should read “28”. 

39.	By rule 15 of the Land Registration Rules 2003 an application received on a business day is to be taken as made at the earlier of (1) the time of the day that notice of it is entered in the day list, or (2) midnight marking the end of the day it was received if the application was received before 12 noon, or (3) midnight marking the end of the next business day after the day it was received if the application was received at or after 12 noon.

40.	On Monday 31 March 2008 Mr Robinson sent to Land Registry by DX Game’s original application, namely an application in form AP1 to register Game as the proprietor of the property.  This has been dated by Land Registry as Tuesday 1 April 2008.  This was within the priority period afforded by the search made by Mr Robinson on Wednesday 26 March 2008.  

41.	On 18 April 2008 MED wrote to Land Registry on behalf of Mr Ijacic objecting to Game’s original application.  MED relied upon two grounds.  First, it was said that the charge was fraudulently obtained.  Secondly, it was said that the transfer was at an undervalue.  The latter point has not been pursued before me as a ground of objection, simply as a comment on the value of any indemnity.

42.	On 15 May 2008 Land Registry emailed MED:

	Further to this matter, I am serving formal notice of your application to remove the charge dated 17 December 2007 on [Link].  I note that you have not lodged a completed application form AP1, as required by rule 13(1) of the Land Registration Rules 2003 ... Please lodge the appropriate form duly completed.

43.	Rule 13(1) of the Land Registration Rules 2003 provides that any application made under the Land Registration Act 2002 or the Land Registration Rules 2003 for which no other application form is prescribed must be made in form AP1.  This is the default form and the appropriate form for making an application to alter the register, as there is no separate form prescribed for this purpose.

44.	On 16 May 2008, without waiting for the receipt of an application in form AP1, Land Registry wrote to Game:

I am writing to inform you that we have received an application to cancel the charge in favour of [Link] dated 17 December 2007, registered 21 December 2007.

45.	On 19 May 2008 MED sent to Land Registry by DX an application in form AP1 to remove the charge from the register.  As already stated, Game objected to Mr Ijacic’s original application by a letter from Mr Robinson dated 5 June 2008, and Link objected by a letter from Moore Blatch dated 28 May 2008.  Both letters pointed out that, notwithstanding any fraud, Link as the proprietor of the charge had power to sell the property. Reliance was placed on the “statutory magic” afforded by section 58(1) of the Land Registration Act 2002.  This provides:

	If, on the entry of a person in the register as the proprietor of a legal estate, the legal estate would not otherwise be vested in him, it shall be deemed to be vested in him as a result of the registration.

The issues

46.	The remainder of this decision is divided into the following paragraphs dealing with the issues I have to decide:
	
(1)	When was Mr Ijacic’s original application made?	47-53	
			
(2)	Does Mr Ijacic’s original application have priority over Game’s original application?	54-60	
			
(3)	If yes, is there power to alter the register to remove the charge under paragraph 5 of schedule 4 of the Land Registration Act 2002?	61	
			
(4)	If yes, is there a restriction on how the power to alter the register must be exercised, pursuant to paragraph 6(2) of schedule 4 of the Land Registration Act 2002?	62-66	
			
(5)	If there is no such restriction, are there exceptional circumstances which would justify not making the alteration, within paragraph 6(3) of schedule 4 of the Land Registration Act 2002?	67-80	
			
(6)	If the register were to be altered by removing the charge, from what date would that take effect?	81	
			
(7)	How should Game’s original application be dealt with?	82-90	

When was Mr Ijacic’s original application made?

47.	Mr Ijacic’s original application and Game’s original application are entirely separate applications and need to be looked at in turn.  Mr Price submits that Game’s original application takes precedence over Mr Ijacic’s original application because it was made earlier in time.

