Proprietor of registered leasehold title dispossessed by defendant – Defendant in adverse possession for more than 12 years – No application for registration made by defendant – Leaseholder surrendering 32-year residue to plaintiff freeholder – Whether defendant entitled to remain in possession until expiry of lease
In 1935 a 94-year lease was granted by a predecessor of the plaintiff (Central) to a predecessor of the third party (Axa) of land forming part of the south west wing of Bush House, Strand, London WC1. The lease had at all material times been registered with good leasehold title. Shortly afterwards a long sublease was executed in favour of the Crown, but that did not include a courtyard comprised in the headlease. For the purpose of determining a preliminary issue, arising out of a dispute over the ownership of the courtyard, it was assumed that the first defendant (Kato), who had been using it as part of a paying car park, had, immediately before December 20 1996, exercised adverse possession to a degree and for a duration sufficient to acquire a good title to the courtyard as against Axa. On that date Axa purported to surrender the residue of the headlease to Central, the freeholder, with the intention of preventing Kato, so far as possible, from excluding Central from the courtyard until the expiry of the headlease in December 2028.
For the purpose of the hearing it was common ground that: (i) this objective would have been achieved if title to the lease had not been registered: see St Marylebone Property Co Ltd v Fairweather [1963] AC 510, HL; and (ii) it would have been otherwise if Kato had applied for registration of its possessory title before the purported surrender: see Spectrum Investment Co Ltd v Holmes [1981] 1 WLR 221. Kato had made no such application. The question turned on the true construction of section 75 (1) of the Land Registration Act 1925 which, after declaring that the Limitation Acts shall apply in the same manner and to the same extent as they apply to non-registered land, added by way of “exception”, that in a case where a non-registered estate would have been extinguished “such estate shall not be extinguished but shall be deemed to be held by the proprietor for the time being in trust for the [adverse possessor] but without prejudice to the estates . . . of any other person . . . whose estate or interest is not extinguished . . . “. Against Kato, who contended that the ruling in St Marylebone supra did not apply, it was argued by Central that the barring of Axa’s title as against Kato did nothing to extinguish the “estate” which Axa held from Central. To the same end, it was argued by Axa that the trust imposed by the section was not intended to extend to the tripartite relationship which had arisen in cases of the St Marylebone type, but only to the limited element relating to the leaseholder and the adverse possessor.
Held Kato had good title to the residue of the lease.
1. So far as the present issue was concerned the section drew no relevant distinction between “title” and “estate”. The contentions of both Central and Axa rested on the notion that the leasehold estate could be divided into two tranches, one being the right to possession which passes to the squatter, the other being the interest held from the freeholder. However, that notion was inconsistent with the relatively straightforward purpose of section 75 which, far from preserving the squatter’s common law rights, created a new statutory right for the squatter to be in all respects substituted, by registration, for the leaseholder. It followed that the surrender operated to pass the trusteeship to Capital, who could not disregard the interest of Kato, which ranked as an overriding interest for the purpose of section 70(1) of the 1925 Act.
2. Despite dicta to the contrary in Marylebone, arguments based on practical inconvenience should carry little weight. Examples canvassed in argument demonstrated that the deserving and the undeserving alike might be caught or spared by the operation of the Limitation Acts.
Romie Tager QC (instructed by Michael Conn & Co) appeared for the plaintiffs; Christopher Nugee QC (instructed by Linklaters) appeared for the first defendants; Terence Etherton QC (instructed by DJ Freeman) appeared for the third party.