Adverse possession — Lease — Registered land — Land Registration Act 1925 section 75(1) — Whether on surrender of lease freeholder entitled to recover possession against squatter
In 1935 a long
lease was granted of land forming part of the south-west wing of Bush House,
the Strand, London. The plaintiff held the freehold; the leasehold interest,
which became a headlease, passed to the third party. Both interests were
registered titles. The first defendant had been in continuous adverse
possession of a courtyard, forming part of the land held under the headlease,
for more than 12 years prior to December 20 1996, using it as a car park. On
that date the third party surrendered the lease to the plaintiff. In
proceedings by the plaintiff to recover possession of the courtyard, orders
were made for the hearing of a preliminary issue as to whether, on the
surrender by a registered proprietor of a lease to the freeholder, the
freeholder had a right to immediate possession against the squatter.
specified exception to the general rule that limitation should affect
registered and unregistered land similarly. ‘Estate’ and ‘title’, in section
75, meant the same in the present context. Section 75 lifted the extinguishing
effect of the Limitation Act 1980 and substituted a trust of the leasehold
interest, benefits and burdens alike, from the moment of extinction of the
leasehold title. The squatter became entitled, without regard to merits, to be
placed in the same relationship with the freeholder as had previously been
enjoyed by the leaseholder. The trust preserved not the squatter’s common law
title but a new statutory right to be substituted by registration for the
leaseholder. If the leasehold interest was impressed with the statutory trust,
that trusteeship passed to the freeholder upon the merger of the leasehold with
the freehold by surrender. The beneficial interest of the squatter under
section 75 was an overriding interest under section 70(1)(f) or (g)
or both, and by sections 23(1)(c) and 69 it bound the freeholder.
The following
cases are referred to in this report.
Bridges v Mees [1957] Ch 475; [1957] 3 WLR 215; [1957] 2 All ER 577
Clark v Chief Land Registrar; Chancery v Ketteringham
[1994] Ch 370; [1994] 3 WLR 593; [1994] 4 All ER 96, CA
Fairweather v St Marylebone Property Co Ltd [1963] AC 510; [1962] 2 WLR
1020; [1962] 2 ALL ER 288, HL
Jessamine
Investment Co v Schwartz [1978] QB 264;
[1977] 2 WLR 145; [1976] 3 All ER 521; (1976) 33 P&CR 346; [1977] 1 EGLR
46; 241 EG 383, CA
Mount
Carmel Investments Ltd v Peter Thurlow Ltd
[1988] 1 WLR 1078; [1988] 3 All ER 129, CA
Rosenberg v Cook (1881) 8 QBD 162
Spectrum
Investment Co Ltd v Holmes [1981] 1 WLR 221;
[1981] 1 All ER 6
Tichborne v Weir (1892) 67 LT 735
Walter v Yalden [1902] 2 KB 304
Williams
& Glyn’s Bank Ltd v Boland [1981] AC
487; [1980] 3 WLR 138; [1980] 2 All ER 408; (1980) 40 P&CR 451, HL
This was a
hearing of a number of questions by way of a preliminary issue in proceedings
by the plaintiff, Central London Commercial Estates Ltd, for possession of land
against the defendants, Kato Kagaku Ltd and the Secretary of State for the
Environment, to which Axa Equity & Law Assurance Society plc had been made
third party.
Romie Tager QC
and Alexander Goold (instructed by Michael Conn & Co) appeared for the
plaintiff; Christopher Nugee QC (instructed by Linklaters) appeared for the
first defendant; Terence Etherton QC (instructed by DJ Freeman) represented the
third party.
Giving
judgment, SEDLEY J said:
The issue
There is
before the court a preliminary issue raising a vexed but unresolved question of
real property law: whether, after more than 12 years’ adverse possession by a
trespasser, the registered leaseholder of land can, by surrendering the
remainder of his term to the freeholder, give the latter a right to immediate
possession against the erstwhile squatter. In relation to unregistered land the
answer, on House of Lords’ authority, is yes. The issue is whether the
provisions of the Land Registration Act 1925, centrally section 75, produce a
different outcome in registered conveyancing.
