Swift 1st Ltd v The Chief Land Registrar

The issue on this appeal is whether the proprietor of a registered charge which turns out to have been a forged disposition is entitled to payment by way of indemnity under Schedule 8 to the Land Registration Act 2002 (“LRA 2002”) in circumstances where the registered proprietor and rightful owner of the property was in actual occupation at the date of the disposition. For reasons which I will come to, it also raises the question whether the much-debated decision of this court in Malory Enterprises Ltd. v Cheshire Homes (UK) Ltd. & Ors [2002] EWCA Civ 151; [2002] 3 WLR 1; [2002] Ch 216 (“Malory”) was decided per incuriam insofar as the court held that the innocent victim of a forged disposition acquired only the legal estate and not the beneficial ownership of the property.

The Chief Land Registrar (“the Registrar”) appeals with the leave of the deputy judge against an order of Mr Richard Sheldon QC (sitting as a deputy judge of the Chancery Division) dated 31 January 2014. He directed the Registrar to pay the respondent, Swift 1 ^st Limited (“Swift”), £90,658.99 under Schedule 8 LRA 2002 to indemnify it for the loss occasioned by the cancellation of Swift’s registered charge over a property at 15 Elmstead Road, Ilford, Essex (“the Property”).

The facts are unusual. The registered proprietor of the Property is and was a Mrs Rani who has occupied it as her home throughout the relevant period. In April 2006 an unknown third party fraudulently executed a legal charge over the Property in favour of GE Money Lending Limited (“GE Money”) which purported to secure a loan to Mrs Rani of £32,000. The charge was registered in the charges register for the Property.

In May 2006 a second charge, again fraudulent, was executed in favour of Swift as security for a loan to Mrs Rani of £64,500. Swift advanced £34,403 of the loan to GE Money to redeem the prior registered charge and paid the balance by cheque to Mrs Rani who (the judge accepted) never received the funds and had not made the application for the loan. The charge in favour of Swift was duly registered on 2 June 2006 and the entry in favour of GE Money removed.

The instalments of interest due under the Swift loan were not paid and in May 2007 proceedings were issued seeking possession of the Property. Mrs Rani defended the proceedings on the basis that both the Swift charge and the GE Money charge were forgeries so that Swift had no enforceable security against the Property for its loan either under its own charge or by way of subrogation under the GE Money charge. Swift accepted this and on 20 January 2009 a consent order was made which required the Land Registry to amend the registered title to the Property by deleting the entry in the charges register in favour of Swift.

Swift then issued proceedings against the Registrar seeking an indemnity under Schedule 8 in respect of the loss of its charge. It pleaded that the register had been rectified to its prejudice by the deletion of the entry in respect of its charge and that it was entitled to be indemnified for its loss pursuant to paragraph 1(1)(a) or (b) and paragraph 1(2)(b) of Schedule 8 LRA 2002. The Registrar in his defence pleaded that the cancellation of the entry in the charges register did not amount to rectification of the register within the meaning of Schedules 4 and 8 LRA 2002 but was simply an alteration of the register made in order to bring it up to date rather than to correct a mistake. It was not prejudicial to Swift because Mrs Rani as registered proprietor retained beneficial ownership of the Property and a right to have the forged disposition set aside which took effect as an overriding interest on the basis of her actual occupation of the Property at the time the registered disposition was created. Swift’s charge therefore took effect subject to her rights and was always liable to be defeated by any application she made to have the charge set aside as a forgery.

The grant of a legal charge is a disposition which requires to be completed by registration and does not operate at law until the relevant registration requirements are met: see s.27(1), (2). Once registered, the proprietor of the registered charge is entitled to exercise the powers of an owner in respect of the charge which would include the power of sale. Section 30 provides:

Mrs Rani’s registered title to the Property therefore took effect subject to Swift’s registered charge for so long as the charge continued to be protected by registration. But the priority enjoyed by the registered charge did not extend to any Schedule 3 interests which include the interests of persons in actual occupation. Schedule 3, paragraph 2, describes these as:

It is not suggested that any relevant inquiry was directed to Mrs Rani before completion of the charge which she failed to respond to or that her occupation of the Property was not known to Swift at the time of the disposition.

Swift’s registered charge therefore took effect subject to any overriding interest which Mrs. Rani could assert against its title. The Registrar’s position is that this would include her right to have the charge removed from the register as a void disposition by reason of the forgery. On this basis Swift’s charge, although substantively registered, was always liable to be defeated by a claim brought by Mrs Rani and was never therefore de facto enforceable against the registered title to the Property at least so long as she remained its owner.

