Case No: A3/2001/1736 CHANF
Neutral Citation Number:  [2002] EWCA Civ 1080
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
LEEDS DISTRICT REGISTRY 
(His Honour Judge Langan QC)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 25 July 2002

Before :

LORD JUSTICE AULD
LORD JUSTICE ROBERT WALKER
and 
LADY JUSTICE ARDEN

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Between :

	Bryant Homes Northern Ltd	Respondent	
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	David Thompson	Appellant	

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040,  Fax No:  020 7831 8838
Official Shorthand Writers to the Court)
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Mr Derek Wood QC and Mr S J Pritchett (instructed by Cobbetts) for the Appellant
Mr McGhee (instructed by Eversheds) for the Respondent

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Judgment
As Approved by the Court

Crown Copyright ©

Lady Justice Arden  : 

1.	This is an appeal with the permission of the judge against the order of His Honour Judge Langan QC dated 23 July 2001 on a preliminary issue arising in this action.  By this action the respondent seeks to obtain compensation from the appellant under section 56(3) of the Land Registration Act 1925 for damage alleged to have been caused by the lodging of a caution without reasonable cause.
2.	The preliminary issue which the judge had to determine was whether the caution had been registered with the consent of the registrar pursuant to section 54(1) of the Land Registration Act 1925.  He held that although the registrar approved the registration of the caution he did not give consent under the proviso to section 54(1) because he did not address his mind to that question.
3.	Section 54(1) of the Land Registration Act 1925 provides as follows:-
“54 Cautions against dealings
(1)	Any person interested under any unregistered instrument, or interested as a judgment creditor, or otherwise howsoever, in any land or charge registered in the name of any other person, may lodge a caution with the registrar to the effect that no dealing with such land or charge on the part of the proprietor is to be registered until notice has been served upon the cautioner:
Provided that a person whose estate, right, interest or claim has been registered or protected by a notice or restriction shall not be entitled (except with the consent of the registrar) to lodge a caution in respect of such estate, right, interest or claim.”
4.	Prior to registering his caution, the appellant had protected his rights by registering a notice against the respondent’s title.  Accordingly, the respondent contended that the appellant had to show that, pursuant to the proviso to section 54(1), the registrar consented to the caution being lodged.  The respondent also contended (in the action) that if the appellant could not do so there was no basis in law for the registration of the caution.
5.	Section 56(3) of the Land Registration Act 1925 provides in material part:
“If any person lodges a caution with the registrar without reasonable cause, he shall be liable to make to any person who may have sustained damage by the lodging of the caution such compensation as may be just ...”
6.	The relevant factual background is as follows.  The appellant owned a large parcel of land at Strensall Road, York and sold part of it by a transfer dated 30 August 1995.  By the transfer there was excepted and reserved for the benefit of the retained land the right to use and to lay and connect into any drains, sewers or pipes then or within the perpetuity period in or under the land sold, and the right to free and uninterrupted passage of surface and foul water and sewage through them.  This exception and reservation was protected by a notice in the charges register against the respondent’s title, the respondent having been registered as proprietor with title absolute under title number NYK170665 on 12 October 1995.
7.	On 18 July 2000, the appellant’s solicitors sent to the York District Land Registry an application in form CT2 to have a caution against dealings lodged against the claimant’s title.  In the accompanying statutory declaration it was said that the appellant’s interest in the land arose under the reservation contained in the transfer and that in breach of the reservation the respondent had removed the drainage without the consent of the appellant resulting in the appellant suffering loss and damage.  Reference was made to proceedings in the Leeds District Registry of the High Court seeking an injunction to restrain the respondent from unlawfully interfering with the drainage.  The statutory declaration also explained that the proceedings affected the respondent’s land as it was to be sold as individual plots and the rights of purchasers of the said plots, some of which might be built over the land from where the drainage had been removed, would be affected by the terms of any injunction awarded to the appellant.  It is well established that the appellant had to show that the interest which he sought to protect by a caution amounted to a proprietary interest in the respondent’s land.
8.	The action in the Leeds District Registry had, in fact, been commenced by a claim form issued on 14 July 2000.  There is an application to amend the defence (to which the respondent consents) to allege in the alternative that the caution was intended to protect the pending land action whereas the notice registered against the claimant’s title was to protect rights under the transfer.
9.	The facts found by the judge were as follows.  On 21 July 2000 the Land Registry informed the appellant’s solicitors that the officer dealing with the matter had some reservations about the proposed caution and proposed to refer the matter to an assistant land registrar.  This was followed by a letter from the appellant’s solicitors to the Land Registry.  On 4 August 2000, the Land Registry replied that the officer had been instructed to approve the application for entry.  The letter added “Whilst not convinced that the interest related in the declaration constitutes one that is able to be protected by way of caution, [the assistant land registrar] has taken the view that latitude can be applied in view of section 56(3) of the Land Registration Act 1925.”