The facts
The facts
accepted or assumed for the purpose of the preliminary issue are these. In 1935
a lease was granted for 940 years from June 24 1934 of land forming part of the
south-west wing of Bush House in the Strand. The freeholder’s interest,
belonging to London County Council, passed, in 1989, through the London
Residuary Body to the present plaintiff (Central). The leasehold interest
passed, in 1942, from St Clement’s Property Co to the present third party
(Axa). Both the freehold and the leasehold estates had, at all material times,
been registered; the plaintiff’s with title absolute, the third party’s with
good leasehold title. In 1935 all but the last 10 days of the leasehold term
were sublet to the Crown. The subdemise included buildings below ground level,
but did not include the surface of the courtyard that is the subject of the
present dispute. This courtyard had for more than 12 years prior to the date of
surrender (December 20 1996) been in the continuous adverse possession of the
first named defendant (Kato) and its predecessor in title. Kato is the owner of
the north-west wing of Bush House, a freehold that includes a small part of the
west courtyard. It has, however, been operating a paying car park not only on
its own segment of the west courtyard but on that demised to Axa. For the
determination of the present issue it is assumed that the use made by Kato of
Axa’s land amounts to adverse possession of the surface of the west courtyard.
(Since land, for proprietary purposes,
sublet, the depth of the contentious parcel of land will presumably have to be
ascertained at some time; but nothing turns on it for the present.)
On December 20
1996 Axa, by deed, surrendered the headlease to Central. Rather than replace
Axa with Central as the registered proprietor of the leasehold interest (which
would have enabled Kato to seek registration instead), the Land Registry closed
the title to the headlease and reregistered the freehold title subject only to
the underlease.
The law
Unless at some
future date their lordships’ house, pursuant to its 1966 practice statement,
revisits the issue, the law of unregistered conveyancing makes a surrender in
equivalent circumstances to the foregoing effective to defeat any possessory
right or title in the squatter.
The starting
point is the decision of the Court of Appeal in Tichborne v Weir
(1892) 67 LT 735, on the Real Property Limitation Act 1833, which provided that
after 20 years of adverse possession ‘the Right and Title’ to the land ‘shall
be extinguished’ (sections 2 and 34). The Court of Appeal explained that, by
barring the remedy and extinguishing the title of the person out of possession,
the Act did not create a new title in the disseisor or convey the dispossessed
person’s title to him. A decade earlier, in Rosenberg v Cook
(1881) 8 QBD 162 at p165, Sir George Jessel MR had spelt out clearly that a
squatter’s title is a freehold. By the date of these decisions, however,
parliament had legislated, by section 21 of the Land Transfer Act 1875, to
protect a registered proprietor from the acquisition of an adverse title by
adverse possession of whatever duration. This was modified by the Land Transfer
Act 1897 section 12, which provided that rectification of the register was to
be available to a disseisor who would have obtained a title by possession to
registered land but for the statutory block upon it. The limitation period for
real property had been brought down to 12 years by section 1 of the Real
Property Limitation Act 1874. The law of adverse possession of registered land
was again recast by section 173 of the Law of Property Act 1922, which
substituted for section 12 of the 1897 Act the trusteeship provisions that now
appear, by way of consolidation, in section 75 of the Land Registration Act
1925. Legislative history is not an aid to the construction of a consolidating
statute, except in extremis, but it is not irrelevant that the history
of section 75 is no more than a history of varying policy approaches to the
combined effects of the Limitation Acts and the squatter’s common law freehold
upon registered leasehold land.
At the time
the 1925 Act (like its immediate predecessor) was passed, the law was believed
to be as stated by the Divisional Court in Walter v Yalden [1902]
2 KB 304, namely that the surrender of a lease by a lessee whose right and
title to possession had been extinguished by effluxion of time gave the
leaseholder no right of re-entry during the remainder of the term. It was in
the leading case of Fairweather v St Marylebone Property Co Ltd
[1963] AC 510 that the House of Lords by a majority, endorsing the decision
([1962] 1 QB 498) of a majority of the Court of Appeal, held that Walter
v Yalden had been wrongly decided, and that, in the case of unregistered
land, a surrender after the running of 12 years’ adverse possession against a
leaseholder was effective to give the fee simple owner a right of re-entry
against the disseisor. Lord Radcliffe who, with Lord Denning, spoke for the
majority, explained (at pp535–536) that a squatter does not succeed to the
title that he has disturbed: by sufficiently long adverse possession he obtains
a title of his own, but ‘his possession only defeats the rights of those to
whom it has been adverse’. It follows (see pp540–541) that:
the effect of
the ‘extinguishment’ sections of the Limitation Acts is not to destroy the
lessee’s estate as between himself and the lessor; and that it would be
incorrect to say that if he offers a surrender to the lessor he has nothing to
surrender to him in respect of the land in the possession of the squatter.
