Iam Group Plc v Chowdrey

This is an appeal from an order of HHJ Blunsdon in the Lambeth County Court on 9 June 2011. By that order he dismissed the claim of the appellant, IAM Group Plc, for possession of the first and second floors of 26 Rye Lane, Peckham, London SE15 5BS (“No. 26”). He gave judgment for the respondent, Qamar Chowdrey, on his counterclaim by declaring that the respondent had a defence based on adverse possession pursuant to section 98(1)(a) and (b) of the Land Registration Act 2002 (“the LRA”) and that the respondent was entitled to apply immediately to HM Land Registry (“the Land Registry”) to be registered as proprietor with title absolute to the first and second floors of No. 26 (“the disputed property”). The Judge further ordered that, pursuant to section 98(5) of the LRA, the registrar of the Land Registry shall register the respondent as such proprietor.

The basis of the appeal – which has been extremely well presented by counsel for the appellant, Mr Stephen Evans, – is that the Judge was wrong to conclude that the respondent satisfied the conditions in section 98(1) and paragraphs 1 and 5(4) of schedule 6 of the LRA. In particular, the appellant contends that the Judge made an error of principle in concluding that the respondent satisfied the requirement in paragraph 5(4)(c) of schedule 6 that the respondent “reasonably believed” that the disputed property belonged to him for the period specified in that provision.

Section 98 of the LRA provides that a person has a defence to an action for possession of land if (a) on the day immediately preceding that on which the action was brought he was entitled to make an application under paragraph 1 of schedule 6 to be registered as the proprietor of an estate in the land, and, (b) had he made such an application on that day, the condition in paragraph 5(4) of that schedule would have been satisfied.

Paragraph 1 of schedule 6 to the LRA provides that a person may apply to the registrar to be registered as the proprietor of a registered estate in land if he has been in adverse possession of the estate for the period of ten years ending on the date of the application.

In the present case, in order to succeed in his defence and counterclaim, the respondent had to satisfy the “third condition” set out in paragraph 5(4) of schedule 6, as follows:

“(4)

The third condition is that—

(a) the land to which the application relates is adjacent to land belonging to the applicant,

(b) the exact line of the boundary between the two has not been determined under rules under section 60,

(c) for at least ten years of the period of adverse possession ending on the date of the application, the applicant (or any predecessor in title) reasonably believed that the land to which the application relates belonged to him, and

(d) the estate to which the application relates was registered more than one year prior to the date of the application.”

As I said, what is in issue on this appeal is whether the Judge was right to find that paragraph 5(4)(c) is satisfied.

There is no appeal from the following findings of fact of the Judge.

The appellant is the registered proprietor of No. 26 at the Land Registry under Title No. SGL307164. The appellant completed the purchase of No. 26 on 12 December 2000 and was registered as proprietor on 15 January 2001. The Charges Register refers to the provisions of a deed dated 18 September 1928 (“the 1928 Deed”) made between (1) J Lyons & Co Limited (“Lyons”) and (2) Maxwell and Ponting Limited (“Maxwell”). The title plan shows No.26 as delineated by a single red line in a broadly rectangular shape.

The respondent entered into occupation of No. 26a Rye Lane (“No. 26a”) under an oral tenancy. In 1993 he purchased No. 26a at auction. The purchase was completed on 29 March 1993. The respondent was registered on 28 April 1993 as the proprietor of No. 26a at the Land Registry under Title No. TGL5042.

It is apparent from the 1928 Deed that No. 26 was then owned by Lyons and No. 26a and other land to the south along Rye Lane was then owned by Maxwell. The 1928 Deed referred to a lease which had been granted on 23 February 1918 (“the 1918 Lease”) by the then common owner of both No. 26 and No. 26a. The 1918 Lease was in respect of No. 26a and described part of the demised property as extending partly over No. 26 in the ownership of Lyons. The 1918 Lease was for a term of 27 years from 25 December 1917. It is apparent from the 1928 Deed that it both confirmed and regularised the boundary between No. 26 and No. 26a. It effectively acknowledged or confirmed that the room over No. 26 which was included in the 1918 Lease was within the title of No. 26. It provided that at the termination of the 1918 Lease No. 26 and No. 26a would be physically separated by blocking up the opening between them. The 1928 Deed contained other provisions to which reference is made in the registered title of each of No. 26 and No. 26a at the Land Registry, but those provisions are of no relevance on this appeal.

The Judge concluded that, on the balance of probability, the disputed property is within the appellant’s title at the Land Registry and that there is a clear vertical boundary between the two properties.