48.	Mr Price’s primary argument is based upon rule 13(1) of the Land Registration Rules 2003, referred to in paragraph 43 above, which requires the application to be made in form AP1.  He says that an application to alter the register can only be made by an application in form AP1, and that an application made by letter is not a valid application.  It was only when the form AP1 was sent to Land Registry on 19 May 2008 that the application was made. It was therefore made later in time than Game’s original application which is dated Tuesday 1 2008.

49.	Mr Price also puts forward a secondary argument that neither of the letters from MED to Land Registry dated Thursday 27 March 2008 and Friday 28 March 2008 is expressed to be an application to alter the register by removing the charge.  Whislt I accept that submission in respect of the first letter, I do not accept it in respect of the second letter.

50.	Mr Price is able to muster a powerful argument in support of his primary argument.  Rule 206(1) of the Land Registration Rules 2003 provides that the schedule 1 forms must be used where required by the rules.  The form AP1 is a schedule 1 form.  Under rule 322(1) of the Land Registration Rules 1925 the registrar had the power to relax the regulations made by general rules, and this could be used in connection with prescribed forms.  This rule is not carried forward into the Land Registration Rules 2003. Instead provision is made in rule 209 of the Land Registration Rules 2003 for an application to be made for the use of non-prescribed forms.  But Mr Ijacic did not and had no grounds to make such an application. 

51.	Rule 206(2) of the Land Registration Rules 2003 deals with schedule 3 forms.  These forms differ in that whilst they must be used, it is with such alterations and additions as are desired and the registrar allows.

52.	Mr Hamilton relies on rule 16 of the Land Registration Rules 2003 which deals with applications which are not in order but gives the registrar power to raise requisitions or reject or cancel the application.  This suggests there is a discretion.  I agree with Mr Hamilton that Mr Price’s argument seems to be conspicuously lacking in merit.  MED gave Mr Robinson notice of the application to alter the register as early as Friday 28 March 2008, as explained in paragraph 36 above.  There is no information contained in the form AP1 additional to that which had been provided earlier.

53.	In my judgment, I do not have the jurisdiction to decide when Mr Ijacic’s original application was made.  It is my function to decide disputes between the parties which have been referred to me by Land Registry.  I have no right to decide upon disputes between one party and Land Registry.  Nor do I have any right to control or supervise Land Registry’s procedures or decisions.  Land Registry has determined the date of Mr Ijacic’s original application as Friday 28 March 2008, and that has not been challenged by judicial review.  I shall therefore proceed on the basis that Mr Ijacic’s original application is dated Friday 28 March 2008, and is therefore earlier in time to Game’s original application.

Does Mr Ijacic’s original application have priority over Game’s original application? 
  
54.	Mr Price submits that, whatever the correct date of Mr Ijacic’s original application, Game’s original application nevertheless has priority protection.  I have already stated that Mr Robinson made an official search of the register on Tuesday 25 March 2008, which gave priority until 7 May 2008.  Game’s original application is dated Tuesday 1 April 2008 and falls within the priority period.

55.	Section 72 of the Land Registration Act 2002 provides:

(1)	For the purposes of this section, an application for an entry in the register is protected if –

	(a)	it is one to which a priority period relates, and

	(b)	it is made before the end of that period.

(2)	Where an application for an entry in the register is protected, any entry made in the register during the priority period relating to the application is postponed to any entry made in pursuance of it.

56.	Mr Price says that the effect of this provision is that Mr Ijacic’s original application is postponed to Game’s original application.  Mr Hamilton disagrees for two reasons.  First, he says that an official search can only afford priority against a third party, not against the registered proprietor.  No authority is cited for this proposition and I am unable to accept it.

57.	Mr Hamilton says, secondly, that Mr Ijacic’s original application is not an application for an entry in the register, within the meaning of section 72 of the Land Registration Act 2002.  It is either an application to remove an entry from the register, or being an application to rectify the register on the grounds of mistake it is of a fundamentally different nature to an application to register a competing interest.

