Land Registry: rectification of title - effect of a fraudulent transfer

Background

The case concerned property in Henley Street, Birmingham. Before May 1989, Mohammed Rashid (M) was the registered proprietor of the property. In May 1989, Farakh Rashid’s father forged M’s signature on a transfer and was registered as proprietor. In 1990, the father executed a transfer by way of gift in favour of Farakh Rashid (F). In 2011, after discovering sufficient evidence of the dealings amongst family papers, M sought rectification of the register, to be reinstated as registered proprietor in place of F. He succeeded in obtaining an order from the First-tier Tribunal to that effect, and F then appealed to the Upper Tribunal.

Issues

It was found by the First-tier Tribunal that the 1989 transfer was a forgery. Therefore, registration of the transfer to F’s father and the subsequent transfer to F were mistakes for the purpose of the Land Registration Act 2002 (LRA). The order of the First-tier Tribunal therefore had the effect of restoring to M title to property of which he had been deprived by fraud.

Mistakes such as the registration of a fraudulently executed transfer would ordinarily justify the making of an order for rectification of the register. The LRA gives special protection to a registered proprietor and says that the register cannot normally be rectified if it will prejudicially affect the registered proprietor’s title, but there is no such protection for a registered proprietor who has contributed to the mistake by fraud or lack of proper care (as the First-tier Tribunal found F had done) unless there are exceptional circumstances. F argued before the First-tier Tribunal that exceptional circumstances existed under paragraph 6(3) of schedule 4 of the LRA preventing the making of an order for rectification, namely that F had been in adverse possession of the property for sufficient time to defeat any rights M might have.

This argument was rejected by the First-tier Tribunal, relying on a previous decision by the Court of Appeal in Parshall v Hackney, where it had been held that someone who is the registered proprietor cannot be in adverse possession. F argued that the nature of his adverse possession was different, that Parshall was only relevant where the registered proprietor was lawfully in possession and that F’s position was different because his possession stemmed from a fraud.

Decision

The Upper Tribunal was not persuaded by this reasoning. The title conferred by statute is “morally blind”. It was acknowledged as a general point that wrongful or even criminal behaviour will not necessarily prevent title from being acquired by adverse possession. However, the principle set out in Parshall (that a party cannot be considered to be in adverse possession of property of which he is the registered proprietor) applies regardless of whether the registration as proprietor came about innocently or otherwise.

Comment

The facts of the case are unusual but provide a useful example of the application of the rectification provisions of the LRA. Were F to have succeeded in a line of argument that he had acquired a separate title by adverse possession running in parallel to the existing registered title, this would have been confusing and contrary to the policy of the LRA, and it is to be welcomed that the Upper Tribunal did not muddy the waters in this way.