Forged legal documents are not uncommon in mortgage cases, and may typically involve one person forging another person’s details and/or signature in a range of documents, most commonly a transfer of property, a mortgage application form (and/or other documents and correspondence in relation to a mortgage application) and the mortgage deed itself.
The most common example is where a husband (H) forges his wife’s (W) signature on a legal mortgage to a lender (L) over their jointly owned matrimonial home.
Quite apart from exposing H to criminal liability and the risk of prosecution under the Forgery and Counterfeiting Act 1981, or other criminal statutes, the effect in civil law is that the mortgage will not take effect as a legal mortgage, so to that extent the legal mortgage is void, and the obligations contained in the mortgage will not normally be binding on W. However, L may have a range of alternatives:
(1) To the extent that the advance has been paid or applied in discharge of a prior mortgage, L may be entitled to be subrogated to the prior mortgage and seek to enforce its mortgage to the extent of the subrogated sum as if it had the benefit of the prior mortgage. This is important because it will invariably mean that L is entitled to possession and to exercise a power of sale without having to apply to the court for the remedy of sale
(2) The mortgage will take effect as an equitable mortgage over H’s beneficial interest (and will effect a severance of any beneficial joint tenancy) (Law of Property Act 1925, s 63(1); Williams & Glyns Bank v Boland [1981] AC 487; Thames Guaranty Ltd v Campbell [1985] QB 210; First National Securities Ltd v Hegerty [1985] QB 850; Ahmed v Kendrick (1985) 56 P & CR 120; Mortgage Corporation v Shaire [2001] Ch 743; Bank of Ireland Home Mortgages Ltd v Bell [2001] 2 All ER (Comm) 920; Edwards v Lloyds TSB Bank Plc [2004] EWHC 1745 (Ch). L will be a person who has ‘an interest in a property subject to a trust of land’ under s 14(1) Trusts of Land and Appointment of Trustees Act 1996 and will be entitled to apply to court for an order for sale although note that in some cases it may also be necessary to determine H and W’s respective beneficial interests first. The combination of subrogation and recovery against H’s beneficial interest will often mean that L makes a full recovery. Alternatively, L may sue H for a money judgment which it can enforce by a charging order or bankruptcy (leaving it to the trustee in bankruptcy to seek a sale of the property under s 335A Insolvency Act 1986): Zandfarid v BCCI [1996] 1 WLR 2420; Alliance & Leicester Plc v Slayford [2001] 1 All ER (Comm) 1).
(3) In an exceptional case it may also take effect as an equitable mortgage over W’s beneficial interest (where W may be shown to have authorised H to act as her agent, or consented to the transaction, or is otherwise estopped from denying the validity of the mortgage. For an example in which these arguments failed on the evidence, see Mortgage Corporation v Shaire [2001] Ch 743. W’s conduct may also give rise to a broader principle known as the Brocklesby principle.
(4) L may have a proprietary restitutionary claim by way of lien or equitable charge to the extent that any part of the advance was used to acquire an asset (Goff & Jones, The Law of Unjust Enrichment, 9th Edition, para 34-85 etc).
(5) Where it can be shown that W received any part of the advance, L may have a common law restitutionary claim for money had and received (Goff & Jones, The Law of Unjust Enrichment, 9th Edition, para 8-104 etc).
(6) L may have a cause of action against a witness (if real) to the purported signature of W, for breach of warranty.
(7) L may have a claim for damages for professional negligence or breach of warranty of authority against a solicitor who was either retained to certify, or otherwise warranted, the identity of the signatories (subject to the terms of the retainer or warranty, since the standard of care is one of reasonableness, a solicitor does not normally guarantee the identity of the signatories: Penn v Bristol & West Building Society [1997] 1 WLR 1356; Bristol & West Building Society v Fancy & Jackson [1997] 4 All ER 582 (disapproved on a different point by the Supreme Court in Hughes-Holland v BPE Solicitors [2018] AC 599. See also para 4.5 the Law Society’s Practice Note on Mortgage Fraud (13 January 2020) in respect of checking signatures).
Significant issues follow from the fact of registration of a forged legal mortgage at HM Land Registry, since on completion of the relevant registration requirements, a charge created by means of a registrable disposition of a registered estate has effect, if it would not otherwise do so, as a charge by deed by way of legal mortgage (Land Registration Act 2002, s 51, and the register is deemed to be conclusive: Land Registration Act 2002, s 58(1)), but this may be subject to any application for alteration of the register pursuant to Schedule 4, Land Registration Act 2002 (the application may be made to the court under Schedule 4, para 2, or to the registrar under Schedule 4, para 5 - a disputed application will usually be referred to the First-tier Tribunal under Land Registration Act 2002, s 73(7)).
