Bank of Scotland (Ireland) Limited (“BOSI”) loaned monies to Mr Rolf Kane and secured the loan by way of a mortgage over his principal private residence and registered the charge in the Land Registry in 2006.
All of the assets and liabilities of BOSI including the mortgage and charge over Mr Kane’s property (the “Mortgage”) transferred to Bank of Scotland plc (“BOS”) pursuant to a cross-border merger in 2010 and BOSI was then dissolved. No steps were subsequently taken to register BOS as the legal owner of the mortgage and charge in the Land Registry.
BOS sold a loan portfolio to Tanager DAC (“Tanager”) in 2014 which included the Mortgage over Mr Kane’s property and Tanager registered its ownership of the Mortgage in the Land Registry.
The borrower fell into arrears and Tanager issued proceedings for possession of the property in the Circuit Court. The borrower’s main defence to the proceedings was that, as BOS was never registered as the owner of the Mortgage in the Land Registry, it was not entitled to transfer the Mortgage to Tanager. Accordingly, the borrower argued that Tanager never acquired title to the Mortgage and was not entitled to enforce the Mortgage against the borrower.
The Circuit Court found in favour of Mr Kane and this decision was appealed by Tanager to the High Court. The High Court then stated a case to the Court of Appeal.
Court of Appeal Judgment
The following five questions were put to Court of Appeal for judgment:
Q1 Can the borrower challenge the registration of Tanager as owner of the Mortgage having regard to the conclusiveness of the Register pursuant to section 31 of the Registration of Title Act 1964 (the “Act”)?
A The Court of Appeal held that the Register is conclusive evidence of title in possession cases. The party seeking possession must prove that he is the registered owner of the Mortgage and it is that registration which triggers that party’s statutory entitlement to seek possession. Accordingly, the Court cannot look behind the Register in possession proceedings.
Further, the Court of Appeal held that the jurisdiction to rectify the Register on the grounds of actual fraud or mistake is limited to proceedings between the registered owner of the Mortgage and the party who asserts that they are the correct owner of the Mortgage. The court held that the borrower did not have locus standi to make an application to rectify the Register.
Q2 If yes, can the court join the Property Registration Authority (“PRA”) as a notice party to the proceedings?
A The Court of Appeal held that the PRA may not be joined as a notice party in possession proceedings as possession proceedings require the Court to consider whether the proofs are met by the party seeking possession and not whether the Mortgage was wrongly entered in the Land Registry.
Q3 Is the court entitled to have regard to the circumstances in which Tanager became the registered owner of the Mortgage in the Land Registry?
A The Court held that this does not arise arising from the determinations given to questions 1 and 2.
Q4 Is it open to the borrower to argue that those circumstances amounted to a “mistake” within the meaning of section 31 of the Act?
Q5 In considering the validity of the registration of Tanager as owner of the Mortgage, does section 90 of the Act apply to the transfer of the Mortgage?
A Section 90 of the Act allows a party to deal with its interest in a mortgage before the registration process of ownership is completed by the Land Registry but does not allow a party to enforce its mortgage pending registration.
Section 90(2) allows a party to whom the section applies to take such action, including the action of passing the interest in the charge as if that party was registered as the owner of the mortgage. The court held that section 90 of the Act applied to the transfer of the Mortgage from BOS to Tanager and that BOS was entitled to transfer its ownership of the Mortgage to Tanager notwithstanding that it was not registered as the owner on the Register.
This judgment will have positive implications for acquirers of loan portfolios as it has now been determined that in possession proceedings, a court cannot be asked to look behind the Register which provides conclusive evidence of a party’s title to a charge. This should provide comfort to acquirers of loan portfolios in possession proceedings as long as they have taken steps to have their ownership of charges registered in the Land Registry.
Contributed by Zara West
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