What the
lessee surrendered in this case was the incumbrance on the fee simple in
possession which was represented by the term of years … Now … if the landlord
then goes to the lessee and gets him to surrender the outstanding term, which
incumbers his fee simple in possession, then the squatter’s defence against the
landlord disappears and, since he has not completed adverse possession against
the landlord, he must give way to the rightful owner’s claim to the land.
Lord Denning
agreed (see p545) that:
the title of
the leaseholder … is extinguished as against the squatter, but remains good as
against the freeholder.
He added at
p547:
The only
reason, it seems to me, which can be urged against this conclusion is that it
means that a squatter’s title can be destroyed by the leaseholder and
freeholder putting their heads together. It is said that they can by a
surrender — or by a surrender and regrant — destroy the squatter’s title
completely and get rid of him. So be it. There is no way of preventing it.
This being the
effect of limitation on the law of unregistered conveyancing, how does it
differ, if at all, from registered conveyancing? The current limitation
provision (replicating that made by the Limitation Act 1939 at the time Fairweather
was decided) is in sections 15 and 17 of the Limitation Act 1980:
15.–(1) No action shall be brought by any person to recover any land
after the expiration of twelve years from the date on which the right of action
accrued to him or, if it first accrued to some person through whom he claims,
to that person…
17 Subject to–
(a)
section 18 of this Act; and
(b)
section 75 of the Land Registration Act 1925;
at the
expiration of the period prescribed by this Act for any person to bring an
action to recover land (including a redemption action) the title of that person
to the land shall be extinguished.
Section 75 of
the Land Registration Act 1925 provides:
(1) The
Limitation Acts shall apply to registered land in the same manner and to the
same extent as those Acts apply to land not registered, except that where, if
the land were not registered, the estate of the person registered as proprietor
would be 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 person,
who by virtue of the said Acts, has acquired title against any proprietor, but
without prejudice to the estates and interests of any other person interested
in the land whose estate or interest is not extinguished by those Acts.
(2) Any
person claiming to have acquired a title under the Limitation Acts to a
registered estate in the land may apply to be registered as proprietor thereof.
(3) The
registrar shall, on being satisfied as to the applicant’s title, enter the
applicant as proprietor either with absolute, good leasehold, qualified, or
possessory title, as the case may require, but without prejudice to any estate
or interest protected by any entry on the register which may not have been
extinguished under the Limitation Acts, and such registration shall, subject as
aforesaid, have the same effect as the registration of a first proprietor; but
the proprietor or the applicant or any other person interested may apply to the
court for the determination of any question arising under this section.
By virtue of
section 17(2)(a), section 22(1) and Schedule 2, para 3, of and to the
Interpretation Act 1978, the reference in the Act of 1925 to the earlier
Limitation Acts becomes a reference to the current Limitation Act.
Section 70(1)
(subject to contradiction by the register) deems registered land to be subject
to any subsisting overriding interests in the form of, inter alia:
(f)
Subject to the provisions of this Act, rights acquired or in course of being
acquired under the Limitation Acts;
Section 23(1)(c)
makes any disposition of a leasehold estate subject (unless the register shows
otherwise) to any overriding interest affecting the estate.
An overview of
the scheme of the Act in relation to prescription can be found in Ruoff and
Roper, Registered Conveyancing, para 29-02, (though they are surely
wrong to describe the squatter’s title as equitable or to suggest that there
can be only one legal estate in a piece
Wade, The Law of Real Property (5th ed.) The Act has not had a good
press. Megarry and Wade, at p196, speak of its ‘deficiencies’ and characterise
it as ‘legislation of exceptionally low quality’, a description quoted without
dissent by Nourse LJ in Clark v Chief Land Registrar [1994] Ch
370 at pp378 and 385.
Section 75
came into the Fairweather case in an unsatisfactory way: registration
had not been argued in the county court, probably for good legal reason; and,
although it was allowed to be raised in the Court of Appeal, leave was refused
to adduce evidence of the date of registration. The report (at pp519–520,
527–528, 532–533) shows that serious attention was devoted to it in argument
before the House, and both Lord Radcliffe and Lord Denning considered it,
although inconclusively. Lord Radcliffe (at p541) mentioned the procedural
history and went on:
As I think
that the true meaning of section 75(1) is not at all easy to discover and may
have to be fully considered on some other occasion, I think it best on this
occasion to say as little about it as possible.