58.	Paragraph 5.3 of Land Registry’s Practice Guide 12 entitled Official Searches and outline applications provides:

	An official search certificate with priority grants priority to the protected registrable disposition over other registrable dispositions, rights, interests or matters that have not been entered on the day list before the official search with priority and are not themselves protected by an earlier official search with priority (if capable of being protected by an official search).

59.	There is a distinction to be drawn between the making of an entry in the register, the removal of an entry in the register and the alteration of the register pursuant to an application under the Land Registration Act 2002 or the Land Registration Rules 2003.  Thus, rule 20 of the Land Registration Rules 2003 provides:

	An entry in, removal of an entry from or alteration of the register pursuant to an application under the Act or these rules has effect from the time of the making of the application.

60.	I accept the force of the argument that where a seller of land attempts to remove an entry during the priority period because he has, for example, extinguished for consideration an easement which benefits the land, section 72(2) of the Land Registration Act 2002 should not be construed narrowly.  But that is not what has happened here.  It does not seem to me that an official search is apt to afford priority over an application to alter the register for the purpose of correcting a mistake.  As Mr Hamilton said in opening, if an application for rectification can be made after a transfer, why should it not be made before a transfer? I accept Mr Hamilton’s argument on this point.

Is there power to alter the register to remove the charge under paragraph 5 of schedule 4 of the Land Registration Act 2002?

61.	In respect of alteration of the register, I am exercising the powers of the registrar.  Paragraph 5(a) of schedule 4 of the Land Registration Act 2002 provides that the registrar may alter the register for the purpose of correcting a mistake. The charge was a forgery and is void.  The entry of an estate or interest purportedly arising under a void disposition is a mistake.  I therefore have the power to remove the charge.

Is there a restriction on how the power to alter the register must be exercised, pursuant to paragraph 6(2) of schedule 4 of the Land Registration Act 2002?

62.	Paragraph 1 of schedule 4 of the Land Registration Act 2002 provides that alteration involving the correction of a mistake and prejudicially affecting the title of a registered proprietor amounts to rectification.  

63.	Paragraph 6(1) of schedule 4 of the Land Registration Act 2002 provides:

	This paragraph applies to the power under paragraph 5, so far as relating to rectification.

64.	Paragraph 6(2) of schedule 4 of the Land Registration Act 2002 provides:

	No alteration affecting the title of the proprietor of a registered estate in land may be made under paragraph 5 without the proprietor’s consent in relation to land in his possession unless –

(a)	he has by fraud or lack of proper care caused or substantially contributed to the mistake, or

(b)	it would for any other reason be unjust for the alteration not to be made.

65.	A registered estate is defined in section 132(1) of the Land Registration Act 2002 as:

	A legal estate the title to which is entered in the register, other than a registered charge.

66.	Accordingly, the restriction contained in paragraph 6(2) does not apply to Mr Ijacic’s original application which concerns the removal of a registered charge.

If there is no such restriction, are there exceptional circumstances which would justify not making the alteration, within paragraph 6(3) of schedule 4 of the Land Registration Act 2002?

67.	Paragraph 6(3) of schedule 4 of the Land Registration Act 2002 provides that if on an application for alteration amounting to rectification, the registrar has power to make the alteration, it must be approved, unless there are exceptional circumstances which justify not making the alteration.  

68.	The relevant provisions relating to an indemnity are to be found in paragraph 1 of schedule 8 of the Land Registration Act 2002.  This provides:

(1)	A person is entitled to be indemnified by the registrar if he suffers loss by reason of-

(a)	rectification of the register,

(b)	a mistake whose correction would involve rectification of the register...

69.	The rival arguments are set out as follows.  Mr Price relies upon paragraph 29 of Game’s statement of case and a written submission made after the hearing.  Mr Hamilton relies upon paragraphs 14-17 of Mr Ijacic’s statement of case, paragraphs 42-53 of his skeleton argument and his written response to Mr Price’s written submission.

