REC/2009/0007

 

ADJUDICATOR TO HER MAJESTY’S LAND REGISTRY

LAND REGISTRATION ACT 2002

 

IN THE MATTER OF A RECTIFICATION APPLICATION PURSUANT TO SECTION 108(2) OF THE LAND REGISTRATION ACT 2002

 

BETWEEN

PALACE GATE WORLDWIDE LIMITED

Applicant

and

 

(1) PALACEGATE AGENCIES LIMITED

(2) ODDBINS LIMITED

Respondents

 

Property Address: 116 High Street, Chatham, Kent ME4 4BY

 

Title Number: K277321

 

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

 

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

 

On: 8-11 and 29 November 2010

 

Applicant’s Representation: Ms Stephanie Tozer of counsel.

Respondents’ Representation: Mr Simon Johnson of counsel.

 

DECISION

 

Rectification of a document relating to registered land – sale of a commercial property to an offshore company – property registered under two separate titles – transfer only referring to one of the titles - whether transferee coming to equity with clean hands – issue of jurisdiction of adjudicator on rectifying a document to direct an alteration of the register.

 

Craddock Bros v Hunt [1923] 2 Ch 136, Freer v Unwins [1975] Ch 288, Blacklocks v JB Developments (Godalming) Ltd [1982] Ch 183, Clark v Chief Land Registrar [1993] Ch 294, Mortgage Express Ltd v Robson [2001] EWCA Civ 887, Malory Enterprises Ltd v Cheshire Homes (UK) Ltd [2002] Ch 216, Sainsbury’s Supermarkets Ltd v Olympia Homes Ltd [2006] 1 P&CR 17, Re K [2007] EWCA Crim 491, Halifax PLC v Curry Popeck [2008] EWHC 1692 (Ch).

 

Introduction

 

1. This is an application by Palace Gate Worldwide Ltd (“Worldwide”) to rectify a transfer of registered land. Section 108(2)(a) of the Land Registration Act 2002 gives the adjudicator jurisdiction to make any order which the High Court could make for the rectification or setting aside of certain documents, including a transfer of registered land.

 

2. The transfer concerned in this application (“the transfer”) is dated 20 February 2006 and is in prescribed form TR1. The transferor is Palacegate Agencies Ltd (“Agencies”), the first respondent. The transferee is Worldwide. In panel 2 of the form the title number of the property being transferred is given as “K284069.” In panel 3 of the form the property is described as “116 High Street, Chatham ME4 4BY.” The purchase price is £249,000.

 

3. 116 High Street, Chatham (“116 Chatham High Street”) is a substantial part three storey and part two storey “L” shaped building built about 100 years ago. On the ground floor there is a large rectangular shaped lock-up shop and store rooms. The upper floors are used as offices and as artists’ studios. There is a separate single storey structure at the rear which comprises two lock up stores/garages and a carport.

 

4. 116 Chatham High Street is registered under two separate titles. One of the garages at the rear (“the garage”) is registered under title number K284069. The remainder of 116 Chatham High Street (“the shop”) is registered under title number K277321.

 

5. In a report dated 18 October 2010 Mr Scannell FRICS has valued the shop at the date of the transfer as at between £250,000-£255,000 and the whole of the lock up stores/garages and carport at the rear as at £10,000. In my view it would be reasonable to value the garage at £4,000.

 

6. Following the transfer Worldwide was registered on 23 March 2006 as the proprietor of the garage only. Agencies remains to this day registered as the proprietor of the shop.

 

7. The parties to the transfer are agreed that a mistake was made and that the shop should have been included in the transfer. Worldwide would not have paid £249,000 for a garage worth only £4,000. It is said by both Worldwide and Agencies that in panel 2 of the form the title numbers of the property being transferred should have been given as K284069 and K277321. Agencies therefore agrees to the application to rectify the transfer.

 

8. Worldwide and Agencies claim that the transfer was preceded by a written agreement dated 20 February 2006 for the sale by Agencies to Worldwide of the whole of 116 Chatham High Street (“the contract”). On 7 November 2008 Worldwide entered a unilateral notice to protect that estate contract in the charges register of the shop.

 

9. On 1 December 2006 Oddbins Ltd (“Oddbins”) obtained a judgment against Agencies in the Central London County Court for £71,039.21 together with interest and costs.

 

10. On 18 January 2007 Oddbins obtained an interim charging order over the shop to enforce the judgment. On 5 February 2007 Oddbins entered a unilateral notice in respect of the interim charging order in the charges register of the shop. On 7 March 2007 Oddbins obtained a final charging order over the shop. On 3 July 2007 Oddbins entered notice of an equitable charge created by the final charging order in the charges register of the shop.

 

11. Oddbins believes that it will be prejudiced by the application to rectify the transfer. It has been joined as the second respondent to the rectification application and has objected to it.

 

Agencies and Worldwide

 

12. Agencies is an English company incorporated on 18 January 1999. Mr Mohanbir Singh owns one £1 share and his wife, Mrs Parminder Kaur, owns the other £1 share. Until 2005 they were both directors of Agencies. Since then the directors have been Mr Singh’s son, Mr Harminder Singh Dooa, and the latter’s wife, Mrs Avneet Dooa.

 

13. On 28 March 2006 Mr Dooa, as a director of Agencies, signed a form 652a applying to strike the company off the register. The application itself appears to have been made on 7 June 2006. In fact, Agencies was subsequently dissolved on 12 February 2008, but was restored to the register on 23 April 2009 on the application of Oddbins.

 

14. Worldwide is a British Virgin Islands company incorporated on 20 July 2005. The directors are Mr Singh and Mrs Kaur. They are also the shareholders.

 

15. During 2005 Mr Singh and Mrs Kaur moved from England to settle in Dubai, and Mr and Mrs Dooa followed them out there.

 

16. At that time Agencies owned a portfolio of five commercial properties:

1.	39/39A New North Road, Hainault, Ilford IG6 2UE (“39 New North Road”).
2.	45/45A New North Road, Hainault, Ilford IG6 2UE (“45 New North Road”).
3.	14 Eastover, Bridgewater, Somerset TA6 5AB (“14 Eastover”).
4.	25 Upper High Street, Epsom KT17 4QY (“25 Epsom High Street”).
5.	116 Chatham High Street.

 

17. The portfolio [1] was sold for £968,000 when Mr Singh and his family moved to Dubai as follows:

PROPERTY	DATE OF SALE	BUYER [2]	PRICE
39 New North Road	31 January 2006	Worldwide	£125,000
45 New North Road	31 January 2006	Worldwide	£125,000
14 Eastover	1 February 2006	Worldwide	£220,000
25 Epsom High Street	20 February 2006	Global Estates Overseas Ltd	£249,000
116 Chatham High Street	20 February 2006	Worldwide	£249,000
			£968,000

 

18. Worldwide’s case is that the portfolio was transferred at full value for tax reasons following discussions between members of Mr Singh’s family. Oddbins believes that the portfolio was transferred at an undervalue to remove assets from Agencies so that the judgment it subsequently obtained could not be enforced.

