This is not your land

'Personal liability' are two words which send chills down the spine of even the most hardened business executives. Prior to the case of Anderson Antiques (UK) Limited v Anderson Wharf (Hull) Ltd & Philip Robert Akrill [2007] EWHC 2086, personal liability was not a feature of the case law concerning the improper entry onto the Land Register of unilateral notices by a company.

However, in Anderson Antiques, Briggs J opened the door to the possibility of imposing liability on both a defendant company and its director.

The court also made orders preventing the registration of further notices without leave of the court and granted interim relief founding the claimant's entitlement to damages. The case thus demonstrates the wide ranging relief available to a registered owner faced with the entry without reasonable cause of a notice, by reliance on the statutory tort introduced by the Land Registration Act (LRA) 2002, s77.

Legal framework

Section 34 LRA 2002 provides that a person claiming to be entitled to the benefit of an interest affecting a registered estate or charge may apply to the Land Registrar for the entry of a notice in respect of the interest. Upon registration of a unilateral notice the Land Registrar must notify the registered owner. The registered owner can challenge the entry of the notice if he takes the view that it has been wrongly entered. The practical effect of the notice is that it may well prevent the registered owner from dealing with his land. As such, it is a potentially strong weapon in the hands of a party seeking to assert an interest.

It is therefore unsurprising that the LRA 2002 incorporates a safeguard against the abuse of this right. Section 77 provides that a person must not apply for the entry of a notice without reasonable cause. What is surprising is the lack of reported cases in which s77 has been invoked.

Pre-Anderson Antiques case law

The availability of s77 as a cause of action was recognised in Loubatieres & Ors v Mornington Estates (UK) & Ors [2004] EWHC 825. The court held that despite the existence of machinery under LRA 2002 for the resolution of disputes between parties there was 'no reason why the court should not entertain a claim for breach of s77 and make appropriate orders'.

In UCB Group Ltd v Hedworth [2004] EWHC 1138, the claimant sought the removal of a unilateral notice. The claim was not however based on a breach of s77. The claimant simply relied upon the court's jurisdiction to grant injunctive relief where justified on the balance of convenience. In the event, the claimant's summary judgment application succeeded and the application for interim relief was not considered. However, in contrast to Loubatieres, the court in UCB refused to grant injunctive relief to prevent further applications for the entry of notices.

Donnelly & Ors v Weybridge Construction Ltd [2006] EWHC 348 was also a claim for the discharge of unilateral notices, in this instance brought by the defendant. As in UCB, the defendant did not rely upon a breach of s77, instead inviting the court to exercise its discretionary powers to vacate a notice in appropriate circumstances.

Thus, aside from Loubatieres there is a noticeable lack of reported cases in which a breach of s77 has been relied upon. Furthermore, the courts have shown some reluctance, for example in UCB, to go beyond ordering the removal of the notice and restraining a party from making further applications. Accordingly, the decision in Anderson Antiques is of interest firstly because of the wide relief granted, and secondly as the claimant's case was grounded on a breach of s77. Moreover it is the first reported case in which the director of a company has been held jointly liable for breach of the duty under s77 and hence personally liable in damages.

Anderson Antiques: one step further

In Anderson Antiques the claimant challenged the registration of unilateral notices by the defendants against the claimant's title to development land.

The claimant applied for summary judgment and/or an interim injunction for the removal of those notices and for judgment for damages for breach of the duty under s77. The claimant sought relief not only against the registering party, the first defendant, but also against the second defendant, its director, alleging that the latter procured the commission of the statutory tort (the breach of duty under s77) by the former. The defendants sought to justify the notices on the basis of a proprietary estoppel or constructive trust in the first defendant's favour.

The defendants sought to rely upon an oral agreement for the sale of the land. The Law of Property (Miscellaneous Provisions) Act 1989 s2(1) requires such agreements to be made in writing. To avoid this obstacle, the defendants claimed that steps had been taken in the build up to the purchase of the property, such as instructing solicitors, which amounted to detrimental reliance, thus giving rise to a proprietary estoppel or constructive trust. Section 2(5) LPA 1989 provides that the creation of a resulting, constructive or implied trust is not affected by the rule in s2(1).