70.	I have given careful consideration to the submissions and reminded myself that it is not simply a question of balancing the equities.  There have to be exceptional circumstances.  In my judgment, there are no exceptional circumstances which justify not making the alteration.  

71.	First Mr Price submits that if the charge was removed and Game was not registered as the proprietor, Game would suffer very considerable losses.  The losses are set out in paragraph 29.1(i) of Game’s statement of case and include the purchase price of £500,000 paid to Link, the costs of the purchase, the costs of a loan subsequently taken out and secured on the property, management costs and loss of profit.  

72.	Secondly, Mr Price submits that as Game is not actually registered as proprietor of the property, it is not certain that it would be entitled to claim an indemnity or that such a claim would succeed.  

73.	I do not agree with these submissions.  I am of the view that a refusal to register the transfer because the charge no longer existed at the date of Game’s original application would be a direct consequence of rectification of the register.  There is no requirement that the person claiming an indemnity be a registered proprietor.  The fact that there are losses, including consequential losses, cannot amount to exceptional circumstances.  The indemnity covers consequential losses as well as the value of the estate lost.

74.	Thirdly, Mr Price relies on the date when the value of the property would be calculated.  Paragraph 6 of schedule 8 of the Land Registration Act 2002 provides:

Where an indemnity is payable in respect of the loss of an estate, interest or charge, the value of the estate, interest or charge for the purposes of the indemnity is to be regarded as not exceeding-

(a)	in the case of an indemnity under paragraph 1(1)(a), its value immediately before rectification of the register (but as if there were to be no rectification), and

(b)	in the case of an indemnity under paragraph 1(1)(b), its value at the time when the mistake which caused the loss was made.

75.	Mr Price says that, having regard to the decrease in property prices, the freehold would now be valued at less than the value paid.  As to this submission, first, there is no evidence to support this.  Secondly, it now apparent that £500,000 was a low figure and it is far from clear that the real value had dropped below that figure.

76.	Fourthly, Mr Price says that even if Game were entitled to an indemnity, it might not be able to recover all of its consequential losses.  No reason is put forward as to why this might be, no particularisation is given of the consequential losses said to be irrecoverable and I do not consider in principle that this is an exceptional circumstance.  

77.	Fifthly, it is said that if Game was not entitled to an indemnity, it would have to make a claim against Link.  Such a claim would raise difficult issues, it is not clear whether all of Game’s losses would be recoverable and Link may not be able to satisfy any judgment.

78.	I do not regard the last point as a good one.  There is no evidence that Link is not good for money and Mr Price conspicuously did not cross-examine Mr MacLean, still a shareholder of Link, on this point.  I accept that there are arguments that litigation against Link may not be straightforward, but given my view that an indemnity is likely to be recovered, I do not regard this risk as amounting to an exceptional circumstance.

79.	Sixthly, Mr Price makes the attractive point that Mr Ijacic does not want to use the property.  He simply wants to sell it, so why should he not be content with an indemnity?  I accept that if someone has been in possession of a property for some time as a home that may be a reason for resisting rectification:  see Pinto v Lim [2005] EWHC 630 (Ch) at paragraph 97.  This is because Parliament favours the position of the proprietor in possession.  It does not follow that not wanting to be in possession is an exceptional circumstance.  

80.	I will therefore direct the registrar to give effect to Mr Ijacic’s original application.

If the register were to be altered by removing the charge, from what date would that take effect?

81.	If I accede to Mr Ijacic’s original application and the charge is removed from the register, Mr Hamilton submits that it will be removed as from Friday 28 March 2008.  This is the effect of rule 20 of the Land Registration Rules 2003 which is set out at paragraph 59 above.  I agree.

How should Game’s original application be dealt with?

