Andrew Butler succeeds in long-running Chancery action
3rd November 2017
Andrew Butler has won a case in which his client sought rectification of title at HM Land Registry, following contested transactions after a company breakdown.
The case, Knightsbridge Property Development Corporation (UK) Ltd v South Chelsea Properties Ltd.  EWHC 2730 (Ch), concerned a breakdown in relations between a director and secretary of a property company. Following the dismissal of the secretary for alleged dishonesty, the Claimant company (C) discovered that there had been certain dealings with its portfolio in favour of two companies connected with the secretary – in one case a conveyance to such a company, and in another case the discharge of a mortgage held by C, over land owned by a different company.
C, for whom Andrew acted, contended that both transactions were unauthorised and that the Register should be rectified so as to reflect the true position. It was important to C to achieve rectification, as opposed to alteration, because otherwise their interests would have been relegated in priority to subsequent interests, rendering them worthless (MacLeod v Gold Harp Properties Ltd  EWCA Civ 1084).
There were a number of factual issues, mainly concerning the question of whether the transactions were authorised. There were also legal issues, in particular whether, if the transactions were not authorised, they amounted to a “mistake” within the meaning of para.2(1) of Sched 4 to the Land Registration Act 2002. This in turn depended on whether the transactions were void or voidable (NRAM Ltd v Evans  EWCA Civ 1013).
Following an 8-day trial, Newey J found for C on the facts. He also accepted Andrew’s submission that the transactions were founded on a mistake. In the case of the mortgage, this was because (a) the indebtedness had not, as a matter of fact, been repaid, and (b) the third party having known of the lack of authority, on the ordinary principles of agency the transaction was void. In the case of the conveyance, while there had been a breach of the Companies Act 2006, this rendered the transaction voidable rather than void and did not of itself permit rectification; here again however, the third party knew that the transaction was unauthorised, which rendered it void.
He therefore ordered rectification.
The judgment can be found in full here.