From the time that the respondent entered into occupation of No. 26a in 1990 he had exclusive possession not only of No. 26a but also of the disputed property for the purposes of his business as a retail shop. In particular, the first floor above No. 26 was used for the storage of stock, together with an office area, and the floor above was also used for the storage of stock. The only access to those areas throughout the period of his occupation has been by means of the rear of the ground floor of No. 26a.

When the appellant purchased No. 26 it was subject to a 20-year lease granted on 20 October 2000 in favour of Atlantic Fashions of the whole of the registered title of No. 26. No. 26 had also been the subject of an earlier lease dated 24 July 1992 for 25 years. Notwithstanding those leases, the tenants under them never exercised any right they may have had to possession of the disputed property. Indeed, by a letter dated 18 January 2001 Goldfreight, a property management company acting on behalf of the appellant, acknowledged that the disputed property was not being used by Atlantic Fashions and that access was only via No. 26a.

The Judge concluded that the respondent had been in exclusive possession of the disputed property since he first took up occupation in 1990. He said the period from 1990 to 1993 had to be discounted because the respondent was in occupation as a tenant, paying rent to his landlord. That meant that the respondent fell short of the 12 year period required for adverse possession under the Limitation Act 1980 for extinguishing the title of the paper owner. There was a question in my mind as to whether or not, for the purposes of the Limitation Act 1980, it was right for that period to be discounted since exclusive and adverse possession by the respondent during the period 1990 to 1993 would have enured for the benefit of the owner of No. 26a, and at first sight one would have thought that the respondent, after he acquired the freehold himself in 1993, would have been entitled to aggregate his adverse possession as owner with his prior three year adverse possession which had enured for the benefit of the owner while he was the tenant. However, I ignore that question entirely because there is no cross appeal on that point and I have not heard full submissions on it.

As I have said, the Judge found that the respondent had been in adverse possession since his purchase of No. 26a in March 1993, that is to say, for the purposes of paragraph 1 of schedule 6 to the LRA, for a period of more than ten years prior to 15 August 2010, which was the day before the commencement of these proceedings for possession.

When the respondent purchased No. 26a in 1993 he believed he had purchased exactly that which he had previously rented. There was no material change in layout between 1990 and the commencement of these proceedings. The branch manager of Atlantic Fashions between 2002 and 2008 regarded the disputed property as belonging to the respondent, even seeking permission from him or one of his staff to use the office. The area manager of Atlantic Fashions never challenged the respondent’s ownership, occupation or control of the disputed property. The respondent associated the flying freehold in the disputed property with what he thought was a flying freehold of No. 28 Rye Lane over part of No. 26a.

The Judge expressed his reasons for finding in favour of the respondent on the satisfaction of the condition in paragraph 5(4)(c) of schedule 6 of the LRA as follows:

“This then leaves sub-paragraph (c) and the remaining attack is directed at whether the Defendant reasonably believed that throughout the period of 10 years ending on 15^th August 2010 the disputed land belonged to him. By using the word ‘reasonably’ it is clear the test is intended to be objective. Mr Evans draws attention to the fact that the Defendant’s evidence is self-serving. There is a distinct lack of evidence in the form of documents or from the conveyancing solicitors at the material time. Mr Evans submits that Title documents if seen by the Defendant would have alerted him and he should be fixed with the knowledge of his solicitors. Further by 2009 a letter had been sent to the Defendant’s solicitors notifying the Defendant he held no interest in the disputed land. Of course in June 2008 the Defendant’s own solicitors had notified the Claimant the Defendant was the owner of the upper floors of 26 Rye Lane and that the boundaries between 26 and 26a were not vertical. On the evidence I have found the Defendant was in possession of the disputed land from 1990; that throughout his occupation possession has been exclusive. I have found that he did not construct the access to the disputed land, which access is only via his ground floor shop. I have found that when he purchased the property in 1993 he believed he purchased exactly that which he had rented. There was no material change in layout between 1990 and the date of these proceedings. The Defendant’s witnesses confirm the static physical layout at various times during the material period. There were at least two leases of 26 Rye Lane, one in 1992 and a second in 2000. Neither of those tenants challenged the possession by the Defendant of the disputed land and nor did their respective landlords during the terms of the leases. The branch manager of Atlantic Fashions between 2002 and 2008 regarded the disputed land as that of the Defendant even seeking permission from him or one of his staff to use the office. The Area Manager of Atlantic Fashions never challenged the disputed land with what appears to be a flying freehold of 28 Rye Lane over part of the ceiling of 26a. All of these factors would on balance have fortified the original belief held by the Defendant. Mr Evans relies on the correspondence from the solicitors as ending any reasonable belief that the Defendant may have held although Mr Evans stresses that such belief was not accepted by the Claimant. If the Defendant did believe that he owned the land for the reasons I have touched upon, it was in my judgment not unreasonable for him to reject the Claimant’s assertions to the company and suggest, as he did, the matter be decided by court. I have found the Defendant to be a compelling and convincing witness. I can fully understand why after a period of 18 years’ exclusive possession without disturbance from the lessees and owners of No 26 he held such a belief. Add in the ingredients of the apparent flying freehold of No 28, the physical and somewhat rambling internal appearance above ground floor level of these properties – which I saw for myself – and the long-established exclusive access to the disputed land, the court can be satisfied that the belief held by the Defendant that disputed land belonged to him and that his belief was both genuine and objectively reasonable. I am also satisfied that notwithstanding such correspondence as the Defendant may have seen from the Claimant’s solicitors he continued reasonably to hold the belief for the whole of the material 10 years. He may well have believed, as Mr Orme suggested, that the conveyancing Title documents had long lost touch with reality. In those circumstances the Defendant has established the third issue, and he has satisfied the conditions within the Land Registration Act Section 98.”

