Lease — Diplomatic premises — Rectification of register – Socialist Federal Republic of Yugoslavia taking lease of flat in London – Registrar entering name of republic at Land Registry – Republic ceasing to exist – Successor states entering into agreement to deal with distribution of assets — Property continuing to be registered in name of former republic – Appellant state applying to enter restrictions on title to property – Whether adjudicator to Land Registry having jurisdiction to direct registrar to enter restrictions — Whether appellant having sufficient interest in property to justify restrictions — Appeal allowed
In 1971, the Socialist Federal Republic of Yugoslavia (Y) took a long lease of a flat in London for a term of 84 years; its interest in the property was registered at the Land Registry in 1974. Y subsequently ceased to exist when four of its six constituent members declared independence. Following that dismemberment, all the successor states, including the appellant and the respondent, entered into a written agreement to resolve issues relating to the distribution of their rights, obligations, assets and liabilities. The agreement stipulated that the distribution of diplomatic properties should be in kind, (that is, as properties) by proportionate percentage share and a list of relevant properties was appended to the agreement. The disputed property was not on the list.
The appellant applied to the Land Registry to impose restrictions to prevent the flat from being distributed without the authority of a court and a certificate that the appellant had received due notice. The Land Registry agreed to accept the application but the occupier of the flat, who was a member of the respondent’s armed forces, objected and the case was referred to an adjudicator.
The adjudicator considered that he had no jurisdiction to deal with an issue between sovereign states and that the absence of the flat from the list was fatal to the appellant’s application. Further, the appellant’s claim was non-justiciable by an English court since it could not have acquired, under English domestic law, any interest in the property. The appellant was therefore unable to show a sufficient interest, under section 43(1) of the Land Registration Act 2002, to give the adjudicator jurisdiction to direct the registrar to enter the restrictions sought. He directed the chief land registrar to cancel the appellant’s application.
The appellant appealed. The principal issue was whether the appellant had a right or a claim to the registered leasehold interest in the property, under section 42(1)(c) of the 2002 Act, providing it with a sufficient interest in the entry of restrictions within section 43(1)(c) to give the adjudicator jurisdiction to decide whether such entries were necessary or desirable.
Held: The appeal was allowed.
The appellant had two types of claim in respect of the property. First, it claimed, pending any determination as to the distribution of the property in specie pursuant to the agreement, a beneficial share in the property arising from the common understanding that the only candidates for ownership of Y’s property were the successor states. Second, it claimed full beneficial ownership of the property, capable of being pursued by each of them pursuant to the agreement, which might or might not succeed. To conclude that both claims satisfied the threshold test of reasonableness, or arguability, such that they ought not to be regarded as fanciful would not breach the non-justiciability principle: Re AY Bank Ltd (in liquidation) [2006] EWHC 830 (Ch); [2006] 2 All ER (Comm) 463 considered.
It was wrong, and a breach of the non-justiciability principle, for the adjudicator to resolve in the respondent’s favour the question of the agreement’s construction when, in the light of the agreement, the contrary was reasonably arguable.
The appellant’s claims together with its status as a party to the agreement, gave it a sufficient interest in the entry of a restriction, for the purpose of affording jurisdiction to the registrar to enter such restrictions, if that were necessary or desirable pursuant to section 42(1) of the 2002 Act.
The appellant had a claim to an interest in the property, a claim to have the property distributed to it in specie pursuant to the agreement and an interest in having the principles and machinery of the agreement carried into effect. The combination of those claims and the appellant’s interest gave rise to a sufficient interest in the making of the entry requested for the purposes of section 43(1)(c).
Weighted against that conclusion was that the appellant’s claims were in all likelihood not justiciable by an English court because they arose out of the transactions of sovereign states and from an unincorporated treaty to which the UK was not a party. None the less, the claims related to an interest in or ownership of land situated in England, title to which was identified and guaranteed by the statutory system of land registration. That included a system of limited protection by restriction designed to assist persons seeking to protect rights or claims to registered estates. That was an equally powerful factor, suggesting that non-fanciful claims to property ought in principle to be capable of restriction, even if they had to be determined somewhere other than in the English courts.
If there were a reasonable prospect that the principles and machinery of the agreement might lead to a determination that the property should be distributed to the appellant, there was no reason why the appellant’s claim to that effect should not be protected by a restriction. There was no reason why the appellant’s claim to be the joint beneficial owner of the property, pending any determination to the contrary, should not also be protected by a restriction.
James Crawford SC and Simon Olleson (instructed by Ince & Co) appeared for the appellant; Daniel Margolin and Dan Sarooshi (instructed by Clyde & Co LLP) appeared for the respondent.
Eileen O’Grady, barrister
