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Malory Enterprises Ltd v Cheshire Homes (UK) Ltd

[2002] EWCA Civ 151, [2002] Ch 216, [2002] 3 WLR 1, [2002] 14 LS Gaz R 25, [2002] 10 EGCS 155, (2002) Times, 21 March, 146 Sol Jo LB 61, [2002] All ER (D) 319 (Feb)

Court: CA

Judgment Date: 22/02/2002

REGISTRATION OF LAND - RECTIFICATION OF REGISTER - CIRCUMSTANCES JUSTIFYING RECTIFICATION - LAND CERTIFICATE BEING TRANSFERRED BY DISHONEST THIRD PARTY TO APPELLANT - RESPONDENT BRINGING ACTION SEEKING RECTIFICATION AND DAMAGES FOR TRESPASS - JUDGE FINDING RESPONDENT IN ACTUAL OCCUPATION - JUDGE HOLDING RESPONDENT RETAINING BENEFICIAL OWNERSHIP - JUDGE ORDERING RECTIFICATION - WHETHER JUDGE IN ERROR

In 1986, a company, M UK, was dishonestly set up in the United Kingdom. By deception M UK obtained a new land certificate in respect of a development site (the rear land) behind a block of flats in Manchester. The rear land had originally been part of a larger plot, but the front land had been transferred in 1984 separately from the rear land and became separately registered at the land registry. In the new certificate, the name of the proprietor was stated to be that of the claimant, of a new address. M UK then sold and executed a transfer of the rear land to the defendant which was then registered as proprietor in January 1999. As a result of the fraud of M UK, a new title was given to the rear land. The claimant brought an action for rectification of the land register under s 82 of the Land Registration Act 1925, contending that at all material times it had been in actual occupation of the rear land, so as to have an overriding interest which prevailed against the registered title of the defendant by virtue of s 70(1)(g) of the 1925 Act, which provided: 'All registered land shall . be deemed to be subject to such of the following overriding interests as may be for the time being subsisting in reference thereto . (g) The rights of every person in actual occupation of the land or in receipt of the rents and profits thereof, save where enquiry is made of such person and the rights are not disclosed .' The claimant also sought damages for trespass. The judge held that the title of the claimant had not been displaced by the actions of M UK, and the claimant had therefore remained in possession. He held that, if he were wrong in that view, the claimant had remained the true beneficial owner and its possession had not been disturbed in fact, since although the land had remained in a state which had not amounted to any serious use or occupation, it had secure fencing on three sides, and the only access was across the unfenced boundary with the front land. The judge accordingly ordered rectification of the title, and ordered the rectification to be retrospective, so as to be effective from the original date on which the dispute had arisen. He did not deal expressly with the question of liability for trespass, but his order made clear that liability in trespass arose from the fact that the claimant was in possession. The defendant appealed, contending that at all material times from and after the registration of the defendant up to the date of rectification the entire beneficial ownership and legal interest in the rear land and the right to possession of the rear land were vested in the defendant. The defendant submitted that the effect of s 69(1) of the 1925 Act was that if the legal estate was registered in the name of a person, that person acquired the beneficial interest. Section 69(1) provided: 'The proprietor of land . shall be deemed to have vested in him without any conveyance, where the registered land is freehold, the legal estate in fee simple in possession .'
Held - The appeal would be allowed in part. The defendant's status as registered proprietor was subject to the rights of the claimant as beneficial owner because s 69 of the 1925 Act only had the effect of vesting in Cheshire 'the legal estate in fee simple in possession'. It followed that the claimant had sufficient standing to sue for trespass even without seeking rectification of the register because it was the true owner and had a better right to possession. Moreover, the claimant had an overriding interest by virtue of its right to claim rectification. The judge's conclusion that the claimant was in 'actual occupation' of the rear land within the meaning of s 70(1)(g) of the 1925 Act would not be disturbed, and thus any rights of Cheshire were subject to the claimant's overriding interest. In those circumstances, it was unnecessary to determine whether or not rectification of the register could be ordered retrospectively, and thus the judge's order would be varied to the extent of removing the words 'with such rectification to be . retrospective'.