The consent order which led to the deletion of the charge from the register involved an exercise of the powers contained in Schedule 4: see s.65. So far as material, Schedule 4 provides:

The scheme of these provisions is to draw a distinction between the alteration of the register to correct a mistake (which justifies the deletion of an entry either pursuant to an order of the court under paragraph 2 or administratively by the Registrar under paragraph 5) and a case where that process of correction prejudicially affects the title of the registered proprietor: paragraph 1(b). Under LRA 2002 rectification of the register is now restricted as a term to alterations which satisfy both conditions in paragraph 1 and the right to an indemnity under Schedule 8 is limited to cases of rectification so defined.

The Registrar has a discretion under paragraph 9 of Schedule 4 to pay costs incurred in connection with an alteration of the register. But substantial compensation for loss due to the correction depends upon the registered proprietor (in this case Swift) being able to establish that its title has been prejudicially affected by the change. This is confirmed by the provisions of Schedule 8 which set out the conditions of entitlement to an indemnity:

Swift’s claim for an indemnity turns on the interaction between paragraph 1(1)(a) and 1(2)(b). The Registrar contends that the alteration of the register did not amount to rectification in this case within the meaning of paragraph 1(1)(a) because it did not prejudicially affect Swift’s title to the registered charge so as to cause loss. The registration was always subject to Mrs Rani’s right to have the forged disposition set aside which took effect as an overriding interest binding on Swift’s own registered title. Swift’s title was not therefore prejudiced by the deletion of the charge even though Swift was obviously worse off than it would have been had Mrs Rani not taken the action which she did.

Swift’s response to this was to rely upon the provisions of paragraph 1(2)(b) of Schedule 8 under which, it says, the proprietor of a registered charge claiming in good faith under a forged disposition (which this was) is deemed to have suffered loss by reference to an assumption that the charge had been validly executed. This statutory hypothesis therefore enables the registered proprietor of a forged charge who acts in good faith to obtain an indemnity notwithstanding that his charge was always liable to be set aside on the application of the registered proprietor of the property.

Before turning to the way in which the deputy judge construed these provisions, it is necessary to look at the relevant legislative history beginning with the earlier provisions of the Land Registration Act 1925 (“the 1925 Act”). Under s.20 of the 1925 Act a disposition of a legal estate in registered land for valuable consideration, once registered, conferred on the transferee the estate in fee simple free from all other estates and interests but subject to any other entries on the register which had priority and any overriding interests. It was the act of registration which, subject to overriding interests, vested the freehold title and gave the proprietor the powers of ownership: see s.69. Overriding interests were defined in s.70 to include (s.70(1)(g)) “the rights of every person in actual occupation of the land … save where enquiry is made of such person and the rights are not disclosed”.

Part VII of the 1925 Act dealt with the rectification of the register. Section 82 provided that:

The term “rectification” was therefore used to describe any alteration or correction of the register and was not limited to cases where the alteration would prejudicially affect a registered title. The right to an indemnity depended, however, on proof of loss and s.83 provided:

It can be seen that s.83(4) contains for the most part the same provisions as those now comprised in paragraph 1(2)(b) of Schedule 8 to LRA 2002. But the inclusion in the 2002 definition of rectification of the requirement to show that the registered title has been prejudicially affected has no precise antecedent in the language of the 1925 Act. The term “loss” in s.83(1)(a) was, however, the subject of a decision of Clauson J. in Re Chowood's Registered Land [1933] 1 Ch. 574 where the judge held that no loss had been suffered for the purposes of s.83 where the register had been rectified in order to give effect to an overriding interest binding on the registered title. The case concerned the registration of title absolute to land which included parcels of woodland that had prior to the date of registration been acquired by a third party by adverse possession. Clauson J. held that the subsequent correction of the register to exclude these parcels from the registered title did not occasion loss to the registered proprietor:

The decision in Chowood did not, of course, concern a fraudulent disposition but it did establish the general principle that the alteration of the register in order to give effect to an overriding interest does not amount to loss for the purpose of the indemnity provisions. The correctness of Chowood has never been doubted and both sides accept that there is no material difference between the provisions of s.83 and those of paragraph 1(1)(a) of Schedule 8. For this reason Swift, I think, accepts that it cannot establish loss and therefore prejudice for the purposes of its claim for an indemnity under LRA 2002 unless either Mrs Rani’s right to set aside the forged charge did not take effect as an overriding interest or loss is established by reason of the deeming provisions contained in paragraph 1(2)(b) of Schedule 8.

