Nugent v Nugent [2013] EWHC 4095 (Ch) (20 December 2013)

Nugent v Nugent [2013] EWHC 4095 (Ch) (20 December 2013)

This case raised a novel issue before Mr Justice Morgan as to  whether the court had, following the Land Registration Act 2002 ("the 2002 Act"), an inherent power to order the cancellation of a unilateral notice registered against a title and, if so, in what circumstances, and how, such a power should be exercised.
Section 32 (1) of the 2002 Act provides that a notice is an entry in the register in respect of the burden of an interest affecting a registered estate or charge. The entry of a notice does not mean that it has been accepted that the claimed interest is valid but that the priority of such an interest, if valid, is protected for the purposes of the 2002 Act.

In brief the Claimant claimed he was entitled to a property on the basis of a promise   by the Defendant and her late husband. The Defendant later confirmed she would not leave the property to the claimant.

The Claimant sought various heads of relief and a declaration that the Defendant was not free to sell more of the property than was reasonably needed to meet her needs and debts and that the balance of the property and its proceeds be left by will to the Claimant. 

The issues
In June 2012, the Claimant’s solicitors registered a unilateral notice against the Defendant’s registered title to the property in order to protect the alleged interest claimed.  
The practical effect of the unilateral notice was to prevent the Defendant selling the property or charging the property.  Accordingly the Defendant sought an order that the Chief Registrar to the Land Registry be directed to cancel the unilateral notice under the court’s inherent jurisdiction.
Section 77(1) of the 2002 Act provides that a person must not exercise the right to apply for the entry of a notice "without reasonable cause". Section 77(2) provides that the duty under section 77(1) is owed to any person who suffers damage in consequence of its breach.
The meaning of "without reasonable cause" in section 77 was in fact considered by Mr Justice Morgan in Fitzroy Development Ltd v Fitzrovia Properties Ltd [2011] EWHC 1849 (Ch), where he held that a person with a reasonably arguable case in support of the existence of the interest claimed had "reasonable cause" to enter a unilateral notice to protect such an interest, even where a court later ruled against the existence of the interest. 
Objections and Jurisdiction
There were a number of issues as to objections and Jurisdiction
1. Section 73 of the 2002 Act deals with objections and provides that if the objection is not otherwise disposed of, then the registrar must refer it to the First-tier Tribunal (formerly the Adjudicator).
2. Schedule 4 to the 2002 Act distinguishes between alteration and rectification of the register. Rectification involves an alteration which prejudicially affects the title of a registered proprietor. The court noted that cancellation of a unilateral notice may benefit a registered proprietor and so would not adversely affect his title. Therefore cancellation would involve an alteration of the register.
3. By schedule 4 para. 2, the court may make an order for alteration of the register for the purpose of correcting a mistake or bringing the register up to date. The court’s power could be relied upon in some cases to order the removal of a unilateral notice.  For example if the registered proprietor sought a declaration, whether by way of an application for summary judgment, that the beneficiary of the notice did not have the interest which he sought to protect by the unilateral notice, and the court made such a declaration, then the court could proceed to order under schedule 4 para. 2 that the register be altered by the removal of the unilateral notice in order to bring the register up to date. However importantly this power could not be exercised where the court considered that the issue as to whether the interest existed could only be finally determined at a trial.
4. Could the Court invoke section 77 of the 2002 Act on the basis there was no reasonable cause? Mr Justice Morgan noted that in principle a court could make an order, before a person applies to register a unilateral notice without reasonable cause, to restrain such a person from committing such a tort and where a person had registered a unilateral notice without reasonable cause, requiring him to apply for the removal of the notice under section 35(3). On such applications on an interim basis, the court would adopt the usual approach (see American Cyanamid Co v Ethicon Ltd [1975] AC 396) i.e. whether the claimant has a real prospect of success).
5. Mr Justice Morgan held that the Claimant had in good faith, made a claim which was reasonably arguable. Accordingly the Defendant was unable to rely on section 77 of the 2002 Act nor schedule 4 paragraph 2. 
Historical jurisdiction
The Court considered a number of reported decisions dealing with previous statutory provisions (the Land Registration Act 1925 and the Land Charges Act 1925 and 1975) as to the court’s inherent jurisdiction to order the vacation of a register entry made under one or other of those Acts. The reader is referred to the judgment for further details.
In short in Clearbrook Property Holdings Ltd v Verrier [1974] 1 WLR 243 and  Tiverton Estates Ltd v Wearwell Ltd [1975] Ch 146. The court held (without explaining the origins of its powers) that it had jurisdiction to vacate an entry on the register. Such power was not challenged and as Mr Justice Morgan noted Clearbrook and Tiverton Estates were regularly followed. 
Therefore if this case had arisen under LRA 1925 or LCA 1925 or 1975 at first instance the court would be bound to hold that it had jurisdiction to make an order of the kind envisaged in those cases.
Did the jurisdiction survive the 2002 Act?
A number of points were material:
1. There was no sufficient change of substance between the earlier provisions and the provisions in the 2002 Act which would justify the conclusion that the existence of the inherent jurisdiction was incompatible with the 2002 Act.
2. The 8th edition. of Megarry & Wade on the Law of Real Property (the leading editor Mr Charles Harpum, formerly a law commissioner who had been closely involved in the preparation of a consultative report prior to the 2002 Act ) at para. 7-076, stated:
"In practice, if, as often happens, a registered proprietor seeks the removal of a unilateral notice as a matter of urgency (usually because a sale is pending), he may apply to the High Court, acting in its inherent jurisdiction, to seek the vacation of that notice. The court has a wide inherent jurisdiction to order the vacation of any entry in the register, and it was often used in the past in relation to cautions against dealings. Although the point has been left open, there is nothing in the Land Registration Act 2002 that takes away this useful jurisdiction. 
3. Considering the case law after the 2002 Act it was observed that in Waghorn v Waghorn Chancery Division 14 June 2013 the court held the claim which was sought to be protected by a unilateral notice was hopeless and that the jurisdiction which existed before the 2002 Act to vacate cautions had survived the 2002 Act. Accordingly the court ordered the removal of the unilateral notice.
The Decision
Mr Justice Morgan held that the jurisdiction, recognised and developed by the courts, to vacate cautions registered under the LRA 1925, applied to unilateral notices registered under the 2002 Act. In the present case, the claimant’s case was well arguable. Accordingly, the court would not order the cancellation of the unilateral notice on the ground that the claim was without substance.
The jurisdiction applied in different ways in relation to cautions to protect claims which were unsustainable and in relation to cautions to protect claims which were well arguable. 
The Courts jurisdiction to vacate a unilateral notice is on first sight not at all obvious. As ever the law has adapted and borrowed from other areas to develop justice where required, most noticeably the jurisdiction for an interim injunction.
The potential statutory jurisdiction pursuant to section 77(1) of the 2002 Act is far from clear given that a breach sounds in a claim for a statutory tort with a potential remedy for an injunction. 
The Courts inherent jurisdiction appears to be founded on practice established in a number of first instant decisions and again appears to be founded on an analogy with the granting of an injunction with the party who registered the notice being ordered to give the usual cross undertakings in damages.
This area is very likely to be tested in the Court of Appeal given the potential injustice and uncertainty of the jurisdiction.

General News

Leave a Reply

Your email address will not be published.