Peter Reekie comments on NRAM v Evans [2017] EWCA Civ 1013. 

As most home owners will agree, the day when the mortgage has finally been paid off will be a day to treasure. In our case this month, NRAM v Evans [2017] EWCA Civ 1013, Mr and Mrs Evans had received a letter from their mortgage lender that said, ‘…I can confirm that the above mortgage [was] redeemed on 13 December 2005…’ 

The background to this was that they had taken out a loan to buy their house and this had been secured by a mortgage (the 2004 charge). This first loan had subsequently been redeemed by a second loan from the same lender on different terms. The case principally concerned this second loan, which, the owners claimed at trial, was not secured by the 2004 charge. 

They continued to meet their financial commitments under the second loan for the next few years. They then instructed solicitors in connection with the sale of their house. Their solicitors wrote to the lender enclosing a copy of the above letter asking for the registered charge, which was still shown on the register, to be removed. As Lord Justice Kitchen said: 

‘It appears that the system then in use … was checked and it was found that the 2004 loan had been redeemed. Unfortunately, the [lender’s] employee failed to find the [second] loan and, no doubt believing that all debts for which the 2004 charge was security had been redeemed, released the charge by submitting an e-DS1…’ 

The lender then realised that a mistake had been made, contacted the solicitors to explain that the e-DS1 should not have been issued, and was told that they were not aware of the second loan. The lender applied to the court for rescission of the e-DS1 and for re-registration of the charge. The court held that the charge was security for the second loan (the charge provided that it was to secure any money that the borrowers owed from time to time), and ordered re-registration of the charge. The owners appealed to the Court of Appeal. They also applied for an indemnity from the Registrar for their losses due to rectification if their main appeal was unsuccessful. 

The provisions of the LRA 2002 are set out below so far as relevant here. Sched 4 para 2(1) provides: 

‘The court may make an order for alteration of the register for the purpose of:

(a)     correcting a mistake,

(b)     bringing the register up to date, or …’ 

Schedule 8 para 1(1) provides that:

‘A person is entitled to be indemnified by the registrar if he suffers loss by reason of:

(a)     rectification of the register,

(b)     a mistake whose correction would involve rectification of the register…’ 

The Court of Appeal dismissed the owners’ appeal. The word ‘mistake’ in the statutory provision was not defined, but the Court held that a distinction must be drawn between a void and a voidable disposition (see Norwich and Peterborough Building Society v Steed [1993] Ch 116). The Court held that registration of a voidable disposition (the e-DS1 here) before it was rescinded was not a ‘mistake’ under these provisions because it was a valid disposition until rescinded. Once a voidable disposition had been rescinded, the register can be ‘brought up to date’, see para 2(1)(b) above. No ‘rectification’ within the meaning of the statutory provision was therefore necessary. 

As to the owners claim for an indemnity the Court held that as the register had been brought ‘up to date’ the claim was outside the scope of a claim for indemnity. It did not involve a ‘rectification’ or a ‘mistake’ whose correction would involve rectification.