The Court of Appeal in London ruled this week that a man who owns a property obtained by fraud can keep it, because the defrauded former owner didn’t take action soon enough.
In 1989 the property at the centre of the dispute was fraudulently transferred from its owner, a man called Mohammed Rashid, to another man, also called Mohammed Rashid, while the original owner was abroad, according to the judgment.
The fraudster then gave the property to his son as a gift. According to the ruling, the son was “complicit in the fraud”.
When the defrauded former owner returned to the UK later that year, he complained to the police, but was told it was a civil matter, the judgment said.
When he consulted solicitors, none would take on his case as he lacked documents.
Many years later, in 2013, the defrauded former owner applied to amend the property register to become the registered owner again, using the terms of the Land Registration Act of 2002.
However, in this week’s ruling, the Court of Appeal said that the defrauded owner couldn’t amend the register because there was a 12-year limitation period on the law of adverse possession.
“There can be no doubt that bad people are entitled to the benefit of limitation periods,” Lord Justice Lewison wrote in the ruling.
“Subject to the court’s discretionary power to override limitation periods, sexual abusers are entitled to rely on the limitation period in section 11 of the Limitation Act 1980. Dishonest assisters in a breach of trust are likewise entitled to rely on the limitation period in section 21 (3). Common law fraudsters are entitled to rely on the limitation period in section 2.”
Moreover, the Limitation Act contains its own provisions for dealing with criminality. The most familiar is section 32, which extends the limitation period in cases of fraud and deliberate concealment, so that time does not begin to run until the claimant has discovered the fraud or deliberate concealment; or could with reasonable diligence have discovered it.
But the fact that the defrauded party knew about the fraud since 1989 makes an extension not possible, he said.
“It is impossible not to feel sympathy for the victim of a brazen fraud of this kind and to wish to deprive a scoundrel such as this appellant of the benefit,” Lady Justice Eleanor King and Lord Justice Peter Jackson added to the judgment.
“However, correctly analysed, the outcome in this case is not the result of the fraud but of the true owner’s subsequent failure to take effective action to challenge it.”
“Had [the defrauded former owner] sought rectification at any time between 1989 and 2001, there is no reason why he could not have succeeded. But he did not apply until 2013 and by then it was too late.”
“Although the result is undoubtedly a hard one, that is not because [he] did not have full legal rights to face down the fraud but because he did not exercise them in the 12 years during which they were available to him.”
Farakh Rashid v Teyub Nasrullah
Court of Appeal (Lewison LJ, King LJ, Jackson LJ) 29 November 2018