Briefly,
section 75(1) appears to set out with the purpose of applying the Limitation
Acts and, therefore, the statutory consequences of adverse possession to
registered land but then goes on to provide that where the estate of a person
registered as proprietor would be 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 person who … has acquired title against any
proprietor’. It therefore succeeds in making a provision at the end of the
subsection which is wholly inconsistent with the conceptions of the Limitation
Acts as previously understood and achieves just that ‘Parliamentary conveyance’
(through the medium of trustee and cestui que trust) which was denied by the
decision in Tichborne v Weir. It would certainly be very
satisfactory for the appellant if this is what the Act of 1925 has really done,
because it would give him just that beneficial interest in the lessee’s term
which, in my view, he lacks under the Limitation Acts themselves…
I only wish
to add that at present I am not at all satisfied that section 75(1) does create
a trust interest in the squatter of the kind that one would expect from the
words used. So to hold would raise difficulties which I do not now explore; and
the trust of the dispossessed owner’s title under subsection (1) must somehow
be reconciled with the provision under subsection (2) for the squatter to apply
to register his own title, which would presumably be his independent possessory
title acquired by adverse possession.
Lord Denning
concluded his speech at p548:
I doubt if
…[section 75(1)] puts registered land on a very different footing from
unregistered land. It is machinery so as to apply the Limitation Acts to
registered land but it does not alter the substantive position very materially.
A registered leaseholder clearly remains liable on the covenants and subject to
the conditions of the lease, including the proviso for re-entry: and I do not
see why, on a surrender, the freeholder should not recover possession from a
squatter, just as he can on a forfeiture. The freeholder has no notice of the
trust in favour of the squatter and his interests are not to be prejudiced by
the fact that the leasehold is registered.
The insidious
problems identified by Lord Radcliffe emerged more starkly in Spectrum
Investment Co Ltd v Holmes [1981] 1 WLR 221. The plaintiff company
had, in 1957, acquired the freehold of a house and registered itself as
proprietor. The house was already demised on a long lease. The leaseholder had
sublet to the defendant, who, by continuous non-payment of rent, had, by 1963,
acquired a prescriptive title against her. In 1968 the defendant sought
registration as proprietor of the leasehold interest and, in the absence of any
response from the leaseholder’s solicitors to the notice that they received,
the Land Registry closed the registration of the latter’s title and opened a
new registration of the defendant’s title, describing the property as leasehold
land held on the terms of the 1902 lease. Seven years later, in 1975, the
leaseholder sought to defeat the defendant’s title by executing a deed of
surrender to the freeholder (a company controlled by her own family).
Browne-Wilkinson J held that the device, as it was admitted to be, failed. He
said at p230F:
To my mind
the words [of section 75(1)] are clear and unequivocal: the squatter claims to
have acquired a title to ‘a registered estate in the land’ (ie the leasehold
interest) and applies to be registered as a proprietor ‘thereof‘ (my
emphasis). Therefore under section 75(2), references to the squatter having acquired
title to a registered estate must include the rights which under the Limitation
Act 1939 the squatter acquires in relation to leasehold interests. Section
75(2) then refers to the squatter applying to be registered as proprietor
‘thereof’. This word can, in my judgment, only refer back to the registered
estate in the land against which the squatter has acquired title under the Act
of 1939, ie the leasehold interest. The clear words of the Act therefore seem
to require that, once the 12 years have run, the squatter is entitled to be
registered as proprietor of the lease itself, and is bound to be so registered
if he applies for registration. It follows that in my judgment the defendant
(as the squatter) is correctly registered as proprietor of the lease itself in
accordance with the clear requirements of section 75. If that is right, … [the
leaseholder] cannot be entitled to rectification of the register as against the
defendant, and she can therefore never get into a position in which she is
competent to surrender the lease to the plaintiff.
