Land registration – Alteration of register – Rectification of mistake – First claimant holding lease of club premises – Defendant occupying part of pavement in front of premises as sandwich bar – Defendant former general manager of first claimant being registered as proprietor of possessory title to disputed land – Claimants claiming title to disputed land under constructive trust – Claimants seeking rectification of register to remove defendant as proprietor – Whether defendant being fiduciary of first claimant in respect of application for possessory title — Whether defendant acting in breach of fiduciary duty – Whether registration of possessory title resulting from mistake – Claim allowed in part
A dispute arose concerning part of the pavement in front premises in Broad Street, Birmingham. The defendant’s father had taken possession of the disputed land in 1974 and placed a trailer on it from which he ran a sandwich bar. The defendant took over the business in 1986 together with possession of the land. From 1991, the premises were used as a club which incorporated the disputed land into its area, although the sandwich bar continued to operate. The first claimant company was the lessee of the premises but, during the course of the proceedings, assigned its lease to the second claimant. The defendant, who was also the general manager of the first claimant, successfully applied for the registration of freehold possessory title to the disputed land.
When the relationship between the parties broke down, the claimants applied to rectify the register, contending that the defendant, as the then general manager of the first claimant, owed a fiduciary duty to it with the result that he held his registered title on a constructive trust for one or other of the claimants. In the alternative, the defendant should not have been registered in relation to the disputed land so that the court should rectify the register under schedule 4 to the Land Registration Act 2002.
The High Court dismissed the application with the result that the defendant remained the registered proprietor of the disputed land: [2011] EWHC 2437 (Ch). The Court of Appeal allowed an appeal by the claimants on the basis of fresh evidence in relation to some of the matters in dispute. The Court of Appeal directed a new trial: [2012] EWCA Civ 1508.
Held: The claim was allowed in part.
(1) There was a presumption that the owner of land with a paper title was in possession of the land. If a person, who did not have the benefit of that presumption, wished to show that he was in possession of the land, the burden was on him to show that he was in factual possession and had the requisite intention to possess the land to the exclusion of all other persons, including the owner with the paper title. That person had show that he had an appropriate degree of physical control of the land, that his possession was exclusive, and that he had dealt with the land as an occupying owner might have been expected to deal with it and no-one else had done so. Whether a person had taken a sufficient degree of control of the land was a matter of fact, depending on all the circumstances, in particular, the nature of the land and the manner in which it was commonly enjoyed: JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419 applied. Under the new regime relating to adverse possession in relation to registered land, introduced by the Land Registration Act 2002, a person was not entitled to be registered as proprietor just by being in adverse possession for a period of time. After ten years of adverse possession, he might apply to be registered, but notice of his application had to be given to the registered proprietor, who could block the application. If a person had already been in adverse possession for 12 years prior to the coming into force of the Act, they remained entitled to be registered as the proprietor of the estate.
On the facts of the present case, it was clear that neither the defendant nor the claimants could show that any part of the disputed area was held on trust for them when the 2002 Act came into force. Further, the defendant had not been able to show that he had been in possession of any part of the disputed land for ten years, ending on the date of the application in 2009. However, the defendant had in fact been registered as the proprietor and the claimants could not say that he had broken any fiduciary duty owed to the first claimant. He had applied for possessory title to the disputed land with the knowledge and consent of the first claimant so that it was not entitled in equity to be registered as proprietor in place of the defendant.
(2) By paragraph 2 of Schedule 4 to the 2002 Act, the court might make an order for alteration of the register for the purpose of correcting a mistake. That power was qualified by paragraph 3(2) where the alteration in question was “rectification” i.e. where it prejudicially affected the title of the registered proprietor. In such a case, no order might be made under paragraph 2, without the proprietor’s consent, in relation to land in the possession of the proprietor, unless he had 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. If the court had power to make such an order, it had to do so, unless there were exceptional circumstances which justified it not doing so. The burden was on the applicant for rectification to establish that it would be unjust for the alteration not to be made.
On the facts of the present case, it was clear that the defendant’s registration had been the result of a mistake since he had not been entitled to be registered as the proprietor of the disputed area. For the purposes of paragraph 3(2)(a), the defendant had, by fraud and/or by lack of proper care, caused and/or substantially contributed to the mistake. The exceptional circumstances in the case did not justify a refusal to order rectification. All the requirements in schedule 4 in relation to the court making an order for rectification had been satisfied. Accordingly the court would make an order removing the defendant as the registered proprietor of the disputed land: Baxter v Mannion [2010] 1 WLR 1965 (Ch); [2011] EWCA Civ 120; [2011] 20 EG 114; [2011] PLSCS 57 and Walker v Burton [2012] EWHC (Ch); [2013] EWCA Civ 1228; [2013] PLSCS 239 (CA) applied; Paton v Todd [2012] 2 EGLR 19; [2012] 31 EG 48 considered.
John Randall QC and Anthony Verduyn (instructed by Irwin Mitchell Solicitors) appeared for the claimants; William Hansen (instructed by Wright Hassall Solicitors) appeared for the defendant.
Eileen O’Grady, barrister
