As a registered charge is a public document on a public register, third parties can expect it to accurately reflect the state of the title to the land.
That was the conclusion in Cherry Tree Investments Ltd v Landmain Ltd in which a finance company's (F's) loan to the defendant was secured by a registered charge on the defendant's property. The charge was in standard form and failed to make reference to a facility agreement which had varied and extended the statutory power of sale conferred on the mortgagee by s 101 of the Law of Property Act 1925. The facility agreement provided that F could sell at any time after execution of the facility agreement, without any default.
A dispute arose between F and athe defendant and F sought to exercise its extended right of sale and sold the property with full title guarantee to the claimant which then sought to register its title to the property. The defendant objected on the basis that the charge made no reference to the extended power of sale and so the property could only be sold upon default. At first instance the judge held that F and the defendant must have intended the power of sale to arise immediately upon execution of the charge. There was therefore a mistake in the charge which should be read as if it contained the immediate power of sale. The claimant could therefore be registered as proprietor.
The Court of Appeal disagreed holding that the land register was intended to be a complete and accurate reflection of the state of the title to the land. A more restrictive approach would be taken to the use of background material in the interpretation of registrable contracts and public documents than in commercial contracts. The court should not use the process of interpretation to insert whole clauses into such charges that the parties had mistakenly failed to include.
Things to consider
The decision seems unfair to the innocent claimant given that the defendant accepted the extended power of sale in the facility agreement. The claimant should have sought rectification of the charge, rather than relying upon interpretation but had failed to plead such a claim in its summary judgment application.
