Directors’ powers in a receivership

The company concerned was the freehold owner of Bolbec Hall. On 8 June 2018, the Company completed on a sale to Maymask 228 Ltd for £650,000. The transfer was executed by the Company’s sole director. An investor objected to the registration of the transfer - some eight months earlier, the lender had appointed a fixed charge receiver and their appointment had displaced the director’s powers.

The Upper Tribunal held that the receivers had in fact terminated their appointment shortly before completion, but even if they had not, the disposal would still have been valid. This was because Section 26 Land Registration Act 2002 provides that a registered owner’s ability to dispose of registered property is to be taken free from any limitations that may affect its validity, unless reflected by an entry in the register. 

In this instance, there was no entry in the register referring to the appointment of the receivers or to any limitation on the power of the company to make dispositions of the Property. The result? Even though the purchaser knew receivers had been appointed, they were entitled to rely on Section 26 and proceed on the basis that the Company (via its directors) could exercise its powers as registered owner without any limits.

If receivers (or a lender) want to ensure they maintain control over a sale, the receiver’s interest should be protected by a restriction on the title following their appointment.

Ghai & Ors v Maymask (228) Ltd (LAND REGISTRATION - Alteration and rectification) [2020] UKUT 293 (LC)

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