1. Introduction

The case of Dhillon v. Barclays Bank Plc & Anor ([2020] EWCA Civ 619) addresses the complexities arising from rectifying the Land Register in circumstances involving mortgage fraud. The appellant, Mrs. Dhillon, sought to have a fraudulent mortgage charge removed from the Land Register. Both Barclays Bank Plc (BB) and the Chief Land Registrar (CLR) opposed this request, arguing against the rectification based on exceptional circumstances. This commentary delves into the judgment's background, its legal reasoning, and its broader implications for land registration law.

2. Summary of the Judgment

The England and Wales Court of Appeal dismissed Mrs. Dhillon's appeal against the High Court's refusal to rectify the Land Register by removing a fraudulent charge in favor of BB. The High Court had found that exceptional circumstances justified not rectifying the register under paragraph 3(3) of Schedule 4 of the Land Registration Act 2002. The Court of Appeal upheld this decision, affirming that the circumstances of fraud, coupled with Mrs. Dhillon's inability to afford purchasing the property legitimately, constituted exceptional circumstances warranting non-rectification.

3. Analysis

3.1 Precedents Cited

The judgment extensively engaged with prior case law to contextualize its decision:

• NRAM Ltd v Evans [2017] and Antoine v Barclays Bank Plc [2018]: These cases informed the court's understanding of mistakes warranting rectification.
• Paton v Todd [2012]: Provided the two-stage test for determining exceptional circumstances in rectification cases.
• Scmlla Properties Ltd v Gesso Properties (BVI) Ltd [1995]: Highlighted principles of escheat and its impact on land ownership.
• Nasrullah v Rashid [2018], UK Learning Academy Ltd v Secretary of State [2020], and others: These cases underscored procedural expectations in civil litigation and the handling of issues like illegality.

3.2 Legal Reasoning

The court's legal reasoning centered on whether "exceptional circumstances" existed that justified not rectifying the Land Register. Applying the two-stage test from Paton v Todd:

1. Existence of Exceptional Circumstances: The court identified several factors, including the fraudulent transfers involving Mrs. Dhillon's forged signatures, her inability to afford the property legitimately, and the substantial increase in the mortgage debt.
2. Justification for Non-Rectification: Rectifying the register would have disproportionately benefited Mrs. Dhillon by granting her an unencumbered title to a million-pound property without corresponding financial investment, effectively creating a windfall.

The court also addressed arguments related to jurisdiction and the doctrine of illegality but deemed them irrelevant to the primary issue of exceptional circumstances.

3.3 Impact

This judgment reaffirms the stringent application of the "exceptional circumstances" test in rectification cases involving land registration. It emphasizes that rectification will not be granted merely because fraud is present; the court must assess whether rectifying the register would lead to unfair advantages or windfalls. This decision provides clarity for future cases where rectification requests intersect with complex fraud-related scenarios, ensuring that lawful protections for bona fide lenders like BB are maintained unless genuinely exceptional reasons exist.

4. Complex Concepts Simplified

4.1 Rectification vs. Alteration

Rectification: A judicial correction of the Land Register to address a mistake that prejudicially affects the title of a registered proprietor.

Alteration: Broader than rectification, it includes any changes made to the Land Register, such as updating or adding entries that do not necessarily correct a mistake.

4.2 Exceptional Circumstances

Under paragraph 3(3) of Schedule 4 of the Land Registration Act 2002, the court must rectify the register unless exceptional circumstances justify not doing so. "Exceptional circumstances" refer to unusual or rare conditions that make rectification unjust or disproportionate.

4.3 Escheat

Escheat occurs when property reverts to the Crown (state) due to the absence of a legal heir or other qualifying reasons. In this case, CEL was struck off the Register, leading to escheat before the land was eventually vested in Mrs. Dhillon.

4.4 Indemnity

Indemnity: Compensation provided to a party suffering loss due to rectification of the register, as outlined in Schedule 8 of the Land Registration Act 2002.

The court clarified that the availability of an indemnity (if rectification were to occur) does not override the assessment of exceptional circumstances.

5. Conclusion

The Court of Appeal's decision in Dhillon v. Barclays Bank Plc & Anor underscores the judiciary's cautious approach to rectifying land registers in the face of fraud. While recognizing the existence of a mistake due to fraudulent transfers, the court determined that exceptional circumstances prevailed, thereby upholding the High Court's decision not to rectify the register. This ensures the protection of bona fide lenders and prevents unjust enrichment of individuals like Mrs. Dhillon who might otherwise gain significantly from altering the register in light of fraudulent activities.

Lawyers and parties involved in similar disputes must meticulously assess the presence of exceptional circumstances before seeking rectification of the Land Register, understanding that mere fraud does not automatically warrant such a correction unless accompanied by rare and significant conditions that justify it.