 

19. In 2009 litigation took place in the Central London County Court between (1) Mr Savage and Mrs Walding and (2) Mr Singh, Mrs Kaur and Worldwide. A post judgment freezing order was made against Mr Singh, Mrs Kaur and Worldwide by HH Judge Cowell on 8 July 2009. The freezing order ceased to have effect by a consent order made on 20 August 2010 after Mr Singh, Mrs Kaur and Worldwide had provided alternative security.

 

20. This security included a charge executed on 23 March 2010, by District Judge Langley on behalf of Agencies, over the shop in favour of Mr Savage and Mrs Walding. The latter were registered on 26 March 2010 as proprietors of the charge in the charges register of the shop.

 

The issues

 

21. The following are the issues I have to decide:

 

(1) Was there an agreement or understanding between Worldwide and Agencies that the shop would be transferred by Agencies to Worldwide?

 

(2) In particular:

 

(a) Was there an oral agreement between Worldwide and Agencies to that effect in or about August 2005?

 

(b) Was there a written agreement between Worldwide and Agencies to that effect made on 20 February 2006, namely the contract?

 

(3) Did this agreement or understanding remain the intention of both parties at the time the transfer was executed?

 

(4) Did the persons executing the transfer mistakenly believe that it would be effective to do this?

 

(5) Should my discretion be exercised in favour of Worldwide?

 

(6) In particular:

 

(a) Was the transaction a sham – was it intended that the beneficial interest in the shop should remain in Agencies?

 

(b) Would Oddbins be prejudiced by the rectification, in the sense of being put in a worse position than it would have been if the transfer had been completed in the correct form in the first place?

 

(c) Should Oddbins be able successfully to invoke the equitable maxim that he who comes to equity must come with clean hands?

 

(7) If the transfer is not rectified, did the beneficial interest in the shop, as well as the garage, pass to Worldwide on 20 February 2006 by reason of the contract being a specifically enforceable agreement for the sale of the whole of 116 Chatham High Street to Worldwide and/or by the payment of the purchase price by Worldwide?

 

(8) In either event, do I have the power to and, if so, should I order rectification of:

 

(a) the proprietorship register of the shop to show Worldwide as the proprietor?

 

(b) the charges register of the shop to remove all entries relating to Oddbins’ charging order?

 

(9) Has there been an underpayment of SDLT by Worldwide and, if so, what should be the consequences, if any?

 

(10) If the transfer is rectified, would Oddbins’ equitable charge fall away?

 

The witnesses

 

22. Mr Singh was born in 1947. He has made four witness statements. He gave oral evidence in support of Worldwide’s application. He journeyed from Dubai to attend the hearing.

 

23. Mr Dooa was born in 1977. He has made two witness statements, which are admissible under the Civil Evidence Act 1995. He chose not to journey from Dubai to be cross examined. I am satisfied that Mr Dooa suffers from very serious ill health. A recent medical certificate refers to hypercholesterolaemia and chronic pancreatitis. Hypercholesterolaemia is not a disease but a metabolic derangement that can be caused by many diseases and can in turn contribute to many other diseases, notably cardiovascular disease. Two years ago the cholesterol reading was 438, which is extremely worrying as anything over 240 is regarded as high.

 

24. Although the medical evidence presented on behalf of Mr Dooa did not specifically state he was not advised to travel, Mr Singh referred to concerns about his son’s heart which is entirely consistent with a high cholesterol reading. I am not prepared to draw any adverse inferences or to attach less weight to Mr Dooa’s witness statements solely because he did not attend the hearing.

 

25. Worldwide also called Mr Mehta FCA FCCA, who has acted as accountant to Agencies but not to Worldwide.

 

26. Neither Mrs Kaur nor Mrs Dooa made a witness statement or gave oral evidence.

 

27. Oddbins’ solicitors are Clarke Willmott. A witness statement from Mr Ham, the partner conducting the litigation with Agencies, exhibited certain documents relating to that litigation, but he was not required to give oral evidence.

 

The Oddbins litigation

 

28. In 2003 Oddbins was Agencies’ tenant at 25 Epsom High Street. The lease was due to expire in 2008 and contained a fully qualified covenant against underletting. Oddbins was anxious to underlet as it had ceased trading from the premises, but remained liable for the rent. In 2003 and 2004 Oddbins made two separate applications to Agencies for permission to underlet. In 2003 Agencies served a substantial schedule of dilapidations on Oddbins. Agencies did not give permission for either of the proposed underlettings. In each case the proposed undertenant withdrew from the transaction. The second withdrawal was on 12 January 2005.

 

29. On 22 August 2005 Clarke Willmott wrote a substantial letter before action to Agencies, in accordance with the pre-action protocol, setting out their case for damages under the Landlord and Tenant Act 1988. They threatened to commence proceedings unless the amount claimed was paid by 21 September 2005.

 

30. Mr Singh replied to the letter before action by telephone on 25 August 2005 and in writing on 12 September 2005. He denied any liability and suggested that Oddbins was trying to escape its obligations for dilapidations.

 

31. Oddbins commenced the claim against Agencies on 23 November 2005 when Part 7 proceedings were issued in the High Court. A defence, prepared and signed by Mr Dooa, was filed on 20 December 2005.

 

32. The claim brought by Oddbins was duly transferred to the Central London County Court. Agencies chose to play no further part in the litigation. Following a failure by Agencies to comply with an unless order, Oddbins obtained the judgment dated 1 December 2006 referred to in paragraph 9 above. Oddbins then enforced the judgment as described in paragraph 10 above.

 

My assessment of the witnesses

 

33. Mr Mehta was an impressive witness as Mr Johnson, with typical candour, admitted. I accept his evidence without hesitation.

 

34. Mr Singh was born in Kanpur. He settled in England in 1967. He is an experienced and astute businessman. He told me that he made his money in the grocery business and then moved into property several years ago. He described himself as having once been a millionaire, but I imagine that to be an understatement. He buys and sells freehold property which he lets out for a rental income. He seems to me to have a particular aptitude for High Street commercial lettings. Between 1999 and 2006 he used Agencies as a corporate vehicle but he also held properties in the names of himself and Mrs Kaur.

 

35. I have no doubt that in many respects both Mr Singh and Mr Dooa have tried to mislead me. Mr Singh gave evidence for over five hours. I am satisfied that at all times he controlled both Agencies and Worldwide. At times he would answer the question put to him with almost excessive enthusiasm, but at other times when it suited him he would appear not to have an answer or not to know what was going on.

 

36. For example, he was pressed strongly as to whether the offshore company Global Estates Overseas Ltd (“Global”) which purchased 25 Epsom High Street, was connected to Worldwide. The companies share the same address in the United Kingdom, Mr Shah, 92-94 Roman Road, London E2 0PG. This address is also that of Zacks Footwear.