It is to be
observed that Browne-Wilkinson J’s construction of section 75(2) controverts
Lord Radcliffe’s provisional view (in Fairweather at p543) that section
75(2) relates not to the usurped leasehold title but to the independent
prescriptive title acquired by adverse possession. In the present case, counsel
for all three parties, for their own independent reasons, have, in the end,
united behind Browne-Wilkinson J’s reading, from which I would not, in any
case, have felt justified in departing. It eliminates the possible view that
while section 75(1) creates a trust of the leasehold interest for the squatter,
section 75(2) allows registration of the squatter’s own prescriptive title.
Instead, a squatter on registered land is deprived by section 75(1) of his own
prescriptive title (‘such estate shall not be extinguished’) and is furnished
instead with the right to acquire and register as his own the usurped leasehold
title. What this does to the opening words of subsection (2) may have to be
considered on another occasion.
It is also
common ground before me that section 75 includes leasehold interests. Mr Romie
Tager QC, for Central, concedes it only because registration ‘with … good
leasehold … title’: is spelt out as a possibility in subsection (3); but Mr
Christopher Nugee QC, for Kato, points out that the saving at the end of
subsection (l) for unextinguished estates or interests of others in the land
must also be designed to bring leasehold interests within the section.
The critical
difference between this case and the Spectrum case is that the
possibility of Kato becoming registered as proprietor of the leasehold interest
under section 75 has been pre-empted by the surrender of the headlease and the
consequent reregistration of the plaintiff’s freehold title subject only to the
underlease. Browne-Wilkinson J (at p231A) was careful to distinguish this
situation from that which faced him:
I am not
deciding anything as to the position during the period between the date when
the squatter obtains his title by adverse possession and the date on which he
obtains registration of it. This is the period covered by section 75(1) which
is the subsection on which Lord Radcliffe in St Marylebone Property Co v
Fairweather … and Sir John Pennycuick in Jessamine Investment Co
v Schwartz [1978] QB 264, at p275 were commenting. It may well be, as
their dicta suggest, that during the period preceding any registration of the
squatter’s rights, the documentary lessee (as registered proprietor of the
lease) and the freeholder can deal with the legal estate without reference to a
person whose rights are not recorded on the register. But once the Act provides
for registration of the squatter’s title, it must in my judgment follow that
the squatter’s rights (once registered) cannot be overridden.
The Court of
Appeal had decided the Jessamine case, contrary to the approach of the
trial judge, without reliance upon section 75; but Sir John Pennycuick had
added at p275A:
I should be
very reluctant to introduce a substantive distinction in the application of a
provision of the Limitation Act to registered and unregistered land
respectively, based upon what is plainly a conveyancing device designed to
adapt that provision to the former class of land.
Browne-Wilkinson
J, guided by the opening words of section 75(1), took the same approach in the Spectrum
case. But, given the decision of the House of Lords in Williams & Glyn’s
Bank Ltd v Boland [1981] AC 487, to the effect that ‘if the words of
the Land Registration Act
as to seek to produce uniformity in the substantive law as between registered
and unregistered land’, he concluded at p230B:
I therefore
approach this question on the basis that one would expect that substantive
legal rights would be the same whether the land is registered or unregistered
but that clear words in the Act of 1925 must be given their natural meaning
even if this leads to a divergence.
Since this was
enough to conclude the case in the defendant’s favour, Browne-Wilkinson J went
no further into her counsel’s submission ‘that the whole scheme of the Land
Registration Act 1925 shows that the position of the squatter on registered
land is totally different from that of a squatter on unregistered land’. He
was, he said, leaving it to others to resolve the more fundamental questions.
This is the lot that has fallen to me.
The
arguments
No summary
will do justice to the able arguments addressed to me by counsel for the three
active parties, but, in essence, they are these.