82.	Prior to Friday 28 March 2008, Link had on Wednesday 26 March 2008 effected a transfer of the property to Game.  That was a valid disposition because of section 58(1) of the Land Registration Act 2002, referred to in paragraph 45 above.  Reference should be made to section 23(2) of the Land Registration Act 2002 which provides that:

	Owner’s powers in relation to a registered charge consist of –

(a)	power to make a disposition of any kind permitted by the general law in relation to an interest of that description, other than a legal sub-mortgage, and

(b)	power to charge at law with the payment of money indebtedness secured by the registered charge.

83.	Reference should also be made to section 24 of the Land Registration Act 2002 which provides that:

	A person is entitled to exercise owner’s powers in relation to a registered estate or charge if he is-

	(a)	the registered proprietor, or

	(b)	entitled to be registered as the proprietor.

84.	Game became the owner of the property in equity on Wednesday 26 March 2008. But a transfer is a disposition which is required to be completed by registration: section 27(2) of the Land Registration Act 2002.   Section 27(1) of the Land Registration Act 2002 provides:

	If a disposition of a registered estate ... is required to be completed by registration, it does not operate at law until the relevant registration requirements are met.

85.	Paragraph 2(1) of schedule 2 of the Land Registration Act 2002 provides:

	In the case of a transfer of whole or part, the transferee, or his successor in title, must be entered in the register as the proprietor.

86.	Accordingly, on Tuesday 1 April 2008, Game’s original application in form AP1 was made in order to enter Game in the register as the proprietor of the property.

87.	Game makes a powerful case, based in sections 23, 24 and 58 of the Land Registration Act 2002 that it was entitled to be registered as proprietor on Wednesday 26 March 2008, and that were it not for the registration gap it would have been so registered on that date.  Registration now would not prevent a later application for rectification of the register, although it is submitted by Mr Price that as a matter of law rectification would not be possible.  This is because no mistake has in fact occurred, as the sale by Link to Game was a valid transaction.

88.	There are a number of recent cases dealing with the issue whether, if Game had already been registered as the proprietor, it would now be possible to rectify the register.  The contrary argument to that adduced by Mr Price is that the direct consequences of the original mistake can be corrected.  There is at present a lively debate on this issue.  There is as yet no determinative decision of a higher court.  The debate is admirably summarised in a recent article in Estates’ Gazette, published since the hearing.  The decisions are Barclays Bank plc v Guy [2008] EWCA Civ 452, Guy v Pannone LLP [2009] EWCA Civ 30, Ajibade v Bank of Scotland plc 2006/0163/0174, Odogwu v Vastguide Ltd [2008] EWHC 3565 (Ch) and Quinto v Santiago Castillo Ltd [2009] UKPC 15.  

89.	But since Game has never been registered as the proprietor, there is no application before me to rectify any registration of Game.  What I have to consider is whether Game ought to be registered as the proprietor of the property as a result of the transfer, which was validly made on Wednesday 26 March 2008.

90.	 As Mr Hamilton reminded me at the end of his closing submissions, the critical date must be Tuesday 1 April 2008, which is the date of Game’s original application.  I have already decided that the register was altered as from Thursday 28 March 2008 by the removal of the charge.  Alteration of the register is prospective.  On Tuesday 1 April 2008 there was, accordingly, no charge on the register.  It follows that I ought to refuse to register Game as the proprietor and I will direct the registrar to cancel Game’s original application. 

91.	 Costs usually follow the event.  If Game wishes to suggest that there is any specific reason why that course should not be adopted in this case, written reasons must be submitted within 14 days of the receipt of this decision to the adjudicator and to Mr Ijacic’s solicitors.  In the meantime, Mr Ijacic’s solicitors should, within 14 days of receipt of this decision, serve a schedule of costs incurred since 11 August 2008 on the adjudicator and Game’s solicitors.  Game’s solicitors should, within 14 days thereafter, serve a response on the adjudicator and Mr Ijacic’s solicitors.

Dated 16 October 2009

 
BY ORDER OF THE ADJUDICATOR TO HM LAND REGISTRY