NRAM v Evans [2017]
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NRAM v Evans [2017] EWCA Civ 1013 addresses crucial legal questions concerning the rectification of the Land Register under the Land Registration Act 2002 (LRA 2002). The case revolves around the cancellation of a charge on Mr and Mrs Evans’ property, which occurred due to a mistake by Northern Rock Asset Management (NRAM). The key issue was whether the creation or cancellation of an entry on the Land Register based on a voidable disposition could be considered a ‘mistake’ under Schedule 4 of the LRA 2002.
In this case, NRAM had loaned money to Mr and Mrs Evans, securing most of the loan by a charge on their property. However, due to financial difficulties, the couple was declared bankrupt in 2005. Several years later, in 2014, NRAM mistakenly believed that the unsecured portion of the loan had been discharged through their bankruptcy. Acting on this incorrect assumption, Mr and Mrs Evans’ solicitor requested NRAM to cancel the charge on the property, which NRAM agreed to do. Following this, NRAM submitted an electronic discharge (e-DS1) to the Land Registry, which was processed, leading to the cancellation of the charge. When NRAM realised its mistake, it sought to rescind the e-DS1 and applied for the Land Register to be rectified.
The High Court ruled in NRAM’s favour, ordering the cancellation to be set aside and the charge reinstated on the Land Register. The judge determined that a mistake had been made and that Mr and Mrs Evans had contributed to the error by making misleading statements in their request to cancel the charge. The case was appealed by Mr and Mrs Evans, who argued that there had been no mistake on the Land Register and that they had not contributed to any error.
The Court of Appeal, led by Kitchin LJ, upheld the lower court’s decision but made critical distinctions about the nature of ‘mistakes’ on the Register. Kitchin LJ ruled that the registration of a voidable disposition, such as the e-DS1 in this case, is not immediately a mistake for the purposes of Schedule 4 of the LRA 2002. A voidable disposition remains valid until it is rescinded, meaning that any entries on the Register related to such a disposition cannot be characterised as mistakes until the underlying transaction is voided. Once the disposition is set aside, the Register can be rectified to reflect the change, bringing it up to date unless exceptional circumstances justify not doing so.
This ruling aligns with earlier case law, such as Norwich & Peterborough Building Society v Steed (No. 2) [1993], which drew a distinction between instruments that are void from the outset (void ab initio) and those that are merely voidable. Void ab initio instruments, such as those affected by forgery or fundamental mistakes, are automatically regarded as mistakes on the Register. In contrast, voidable transactions, like those involving misrepresentation or undue influence, do not result in mistakes on the Register until they are legally rescinded. The decision in NRAM v Evans reaffirms this interpretation of the law but also highlights potential complications when dealing with voidable dispositions and their impact on land registration.
The case also touches on the issue of indemnity under Schedule 8 of the LRA 2002. Mr and Mrs Evans sought indemnity if the Register were rectified against them, arguing that they would be entitled to compensation. However, the Court of Appeal did not grant indemnity, indicating that indemnity is not automatically provided when a voidable transaction is set aside and the Register is rectified.
In conclusion, NRAM v Evans is a significant case in clarifying the legal principles surrounding rectification of the Land Register under the LRA 2002. It draws important distinctions between void and voidable transactions and provides guidance on when a mistake on the Register can be rectified. The case also highlights the complexities involved in balancing fairness between parties, particularly when dealing with the consequences of mistaken transactions in land registration.
In this case, NRAM had loaned money to Mr and Mrs Evans, securing most of the loan by a charge on their property. However, due to financial difficulties, the couple was declared bankrupt in 2005. Several years later, in 2014, NRAM mistakenly believed that the unsecured portion of the loan had been discharged through their bankruptcy. Acting on this incorrect assumption, Mr and Mrs Evans’ solicitor requested NRAM to cancel the charge on the property, which NRAM agreed to do. Following this, NRAM submitted an electronic discharge (e-DS1) to the Land Registry, which was processed, leading to the cancellation of the charge. When NRAM realised its mistake, it sought to rescind the e-DS1 and applied for the Land Register to be rectified.
The High Court ruled in NRAM’s favour, ordering the cancellation to be set aside and the charge reinstated on the Land Register. The judge determined that a mistake had been made and that Mr and Mrs Evans had contributed to the error by making misleading statements in their request to cancel the charge. The case was appealed by Mr and Mrs Evans, who argued that there had been no mistake on the Land Register and that they had not contributed to any error.
The Court of Appeal, led by Kitchin LJ, upheld the lower court’s decision but made critical distinctions about the nature of ‘mistakes’ on the Register. Kitchin LJ ruled that the registration of a voidable disposition, such as the e-DS1 in this case, is not immediately a mistake for the purposes of Schedule 4 of the LRA 2002. A voidable disposition remains valid until it is rescinded, meaning that any entries on the Register related to such a disposition cannot be characterised as mistakes until the underlying transaction is voided. Once the disposition is set aside, the Register can be rectified to reflect the change, bringing it up to date unless exceptional circumstances justify not doing so.
This ruling aligns with earlier case law, such as Norwich & Peterborough Building Society v Steed (No. 2) [1993], which drew a distinction between instruments that are void from the outset (void ab initio) and those that are merely voidable. Void ab initio instruments, such as those affected by forgery or fundamental mistakes, are automatically regarded as mistakes on the Register. In contrast, voidable transactions, like those involving misrepresentation or undue influence, do not result in mistakes on the Register until they are legally rescinded. The decision in NRAM v Evans reaffirms this interpretation of the law but also highlights potential complications when dealing with voidable dispositions and their impact on land registration.
The case also touches on the issue of indemnity under Schedule 8 of the LRA 2002. Mr and Mrs Evans sought indemnity if the Register were rectified against them, arguing that they would be entitled to compensation. However, the Court of Appeal did not grant indemnity, indicating that indemnity is not automatically provided when a voidable transaction is set aside and the Register is rectified.
In conclusion, NRAM v Evans is a significant case in clarifying the legal principles surrounding rectification of the Land Register under the LRA 2002. It draws important distinctions between void and voidable transactions and provides guidance on when a mistake on the Register can be rectified. The case also highlights the complexities involved in balancing fairness between parties, particularly when dealing with the consequences of mistaken transactions in land registration.