Mr Nugee,
while reserving his position on the correctness of the decision in Fairweather,
argues that the position in registered conveyancing is fundamentally different
from that in unregistered conveyancing. From the common starting point for
registered and unregistered land dictated by the opening words of section
75(1), the section goes on to create for the former a tangibly different
regime. How different is not to be quantified by the characterisation of the
section (eg by the Court of Appeal in Mount Carmel Investments Ltd v Peter
Thurlow Ltd [1988] 1 WLR 1078 at p1089) as machinery, but (since machinery
itself can have important effects: see Boland, ante, at pp504 and
511) is to be ascertained by following the ordinary principles of construction
and seeing where they lead. They lead, Mr Nugee submits, after 12 years’
adverse possession of leasehold land, to a situation in which the disseisor can
secure registration as surrogate proprietor of the leasehold interest or estate
under section 75(2), in which case, barring rectification, the decision in Spectrum
concludes matters in his favour. In the interim between the extinction of the
lessee’s title vis-à-vis the squatter and the registration of the squatter as
proprietor of the lessee’s leasehold interest, the statutory trust comes into
operation under section 75(1). The answer to the still open question of
whether, in this period, the leaseholder can arrange with the freeholder to defeat
the squatter’s title by merging the leasehold and freehold estates is given, Mr
Nugee submits, by the statute itself: Axa has, since the expiry of the
limitation period, held the leasehold estate on trust for Kato, whose rights
are overriding interests under section 70(1)(f) and 23(1)(c) of
the Act of 1925, placing Axa and Central in a position no different from that
found in Spectrum. The relativity of titles in unregistered land cannot
survive in a system of registration that makes a registered title good against
the world. As Harman J said in Bridges v Mees [1957] Ch 475 at
p483, ‘this being registered land, the defendant gets the title which the
register gives him’.
It will follow
that any disposition by Axa, surrender included, is incapable of extinguishing
Kato’s rights; or, at worst, will afford Kato a remedy against Axa for breach
of trust.
To this scheme
Mr Tager and (for Axa) Mr Terence Etherton QC advance different but
complementary answers. Mr Tager, starting from the accepted fact that all that
distinguishes the present case from Fairweather is the registration of
the headlease and reserving his position on Spectrum, argues that in a
case like the present the section 75(1) exception has nothing to bite on,
because the barring of Axa’s right and title as against Kato did nothing to
extinguish the relationship or estate between Axa and the freeholder, with the
result that the condition for the operation of the exception, the extinction of
the estate of the person registered as proprietor, is not met. This is because,
in Mr Tager’s submission, title (which is all that section 17 of the Limitation
Act 1980 extinguishes) and estate (which is what section 75(1) focuses on) are
different things, at least in the case of leasehold land; and the extinction of
the leaseholder’s possessory title by 12 years’ adverse possession does not
extinguish the estate that he has of the freeholder. Mr Etherton reaches the
same destination by a less semantic route. The House of Lords in Fairweather
(at pp540 and 545) has determined as part of its ratio decidendi that
the freeholder’s title to the leasehold interest in unregistered land is not
extinguished by adverse possession against the leaseholder and is capable of
being surrendered. This being so, he submits, a tripartite relationship such as
the present does not enter the statutory exception under which a trust comes
into being; only the limited element of it that relates leaseholder to
squatter, if jeopardised by the leaseholder, does so. The statutory purpose is
to protect the sanctity of registered title, but nothing more.
Both Mr
Etherton and Mr Tager accept, indeed assert, that everything depends on whether
the squatter can register his title or estate before the leaseholder
extinguishes it by merger. If, therefore, Kato had obtained registration under
section 75(2) before the date of Axa’s surrender, it would have succeeded in
protecting its acquired leasehold interest from the effect of the surrender;
but absent such registration, the surrender vested in the freeholder a title
absolute to the courtyard unencumbered save for the underlease.
Alternatively,
Mr Tager relies on section 74 of the 1925 Act:
Subject to
the provisions of this Act as to settled land, neither the registrar nor any
person dealing with a registered estate or charge shall be affected with notice
of a trust express implied or constructive, and references to trusts shall, so
far as possible, be excluded from the register.
As to the
remedies, if any, available to Kato against Axa if Axa’s surrender is held to
have injured Kato’s rights, Kato’s primary position is that the issue does not
arise since the estate surrendered to Central was, and remains, impressed with
the statutory trust in Kato’s favour. If, however, this is not so, Mr Nugee
asserts and Mr Etherton denies that Kato has a cause of action against Axa for
breach of trust. Plainly, this cannot arise if — as both Central and Axa
contend — no trust came into being, but if (contrary to their contention) it
did, and if (contrary to Kato’s primary contention) it was violated by the
surrender, then Mr Etherton submits that no cause of action arises. The section
75(1) trust is a legal oddity; not a true private trust but simply machinery
permitting transfer one way (to the squatter) but not precluding transfer the
other way (for example, by surrender to the freeholder). Mr Nugee contends that
a trust, however created, carries at least an obligation enforceable by
injunction to carry out the purpose of the trust and an obligation to account
to the beneficiary for any profit improperly made by acting in breach of trust.
