Malory Enterprises Ltd v Cheshire Homes (UK) Ltd [2002] Ch 2...

Facts

• Malory Enterprises Ltd was the original registered proprietor of a plot of land.
• The land was fraudulently transferred to Cheshire Homes (UK) Ltd by individuals who forged necessary documents.
• Malory Enterprises sought to set aside the transfer and restore the land to its ownership.
• Cheshire Homes argued it was a bona fide purchaser for value without notice of the fraud and sought protection under the Land Registration Act 1925.
• The primary questions concerned the nullification of the fraudulent transfer and the extent of statutory protection for bona fide purchasers in registered land.

Issues

1. Whether a land transfer procured by fraud is void or voidable at the instance of the original owner.
2. Whether a bona fide purchaser for value without notice of the fraud can retain the land under the Land Registration Act 1925.
3. Whether the original owner's equitable rights following a fraudulent transfer constitute an overriding interest under Section 70(1)(g) of the Land Registration Act 1925.

Decision

• The Court of Appeal held that a fraudulent transfer is voidable rather than void; it remains effective until set aside by the defrauded party.
• It was determined that Cheshire Homes could not rely on the protections for bona fide purchasers under the Land Registration Act 1925 to defeat Malory Enterprises' claim.
• The original owner’s equitable rights arising from the voidable transfer may qualify as an overriding interest under Section 70(1)(g) of the Act, binding a subsequent purchaser.

Legal Principles

• A transfer of land procured by fraud is voidable at the instance of the party defrauded, not void from the outset.
• The equitable rights of a defrauded party may survive a fraudulent registration and amount to an overriding interest under Section 70(1)(g) of the Land Registration Act 1925.
• The statutory protection for bona fide purchasers for value is subject to equitable interests that have overriding status.
• Land registration principles must be balanced with equitable doctrines to ensure integrity in property law.

Conclusion

The case establishes that a fraudulent land transfer is voidable and that the original owner’s equitable interest may override a subsequent bona fide purchaser's title under the Land Registration Act 1925, reinforcing the role of equitable interests in registered land.