The court reviewed the authorities of Yaxley v Gotts [2000] Ch 162 and Yeoman's Row v Cobbe [2006] EWCA Civ 1139 (in which judgment of the House of Lords is pending) and stated that while in theory such reliance could give rise to a proprietary estoppel, the defendants' case was far removed from the more typical scenario whereby a party has fully performed a bargain in reliance on promises made.

Ultimately, the court did not decide the point as a matter of law but rejected the defendants' case on evidential grounds. However, Briggs J voiced concerns that if s2 did not operate in a case such as this, it would appear that almost any oral contract for the sale of land could be enforced by way of proprietary estoppel, whether or not wholly or substantially performed. This would enable parties to circumvent s2 with minimal difficulty or expense thus defeating the purpose of the legislation.

Damages

Having rejected the defendants' case on evidential grounds and granted summary judgment in the claimant's favour, the court considered whether there should be judgment for damages against the first defendant for breach of the statutory duty in s77. The court explained that, as with common law negligence, 'loss is of the essence. . . not least because s77(2) focuses . . . on those who suffer damage in consequence of a breach of duty.'

For tactical reasons, the claimant had not at that interim stage produced evidence of its losses. The court therefore declined to give judgment for damages to be assessed. Instead, the court granted a declaration that the unilateral notices had been entered without reasonable cause in breach of s77 and gave case management directions for the claimant to pursue the first defendant in damages if so advised.

Personal liability of the second defendant

The primary duty under s77 is owed by the registering party. However, this did not prevent the second defendant incurring liability if he procured the commission of the unreasonable exercise of the right to apply for the notices.

The court concluded that on the evidence this was a clear case of procurement. The relevant factors which led the court to this conclusion included that:

• The first defendant company was a single purpose vehicle with no relevant staff, directors or shareholders other than the second defendant; and
• The second defendant went to solicitors, gave instructions, took advice, made the decision to apply for the notices and made the statutory declaration in support of the application to the Land Registry.

Thus the decision is a stark warning of the potentially grave consequences that a company director may face as a result of an inappropriate or ill-thought-out application for the registration of unilateral notices.

Injunctive relief against future applications

The Court was keen to stress that 'this is not a remedy which should lightly be given.' Briggs J indicated that where there had only been a single instance of potentially abusive interference with the sale of land, the court should be slow to grant such relief.

On the facts of Anderson Antiques, this was the second occasion that the defendants' activities had forced the claimant to take proceedings to enable it to sell the site (earlier proceedings having been compromised). Thus it was held that this was a proper case for an injunction against both the defendants, restraining each of them from further applications to the Land Registry for the entry of notices or restrictions while the land remained in the ownership of the claimant.

Briggs J ordered that the injunction provide for an application to be permissible with the consent of the claimant or leave of the court.

As the claimant's summary judgment application succeeded, the alternative claim for interim injunctive relief pending trial did not fall to be determined. However, Briggs J made it clear that had it been necessary he would have ordered the removal of the notices awaiting a trial of the issues. The deciding factor was the ability of the parties to meet any liability on an undertaking in damages.

Personal risks

The entry of a unilateral notice is a powerful weapon for a party seeking to assert an interest and prevent an owner dealing with his property. However, Anderson Antiques demonstrates that s77 can be an equally, if not more, powerful weapon in the hands of registered owners.

The case illustrates that in appropriate circumstances the courts offer a speedy and efficient method of limiting the potentially devastating impact that registration of a notice may have. The decision also highlights the advantages of seeking vacation of a notice on the basis of a breach of s77, rather than the more common course followed in the earlier case law. Summary or interim relief may be sought far more quickly than the sometimes more sedate process available in the Land Registry.

Above all, in granting substantially wider relief against the inappropriate registration of unilateral notices than any previous judgment, Anderson Antiques constitutes a salutary warning to those minded to embark upon such a course. In particular, it is an illustration of the substantial personal risks a company director participating in such activity may run.

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