Real property – Disposition – Legal effect – Claimant foundation holding international residences of Saudi royal family – Member of claimant’s council transferring property to defendant – Claimant seeking return of property – Whether transfer void as contrary to claimant’s purpose – Whether member acting in excess of powers – Whether member acting in breach of fiduciary duties – Whether defendant liable to make restitution for unjust enrichment – Claims dismissed
The claimant was a Liechtenstein-based foundation set up to hold the international residences of the Saudi royal family. The late King Fahd of Saudi Arabia was the founder. The defendant who was the king’s widow owned Kenstead Hall, a large house on The Bishops Avenue, near Hampstead Heath. The property had been transferred to the defendant in 2011 via a Land Registry Form TR1 by a member of the claimant’s council (A) on the instructions of her husband.
The claimant subsequently sought the return of the property. It contended that the transfer was in fact void, since it was contrary to the claimant’s purpose, and/or was executed by A in excess of his powers under the claimant’s constitution. Either way, A lacked authority and the transfer was of no legal effect.
If that was wrong, the transfer was liable to be set aside, either because it was a voluntary disposition of property undertaken in breach of fiduciary duties owed by A under English law and/or because the transfer was effected by A, acting under a mistake as to his duties and obligations, which was sufficiently serious to make it unconscionable for the defendant to retain the benefit of it.
Alternatively, the defendant should be liable either to make restitution for unjust enrichment or to pay damages for having received and retained the claimant’s property, knowing that it had been transferred by A in breach of what English law would characterise as his fiduciary duties.
Held: The claims were dismissed.
(1) Under section 26 of the Land Registration Act 2002, a person’s right to exercise an owner’s powers in relation to a registered estate or charge was free from any limitation affecting the validity of a disposition. However, that did not apply to a limitation reflected by an entry in the register, or imposed by, or under, the 2002 Act. The section had effect only for the purpose of preventing the title of a disponee being questioned. It did not affect the lawfulness of a disposition.
The concept of “owner’s powers” was explained by reference to section 23, which provided that “[o]wner’s powers in relation to a registered estate consist of – (a) power to make a disposition of any kind permitted by the general law in relation to an interest of that description…”; section 24 then provided that a person was entitled to exercise owner’s powers if he was either the registered proprietor or entitled to be registered as the proprietor.
The protection afforded to a disponee by section 26 undoubtedly applied to restraints which affected the capacity of a registered proprietor to effect a disposition. Any limitation on the exercise of “owner’s powers” which operated as a fetter on the exercise of the power “to make a disposition of any kind permitted by the general law” needed to be registered to be effective; otherwise, the disponee was entitled to proceed on the basis that there was no limitation and to take free of it. No relevant limitation having been registered, the claimant was to be taken as having had available to it the full range of “owner’s rights” usually available to an owner of a registered estate in freehold land in England, free of any limitation.
(2) In Ghai and others v Maymask (228) Ltd [2020] UKUT 293 (LC); [2020] PLSCS 191, the judge relied on section 26 as validating the disposition, where the deficiency was not a limitation or fetter on the exercise of “owner’s rights”, but a lack of authority arising from a lack of any standing to represent the disponor.
The protection afforded by section 26 was not engaged in that sort of case. Section 26 was concerned with the narrower concept, ie, some aspect of the constitutional make-up of the registered owner itself which operated to limit its ability to exercise the usual range of powers available to such an owner to make a disposition of the registered estate.
In the present case, the claimant’s argument as to the invalidity of the disposition was on the basis of A’s lack of authority, which in turn was said to derive from two sources: (i) he acted in excess of authority because the transfer was outside the purpose of the claimant; and (ii) he lacked authority because he was not constitutionally able to act alone in effecting dispositions of the claimant’s assets. The first source engaged the protection of section 26. The second did not.
If A was acting within his internal competencies and thus was properly authorised to represent the claimant, it could not challenge the disposition of the property on the basis that it was outside the claimant’s purposes. A disponor could not escape the effects of an otherwise valid disposition by saying that its agent was not authorised, if the lack of authority arose solely from some feature of the disponor’s own constitutional make-up which meant it had no capacity in the circumstances to exercise the usual range of “owner’s powers”. Such a result would override the protection section 26 was designed to afford to disponees.
(3) The claim that there had been a voluntary disposal in breach of fiduciary duty failed because there was no breach by A of any duty which was properly characterised as fiduciary under English law. At most, there was a general failure in terms of record keeping and provision of information. But there was no improper disposal of the claimant’s assets either in contravention of its purpose or in excess of A’s internal competencies.
There was no mistake by A about either his entitlement or obligation to transfer the property. He was both entitled and obliged to act as he did in accordance with a power of attorney granted to him by the claimant’s board in 1988. Consequently, there was no mistake of sufficient seriousness to create an equity entitling the claimant to rescind the transfer of the property to the defendant. The claim for unjust enrichment also failed. Although there was enrichment, it was not unjust.
The claim in damages for knowing receipt failed because there was no breach by A of any obligation properly classifiable as fiduciary under English law.
David Mumford KC and James Kinman (instructed by Bryan Case Leighton Paisner LLP) appeared for the claimant; Rupert Reed KC and Simon Atkinson (instructed by Simmons & Simmons LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read a transcript of Asturion Foundation v Alibrahim
