In this case, the Court ordered rectification of the Register to remove the Defendant proprietor from the title on the basis that he obtained that title by reason of his fraud and/or a lack of proper care.
Balevents Limited (“B”) owned the leasehold interest in a club in Birmingham City Centre, which during the course of proceedings, was assigned to the Second Claimant. Mr Sartori (“S”) was the general manager of the club. The case concerned a dispute in relation to an area of pavement in front of the club (the “Disputed Land”). S contended that his father had run a sandwich bar on the Disputed Land from 1974 which S had taken over in 1986, and had continued to run until 1991. On this basis, in 2009, S registered possessory title in relation to the Disputed Land, enabling him to become the registered proprietor of the land.
In this case, the Claimants argued that:
a) S was not entitled to ownership of the Disputed Land ;
b) It was in breach of S’s fiduciary duty to B for him to apply for the possessory title in his name, instead of B’s name, and as a result S held the registered title on constructive trust for B;
c) In the alternative, S should not have been registered in relation to the Disputed Land and the Court is therefore obliged to order that the register is rectified under the Land Registration Act 2002 (“LRA”).
In considering the Claimants’ case, the Court held as follows:
The Court restated the well-established, and settled, principles which apply in a case where it is necessary to determine whether a person has been in possession of land. The starting position is that there is a presumption that the owner of land with a paper title is in possession of the land. If a person who does not have the benefit of this presumption wishes to show that he is in possession of the land, the burden is on him to show that he is in factual possession of the land and that he has the requisite intention to possess the land. To prove this, the individual must demonstrate an appropriate degree of physical control of the land, that his possession is exclusive and that he has dealt with the land in question as an occupying owner might have been expected to deal with it.
The Court then considered the applicable statute. Prior to the enactment of the LRA (on 13 October 2003), if an individual could demonstrate that they had occupied the land for 12 years, they would be entitled to be registered as proprietor. Following introduction of the LRA, a person can apply to be registered as the proprietor of land if they have been in possession of land for a period of 10 years, ending on the date of the application. However, if a person applies to be registered as proprietor, the registrar is obliged to notify the registered proprietor, who then has a set period of time to object. The LRA also contains a transitional provision so that if a person had already been in adverse possession for 12 years, prior to the coming into force of the LRA, he remained entitled to be registered as the proprietor of the estate.
On the evidence, the Court held that S had not been in possession of the land for 12 years prior to the commencement of the LRA. Accordingly, the transitional provision would not apply. Further, when considering whether S fulfilled the requirements of the LRA, they found he did not; he was unable to show that he had been in possession of the Disputed Land for 10 years, ending on the date of the Application in 2009.
The Claimants held that in 2009, there was an opportunity for them to be registered as proprietor of the Disputed Land, and that it was in breach of S’s fiduciary duty to apply for the possessory title in his name, without the knowledge or consent of B. Accordingly, they submitted that S holds the registered title on constructive trust for the Claimants.
The Court considered the evidence available and found that although S called himself the general manager of B, he was not actually employed by B. Whilst the Court found that there was room for some argument as to whether S did owe a fiduciary duty to B in relation to some of his activities, they concluded that it was doubtful whether he was a fiduciary in connection with the application in 2009. Further, they held that in the event that he did hold a fiduciary duty, the application he made was with the knowledge, consent, and encouragement of B. On this basis, the Court dismissed the Claimants’ claim that the title was held on trust, or that it is entitled to be registered as proprietor of the Disputed Land, in place of S.
The Claimants’ final argument, made in the alternative, was that S should not have been registered in relation to the Disputed Land and that the Court is therefore obliged to order that the register is rectified under LRA.
In response to this argument, the Court considered their jurisdiction to make such an order. They identified that the LRA permits alterations to the register which involve the correction of a mistake and prejudicially affect the title of a registered proprietor. Ordinarily, the proprietor’s consent is required to alter the register however the court is obliged, unless there are exceptional circumstances which justify it not doing so, to make an order for alteration of the register for the purpose of correcting a mistake, if:
he has by fraud or lack of proper care caused or substantially contributed to the mistake, or it would for any other reason be unjust for the alteration not to be made.
In deciding whether there were exceptional circumstances in the case, the Court held that it must consider two questions: (1) are there exceptional circumstances in this case? and (2) do those exceptional circumstances justify not ordering rectification? They confirmed that the word “exceptional” describes a circumstance which is out of the ordinary course, or which is unusual, special or uncommon; to be exceptional, a circumstance need not be unique, unprecedented or very rare but it cannot be one that is regularly, or routinely, or normally encountered. In considering whether the circumstances justify not rectifying the register, the Court will consider the effect on the relevant parties of an order for rectification, or of a refusal to order rectification.
On the facts, the Court found that the Application made to the Land Registry by S for possessory title was largely based on false allegations of fact. Accordingly, he only became the registered proprietor of the Disputed Land by reason of his fraud and/or a lack of proper care. On this basis, they held that it was not just that he should be allowed to continue as the registered proprietor of the land, nor were there any exceptional circumstances in the case justifying a refusal to order rectification. On this basis, the Court held that the register should be corrected and made an Order removing S as the registered proprietor of the land and returning the title to the City Council, who was the original proprietor of the Disputed Land.
Although the outcome of this case turns largely on its own facts, the judgment serves as a useful reminder of the principles applied by the courts in relation to the law of adverse possession of land, fiduciary duties and the rectification of a register under the LRA.
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