The principal ground of the appeal is a short one. It is that the Judge ought to have inferred that the respondent’s solicitors not only saw the 1993 transfer to the respondent and the copy entries in the Land Registry, but also conducted all necessary searches on the respondent’s behalf. In the light of all of those documents, and assuming suitable enquiries, there was nothing to lead to a reasonable belief that the disputed property belonged to the respondent. Mr Evans points out that the plans at the Land Registry give no indication of a flying freehold covering the whole of the first floor of No. 26 being comprised within the registered title of No. 26a. He emphasises that the boundaries on the register plans show a vertical division of the boundary between the two properties. He says, moreover, that it is clear from the transfer itself that the transfer was of – and only of – the property comprised in the registered title of No. 26a. He says that on the face of the register entries relating to both No. 26 and No. 26a there is reference to the 1928 Deed. Accordingly, Mr Evans says, not only is the inevitable inference that the solicitors acting for the respondent in 1993 would have seen and understood the Land Registry documents and the transfer as indicating only vertical boundaries between the two properties and the absence of any flying freehold owned by No. 26a over No. 26, but, if they had ever sought to investigate the point, it would have become perfectly clear from the 1928 Deed which they could have obtained from the Land Registry (and which in due course was in fact obtained from the Land Registry by the appellant) that any doubts on the point would have been resolved in favour of the Judge’s ultimate conclusion, namely that there was no flying freehold over No. 26 within the title of No. 26a.

Mr Evans further says that, if that was not enough, in 2009 and in 2010 there was correspondence from the appellant’s solicitors to the respondent asserting that the respondent was not the owner of the first and second floors over the ground floor of No. 26 but that the appellant was, and they enclosed copies of the relevant entries at the Land Registry. Mr Evans submits that, whatever misconception the respondent may have had up until that time about his ownership of the disputed property, he could not reasonably have continued to believe that he owned the disputed property after that time.

Mr Evans distinguishes that situation from the one which was considered by the Court of Appeal in Zarb v Parry [2011] EWCA Civ 1306 on the footing that, in the present case, any person of any competence – certainly a solicitor – looking at the entries at the Land Registry and, if necessary, the 1928 Deed would have been perfectly well aware that there was no flying freehold over No. 26 which was within the paper title of No. 26a.

The appellant does not challenge that the respondent did subjectively (that is honestly and actually) believe that he owned the disputed property. However, Mr Evans submits that the Judge made a number of errors in the way that he approached the objective test as to reasonable belief for the purposes of paragraph 5(4)(c) of schedule 6. He submits that the Judge failed to assert that the burden of proof as to reasonable belief fell on the respondent, and that the Judge wrongly satisfied himself that reasonable belief existed on the part of the respondent on the basis of the very same facts which had led the Judge to find adverse possession. The submission is, in effect, that the Judge did not move beyond the common law requirements for establishing adverse possession to confront directly the quite separate requirement of a reasonable belief in ownership on the part of the respondent.