 

37. Mr Singh explained that Mr Shah runs an accommodation address service for offshore companies, as well as his footwear business, and it is just a coincidence that both companies use the same service. Although it is suspicious I do not regard it as being open to me to make a finding on the limited evidence before me that Worldwide and Global are connected.

 

38. However, Mr Singh went further than that in his oral evidence. He said that the sale of 25 Epsom High Street was arranged in Dubai and that, since the seller was Agencies and not Worldwide, he had no knowledge of the details. Mr Singh and his wife own the share capital of Agencies and he controls the company, even thought he is not longer a director. I find that answer completely disingenuous.

 

39. I find parts of Mr Singh’s witness statements incredible. Mr Singh had wanted Agencies’ portfolio to be conveyed to Worldwide by his solicitor, Mr Vowles of Preuveneers. On 6 December 2005 Worldwide appointed Mr Vowles its agent to sell the portfolio. On 15 December 2005 Worldwide paid £321,915.48 to Preuveneers as the first instalment of the purchase price of the portfolio. The money was returned the following day.

 

40. In paragraph 5 of his third witness statement Mr Singh says that Mr Vowles told him that another solicitor had to act for Agencies. He told Mr Singh that he was being pushed out of the firm by a younger partner. Mr Singh asked Mr Vowles to recommend another solicitor, but he told Mr Singh that he could do it himself and showed him what to do. He showed Mr Singh an agreement for sale of another property as he had done several transactions for Mr Singh. He wrote out the agreement for sale by hand, and also filled in a TR1, an AP1 and a SDLT form. Mr Vowles wanted to give these documents to Mr Singh but his younger partner stopped him. Mr Vowles told Mr Singh that he could download these documents as well.

 

41. Mr Vowles did not give evidence and I am unable to accept this account, which I regard as implausible. It is far more likely that Mr Vowles declined to act for both parties in a conveyancing transaction where both were not established clients or, for reasons which will become apparent, because of concerns or a disagreement over the payment of SDLT.

 

42. Both Mr Singh and Mr Dooa have given misleading evidence in their witness statements about the Oddbins litigation. In his first witness statement Mr Singh says that he only became aware of the proceedings when the tenant of 116 Chatham High Street stopped paying the rent to Worldwide at the request of Oddbins in 2007. In his first witness statement Mr Dooa says that he had never received the summons before he left for Dubai and was not aware of the proceedings or the judgment. In his third witness statement Mr Singh maintains that Mr Dooa must have forgotten about having filed a defence. In his second witness statement Mr Dooa apologises for having forgotten about filing the defence.

 

43. I cannot believe Mr Dooa could have forgotten that he personally signed the defence to the claim, nor can I believe that Mr Singh would not have been aware of the claim having being made. Mr Dooa can also be criticised in stating on the form 652a dated 28 March 2006 that Agencies had not traded or otherwise carried on business or disposed of property for value within the previous three months. Its property portfolio was disposed of during that period.

 

44. I am also satisfied that Mr Singh was instrumental in making a fraudulent application to Land Registry to alter the register on the basis that the transfer had correctly included the title numbers of both the garage and the shop and that Land Registry had incorrectly registered the garage only.

 

45. The application was made on behalf of Worldwide in a letter to Land Registry dated 28 October 2010 from its then solicitors Chhokar & Co, enclosing a copy of the transfer to which “K277321” had been added in manuscript next to the typed “K284069” in panel 2.

 

46. Land Registry had the original transfer in its possession and correctly treated the application as groundless. Chhokar & Co was innocent of any complicity in this matter, having been given the doctored transfer by Worldwide. Apparently it was Mrs Kaur who added the title number of the shop in manuscript.

 

47. Mr Singh said in his oral evidence that the title number of the shop had only been added in manuscript to the copy transfer in order to show the solicitor what the error was and the firm had got the wrong end of the stick. I do not accept that evidence.

 

48. I am also of the view that Mr Singh’s credibility is undermined by the absolutely dismal manner in which documents have been disclosed by Worldwide. At the time of the making of the rectification application on 20 February 2009 Worldwide was still represented by Chhokar & Co. On 31 July 2009 that firm was replaced by JR Jones.

 

49. On 7 May 2010 the Law Society intervened in the practice of JR Jones and Osbornes was appointed to supervise its affairs. I accept Mr Singh’s evidence that Mr Armeet Sikh absconded with money belonging to Mr Singh and/or Worldwide but I do not accept that the documents which have gone missing have necessarily been taken by Mr Sikh, and I find the suggestion that Mr Sikh would have fled to Iran with as many as 30 files relevant to the sale of Agencies’ portfolio as unlikely.

 

50. On 15 June 2010 Mathew Arnold & Baldwin was instructed in place of JR Jones and that firm received some documents from Osbornes. Mathew Arnold & Baldwin ceased to act for Worldwide in September 2010 when Mills Chody, Worldwide’s present firm of solicitors ,was instructed in its place.

 

51. No proper evidence has been produced as to any attempts to find missing documents nor am I satisfied that any, or any adequate, steps have been taken to find documents that Osbornes might have.

 

52. Finally, for reasons explained below, I find that Mr Singh effected the sale of the portfolio by a series of individual sales, rather than by a single sale, with the intention of paying a lower rate of SDLT than he otherwise should have done. Again, this is a matter going to his credit.

 

53. My conclusion is that I have to exercise care in accepting any of Mr Singh’s evidence. Substantial parts of it I reject. But I do not reject the whole of it. There are aspects of the evidence which I accept. Some of Mr Singh’s evidence is corroborated or supported by other evidence. But even when it is not, some of it is credible. It would be too simplistic to reject the whole of Mr Singh’s evidence as Oddbins would like me to do.

 

My findings of fact

 

54. I must begin by considering the move of the Singh family to Dubai. Mr Singh’s residence permit commenced on 7 November 2005 and he told me that he was able to move there two or three months earlier. Mrs Kaur also moved to Dubai with him and they were joined by Mr and Mrs Dooa probably sometime later.

 

55. What were the reasons for the move? Two principal reasons have been put forward. First, the family had experienced two very unpleasant burglaries at the home they shared at 99 College Road, Dulwich, London SE21 7HN (“99 College Road”). Secondly, there were health problems in the family. Mr Singh and Mrs Kaur have each faced a number of difficulties with their health in recent years. Mr Dooa’s health I have already mentioned. I find these reasons credible.