Both would afford a cause of action.
Conclusions
I approach the
construction of section 75(1) in the same way as Browne-Wilkinson J in the Spectrum
case, by regarding it as creating a specified exception to a general rule that
limitation should affect registered and unregistered land similarly. The
ordinary principle that legislation alters the general law is inverted by the
opening words of section 75(1). If, therefore, the effect of limitation on
unregistered land has turned out, on authority, to be other than it was
believed to be at the time of enactment, then (as Mr Tager says) it is the
construction of the statute and not the general law that must give way. I do
not consider, however, that any other assumptions should be brought to bear on
the exercise. In particular, in spite of the regard paid in places by Lord
Radcliffe and Lord Denning to the potential factual merits of the rival
submissions in Fairweather, the law seems to me to adopt and, in turn,
to demand a stance of neutrality as between disseisor and disseised. Parliament
has prescribed the effects of a sufficient period of adverse possession without
reference to circumstances, and enough examples have been canvassed in the
course of the submissions to demonstrate that the deserving and the undeserving
alike may be caught or spared by the operation of the Limitation Acts. The law,
correspondingly, leans neither towards nor against the extinction of titles by
prescription: for policy reasons it simply provides for it to happen in certain
situations: see Ruoff and Roper, Registered Conveyancing, para 29-03;
Megarry and Wade, The Law of Real
evidence about how Kato came to occupy the car park.
The situation
before the court for the purposes of the exception in section 75(1) is that,
were the leasehold estate in the courtyard unregistered, section 17 of the
Limitation Act 1980 would by now have extinguished as much of the leasehold
estate as entitles Axa to exclude Kato, but not as much of it as was held of
the freeholder and has now been surrendered: see Fairweather. Is the
element of the estate that would otherwise be extinguished all that the statute
saves or is the estate indivisible for the purposes of the exception and so
wholly subject to the trust?
I do not
consider that Mr Tager’s distinction between estate and title is material here,
though it may be elsewhere. If estate were not synonymous with title in section
75 (as both Lord Radcliffe and Lord Denning in Fairweather clearly
thought they were), the linkage of the Limitation Acts to the extinction of
estates would be meaningless, since the Limitation Acts speak not of estates
but of titles. In the bipartite situation of freeholder and disseisor, it is
common ground that to bar the title is to bar the estate. The two must mean the
same in the present context.
What then is
the estate or title that, but for the disapplication of the effects of the
Limitation Acts on registered land, ‘would be extinguished’ on the expiry of 12
years’ adverse possession? The relevant unit of registration is ‘the land’,
which by section 3(viii), includes land of any tenure — in a case like the
present, the leasehold estate. Such an estate is divisible for many purposes,
but nothing in section 75 suggests to me that it is divisible for the statutory
purpose: on the contrary, what is evidently contemplated is the substitution of
one registered proprietor for another without more, placing the second in the
same relationship to the freeholder as had been enjoyed by the first. In the
state of the decided cases in 1922 and 1925, this is unsurprising. The
difficulty is to fit the statute to the post-Fairweather situation.
To split the
leasehold interest after 12 years’ adverse possession into an element related
entirely to the freehold and another related solely to the squatter, as is now
known to happen with unregistered land, does not seem to me to marry up with
either the purpose or the operation of section 75(1). The squatter, unlike an
underlessee, has no legal relationship at all with the leaseholder during the
12 initial years of trespass (except in the negative sense that the leaseholder
may at any time evict him and claim damages); and at the end of the 12 years,
by operation of law, the leaseholder’s right and title to do even this are
extinguished wherever the Limitation Acts apply. At law the squatter is then in
a position to make a good title, independent of the lease, although always
subject to the freeholder’s eventual reversion. In relation to a registered
leasehold, however, section 75 lifts the extinguishing effect of the Limitation
Act 1980 and substitutes a trust of the leasehold interest, benefits and
burdens alike, from the moment of extinction of the leasehold title. The
squatter becomes entitled, without regard to merits, to be placed in the same
relationship with the freeholder as had previously been enjoyed by the
leaseholder. The trust preserves not the squatter’s common law title but a new
statutory right to be substituted by registration for the leaseholder —
carrying with it, as Mr Nugee accepts, an obligation to indemnify the
leaseholder against outgoings. This is to all appearances a statutory
conveyance of the entire leasehold interest.