Alteration of the register may be made for the purposes of (amongst other things) (a) correcting a mistake, or (b) bringing the register up to date. Whether the making of an entry in the register is a mistake should be determined by reference to the position at the time the entry was made (NRAM Ltd v Evans [2018] 1 WLR 639). The registration of a void disposition such as a forged legal mortgage is a mistake for this purpose (whereas if the mortgage is procured by, say, undue influence, which means that it is voidable, the entry of the mortgage in the register is not a mistake at the time it is made, and is only avoided subsequently by an order of the court. In such a case the register may still be altered but only for the purposes of bringing the register up to date: NRAM Ltd v Evans [2018] 1 WLR 639; Antoine v Barclays Bank Plc [2019] 1 WLR 1958. If, as occasionally happens, H forges W’s signature to a transfer of the property into his sole name and is registered as the sole proprietor, and then mortgages the property to L, the entry of the mortgage in the register will also be regarded as a ‘mistake’, with the court adopting a broader interpretation of that expression: Argyle Building Society v Hammond (1984) 49 P & CR 148; Barclays Bank Plc v Guy (No. 2) [2011] 1 WLR 681; MacLeod v Gold Harp Properties Ltd [2015] 1 WLR 1249; Dhillon v Barclays Bank Plc [2020] EWCA Civ 619. See also example 1.2 in Ruoff & Roper, Registered Conveyancing, Volume 2, para 46.028 etc).
An alteration which involves the correction of a mistake and which prejudicially affects the title of a registered proprietor amounts to rectification (Land Registration Act 2002, Sched 4, para 1), and is subject to restrictions (Land Registration Act 2002, Sched 4, paras 3(2), 6(2). Alteration affecting the title of the proprietor of a registered estate in land may not be made without the proprietor’s consent in relation to land in his possession unless (a) he has by fraud or lack of proper care caused or substantially contributed to the mistake, or (b) it would for any other reason be unjust for the alteration not to be made. For the application of these provisions, see Barclays Bank Plc v Guy [2008] EWCA Civ 452; Barclays Bank Plc v Guy (No. 2) [2011] 1 WLR 681; Paton v Todd [2012] EWHC 1248 (Ch). For a review of the caselaw including decisions of deputy adjudicators, and textbooks, see MacLeod v Gold Harp Properties Ltd [2015] 1 WLR 1249. For useful examples of common instances of rectification involving forgeries, see Ruoff & Roper, Registered Conveyancing, Volume 2, para 46.024 etc).
If a person suffers loss by reason of rectification of the register, he is entitled to be indemnified by the registrar (Land Registration Act 2002, Sched 8, para 1(1)(a)). For this purpose, the proprietor of a registered charge claiming in good faith under a forged disposition is, where the register is rectified, to be regarded as having suffered loss by reason of such rectification as if the disposition had not been forged (Land Registration Act 2002, Sched 8, para 1(2)(b). See also Swift 1st Ltd v Chief Land Registrar [2015] Ch 602), but no indemnity is payable until a decision has been made about whether to alter the register for the purposes of correcting the mistake, and the loss suffered by reason of the mistake is to be determined in the light of that decision (Land Registration Act 2002, Sched 8, para 1(3)). The entitlement to an indemnity is subject to a number of other important provisions (Land Registration Act 2002, Sched 8, paras 3-11).
The burden of proving a forgery is upon the person who relies upon it. Whether or not a signature is forged is primarily a question of fact, although it may also involve expert opinion evidence. A forgery may be proved by (1) evidence from the parties themselves, (2) evidence from the witnesses, (3) expert handwriting evidence (with the court usually preferring (on proportionality grounds) to direct that evidence is to be given by a single joint expert under CPR 35.7), and (4) extrinsic evidence (i.e. other evidence, usually as to the timing, location and circumstances in which it is alleged the document was signed.
In enforcement proceedings brought by a claimant mortgagee, a defence of forgery, and a counterclaim for relief, involves an allegation of fraud, and will need to be pleaded (a counterclaim is an additional claim for the purposes of CPR 20.2(1)(a) and is treated as if it were a claim, thereby engaging the requirements of CPR PD 16, para 8.2(1) - requirement to plead allegation of fraud in support of claim). Although it is open to the claimant to file a reply to the defence and a defence to the counterclaim, if he wishes to seek alternative relief, he will need to apply for permission to amend the claim form and particulars of claim (CPR 17.1 (unless he obtains the written consent of all the other parties), and for consequential directions (CPR 17.3).
A claim, or counterclaim, which seeks a determination by the court of any question as to (a) whether a party is entitled to an indemnity under Schedule 8, or (b) the amount of such an indemnity (as provided for by Land Registration Act 2002, Sched 8, para 7), will need to join in the Chief Land Registrar (unless terms can be agreed for the Chief Land Registrar to be bound by any order the court makes. In practice the Registrar may wish to take a point on fraud or lack of proper care under Sched 8, para 5. For practice and procedure involving HM Land Registry, see HM Land Registry Practice Guide 39: Rectification and Indemnity).