Discharge of a legal mortgage at the Land Registry – Negligent Misrepresentation

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In Chief Land Registrar v Caffrey & Co [2016] EWCH 161 (Ch), the High Court considered whether a firm of solicitors had made negligent misrepresentations in relation to a discharge of a registered charge.

In 2007, Mr and Mrs Turner charged their farm to DB Bank (the bank) as security for a loan and the charge was registered at the Land Registry. In October 2009, the Turners provided their solicitors with a DS1 form (to discharge the legal mortgage) supposedly signed on behalf of the bank. In fact, it had not been signed by, or on behalf of, the bank. The Turners also lied when they told their solicitors that the bank was represented by another firm of solicitors. The Turners also subsequently supplied a fraudulent power of attorney in relation to the DS1.

The solicitors did not contact the bank (or the solicitors allegedly instructed) to verify the DS1 form. The solicitors submitted the DS1 form to the Land Registry to alter the register and remove the charge.

The charge was removed and Mr Turner later borrowed further money from Santander UK plc, who took a charge over the farm.

In 2011, the original bank discovered that its charge had been removed, and it applied to alter the register to reinstate it, Santander objected. In 2012, a Land Registry adjudicator decided that the charge should be reinstated, but that it should rank after Santander’s charge.

The Land Registry’s argument that the solicitors were negligent was not successful. The court held that the solicitors had no reason to think that the bank was relying on them and had no reason to advise the bank to take its own legal advice. The Land Registry has subsequently tightened its requirements on the evidence of identity needed on the submission of a DS1.

Although the checks that a solicitor is expected to make to verify identity are more rigorous than they were at the time of the case, the issues of verification on the discharge of a registered charge may still be vulnerable to fraud in certain circumstances. The case emphasises the care solicitors should take to verify that a DS1 form has been properly and genuinely executed by the lender.

For more information, help or advice please contact Louise Duffy on 0191 211 7950 or email [email protected].