The second of these points requires a return to the earlier provisions of the 1925 Act. Had the same facts arisen before 2002 it would have been necessary to consider whether s.83(4) created an exception to the principle established in Chowood where the registered title that was rectified consisted of a forged disposition. Mr Morshead QC for the Registrar submits that the purpose of s.83(4) was much more limited and that the provision was included in the 1925 Act to meet a possible objection to indemnification based on the decision of this Court in A-G v Odell [1906] 2 Ch 47.

In that case the proprietor of a forged charge which had been removed from the register by order of the court sought an indemnity under what was then s.7 of the Land Transfer Act 1897. The Court of Appeal held that he was not entitled to an indemnity because, not having received a transfer from the registered proprietor, he had acquired no title by the forged disposition and had therefore lost nothing by the rectification of the register.

Section 7(4) of the Land Transfer Act provided:

Mr Odell made his claim for an indemnity under this provision which, on the face of it, covered his case and Kekewich J. ordered an indemnity on the basis that Mr Odell had suffered loss by being deprived of the charge in circumstances where he took the charge in good faith and could not reasonably have discovered the fraud at the time. He said (at pp. 55-6):

Vaughan Williams LJ took a different view. Referring to s.7(4) he said:

There is no precise equivalent to s.7(4) in s.82 of the 1925 Act. Instead s.82(1)(a) and (h) enabled the register to be rectified to correct mistakes or to give effect to orders of the court. The indemnity provisions in s.83 did, however, qualify the general requirement that a loss should have been suffered by the person against whose interest rectification took effect to the extent of s.83(4) which deems a loss to have been suffered as a result of the rectification of the register in respect of a forged disposition. The conditions contained in s.83(4) reflect those in s.7(4) of the Land Transfer Act and it is common ground that s.83(4) was designed to reverse the effect of the decision in A-G v Odell and to exclude the argument that rectification of the register to remove a forged and therefore invalid disposition causes no loss to the registered proprietor because he derived no title from a void disposition. The change is also consistent with the policy of both the 1925 Act and the LRA 2002 that it is registration rather than the quality of the prior disposition which creates and constitutes the proprietor’s title to the registered estate or charge: see s.58(1) LRA 2002. This is certainly the view of the editors of Ruoff & Roper on the Law and Practice of Registered Conveyancing (see paragraph 47-006) and it was the view of the Law Commission when it produced its report on land registration which led to the passing of the LRA 2002.

Following a consultation exercise, the Law Commission published its report “Land Registration for the Twenty-First Century” on 9 July 2001. The report stated that the fundamental objective of the bill which it proposed was to create an electronic system of land registration under which the register should be a complete and accurate reflection of the state of the title of the land. One of the specific changes proposed was in relation to rectification and indemnity. The bill (in what is now paragraphs 1 and 2 of Schedule 4 LRA 2002) was intended, the Law Commission explained, to recast the existing provisions governing rectification and to make it clear that rectification (with a right to an indemnity) should be limited to cases of alteration of the register which prejudicially affect the title in question. The concept of rectification has therefore been narrowed from that under the 1925 Act and limited to circumstances in which loss has been caused. This is explained in paragraph 10.7 of the report:

As explained in paragraph 10-7(2) above, it seems clear that the Law Commission intended cases where the registered title was “prejudicially affected” under LRA 2002 to be limited to cases where the alteration of the title would have been held to cause “loss” under s.83(1)(a) of the 1925 Act. But the draftsman of LRA 2002 has in fact preserved the requirement to show “loss” as the condition of an indemnity in Schedule 8 paragraph 1(1)(a) which on one possible construction of LRA 2002 might suggest that prejudice and loss as terms were not intended to be co-extensive or synonymous so that there could still be cases of rectification as defined in Schedule 8 paragraph 11(2) which do not create a loss and therefore qualify for an indemnity. This point is not, however, material to the issues on this appeal and does not affect the point of construction we are concerned with. I shall therefore treat “prejudicially affect” as limited to cases where the prejudice suffered does cause loss to the registered proprietor.

The footnotes to paragraph 10.7 make it clear that the reference in the new definition of rectification in Schedule 8, paragraph 11, to an alteration of the register which prejudicially affects the title of a registered proprietor is intended to reproduce and give effect to the decision in Chowood which governed the grant of an indemnity under s.84 of the 1925 Act. In that respect nothing has changed. A registered title which is defeated by the enforcement of an overriding interest does not create a prejudicial effect on the title any more than it constituted loss under the 1925 Act. But this leaves open the question of how what I shall call the Chowood principle operates, if at all, in a case involving a forged disposition.