 

56. I accept that Mr Mehta gave Mr Singh non-specific and general oral advice that, if the family were to become resident or domiciled overseas, there could be tax advantages if Agencies’ property portfolio was transferred to an offshore company. Mr Mehta was scrupulous to make clear that specific advice would need to be taken from tax counsel, but I am satisfied that Mr Singh believed that there would be a tax advantage in trading through an offshore company. I do not believe Mr Singh would have give up his prestigious Dulwich home (worth on the evidence well in excess of £1M) to evade an anticipated judgment debt which he did not expect to be significant and which, in any event, was small compared to the family’s overall wealth

 

57. Worldwide was incorporated in the British Virgin Islands for the very purpose of securing a tax advantage. At a meeting of its directors on 26 July 2005 it was resolved that a branch should be established in one of the emirates of the UAE. Worldwide was established a month before the letter before action in the Oddbins litigation was received. No attempt was made to dispose of the portfolio on receipt of the letter before action or prior to the date when it was said proceedings would be commenced. Mr Singh said that he did not consider that the claim by Oddbins had any value because of his cross claim for dilapidations.

 

58. I am satisfied that, in around August 2005 soon after Worldwide was established, there was agreement amongst the members of the Singh family that Agencies would transfer its portfolio offshore and there was an understanding between Worldwide and Agencies that the whole of 116 Chatham High Street would be transferred by Agencies to Worldwide.

 

59. By the end of the hearing a reasonable picture had emerged of the way in which Mr Singh operated through Agencies. This was only possible through the extremely late disclosure of details of Mr Singh’s director’s loan account kept by Mr Mehta’s firm. As at 1 April 2005 the fixed assets of Agencies totalled £1,004,120. This was the value of the five properties. There was also cash in hand of £22,896. There were two categories of creditors. First, secured NatWest loans of £437,771. Secondly, other creditors falling due within one year of £567,945.

 

60. I am satisfied having heard Mr Mehta, Mr Singh and having seen the documents produced by Mr Mehta that creditors falling due within one year was comprised of Mr Singh’s director’s loan account. These loans were monies put into Agencies by Mr Singh.

 

61. On 14 November 2005 Mr Singh was told by NatWest, in response to an enquiry by him, that the total outstanding loan to Agencies amounted to £399,746.58. On the same day those loans were paid back to NatWest from Mr Singh and Mrs Kaur’s joint account. The security held by NatWest on the properties in the portfolio was released.

 

62. On 17 November 2005 Mr Singh transferred £825,000 from Mr Singh and Mrs Kaur’s joint account into the account of Worldwide. I accept that this money was part of the net proceeds of sale of a property which had been owned by Mr Singh and Mrs Kaur in Scunthorpe.

 

63. On 31 January 2006 Worldwide transferred £246,750 into a joint account of Mrs Kaur and Mr Dooa. The whole of that account was transferred on 1 February 2006 to Mr Singh and Mrs Kaur’s joint account.

 

64. Mr Singh explained to me that the sum of £246,750 was the purchase price for 116 Chatham High Street. This was paid by Worldwide to himself at the direction of Agencies because it was money owing to him by Agencies on his director’s loan account. Despite a strong challenge by Mr Johnson I accept that evidence.

 

65. The actual purchase price was £249,000 but an adjustment was made to reflect the fact that Agencies had received the rent to 31 March 2006 and the insurance premium to 28 May 2006. This was apportioned and deducted from what was payable by Worldwide. It is true that the amount deducted, £2,250, is approximately £26 out from a precise apportionment as explained to me in opening by Ms Tozer. It is also true that there is no contemporaneous working disclosed. But it would be normal for such an apportionment to be made and I am satisfied that this is what happened here. The amount owed by Agencies to Mr Singh in his director’s loan account was reduced by £249,000, and this was stated to be in respect of 116 Chatham High Street.

 

66. Oddbins asserts that 116 Chatham High Street was transferred at an undervalue. This is of no immediate relevance to the rectification application as the transfer would still be susceptible of rectification even if there had been no or a nominal consideration. However, it is part of the case advanced by Oddbins that the transaction was a sham. I do not find any evidence that the sale was at an undervalue or was a sham.

 

67. 116 Chatham High Street was bought by Agencies for £249,000 in 2002. I do not have any evidence as to the movement of the value of commercial property over the following four years. 116 Chatham High Street is subject to a lease expiring in 2013. Mr Singh gave evidence that the value of a commercial freehold reversion falls as the term of the lease declines. No valuation evidence to the contrary on this point was put to him. Mr Scannell values 116 Chatham High Street, subject to the lease, at £255,000. It is true that this evidence was admitted late and the yield of 8.25% is not explained, but that figure does not seem way off the mark for a covenant which is not blue chip.

 

68. Mr Johnson cross-examined Mr Singh on the rebuilding value of £756,999 to be found in the Norwich Union commercial insurance policy. But I do not regard a rebuilding value as a useful comparable and the yield of 2.9% produced by such a capital value would be far too low.

 

69. This case is not directly concerned with the value of the transfer and my finding that it was not at an undervalue is not intended to prevent a liquidator of Agencies, if one is ever appointed, taking issue with the value of the transfer.

 

70. Worldwide asserts that on 20 February 2006 it entered into a contract for the purchase of the whole of 116 Chatham High Street from Agencies. A copy of the contract has been produced. It is an extraordinarily brief document. It is not subject to any standard conditions of sale and contains no special conditions. It does not contain a date for completion although that is not essential to its validity. It is not a document that would be used by a professional conveyancer.

 

71. I cannot see the point of this document from a commercial or conveyancing point of view, where completion is taking place the same day between two family companies. The original has been called for because Oddbins rightly wants to subject it to forensic testing and dating. The original has disappeared into the same void as many other documents, in other words Mr Sikh is said to be to blame. It is astonishing that the computer on which it was generated cannot be produced either. It was apparently given to charity with the memory still in place, an unlikely occurrence when a computer has been used in a business.

 

72. Mr Singh suggested in his cross–examination the other transfers were preceded by contracts, but none has been produced. I am quite sure that Mr Vowles would not have shown a contract of this nature to Mr Singh. I consider it more likely than not that the contract is not a genuine contemporaneous document. I find that it has been created retrospectively to bolster Worldwide’s case.

 

73. The transfer, though, is a genuine document. It must have been created on or about 20 February 2006. On 6 March 2006 Worldwide wrote to the tenant at 116 Chatham High Street asking it to pay the rent in the future to Worldwide. From 25 March 2006 this is what happened. SDLT at 1% in the sum of £2,490 was paid by Worldwide on 24 February 2006. A land transaction return was delivered and a certificate issued on 13 March 2006. On 23 March 2006 Worldwide applied in form AP1 to alter the register following the transfer.

 

74. I am certain that the transfer contained a mistake. I have no doubt at all that both Agencies and Worldwide intended the transfer to be of the whole of 116 Chatham High Street and not just of the garage. It would make no sense to transfer the garage at a multiple of 62 of its true worth. Oddbins cannot really explain this away. I reject Mr Johnson’s hypothesis in his skeleton argument that:

 

Far from being a mistake, the true position is likely to be that no decision had been taken about which family member should take that title and the matter was forgotten.

