Registered land – Limitation – Fraud – Rectification – Adverse possession – Respondent being deprived of title to property by fraud – Respondent applying to alter register of title to restore his name as registered proprietor – First-tier Tribunal directing Chief Land Registrar to respond to application – Upper Tribunal upholding decision – Whether appellant acquiring title to property by adverse possession giving rise to exceptional circumstances justifying not altering register – Appeal allowed
The respondent applied to alter the register of title to 40 Henley Street, Birmingham so as to restore his name as registered proprietor. In May 1989, while he was abroad, the appellant’s father forged the respondent’s signature on a transfer of the property and was registered as proprietor. In 1990, the appellant’s father executed a transfer by way of gift to the appellant who had been the registered proprietor of the property ever since.
The First-tier Tribunal directed the Chief Land Registrar to restore to the respondent the land of which he had been deprived by fraud. The tribunal found that the appellant was the registered proprietor in possession of the property. The Land Registration Act 2002 gave special protection to such a proprietor; the register could not normally be rectified so as to prejudicially affect his title. However, a registered proprietor who had caused or substantially contributed to the mistake by fraud (as the tribunal found the appellant had done) did not have that protection and the register would be rectified unless there were exceptional circumstances that would justify not altering it. The tribunal rejected the appellant’s argument that he was in adverse possession of the property and that that amounted to exceptional circumstances. It followed the Court of Appeal’s decision in Parshall v Hackney [2013] EWCA Civ 240; [2013] 2 EGLR 37; [2013] EGILR 6 as authority for the proposition that a registered proprietor of land could not be in adverse possession of it. The Upper Tribunal upheld that decision: [2017] UKUT 332 (TCC); [2017] PLSCS 177. The appellant appealed. The respondent subsequently died and was represented by his executor.
Held: The appeal was allowed.
(1) Section 15 (1) of the Limitation Act 1980 laid down the basic rule that no action might be brought to recover land more than 12 years after the right of action accrued. Paragraph 1 of Schedule 1 to the 1980 Act provided that where the owner had been dispossessed, the right of action was treated as having accrued on the date of the dispossession as long as the land was in the possession of someone “in whose favour time could run”, namely a squatter in adverse possession. Subject to there being a person in whose favour time could run, all that mattered was whether the squatter had possession and, if so, he had it without the consent of the true owner. If those two conditions were satisfied, the squatter had dispossessed the true owner. Paragraph 1 of Schedule 1 treated a cause of action as arising on the date of dispossession. No other factor was relevant. Since the 1980 Act applied to both legal estates and equitable interests in land, the respondent’s cause of action was treated as having accrued on the date of his dispossession if he had retained an equitable interest in the land following the fraud. Section 21(1) provided that a trustee was not a person in whose favour time could run. However, that meant only true trustees and not people accountable in equity because of their knowing receipt or dishonest assistance. Therefore, the respondent was not entitled to the protection of section 21(1) against the appellant and his father: JA Pye (Oxford) Ltd v Graham [2002] UKHL 30 followed.
(2) The decision of the Court of Appeal in Parshall was irreconcilable with the decision of the House of Lords in Pye and the court in the present case was bound to follow Pye. Therefore, the only question was whether the squatter had dispossessed the owner by going into ordinary possession for the requisite period without their consent. In focusing instead on whether the act of taking possession had been unlawful, the court in Pashall seemed to be reintroducing the concept of non-adverse possession abolished by Pye: JA Pye (Oxford) Ltd v Graham [2002] UKHL 30 and Rhondda Cynon Taff County Borough Council v Watkins [2003] EWCA Civ 129, [2003] 1 WLR 1864 followed. Parshall v Hackney [2013] EWCA Civ 240; [2013] 2 EGLR 37; [2013] EGILR 6 not followed. Buckinghamshire County Council v Moran [1990] Ch 623 considered.
(3) In any event, Parshall did not apply to the facts of the present case. In that case, there were no circumstances from which a separation of the legal title and beneficial ownership of the disputed land could be inferred. In the present case, upon the registration of the appellant’s father as proprietor, section 69 of the Land Registration 1925 had the result that he was deemed to have the legal estate vested in him. However, where land was taken fraudulently, without the consent of the true owner, it was held on constructive trust for the true owner who was entitled in equity to have the land restored to him. The legal and beneficial interests in the property were separated and the subsequent registration of the appellant meant that he was holding the land on constructive trust for the respondent.
(4) By virtue of section 20(4) of the 1925 Act, the appellant acquired the legal estate subject to the respondent’s beneficial interest and, given the separation of the legal and beneficial interests, section 18 of the 1980 Act expressly provided that the appellant’s period of possession barred the respondent’s equitable interest. The appellant and his father were not true trustees and they were persons in whose favour time could run. Section 75 of the 1925 Act applied so that on the expiry of 12 years from the date of dispossession the respondent’s equitable estate was either extinguished or held on trust for the appellant’s father. Either way under para 18 of Schedule 12 to the 2002 Act the appellant was both entitled to be registered as proprietor and had a defence to an action for possession under para 18(2) in which case the registrar had to register him as proprietor under para 18(3). That amounted to exceptional circumstances which precluded an alteration of the register.
(5) The doctrine of illegality jn Patel v Mirza [2016] UKSC 42 (which had nothing to do with limitation periods) could not be used to override the calibrated scheme in the Limitation Act 1980 and the Land Registration Act 2002. Were the court to apply the doctrine of illegality to the facts of this case, it would undermine the law of adverse possession and of limitation more generally: Best v Chief Land Registrar [2014] 2 EGLR 133; [2014 EGILR 6 and Patel considered.
Michael Paget (instructed by Direct Access) appeared for the appellant; Stephanie Tozer and Tricia Hemans (instructed by Green & Olive Solicitors, of Hinckley) appeared for the respondent.
Eileen O’Grady, barrister