The Law Commission report recognised that s.83(4) of the 1925 Act was intended to reverse the decision in Re Odell and paragraph 1(2)(b) of Schedule 8 was designed to replicate these provisions in the LRA 2002. Paragraph 10.31 states:

It is tolerably clear from this passage that the Law Commission regarded the objective of paragraph 1(2)(b) as being to reproduce s.83(4) and to do so on the basis that the registered proprietor under a forged disposition would, if he acted in good faith, be treated as having suffered a loss from the rectification of the register even though he took his interest under a forged (and therefore invalid) disposition. At first sight this might be thought to be determinative of the appeal on this point. If the conditions are satisfied for the operation of the deeming provision it is difficult to see any room for the operation of the Chowood principle. Even if Mrs Rani’s right to set the Swift charge aside as a forgery subsists as an overriding interest, it still leads to the alteration of the register in respect of a forged disposition which are the conditions which engage the operation of what is now paragraph 1(2)(b). Conversely, if paragraph 1(2)(b) is not engaged by the alteration of the register following a court order in proceedings brought by Mrs Rani to enforce her right to have the Swift charge set aside then one asks whether and in what circumstances paragraph 1(2)(b) can ever have any scope for its operation. The unqualified application of the Chowood principle, absent paragraph 1(2)(b), is likely in most, if not all, cases to be a complete answer to any allegation of prejudice.

The Registrar’s response to this is that paragraph 1(2)(b) is not a dead letter if the person entitled to seek rectification was not in actual occupation of the property at the time the charge was entered into. In that case the right to set the charge aside would not take effect as an overriding interest and the registered proprietor of the charge could rely on paragraph 1(2)(b) as an effective answer to any argument based simply on the invalidity of the registered disposition. But for paragraph 1(2)(b), the argument accepted by the Court of Appeal in Re Odell would be an independent bar to an indemnity even in a case where no overriding interest could be relied upon.

The deputy judge held that the presumption of loss under paragraph 1(2)(b) was engaged by an alteration of the register to remove a registered estate or charge based on a forged disposition and that the presumption operated prior to the determination of any question whether the register had been “rectified” within the meaning of paragraph 11(2) of Schedule 8. He rejected Mr Morshead’s submission that, on its proper construction, paragraph 1(2)(b) only applies once it is determined that the alteration to the register amounted to rectification: i.e. caused prejudice to the registered title. This prior question, he submitted, depends on the application of the Chowood principle and therefore on whether the owner of the property could enforce an overriding interest in the form of a right to set the forged charge aside.

One of the difficulties which this argument faces is the content which can be given to paragraph 1(2)(b) if the Chowood principle has to be applied in priority to the presumption of loss. In Malory this Court decided that the fraudulent transfer of land to Cheshire Homes by a UK company with the same name as the registered proprietor of the land, a BVI company, was only effective to transfer the legal estate and left the BVI company with a beneficial interest in the property. The UK company had dishonestly obtained from the Land Registry a new land certificate in its own name and, on this basis, had sold and transferred the land to Cheshire Homes which had become the registered proprietor. The BVI company sought rectification of the register and damages for trespass against Cheshire Homes. The judge had held that the BVI company remained in possession of the land at the date of the transfer so that its right to have the fraudulent disposition set aside and the register rectified took effect as an overriding interest under s.70(1)(g) of the 1925 Act. But the damages claim depended on whether it had retained a right to possession between the registration of Cheshire Homes as proprietor and the date of rectification.

The argument centred on s.69(1) of the 1925 Act which provides:

In her judgment Arden LJ said:

The decision in Malory has not received an enthusiastic response from commentators and continues to create difficulties in cases still governed by the 1925 Act. Although the Court’s determination that the right of the BVI company to obtain rectification of the register was capable of taking effect as an overriding interest has generally escaped criticism and is not challenged on this appeal, concerns have been expressed that the decision that the registration of title under s.69 does not carry with it both legal and beneficial ownership runs contrary to general principle and overlooks the function and purpose of the state of the register as an exhaustive statement of ownership. Dr Martin Dixon in his book: Modern Land Law, 8^th edn (Oxford: Routledge, 2012) said at p. 44:

To much the same effect, Professor Elizabeth Cooke in her case comment on Newey J’s decision in Fitzwilliam v Richall Holdings Services Ltd [2013] EWHC 86 (Ch) [2013]; 1 P&CR 19 (in the Conveyancer and Property Lawyer (2013) Conv 344) described the result in Malory as disastrous for the integrity of the statute:

The relevance of Malory to the present case centres on the Registrar’s argument that paragraph 1(2)(b) would not be a dead letter if the Chowood principle remained applicable to determine whether the registered title was prejudicially affected for the purpose of claiming an indemnity. Mr Morshead accepted before the deputy judge that if Malory is correctly decided on the beneficial ownership point and the original registered proprietor retains beneficial ownership of the property notwithstanding substantive registration of the new proprietor under the forged disposition, then no alteration of the register by the removal of the new entry will constitute prejudice for the purposes of rectification and indemnity under the LRA 2002. In every such case the transferee or chargee would never receive more than the bare legal estate and on the Chowood principle could not therefore claim to have suffered a loss by the subsequent alteration of the register in favour of the beneficial owner regardless of whether the right of rectification amounted to an overriding interest. The position would be equivalent to that under Re Odell; namely that a forged transfer or charge not executed by the registered proprietor could not deprive the original registered proprietor of his interest in the property or vest in the new registered proprietor any substantive estate or right in the property.

One way of circumventing this difficulty would be to treat the decision in Malory as confined to the 1925 Act. But in my view this is unsupportable. Although the scheme of the LRA 2002 is to make rectification as such synonymous with the right to an indemnity based on prejudice or loss, it is clear from the passages I have quoted in the Law Commission report that paragraph 1(2)(b) of Schedule 8 was not intended to make any substantive change to what had been the position under the 1925 Act and the same goes for what are now sections 29 and 58 LRA 2002. The same view was expressed by Newey J in his decision in Fitzwilliam.

One is therefore left to consider Mr Morshead’s submission that the beneficial ownership point was wrongly decided. Much of the academic criticism of Malory has centred on the limited circumstances in which the legal owner of property does not also enjoy full beneficial ownership. Absent a trust, the legal estate carries with it all rights to the property and equity has no rôle to play in separating legal from beneficial ownership. Therefore to achieve the result which obtained in Malory it is necessary to construe s.69 of the 1925 Act as creating a departure from the usual rule that legal and beneficial ownership are, without more, indissoluble and to construe the references to the legal estate as meaning a bare legal estate of the kind that would be vested in a trustee. This runs contrary to the general principle embodied in s.69 that the register is a complete record of all enforceable estates and interests except for overriding interests and that it is registration rather than the transfer which confers title.

We are, of course, bound by the decision in Malory on the beneficial ownership issue unless it can be said that this question was decided per incuriam. Two matters have been drawn to our attention on this point. The first is that Arden LJ makes no reference in her judgment to the earlier decision of the Court of Appeal in Argyle Building Society v Hammond (1984) 49 P & CR 148 where Slade LJ, giving the judgment of the Court, refers to the statutory magic of s.69(1) which has the effect of vesting title by registration even when the transfer has been a forgery. At p. 156 he said:

The second and perhaps more important point is that the Court’s attention was not drawn to s.114 of the 1925 Act which provided that:

An important, perhaps even critical, part of Arden LJ’s reasoning in [65] of her judgment in Malory was that s.20 of the 1925 Act had no application to a forged disposition. But s.114 makes it clear that, although a registered disposition which would be fraudulent and void if unregistered remains fraudulent and void even if registered, this takes effect subject to the provisions of the 1925 Act with respect to registered dispositions for valuable consideration one of which is, of course, s.20. It is not therefore possible to construe s.20 as having no application to a fraudulent transfer for valuable consideration that is registered.

Although hesitating before differing from Arden LJ and the other members of the Court in Malory on this point, I am satisfied that the beneficial ownership issue was decided per incuriam for the reasons I have given and is wrong. In these circumstances, we are, I think, entitled to approach the construction of paragraph 1(2)(b) unaffected by the decision in Malory save for the determination that a right to seek rectification is capable of existing as an overriding interest. This therefore takes me back to Mr Morshead’s argument that there are some circumstances in which paragraph 1(2)(b) could operate to make the alteration of the register rectification within the meaning of paragraph 11(2) rather than being a dead letter in all cases.