 

75. Indeed, so strong do I consider the argument on mistake to be that I suggested to Ms Tozer that the matter might be resolved by rectification by construction [3]. Panel 2 refers to the title of the garage only. Panel 3 refers to the whole of 116 Chatham High Street. The full price of £249,000 is set out in the transfer. What meaning would the transfer convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the transfer?

 

76. However, Ms Tozer reminded me that my statutory jurisdiction was limited to the rectification of certain documents and not to the interpretation of them. I therefore go no further down that route, save to say that on the merits it seems to me to be a strong case of a mistake.

 

77. There is some evidence before me relating to the transfers of the other properties in Agencies’ portfolio. The payment of £220,000 by Worldwide to Agencies for 14 Eastover can be seen. No satisfactory understandable explanation was given as to why 39 New North Road and 45 New North Road were initially transferred to Mr Singh and Mrs Kaur respectively, but I do not agree with Mr Johnson that this undermines the case that the whole of Agencies’ portfolio was being transferred.

 

SDLT

 

78. The prescribed form TR1 in 2006 contained panel 1 which referred to stamp duty. The current prescribed form TR1, substituted in 2008, does not have a panel referring to stamp duty as it was replaced on 1 December 2003 by stamp duty land tax (“SDLT”).

 

79. Section 55(1) of the Finance Act 2003 provides that the amount of tax chargeable in respect of a chargeable transaction is a percentage of the chargeable consideration for the transaction.

 

80. Section 55(2) provides that the amount of SDLT payable is determined as a percentage of the chargeable consideration for the transaction. The percentage increases in respect of a consideration of £250,000 or above. More than £150,000 but not more than £250,000 the rate is 1%. More than £250,000 but not more than £500,000 the rate is 3%.

 

81. Section 55(4) provides that if the transaction in question is one of a number of linked transactions the relevant consideration is the total of the chargeable consideration for all those transactions.

 

82. By section 108 (1) transactions are linked if they form part of a single scheme, arrangement or series of transactions between the same vendor and purchaser or, in either case, persons connected with them.

 

83. On the transfer of 116 Chatham High Street Worldwide paid SDLT at the rate of 1% on £249,000. In panel 1 of the transfer Agencies had wrongly certified that the transaction did not form part of a larger transaction or a series of transactions in respect of which the amount or value or the aggregate amount or value of the consideration exceeded the sum of £250,000.

 

84. Mr Singh was questioned in cross-examination about the payment of SDLT. I have checked the tape and it was put to him that he had dishonestly represented the transactions as separate ones when he knew that they were linked. He replied that he had done nothing dishonest.

 

85. When recalled later to deal with this issue more specifically Mr Singh denied he had any knowledge in 2006 of having to link transactions and aggregating the purchase prices for the purpose of paying tax. He had not paid tax at 1% to evade it. He was familiar with buying a number of properties through the same purchaser from a common vendor at auction and had never had to aggregate the purchase cost for tax purposes.

 

86. I do not accept that explanation. There is a world of difference between a buyer turning up at an auction and happening to buy a number of lots from the same seller, and two parties agreeing to the sale and purchase of an entire portfolio but dividing up the sales individually and certifying in respect of each sale that it did not form part of a larger transaction or a series of transactions.

 

87. I am satisfied Mr Singh knew that the portfolio sale (with the exception of 25 Epsom High Street) constituted a single scheme, arrangement or series of transactions between the same buyer and seller and that the separate sales were designed to evade the payment of the higher rate of SDLT.

 

Conclusions

 

88. It is agreed that the law on rectification of documents is as set out in paragraph 14-14 of Snell’s Equity 31st edition. This is reflected in the first four issues set out in paragraph 21 above. I find that there was an oral agreement or understanding between Worldwide and Agencies that the shop would be transferred by Agencies to Worldwide in or about August 2005. I do not, however, accept that the contract is a genuine document.

 

89. The agreement or understanding did remain the intention of both parties at the time the transfer was executed and the persons executing the transfer mistakenly believed that it would be effective to do this. The ingredients for rectification have been made out.

 

90. I now have to consider whether to grant this equitable and discretionary remedy.

 

91. Since I have found that there was no contract between Agencies and Worldwide, it follows that the beneficial interest in the shop did not pass from Agencies to Worldwide on 20 February 2006 [4]. However, it will pass retrospectively as at that date when my order is completed [5].

 

92. Accordingly, as at 18 January 2007 when Oddbins obtained an interim charging order against Agencies, the beneficial interest in the shop belonged to Agencies still.

 

93. Rectification of a document is retrospective so that it is to be read as if it had been originally drawn in its rectified form. Oddbins is not a bona fide purchaser for value without notice which has taken an interest conferred by the transfer and which would be prejudiced by rectification. In that sense it is not in a worse position than it would have been if the transfer had been completed in the correct form in the first place.

 

94. Oddbins raises a defence. It is said that Mr Singh and Worldwide do not come to equity with clean hands. This doctrine of equity is explained in paragraph 5-15 of Snell’s Equity 31st edition. The claimant not only must be prepared now to do what is right and fair, but also must show that his past record in the transaction is clean. For example, an equitable interest in land granted with a fraudulent purpose cannot be enforced by a person tainted with the fraud.

 

95. However, there needs to be an immediate and necessary relation between the conduct criticised and the equity sued for. So a person who has put money into the acquisition or improvement of a house may be entitled to an equitable interest in it notwithstanding that this money was obtained by him as a result of a fraud effected on a third party [6].

 

96. In Spry’s The Principles of Equitable Remedies 8th edition the author deals with clean hands in relation to specific performance at pages 245-248. Specific performance may be refused for a lack of clean hands in two categories of case. First, where the claimant is shown to have materially misled the court or to have abused its process or to have attempted to do so. Secondly, where the court is being asked to assist unconscionable conduct on the part of the claimant, either by enforcing a right already improperly obtained or by otherwise furthering unconscionable purposes.

 

97. The author deals with discretion, including clean hands, in relation to rectification at pages 616-618. Rectification is an equitable remedy that may be withheld at the discretion of the court according to general equitable principles. The discretion of the court commonly involves, however, different considerations from those that arise in the case of specific performance, where ordinarily the claimant is entitled to alternative relief in damages. If rectification is refused, and the document remains in existence in an uncorrected form, generally the claimant is not entitled to alternative relief and may suffer greater hardship or prejudice accordingly than in cases where a claimant seeking specific performance is confined to damages instead.

 

98. Thus when the basis of a right to rectification is made out relief is only in exceptional circumstances refused on discretionary grounds. In theory, such considerations as an absence of clean hands may cause rectification to be refused but neither counsel could point me to a case where this had happened.

