Court Rejects Claimants' Pleas in Property Sale Dispute Under Land Registration Act 2002

Citation: [2024] EWHC 187 (Ch)
Judgment on

Introduction

The decision in the case of John Baylis & Anor v Syed Ali Haider & Ors provides a rich examination of several legal principles pertaining primarily to property law, mistaken transactions, and their rectification under the Land Registration Act 2002 (LRA 2002). It also touches on the principles related to the Financial Services and Markets Act 2000 (FSMA 2000) as they apply to sale and rent back agreements.

Key Facts

In this case, the Claimants, Baylis and Kreuder, issued proceedings against three Defendants: an individual (Haider), a defunct firm of solicitors (Edward Marshall), and a commercial lender (Together). The core of the case revolves around the disputed sale of a property purportedly sold by the Claimants to the First Defendant, Mr Haider. The Claimants contended they never intended to sell the property and sought to set aside the transfer on grounds of non est factum or mistake, seeking rectification under Schedule 4 of the LRA 2002. The Claimants also pleaded alternative claims under FSMA 2000 and unjust enrichment. The Second Defendants (the solicitors) were largely absent from the proceedings due to the firm’s dissolution following regulatory intervention.

The court delved into several legal principles, including:

Non Est Factum

A plea that the execution of a deed was fundamentally different from what was intended by the signatory. Relying on case law, specifically Saunders v Anglia Building Society (1971) AC 1004 (HL), the court concluded that the Claimants did understand the nature of the transaction and thus the plea failed.

Mistake

Two forms of mistake were considered: parties at cross-purposes and unilateral mistake. However, the court found no evidential basis for this principle since the Claimants intended to execute a transfer that granted the Property to Mr. Haider.

Rectification of the Register under Schedule 4 of the LRA 2002

The circumstances where the court has a power to alter or rectify the register for correcting a mistake. Here, the court found that if the TR1 transfer to Mr. Haider was void due to a technical mistake, the claimants could have sought rectification but exceptional circumstances justified the court in not doing so.

Financial Services and Markets Act 2000 (FSMA 2000)

Addressing whether the arrangement between the Claimants and Haider was a regulated sale and rent back agreement and if Mr Haider was acting in the course of business. Applying Lord Collins in Southern Pacific Mortgages Ltd v Scott (2015) AC 385, the court found that the arrangement did not meet the necessary criteria to engage FSMA 2000.

Overriding Interests

Determining if a charge should stand despite a party’s actual occupation of the property. The court conclusively argued that the Claimants could not assert an overriding interest as they had consented to securing borrowing on the property.

Restitution

Claims for unjust enrichment against Mr Haider were rejected based on the benefits actually received by the Claimants from the transaction.

Claims against Edward Marshall

The claim against Edward Marshall for their breach of trust and duty in not accounting for a balance of the purchase price was acknowledged but not explicitly ruled upon due to the firm’s absence from proceedings.

Outcomes

In this instance, the court found no basis for the Claimants’ primary case claims, supporting Mr Haider’s and Together’s position. The court would have dismissed the possession claim filed by Haider in County Court had it been necessary to address it. Regarding the alternative claim under the FSMA 2000, the court would have found the transaction just and equitable.

Conclusion

The decision of Deputy Master Rhys provides comprehensive guidance on the application of legal principles concerning property transactions, mistake, and related regulatory matters. The court’s systematic dismantling of the Claimants’ pleas relied heavily on contemporaneous evidence, which led to the conclusion that the Claimants entered into the TR1 transaction with Mr Haider fully aware of its implications and nature. This case serves as a profound demonstration of the significance of intent and documentation in property transactions and the circumspect application of rectification powers under land registration law. Moreover, it illustrates the court’s reluctance to rectify the register on the basis of exceptional circumstances.

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