The deputy judge who regarded himself as bound by Malory accepted Swift’s argument that paragraph 1(2)(b) applies for the purpose of determining whether the alteration of the register amounts to rectification. The words “where the register is rectified” were not, he held, to be read as requiring a prior application of the Chowood principle but rather as meaning that for the purpose of determining whether the register should be rectified in cases of a forged disposition, loss (and therefore prejudice) was to be presumed. He said:

Mr Morshead submitted that the limitation of what constitutes rectification under the LRA 2002 to cases of prejudice in the sense of loss makes it impossible to regard paragraph 1(2)(b) as intended in effect to neutralise the Chowood principle in what would otherwise be its application in this case to the claim for an indemnity. Given that the statutory reversal of Odell is capable of serving a purpose in cases where there is no overriding interest enforceable against the title it should not be treated as having the same effect where an overriding interest, as in this case, does exist. Paragraph 1(2)(b) therefore has a role to play in relation to the effect of a forged disposition but it has nothing to do with the enforcement of overriding interests which bind the registered estate by virtue of what is now s.29(2)(iii) and 30(2)(ii) of the LRA 2002 and for that reason fall to be taken into account under the Chowood principle.

I have not found this an easy question and it is certainly an issue which deserves to be considered in the forthcoming review by the Law Commission of the workings of the LRA 2002. One of the problems is that the phrase “where the register is rectified” that appears in paragraph 1(2)(b) has been taken verbatim from s.83(4). There is no clear statement in the Law Commission report to indicate whether, given the change in the meaning of rectification, the use of that term was intended to denote, as the Registrar contends, a prior determination of loss in accordance with the Chowood principle or whether the draftsman of the bill intended that paragraph 1(2)(b) as drawn would have the same effect as s.83(4) under the 1925 Act. Paragraph 10.31(2) of the report certainly suggests that paragraph 1(2)(b) was not intended to effect a change in the law.

On this latter basis the question really resolves itself into whether the effect of s.83(4) was to neutralise the application of the Chowood principle in cases which fall within the sub-section. I am not persuaded that the phrase in paragraph 1(2)(b) “where the register is rectified” is sufficient in itself to compel me to the conclusion that the existence of an overriding interest ousts the right to rectification and an indemnity. Paragraph 1(2)(b) is capable of being read, as the judge found, in a much more neutral way. The contrary construction of the reference to rectification is entirely circular.

The strongest argument in favour of the Registrar’s construction is that s.83(4) has a different origin from the Chowood principle. Section 83(4) was designed to reverse the decision of the Court of Appeal in Re Odell to the effect that a forged transfer or charge was not capable of creating any rights and that registration therefore gave the registered proprietor nothing better than a defeasible interest whose deletion could not be treated as causing loss. The decision in Chowood leads to the same conclusion (i.e. no loss) but does so on different grounds: namely the fact that the registered title remains subject to an overriding interest. That is a broad principle not limited to cases of a forged disposition.

In the end, however, like the judge, I have reached the conclusion that the history of s.83(4) and now of paragraph 1(2)(b) is not sufficient in itself to enable one to treat those provisions as of no application where the overriding interest enforced against the registered title consists of a right to seek rectification (now alteration) of the register on the ground that the disposition was forged. That a right to seek rectification in these circumstances is capable of subsisting as an overriding interest does not alter the fact that the registered proprietor seeking the indemnity is claiming in good faith under a forged disposition and is to be regarded as having suffered loss by reason of the rectification of the register as if the disposition had not been forged. The application of Chowood in the present case would lead to the conclusion that there has been no loss; which is directly contrary to the statutory presumption under paragraph 1(2)(b). The Chowood principle is based on the overriding interest always having been enforceable against the registered estate or charge. But in cases of forgery the fact that the right to have the forged disposition set aside exists as an overriding interest adds nothing. The circumstances in which the overriding interest is enforced are precisely those contemplated by what is now paragraph 1(2)(b). If the 2002 or the 1925 Act intended the deemed loss provisions to provide a limited exception for cases involving the enforcement of an overriding interest, some much clearer indication would, I think, be necessary in the language of the statute and I would have expected to see the point flagged up in the Law Commission report. As it is, the reference in the footnote to paragraph 10.31(2) to s.69 of the 1925 Act strongly suggests that the Law Commission considered paragraph 1(2)(b) to be consistent with the principle that registration confers substantive rights on the proprietor even under the forged disposition and that its loss is to be regarded as prejudicial to the title notwithstanding that the transfer or charge was void.

For these reasons, I would dismiss the Registrar’s appeal.

I agree.

I also agree.