 

99. Mr Johnson put the lack of clean hands at the forefront of his case. Although I do not accept his submissions that the transactions were a sham to avoid paying the judgment subsequently obtained by Oddbins or that the purchase price was never paid to Agencies, there are a number of other matters of concern which remain. These include the misleading evidence given by both Mr Singh and Mr Dooa, the attempt to have the register altered by Land Registry on the basis of the doctored transfer, the lax corporate governance of Mr Singh and the failure of Worldwide to pay SDLT at the correct rate for linked transactions. I was referred to Re K [2007] EWCA Crim 491 which establishes the proposition that a person who cheats the Revenue obtains a pecuniary advantage as a result of criminal conduct within the meaning of section 340(6) of the Proceeds of Crime Act 2002.

 

100. What seems to me to be important in this case is my finding that the transfer was executed for a legitimate and not for a fraudulent purpose. The fact that Worldwide has exaggerated the strength of its case by producing a contract I find to have been created after the event is a matter that can be reflected in costs. It would not be right to deprive Worldwide of its only remedy. I accept that in this respect there is a clear distinction between specific performance and injunctive relief, on the one hand, and rectification on the other.

 

101. I do not regard what Mr Johnson has characterised as the lax corporate governance of Mr Singh as a compelling point. The person asking for equity’s help is Worldwide and I have not been taken to the company law of the British Virgin Islands. I propose to deal with the SDLT point by requiring any underpayment to be made good before my order is perfected.

 

102. I therefore propose to make an order rectifying the transfer so that panel 2 is to be read as containing title number K277321 as well as title number K284069.

 

Further submissions

 

103. It was agreed at the conclusion of the hearing on 11 November 2010 that I would circulate a draft decision and that counsel would address me on the following matters at the adjourned hearing on 29 November 2010.

 

104. The first matter relates to SDLT. I asked for submissions on whether section 14 of the Stamp Act 1891 applies to the adjudicator and whether it applies to a failure to pay a proper level of SDLT as opposed to stamp duty. It is to be noted that SDLT is not a tax on instruments but on land transactions. If section 14 does not apply is there any reason why I should not direct my order to lie on the file until the proper level of SDLT is paid?

 

105. The second matter relates to alteration of the register. I asked for submissions on whether I can direct the registrar to alter the register without an application for alteration of the register having been referred to me by Land Registry under 73(7) of the Land Registration Act 2002. The received wisdom is that I cannot, but there is no decision on the point. It cannot, however, be said that the adjudicator’s office has given any encouragement to the belief that I would be able to direct the alteration of the register. I referred to a copy of a letter sent to Chhokar & Co on 12 February 2009.

 

106. The third matter relates to the removal of Oddbins’ charge in the charges register of the shop. I asked for submissions on whether Oddbins’ charge will be defeated by the rectification of the transfer, because retroactively Agencies no longer had a beneficial interest in any part of 116 Chatham High Street when the charging order was made. The counter-argument may be that rectification of the register is only prospective and therefore the charge should remain. Certainly, Freer v Unwins [1975] Ch 288 has been cited to this end by Mr Johnson in his skeleton.

 

SDLT

 

107. At the adjourned hearing Mr Johnson accepted, correctly in my view, that the Stamp Act 1891 does not apply. He suggests instead that my decision should lie on the file until Mr Singh has provided proof to me that the unpaid tax (with interest and penalties and interest and interest on the penalties) is paid. Ms Tozer accepts that there is no reason why I should not direct the order to lie on the file until the SDLT is paid if I consider it necessary for this to be done in order for any discretion to be exercised in favour of Worldwide. I do so consider, and I do so order.

 

Alteration of the register

 

108. Section 108 of the Land Registration Act 2002 provides:

 

Jurisdiction

E+W

(1) The adjudicator has the following functions—

 

(a) determining matters referred to him under section 73(7), and

 

(b) determining appeals under paragraph 4 of Schedule 5.

 

(2) Also, the adjudicator may, on application, make any order which the High Court could make for the rectification or setting aside of a document which—

 

(a) effects a qualifying disposition of a registered estate or charge,

 

(b) is a contract to make such a disposition, or

 

(c) effects a transfer of an interest which is the subject of a notice in the register.

 

(3) For the purposes of subsection (2)(a), a qualifying disposition is—

 

(a) a registrable disposition, or

 

(b) a disposition which creates an interest which may be the subject of a notice in the register.

 

(4) The general law about the effect of an order of the High Court for the rectification or setting aside of a document shall apply to an order under this section.

 

109. Paragraph 2 of schedule 4 of the Land Registration Act 2002 provides:

 

Alteration pursuant to a court order

E+W

(1) The court may make an order for alteration of the register for the purpose of—

 

(a) correcting a mistake,

 

(b) bringing the register up to date, or

 

(c) giving effect to any estate, right or interest excepted from the effect of

registration.

 

(2) An order under this paragraph has effect when served on the registrar to impose a duty on him to give effect to it.

 

110. Rule 127 of the Land Registration Rules 2003 provides:

 

Court order for alteration of the register – form and service

 

(1) An order for alteration of the register must state the title number of the title affected and the alteration that is to be made, and must direct the registrar to make the alteration.

 

(2) Service on the registrar of an order for alteration of the register must be made by making an application for the registrar to give effect to the order, accompanied by the order.

 

111. Ms Tozer has directed me to section 108(4) of the Land Registration Act 2002 and submits that my jurisdiction is wide enough to order Land Registry to alter the register at the end of a successful rectification application, because the High Court would have the power to do so and would do so in order to dispose of all issues between the parties.

 

112. A purposive construction of the sub-section is to be adopted, she argues. The point of extending the adjudicator’s jurisdiction to include rectification of documents relating to registered land was to avoid the risk of a multiplicity of proceedings in the interests of saving time and cost: see paragraph 16.9 of the Law Commission No 271 Land Registration for the 21st Century: A Conveyancing Revolution.

 

113. In fact the paragraph reads:

 

“Under the present law, the registrar has no power to rectify or set aside a document. On occasions this has meant that he has had to refer a matter to the High Court that he could otherwise have resolved. To avoid the cost and delay that such a reference is likely to entail, it was considered appropriate that the Adjudicator should have a limited power to rectify and set aside conveyancing (but not other) documents. This power is a free-standing one. The Adjudicator’s jurisdiction is not tied to some disputed application to the registrar. Application is therefore to be made directly to the Adjudicator and not on a reference from the registrar.”

 

114. It does not seem to me that this paragraph is really focusing on the precise point I have to decide. The registrar has jurisdiction to alter the register even without an application being made [7].

 

115. Ms Tozer correctly observes that it is not possible to apply for rectification of the register before the rectification application has been successful, so if the Land Registration Act 2002 is not interpreted as permitting alteration of the register to be effected at the same time as rectification of the document, there would be nothing to prevent the losing party from objecting to a subsequent application to alter the register.

 

116. This does not seem to me to be a good point, because Land Registry would be likely to regard any objection to the subsequent application to be groundless as the issue had already been judicially determined between the same parties. However, I accept that rectifying a document affecting registered land will never fully correct the mistake as it is only when the correction to the document is matched by alteration of the register that the intended result is achieved.