10.	The assistant land registrar was a Mr Dunn who gave his approval in a conversation between him and the officer concerned, Mr Kemp.  The judge held that it was impossible to say affirmatively on the evidence that Mr Dunn had applied his mind to the proviso to section 54(1).  The judge found on the balance of probabilities that he did not consider that proviso.  The judge held that he was more likely to have been concerned whether the appellant’s interest in the respondent’s land gave rise to a proprietary interest.
11.	On 14 September 2000 the respondent commenced proceedings for removal of the caution from its title.  On or about 11 October 2000, the appellant agreed to its removal.  Accordingly, the claim in the action was now for damages only.
12.	It was argued before the judge that to qualify under the proviso to section 54(1) a consent had to refer on its face to section 54(1) or at least the circumstances in which the consent was sought and obtained had to be such as to demonstrate that the person giving this consent had section 54(1) in mind.  This question was free from authority.
13.	The judge held that the entry of a caution against dealings was a serious matter because it interfered with the ability of the proprietor to dispose of his land.  Accordingly, any prohibition placed by the legislature on the entry of a caution had to be construed with a view to the enforcement of the prohibition rather than its relaxation.  In consequence, the requisite consent had to be given by a person who had in mind, first, the existence of the prohibition encapsulated in the proviso to section 54(1) and, second, the fact that he had been asked to dispense the intending caution from this prohibition.  According to the judge, if it were otherwise: 
			“the prohibition would be one which could (I put the matters quite 				literally) be thoughtlessly overridden.  Registered proprietors could be 			saddled with unjustified cautions and simultaneously deprived of their 			remedy for compensation almost on the nod.  I do not believe that the 			legislation may properly be construed so as to produce this result.”  
Accordingly, the judge decided the preliminary issue in favour of the respondent.
The appellant’s submissions
14.	Mr Derek Wood QC, for the appellant, submits that the judge was wrong in law.  There was no justification for the gloss which the judge put on the proviso to section 54(1).  The effect of the gloss would be to require the land registrar in every case to be directed to the relevant statutory authority and to be obliged to consider any matter for which his consent is required.  This would bring the private thought processes of the land registrar into the public arena.  Such a conclusion confuses judicial review type considerations as to the underlying decision with the fact of the decision.  Something less than an application specifically for consent under the proviso to section 54(1) of the 1925 Act would discharge the cautioner’s obligation.  If on an objective view of the facts the registrar appeared to have given that consent, it was inappropriate for the parties or the court to investigate further
15.	The judge erred in his reliance on section 56(3) since compensation is potentially payable whether or not the caution has been lodged with consent.
16.	In any event, the judge erred in finding that the land registrar and the defendant’s solicitors did not have section 54(1) in mind at the relevant time.  The statutory declaration referred to the proprietorship register for the property.  This register would have revealed the existence of the notice.  Mr Dunn’s recollection was poor and the court was wrong to conclude that on a balance of probabilities he did not consider section 54(1).  Mr Dunn did not recall his thought processes.  It is possible that he would have looked at the register itself from the computer terminal on his desk, and if he had done so he would have seen the easement noted on the register.   An applicant should be entitled to assume the registrar would do this.
17.	Mr Wood submits that the caution was the appropriate way of alerting purchasers of plots from the respondent of the pending action and of the relief sought in that action, which might otherwise not be capable of being enforced against a purchaser from the respondent.  The caution was to protect the pending action.  The notice previously registered against Bryant’s title was to protect the rights under the transfer.  Leave to amend the defence would be sought so as to allege that there was no duplication of protection in any event and that accordingly the proviso to section 54(1) did not apply.
The respondent’s submissions
18.	Mr John McGhee, for the respondent, submits that the proviso to section 54(1) should be construed restrictively.  This is because the registration of a caution is a serious interference with the rights of owners of property and may cause serious loss and delay in the completion of transactions.  It is for this reason that, where the interest in question has already been protected by a notice, the specific consent of the registrar is required for the registration of a caution in respect of the same interest:  see Ruoff & Roper, Registered Conveyancing, paragraph 36-05.
19.	The judge did not place a gloss on section 54(1).  His construction involved a natural reading of the words.
20.	Section 54(1) would be deprived of much of its effect if it was sufficient that the caution was, in fact, registered.
21.	In most cases, there will be a specific reference in the application to the need for consent under the proviso to section 54(1) and in those cases it can be assumed that the registrar has the requirements of the proviso in mind.
22.	Mr McGhee submits that the appellant’s solicitors did not seek consent under the proviso to section 54(1).  The letter was concerned with whether the caution related to a proprietary interest in the land.  Mr Dunn in his evidence on the preliminary issue confirmed that, as stated in his letter of 15 February 2001, he did not consider the requirements of section 54(1) and in cross examination he said that he did not think that he had in mind the fact that the easement was already on the register and that all he was concerned to establish was that the defendant had an arguable entitlement to a pending land action.  Accordingly, the judge was entitled to conclude that the probability was that Mr Dunn did not consider the proviso to section 54(1).  