Furthermore, although the point was, Mr Evans says, squarely raised in the closing submissions, the Judge never addressed the essential and critical argument of the appellant that, for the purpose of establishing reasonable belief or otherwise under paragraph 5(4)(c), the respondent was to be fixed with the knowledge of his solicitors or the knowledge which it should be inferred they would have had if they had acted with reasonable skill and competence. In short, Mr Evans submitted, the Judge, having found honest and subjective belief on the part of the respondent, never moved beyond reinforcing that finding of subjective belief with the very same facts that the Judge had relied upon to find adverse possession.

So far as concerns the observation of the Judge towards the end of paragraph [42] of his judgment that it was a matter of relevance that the respondent believed that there was a flying freehold over No. 26 enjoyed by the owner and within the title of No. 28, Mr Evans submits that this flies in the face of what is apparent on the Land Registry plans and, furthermore, that it was inconsistent with the Judge’s finding at paragraph [6] of his judgment that: “It is not possible in these proceedings to make any finding as to the alleged flying freehold, particularly as the filed plan to No. 28 has not been produced”.

Mr Evans said that the Judge’s references in paragraph [42] of his judgment to the “rambling internal appearance … of these properties” and to the long-established exclusive access to the disputed land, as factors weighing in the scales in favour the respondent, were only relevant, if at all, to a subjective belief on the part of the respondent.

There cannot be, and there is not, any appeal from the Judge’s finding that the respondent at all times after he purchased No. 26a in 1993 honestly believed that the disputed property belonged to him. The only question on this appeal is whether the Judge was entitled to conclude – and right to conclude – that that belief was reasonably held.

I do not accept the central proposition, advanced skilfully by Mr Evans, that the issue of reasonableness turns on the knowledge which the respondent’s solicitors in 1993 would or should have had if they had been reasonably competent. There was no evidence before the Judge as to what those solicitors did or thought about the matter. Before the Judge, and in the skeleton arguments for the purpose of this appeal, the appellant criticised the failure of the respondent to produce the conveyancing file. It appears, however, that the firm of solicitors acting on the 1993 transfer on the respondent’s behalf no longer exists, and it is certainly almost impossible now to locate the conveyancing file. Accordingly, precisely what those solicitors asked and knew is not before the court as a matter of evidence.

In my judgment, the issue is not the knowledge of a reasonably competent solicitor acting for the respondent in 1993. We are not here concerned with knowledge in the context, which frequently arises, of imputing an agent’s knowledge to the principal. We are here concerned with the requirement as to the reasonable belief of a particular person. In this case, it is the respondent, but generally it is the person who is seeking to apply for registration of title by virtue of adverse possession. What is in issue therefore is not imputed knowledge but rather whether that particular person – here the respondent – was reasonable in holding the belief that he or she did in all the circumstances. That can involve a question as to whether the respondent should have made enquiries of his solicitors or elsewhere as to whether, notwithstanding his purchase of the freehold of No. 26a in 1993, the disputed property was in fact comprised within his paper title.

On the basis of the facts found by the Judge there was nothing to put the respondent on notice in 1993 that he needed to raise with his solicitors whether his title to No. 26a included the disputed property, of which he had enjoyed exclusive possession without challenge or question from the time he first acquired an interest in 1990 and the access to which obtained solely from No. 26a. That, in my judgment, is the end to the ground of appeal based upon the respondent’s inferred knowledge derived from the assumed conduct of what would have been hypothetically competent solicitors.

So far as concerns the letters from the appellant challenging the title of the respondent to the disputed property in 2009 and 2010, it is clear from Zarb v Parry that the mere fact that a paper title owner challenges the asserted ownership of land by the adverse possessor is not in every case sufficient to render unreasonable any continuing belief of ownership on the part of adverse possessor. On the facts in Zarb v Parry the adverse possessor satisfied the requirement of reasonable belief even though that the paper title owner had challenged the assertion of ownership by the adverse possessor.

The question in each case is what, in all the circumstances, is the proper conclusion as to the reasonableness or otherwise of the continued belief as to ownership by the adverse possessor. In the present case, by the time of the letters from the appellants challenging the respondent’s asserted title of the disputed property, the respondent had enjoyed unchallenged exclusive occupation for some 18 years. During that period the respondent’s exclusive occupation of the disputed property had never been challenged or questioned by anyone who had any interest in No. 26, and indeed the appellant’s own tenants had seemingly acknowledged that the disputed land was not being used by them, and access was only obtained via No. 26a. In the light of those facts the Judge was not only entitled but right to conclude that the letters from the appellants did not result in the continuing belief of the respondent that he owned the disputed property ceasing to be a reasonable one.

For those reasons, despite everything Mr Evans has skilfully advanced on behalf of the appellant, I would dismiss this appeal.

I agree.

I also agree.