 

117. If I do accede to this argument on jurisdiction, Ms Tozer invites me to direct Land Registry to alter the proprietorship register of title number K277321 by deleting Agencies and inserting Worldwide.

 

118. Mr Johnson submits that I do not have jurisdiction to direct Land Registry to alter the register without an application for alteration of the register having been referred to me under section 73(7) of the Land Registration Act 2002. Section 108(4) refers to orders for the rectification or setting aside of the specific document in question, not for the alteration of the register. He is supported in his interpretation by paragraph 48-021 of Ruoff & Roper Registered Conveyancing.

 

119. The adjudicator’s powers to give directions to Land Registry are contained in rule 41 of the Adjudicator to HM Land Registry (Practice and Procedure) Rules 2003:

 

(1) Where the adjudicator has made a substantive decision on a reference (my emphasis), the substantive order giving effect to that substantive decision may include a requirement on the registrar to –

 

(a) give effect to the original application in whole or in part as if the objection to that original application had not been made; or

 

(b) cancel the original application in whole or in part.

 

120. These powers are only given in respect of decisions made on a reference, that is to say a dispute referred by Land Registry under section 73(7) of the Land Registration Act 2002. These powers do not expressly extend to rectification applications.

 

121. I prefer Mr Johnson’s submissions. It is also to be noted that whilst the court has an express power to alter the register under paragraph 2(1) of schedule 4 of the Land Registration Act 2002, the adjudicator has no such express power or inherent jurisdiction to do so. The court’s power to alter the register is not based on the general law about the effect of an order of the court for rectification of the document in question, but rather on the court’s separate power to order alteration of the register. It is not an effect of an order by the High Court for rectification of a document that the court has power to order alteration of the register. It may be an effect of the order that there is a mistake in the register, but the power to effect that correction, if it is appropriate to correct it, is a separate matter.

 

122. Finally, it is to be observed that by virtue of rule 127 of the Land Registration Rules 2003, set out above, even a court order for alteration has to be given effect to by an application to Land Registry.

 

123. Worldwide will, accordingly, have to make an application to Land Registry to alter the proprietorship register of title number K277321. It is not for me to direct Land Registry as to how it should conduct future applications, except in certain cases following a substantive decision on a reference [8]. However, Land Registry may feel that any objection to such an application will be groundless as I have already decided between the parties that Agencies transferred ownership of the shop to Worldwide on 20 February 2006. If a disputed application is referred by Land Registry to the adjudicator, then the reference should be reserved to me for case management.

 

124. I canvassed at the hearing the possibility of my staying the order for rectification of the transfer or adjourning the hearing until an application had been made to the county court or Land Registry for alteration of the register. I have formed the view on reflection that it is more important to finalise the order for rectification of the transfer. I can foresee no difficulties in Worldwide applying to Land Registry for alteration of the proprietorship register.

 

Removal of Oddbins’ charge

 

125. In practical terms, this case is all about the survival or removal of the equitable charge protecting Oddbins’ charging order.

 

126. Ms Tozer submits that the inevitable consequence of the retrospective effect of my order rectifying the transfer is that the beneficial interest in the shop will have passed at the date of the execution of the transfer on 20 February 2006. It is a pre-requisite for the grant of a charging order for the judgment debtor to have a beneficial interest in the property: section 2(1)(a)(i) of the Charging Orders Act 1979. Therefore Agencies had no beneficial interest in the shop as at the date of the charging orders which were 18 January 2007 and 7 March 2007.

 

127. Ms Tozer argues that Oddbins’ charging order would be discharged by the county court under section 3(5) of the Charging Orders Act 1979 which provides that the court by which a charging order was made may at any time, on the application of the debtor or of any person interested in any property to which the order relates, make an order discharging or varying the charging order.

 

128. Ms Tozer invited me not just to direct Land Registry to alter the proprietorship register of title number K277321 by deleting Agencies and inserting Worldwide, but also to alter the charges register of title number K277321 by deleting entries relating to Oddbins’ charging order, especially the notice of the equitable charge created by the final charging order.

 

129. There is an important difference between Worldwide’s proposed application to alter the proprietorship register and its proposed application to alter the charges register. The former is not opposed by Oddbins, but the latter is. Oddbins argues that although I have found against it on the rectification of the transfer, and Mr Johnson has stated he does not seek permission to appeal from that decision, nevertheless the notice of the equitable charge created by the final charging order should not be removed.

 

130. In the first place Mr Johnson submits that Oddbins may wish to oppose any application under section 3(5) of the Charging Orders Act 1979 to discharge the charging order on grounds relating to the rectification of the transfer not raised before me, particularly on grounds connected with the lifting of the corporate veil.

 

131. Secondly, Mr Johnson disputes that the alteration of the register can be retrospective and he relies on Freer v Unwins [1975] Ch 288 and later cases saying it was rightly decided. These cases are Clark v Chief Land Registrar [1993] Ch 294, Malory Enterprises Ltd v Cheshire Homes (UK) Ltd [2002] Ch 216 and Sainsbury’s Supermarkets Ltd v Olympia Homes Ltd [2006] 1 P&CR 17.

 

132. As I have decided I do not have the jurisdiction to direct Land Registry to alter the register without an application for alteration of the register having been referred to me under section 73(7) of the Land Registration Act 2002, I can no more direct an alteration of the charges register in these circumstances than I can direct an alteration of the proprietorship register.

 

133. Worldwide will, accordingly, have to make an application to Land Registry to alter the charges register of title number K277321. Whether it can make such an application without first having made an application to the county court to discharge the charging order is not a matter I can determine. Whilst I cannot direct the county court as to how any such application should be dealt with, I am bound to say that I find Mr Johnson’s suggestion that Oddbins could raise fresh arguments in that forum highly unattractive. It is not just a question of having a second bite at the cherry. It has now been decided that at the time of the making of the charging order Agencies did not have a beneficial interest in the shop and it must follow that there was no jurisdiction to have made the charging order.

 

134. This is a separate question as to whether the registrar has power to alter the register retrospectively. Again, I cannot direct the registrar as to how any such application should be dealt with. Nevertheless, having heard argument on this point from both sides, and at the request of Ms Tozer and contrary to the preferred course of Mr Johnson, I will briefly express my views on whether there is any jurisdiction to remove the notice of the equitable charge created by the final charging order.

 

135. The argument was developed orally. Ms Tozer submits it is a question of priorities. The basic rule in section 28(1) of the Land Registration Act 2002 is that the priority of an interest affecting a registered estate is not affected by a disposition of the estate or charge. There is an exception provided by section 29(1) where a registered disposition of a registered estate is made for valuable consideration. But Oddbins cannot bring itself within that section as its equitable charge [9] is not a registrable disposition within the meaning of sections 132(1) and 27(2).