There is
apparent force in Mr Nugee’s submission that Mr Etherton’s ostensibly equally
straightforward construction has hidden traps in it. Because Mr Etherton seeks
to construe ‘where’ as focusing on the facts of a particular transaction, it is
only when subsequent events are known that it becomes possible to say whether a
statutory trust exists: if the leaseholder sues the squatter for possession,
‘the trust intervenes’; if the leaseholder surrenders to the freeholder, no
trust arises (as distinct from there being no breach of trust). But it may be
that, in the end, this does no more than carry into effect the dichotomy of the
leasehold interest that Axa and Central assert characterises registered as it
does unregistered land. The real question is whether, as Mr Tager and Mr
Etherton argue, the material estate for the present statutory purpose is as
much of the whole estate as would not be extinguished if the land were not
registered — that is to say, the leasehold interest shorn of the right to
possession. If it is, then there is no doubt that it falls outside the
exception, so that surrendering it extinguishes the squatter’s title.
I appreciate
that the search for the true meaning of a statute, especially the Land
Registration Act 1925, is not the same thing as a search for simplicity. But it
is realistic, I think, to see in section 75 the relatively straightforward
purpose that I have described. Such a purpose becomes unattainable if the
leasehold estate is split up into two tranches: one, the right to possession of
which after 12 years passes to the squatter; the other, the interest held of
the freeholder, which can be disposed of so as to frustrate the right to
possession — unless the disseisor, following the giving of the necessary
notices by the registrar, first succeeds in obtaining registration in lieu of
the leaseholder. The conceded fact, that what the disseisor in the latter case
obtains by virtue of 75(2) is the entirety of the leasehold interest, seems to
me a strong indicator that this is the estate intended to be preserved from
extinction by the exception contained in section 75(1). So is the fact that the
section 75(1) exception begins by nullifying the squatter’s common law freehold
if the land is registered: why should registration be given this effect unless
the loss is to be made good by another means? By contrast, a trust of a bare
right not to be evicted seems almost pointless. I accept the submission of Mr
Tager and Mr Etherton that the race to register that their case entails is not
unthinkable or unique; but when the result is less like a race than like a game
of double or quits, one has to ask if it can be what parliament meant to
happen. I am persuaded that it is not.
If, as I hold,
the leasehold interest was impressed by 1996 with the statutory trust, it must
follow that the trusteeship passed to the freeholder upon the merger of the
leasehold with the freehold interest by surrender. The full incidents of this
trust, which are far from clear, do not fall for decision by me. It is
sufficient to hold, as I do, that the beneficial interest of Kato under section
75 was an overriding interest under section 70(1)(f) or (g) or both,
and that by virtue of section 23(1)(c) and section 69 it now binds
Central. Section 74 cannot intervene: see Williams & Glyn’s Bank Ltd
v Boland [1981] AC 487 at p508.
The questions
that are to be answered, upon the assumptions set out in the schedule to the
order of Master Moncaster of April 21 1998, are these:
1. Did the
first defendant, by December 20 1996, acquire the following by virtue of its
adverse possession of the west courtyard of Bush House, namely:
(A) the right
against the plaintiff to remain in possession of the west courtyard until the
expiry of the term of the headlease (namely December 25 2028) or,
alternatively, until the expiry of the term of the underlease, namely December
15 2028; and
(B) the
beneficial interest in the registered leasehold title to the west courtyard
under title no LN69 (the headlease) or LN5401 (the underlease); and/or
(C) the right
to be registered at HM Land Registry with possessory title of the surface of
the west courtyard for a term of years to December 25 2028 or, in the
alternative, to December 15 2028?
2. And have
the rights of the first defendant described in para 1 of this schedule been
extinguished or diminished as a result of the purported surrender to the
plaintiff of the headlease on December 20 1996 by Axa Equity & Law Life
Assurance Society plc?
3 And, if the
answer to question 2 is in the affirmative, are the matters there mentioned
capable of giving rise to a cause of action by the first defendant against the
third party?
My answers to
each of the three heads of question 1 are in the affirmative. Under heads (A)
and (C) it is to December 25 2028 that the first defendant’s acquired rights
will run. Under head (B) the beneficial interest acquired was that under title
no LN69. My answer to question 2 is in the negative. The leasehold interest
that was surrendered on December 20 1996 was impressed with the statutory
trust in favour of the first defendant. Question 3 does not therefore arise.