We all make mistakes, right?

Associate, Manisha Modasia, examines a critical mistake involving the removal of charges on 5,100 mortgages, emphasizing the court’s approval for rescinding based on a mistake of fact and legal effect.

Have any mistakes ever been as critical as Barclays Bank UK plc v Terry [2023] EWHC 2726 (Ch)?

Barclays were tidying up their book of mortgages, which when redeemed, required the bank to discharge the security held by the bank by writing to the Land Registry, removing any charge held.

The bank identified 41,000 mortgages it believed had been discharged and proceeded to remove the bank’s charge at Land Registry. By the time 25,900 charges had been removed, the bank realised that it had made a mistake with 5,100 charges, removing them when the mortgage was still outstanding! How did the bank realise, it received actual enquiries from its customers, which tipped them off.

The Bank took steps immediately to apply to the Court to rescind (revoke) the discharged mortgages on the basis that the bank had made a mistake of fact and there was no sensible reason as to why it had done this and the Court allowed it; and consequently made an order to alter the register with Land Registry reinstating the charges.

Why did it decide this?

There is in law an ability to apply to the Court for an equitable remedy on the basis that a mistake had been made by one party (the bank here). The points that satisfied the Court were:

• that the bank had not intended to make this kind of a gift to its customers;
• the mistake in the present case was a distinct mistake. The bank made a deliberate decision to release charges, believing, by mistake, that there was no money secured on those charges, whereas in fact there was;
• the bank had not intended to run the risk of being wrong in any of those cases, it has in fact taken a great amount of care in producing a list from over a number of months believing it to be accurate; and
• that it was a mistake of two different kinds;

1. it was a mistake of fact which was fundamental to the transaction, namely that the customer had not owed any money to the bank, when in fact the opposite was true, and that, had the bank known that money was owed, it would not have made the decision that it had to cancel the mortgage.
2. it was a mistake as to legal effect which the bank thought it was tidying up the title register at Land Registry by removing an unnecessary and valueless security when in fact it was turning itself, by mistake, from a secured to an unsecured creditor

The Court further needed to be satisfied that the mistake was be sufficiently serious or sufficiently grave so as to make it unconscionable for the customers to retain the benefit of it. This element of the court’s judgment made it very fact specific and even though the Bank took this action against Mr and Mrs Terry and sought to make a representation order so that it would have equal application to all the other customers, the Court held that each customers specific facts needed to be considered separately.

There is therefore a narrow basis on which the law will rectify a mistake made. This can happen frequently when an employer overpays an employee for time not in fact worked or the taxman incorrectly calculates what is due from a company or individual.

If you have made a mistake of a similar nature, if you need further assistance to rectify it, act quickly and do not hesitate to contact the Solicitors in the Dispute Resolution Team of Kuits.