 

136. At the date of the charging orders, Worldwide had an equity to rectify the transfer. [10] That equity is earlier in time to the equitable charge acquired by Oddbins as a result of the charging order. Under section 28, the first equity in time prevails. As Norris J pointed out in Halifax PLC v Curry Popeck [2008] EWHC 1692 (Ch) [24] this preserves the rule that where the equities are equal, the first in time prevails. A later disposition which creates a subsequent equitable interest will not affect the priority of a prior equitable interest which affected the registered charge or estate.

 

137. Mr Johnson, on the other hand, relying on the authorities already cited draws my attention to Ruoff & Roper Registered Conveyancing paragraph 46.017:

 

“The rule that rectification operates prospectively is consistent with the policy of the 2002 Act that the register should be as complete and accurate a reflection of the registered proprietor’s title as possible. The interests of third persons who relied on the state of the register would be prejudiced if a retrospective rectification of the register were to change the priority of their interests. Similarly, the effect of retrospective rectification would be that official searches of the register might later become inaccurate, even though they were in fact correct at the time they were issued.”

 

138. Mr Johnson disagrees with my observation in paragraph 93 above that Oddbins has not been prejudiced. He submits that it has. It relied upon the accuracy of the title register. Mr Johnson says that if retrospective rectification of the charges register is ordered, Oddbins will have lost the fruits of the judgment and will have incurred very substantial costs in these proceedings.

 

139. In my judgment Ms Tozer is correct to say that the registrar or court has jurisdiction to remove the notice of the equitable charge created by the final charging order.

 

140. Paragraph 1 of schedule 4 of the Land Registration Act 2002 provides that an alteration of the register which involves the correction of a mistake and prejudicially affects the title of the registered proprietor amounts to rectification.

 

141. The passage in Ruoff & Roper relied upon by Mr Johnson and quoted above refers to rectification in this sense. But I am not persuaded that an application to alter the register by removing the notice of the equitable charge created by the final charging order would amount to rectification in this sense.

 

142. It is pointed out in Ruoff & Roper Registered Conveyancing paragraph 46.009 that whether an entry on the register is mistaken depends on its effect at the time of registration. An entry cannot retroactively become a mistake. At the time of its entry on the register the notice of the equitable charge was not a mistake.

 

143. It seems to me that a more accurate basis for making an application to alter the register would be under paragraph 5(b) of schedule 4 of the Land Registration Act 2002 which enables the register to be brought up to date.

 

144. Ruoff & Roper Registered Conveyancing paragraph 46.019 states:

 

“The Act does not provide specifically for the effect of alterations of the register which do not amount to rectification. This is because changes made to the register under the other grounds of alteration could not affect the priority of other interests affecting the registered estate or charge. For example, in adding an entry to the register pursuant to his duty to keep the register up to date, the registrar will merely be giving effect to an interest which already affects the registered estate or charge.

 

145. In this case it would be the prior equity to rectify the transfer. That equity is earlier in time to the equitable charge acquired by Oddbins as a result of the charging order.

 

146. An analysis of Freer v Unwins[1975] Ch 288 shows that it was not a case of competing equities but one governed by the statutory scheme of priorities in the Land Registration Act 1925. It concerned a lease which was not required to be registered, but was to take effect as if it were a registered disposition under section 19(2) of the Land Registration Act 1925. That being so it was subject to the incumbrances and other entries appearing on the register and to overriding interests, but free from all other estates and interests whatsoever: section 20(1) of the Land Registration Act 1925. As the restrictive covenant which was said to have priority to the lease was not entered on the register of the freehold title out of which the lease was carved until after the lease was granted, the tenant and its assignee took free of the restrictive covenant.

 

Costs

 

147. Although Worldwide succeeded on rectifying the transfer, Mr Johnson invites me to make an order requiring Worldwide to pay Oddbins’ costs. Alternatively he says there should be no order as to costs or to discount the costs payable by Oddbins by at least 50%.

 

148. Under rule 42(3) of the Adjudicator to HM Land Registry (Practice and Procedure) Rules 2003 I must have regard to all the circumstances. These include the conduct of a party during, but not prior to, the proceedings. This conduct includes the manner in which the party has pursued his case and whether a party who has been successful has exaggerated his case.

 

149. Serious criticism can be levelled at the way in which Mr Singh, as director of Worldwide, has conducted the proceedings. But for the avoidance of doubt I do not include three matters. First, the tampering with the copy transfer to make it appear that it originally included the title to the shop was done before these proceedings commenced. Secondly, the failure to pay a correct amount of SDLT does not have a causative link to the conduct of the proceedings and, again, occurred before these proceedings commenced. Thirdly, I ignore the time wasted on obtaining and reading through the papers from the proceedings at Central London County Court because, in the event, Oddbins chose not to rely on anything revealed by what was eventually disclosed.

 

150. What I am entitled to take into account is the lamentable disclosure relating to the important issue as to what, if any, consideration was paid by Worldwide for the purchase of 116 Chatham High Street. This would not have mattered if the transfer had been for a pepper corn. But as the transfer was for valuable consideration which was paid in a somewhat convoluted albeit legitimate manner, it was Worldwide’s obligation properly to explain what was happening in its original witness statements and to provide proper disclosure of the relevant documents. It did not do this until far too late in the day, by which stage Oddbins’ curiosity and suspicion had been aroused.

 

151. I also bear in mind the exaggeration of the case by falsely alleging the transfer had been preceded by a contract. I found this was not true. I have also pointed out passages in the witness statements which are incredible, and my conviction that both Mr Singh and Mr Dooa have tried to mislead me.

 

152. The suggestion that Worldwide should pay the costs despite winning is not, however, a realistic one. Also the proportion of the costs to be withheld suggested by Mr Johnson is too high. Litigation is notoriously risky and unpredictable and nothing is more uncertain as to how much of a witness’ evidence will be accepted. Oddbins chose to adopt a hard line strategy, giving little or no credence to anything that Mr Singh chose to say and on some big issues, such as whether he was primarily motivated by a desire to move to Dubai or simply to avoid a liability, I found in his favour.

 

153. I also bear in mind that the costs of the final half day were very much brought about by Oddbins taking a point subsequently abandoned on the failure to pay the correct level of SDLT. This point was not pursued after Mr Johnson conducted further research.

 

154. In all the circumstances I consider the correct discount is 25%, and I shall order Oddbins to pay 75% of Worldwide’s costs on the standard basis.

 

155. My inclination is to direct a detailed assessment by a costs judge rather that to undertake a summary assessment on paper myself. Worldwide’s solicitors should serve on Oddbins’ solicitors and file with the adjudicator a costs schedule in form N260 by 4.0pm 14 January 2011. Should either side wish to persuade me a summary assessment would be more appropriate those submissions should be served and filed by 4.0pm 21 January 2011. I will then give directions as appropriate.

 

 

Dated this 31st day of December 2010

 

 

 

 

BY ORDER OF THE ADJUDICATOR TO HM LAND REGISTRY