REF//2008/0602 and REF 2009/0047 /0052

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

IN THE MATTER OF 
 REFERENCES FROM HM LAND REGISTRY

BETWEEN

ALEXANDER KARCZEWSKI CROWLEY
(Personal Representative of Verena Marcelina Crowley, deceased)
Applicant
and

SRINIVAS GUDIPATI

Respondent
AND BETWEEN

ALEXANDER KARCZEWSKI CROWLEY
(Personal Representative of Verena Marcelina Crowley, deceased)

Applicant
And

(1)	SRINIVAS GUDIPATI
(2)	STANDARD LIFE BANK LIMITED
 Respondents

Property: Flat 225, Lexington Building, Fairfield Road, London E3 2UE
Title Number: EGL279890

FURTHER DECISION

Whether deceased had over-riding interest under paragraph 2 of Schedule 3 to the Land Registration Act 2002 – deceased in occupation – right to seek rectification is over-riding interest – no inquiries made of her by the Bank – order that charge be removed  

Introduction

1.	Following my decision dated 12 November 2009 I invited the parties to make written submissions relating to the question whether Mrs Crowley had an over-riding interest which was binding on the Bank, and which therefore entitled her son, Mr Crowley, to the relief he sought.

2.	I have seen the submissions of the First Respondent dated 30 November 2009 (which do not deal with this point), the submissions of the Bank sent under cover of a letter from their solicitor dated 20 November 2009, and the submissions made on behalf of Mr Crowley by Mr Grant of Counsel dated 26 November 2009.

3.	For the reasons given in my first decision, and for the reasons which appear below I will order the Chief Land Registrar to give effect to the applications dated 18 June 2008 by Mr Crowley to remove Mr Gupidati as registered proprietor of the Flat and replace Mr Crowley as owner, and to remove the charge in favour of the Bank. In view of this order, there is no need for me to deal with the application dated 21 January 2008 by Mr Crowley to enter a restriction.

4.	It also seems to me that, in principle, Mr Crowley is entitled to costs against Mr Gudipati and the Bank. The first reference (relating to the restriction, and involving Mr Gudipati only) was referred to this office on 9 May 2008. Notwithstanding the fact that the application for a restriction was in effect superseded by the later applications, it seems to me that Mr Crowley is entitled to costs against Mr Gudipati from that date. This, of course, is subject to any representations or objections which Mr Gudipati may wish to make. The other two applications were referred to this office on 8 and 9 January 2009. Again in principle and subject to any representations or objections the Bank may wish to make, Mr Crowley is entitled to his costs against the Bank from that date.

5.	In the first instance Mr Crowley is to file and serve a schedule in Form N260 or the like against Mr Gudipati and the Bank by 9 February 2010. Mr Gudipati and the Bank may then file and serve such representations or objections as they deem fit by 2 March 2010. Subject to any reply by Mr Crowley, I will then consider the matter on paper and either assess costs on the basis of the information before me or order a detailed assessment to be carried out by a costs judge.

The claim against Mr Gudipati

6.	Mr Gudipati has made a number of additional points in his letter dated 25 November 2010. He also makes it clear, however, that he has decided not to appeal. None of the points raised relate to the question whether the Bank’s charge is valid.

7.	My conclusions, as set out in the earlier decision, are that the Transfer (i) is void by reason of the failure to comply with section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 (ii) voidable and liable to set aside by reason of Mr Gudipati’s undue influence and that (iii) the register should accordingly be rectified to replace Mr Crowley as the registered owner in place of Mr Gudipati notwithstanding the fact that he is an occupier in possession (through his tenant).

The claim against the Bank

8.	I have already set out my views regarding whether the claim to rectify against the Bank can be seen as correcting a ‘mistake’ under section 65 and paragraph 5(a) of Schedule 4 to the Land Registration Act 2002. (There is a mistake in paragraph 70 of my earlier decision in that I did not refer to paragraph 5(a))

9.	The  remaining issue  is whether Mrs Crowley had an unregistered interest in the Flat  which over-rode the grant of the legal charge to the Bank (a legal charge being a disposition requiring to be registered pursuant to section 27(2)(f) of the 2002 Act). Section 30 (1) provides that if a registrable disposition of a registered charge is made for valuable consideration, completion of the disposition by registration has the effect of postponing to the interest under the disposition any interest affecting the charge immediately before the disposition whose priority is not protected at the time of registration. Section 30 (2) (a)(ii) provides that the priority of an interest is protected if it falls within any of the paragraphs of Schedule 3.

10.	Paragraph 2 of Schedule 3 deals with interests of persons in actual occupation.  Such an interest is protected except (so far as relevant for present purposes) if either it is an interest of a person of whom inquiry was made before the disposition and who failed to disclose the right when he could reasonably have done so (para 2(b)) or an interest of which belongs to a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition and of which the person to whom the disposition is made does not have actual knowledge at the time (para 2(c )).

11.	The first question therefore is whether Mrs Crowley was in actual occupation at the time of the legal charge (15 August 2007, registered on 29 August 2007) and whether, at that time, she had a proprietary right adversely affecting title to the charge (see section 132(3)(b)).

12.	There is no doubt that Mrs Crowley was in occupation of the Flat at the time of the charge and remained in occupation until her death. The right to seek alteration of the register is such a right (see Malory Enterprises v Cheshire Homes (UK) [2002] 1 W.L.R. 3016). This was clearly held to be the case under section 70(1)(g) of the Land Registration Act 1925) and remains the case under the new legislation.

13.	The second question therefore is whether the Bank can rely on either of the two exceptions referred to above. The test is not whether the Bank had notice of such a right. The Bank rely on the title register at the time of the charge and on the answers given in the mortgage confirmation form signed by Mr Gudipati on 29 June 2007. In that form the question asking for details of the persons over 17 residing in the Flat was left blank. Neither the fact that the property was in Mr Gudipati’s name nor  the fact that he did not answer the inquiry truthfully affect Mrs Crowley’s over-riding interest. It is clear that the inquiry must be made of the occupier. No such inquiry was ever made.

14.	The second exception only applies if Mrs Crowley’s occupation would not have obvious on a reasonably careful inspection of the land at the time of the disposition and if her interest was one of which the Bank did not have actual knowledge at the time. Both conditions must be met. There is no doubt that Mrs Crowley’s occupation would have been obvious on an inspection of the land. She was living there. She was, by then, virtually house bound.  All her belongings were there. It had been her family home for some time.

15.	It follows, therefore, that the application to remove the registered charge in favour of the Bank is to be given effect to. The Bank may or may not be entitled to an indemnity from the Land Registry: this is not a matter for me to decide. 

BY ORDER OF THE ADJUDICATOR

ANN McALLISTER
Dated this 21th day of January 2010