Conclusions
23.	The application for amendment of the defence should be granted as both parties consent, but the question whether it discloses a good ground of defence is a matter for the High Court, which has not yet had an opportunity to consider it.  It is not relevant to the appeal which this court has to determine.
24.	In my judgment, the resolution of the question of law which arises on this appeal, and which was ordered to be tried as a preliminary issue, is likely to prove of limited value.  The issue in the action was whether the caution was lodged “without sufficient cause” for the purposes of section 56(1) of the 1925 Act.  The judge’s concern was that if consent was upheld in these circumstances the registered proprietor could be saddled with unjustified cautions and simultaneously deprived of his right to compensation.  I do not accept this.  The fact that the registrar gives his consent does not mean that the caution was registered with sufficient cause.  The cautioner may have given the registrar incomplete information or the registrar may have made a mistake.  Likewise, the fact that the registrar did not give his consent may not mean that the caution was lodged “without sufficient cause”, particularly if the cautioner had a reasonable belief that the registrar had given his consent.  Moreover, if the defence raised by the amendment succeeds, the point raised by the preliminary issue is irrelevant.
25.	The statutory requirement in the proviso to section 54(1) of the Land Registration Act 1925 for the consent of the registrar is no doubt to avoid unnecessary duplication of the registration of minor interests.  
26.	In my judgment, the proviso to section 54(1) makes it clear that the entitlement of a cautioner to lodge a caution in respect of an interest which is already protected by a notice or restriction is dependent on the registrar’s consent.  However, the consent which is required is to the lodging of the caution.  It is not necessary to show that the registrar addressed his mind to the rationale for which his consent is required (namely, to avoid duplication of an interest already protected in some other way).  If the cautioner had to establish the reason why the registrar gave his consent, the thought processes of the registrar would have to be investigated.  This is not necessarily desirable, not least because it involves the registrar in litigation between private parties but also because it would enable the person against whose title the caution is entered to impugn the validity of the caution.  This may be sought to be done some years after the caution is registered.  This sort of consideration may well have led the legislature to take the view that all that was needed to satisfy the proviso was that the registrar gave his consent to the lodging of the caution.  However, that may be, that in my judgment is what the wording of the proviso achieves.
27.	In those circumstances, in my judgment, the appellant discharged the onus of showing that the proviso was satisfied by showing that the registrar approved the lodging of the caution.
28.	Accordingly, in my judgment, this appeal should be allowed.
29.	The statutory forms for lodging cautions do not provide for any particular form to be used where the proviso applies.  However, it would be good practice, as Mr McGhee points out, for the cautioner to draw attention to the fact that consent is sought under the proviso to section 54(1).
Lord Justice  Robert Walker: 
30.	I gratefully adopt Arden LJ’s summary of the facts relevant to the preliminary issue.  I agree with her that the preliminary issue is likely to prove of limited value in disposing of this action economically and efficiently.  It may have been assumed that the issue of reasonable cause (under section 56(3) of the Land Registration Act 1925) was more or less co-terminous with whether or not the registrar had given consent under the proviso to section 54(1).  But that assumption, if made, was in my view mistaken.  It is easy to imagine cases in which the registrar might be induced, by an incomplete or over-optimistic statutory declaration, to permit the lodging of a caution which ought never to have been lodged.  It is also possible to imagine cases (though they would be less common) in which a caution was lodged, and was reasonably lodged, even though there was an inadvertent breach of the proviso to section 54 (in the sense that the caution was accepted as lodged without anyone at an appropriate level of authority in the Land Registry making any decision on behalf of the registrar).
31.	In this case Mr Dunn, an assistant land registrar, did address his mind to whether the caution should be accepted, and he decided that it should be accepted, but he did not (as the judge found on the balance of probability) have the proviso to section 54(1) in mind.  Was his apparent consent negatived as a result?
32.	At first I was attracted by the argument that no one (and especially no official decision-maker exercising statutory functions) can consent to something that was not in his mind, and that a decision reached without addressing one’s mind to the relevant considerations is liable to be set aside.  However it is only liable to be set aside on judicial review; if not challenged promptly, it stands.  Furthermore consent under the proviso to section 54(1) does no more than allow the caution to be put in place; it is no guarantee that the caution is well-founded, or that it may not still be challenged under section 56(3) (as Mr Kemp’s letter of 4 August 2000 recorded Mr Dunn as having expressly mentioned).  
33.	In the penultimate sentence of his judgment the judge seems to have thought that consent under the proviso would necessarily exclude any possible liability under section 56(3).  This may have influenced his decision to direct a preliminary issue, and it certainly influenced the outcome of the issue in his court.
34.	I respectfully think the judge was wrong to make that assumption, and that it led him to the wrong conclusion.  For these reasons, and for the fuller reasons given by Arden LJ, I would allow this appeal.
Lord Justice Auld:
35.	I also agree that this appeal should be dismissed.
Order: Appeal allowed with costs as in the agreed draft.  Appellant to have permission to re-amend defence as sought.
(Order does not form part of the approved judgment)