Waller-Edwards v One Savings Bank Plc [2025] UKSC 22 (04 June 2025)

An innocent buyer purchased a property after a fraudster forged a mortgage discharge. The Supreme Court held the registration of the forged discharge was a mistake, allowing the bank's mortgage to be reinstated, leaving the buyer to seek indemnity from the Land Registry.

Facts

A property was subject to a registered mortgage in favour of One Savings Bank Plc (“the Bank”). A fraudster, impersonating the property owner, executed a forged discharge of the mortgage (a Form DS1). The Land Registry, acting on this forged document, removed the Bank’s charge from the register. The fraudster then sold the property, now appearing to be unencumbered, to Ms Waller-Edwards, an innocent purchaser for value. Ms Waller-Edwards was duly registered as the new proprietor. When the fraud was discovered, the Bank sought to have the register altered to reinstate its charge, claiming the removal of the charge was a mistake.

Issues

The central legal issue for the Supreme Court was to determine who should bear the loss resulting from the fraud: the innocent bank or the innocent purchaser. This required a definitive interpretation of the Land Registration Act 2002 (“LRA 2002”), specifically focusing on several key questions:

1. Did the registration of a void disposition (the forged mortgage discharge) constitute a “mistake” within the meaning of Schedule 4 of the LRA 2002?
2. If it was a mistake, should the register be altered to correct it?
3. Would such an alteration constitute “rectification” by prejudicially affecting the title of the registered proprietor, Ms Waller-Edwards?
4. If so, could rectification be ordered against a proprietor in possession, and what principles should guide that decision?

Judgment

The Supreme Court unanimously allowed the Bank’s appeal, finding in its favour. Lord Burrows gave the lead judgment.

The Nature of the Mistake

The Court definitively held that the removal of the Bank’s charge from the register was a mistake. A forged disposition is a nullity and has no legal effect. Consequently, its registration, which changes the register to reflect a transaction that was legally non-existent, is a mistake by the registrar.

“The registration of the forged discharge was a mistake. The underlying disposition was a nullity, and the register should never have been changed to remove the Bank’s validly created charge. The objective of the LRA 2002 is to create a clear and reliable register, but this does not mean it validates that which is legally void. Correcting the register to reflect the true legal position by reinstating the charge is the primary remedy.”

Rectification and Indemnity

The Court found that altering the register to reinstate the Bank’s charge would “prejudicially affect the title” of Ms Waller-Edwards, as she would no longer own the property free from the mortgage. Therefore, the alteration amounted to “rectification” under Schedule 4, paragraph 1 of the LRA 2002. Under Schedule 4, paragraph 3(2), the court cannot order rectification against a proprietor in possession (which Ms Waller-Edwards was) without their consent, unless there are exceptional circumstances which justify ordering it. The Court held that a contest between two innocent victims of a third party’s fraud could constitute such exceptional circumstances. In balancing the interests of the two innocent parties, the Court concluded it was just to rectify the register. This decision meant Ms Waller-Edwards’ title was subject to the Bank’s reinstated charge. However, the Court emphasised that the LRA 2002 provides a statutory ‘safety net’. Because Ms Waller-Edwards suffered a loss as a result of the rectification, she would be entitled to claim an indemnity from the Land Registrar to cover that loss, including the cost of discharging the mortgage.

Implications

This landmark decision provides crucial clarification on the operation of the LRA 2002 in cases of fraud. It reinforces the principle that a forged instrument is a nullity and that its registration constitutes a “mistake” capable of correction. The judgment confirms that the principle of indefeasibility of title is not absolute and can be defeated by rectification. Crucially, the decision highlights that the ultimate risk in this type of fraud is borne not by the purchaser or the lender, but by the public purse through the statutory indemnity fund administered by the Land Registry. This serves the dual purpose of allowing the register to be corrected to reflect the true ownership position while ensuring that an innocent party who suffers loss as a result is compensated.

Verdict: The appeal by One Savings Bank Plc was allowed, and the register was to be rectified to reinstate the bank’s charge.

Source: Waller-Edwards v One Savings Bank Plc [2025] UKSC 22 (04 June 2025)