Gelley & Ors v Shepherd & Anor

The Court of Appeal considered competing claims to possession of land and related allegations of fraud in the restoration of an overseas company. Key legal principles applied were: the narrow exception to recognition of a foreign judgment where it was obtained by fraud requires that the fraud be operative in obtaining the foreign order; the Land Registration Act 2002 s.58 was considered in the context of a registration procured by forged evidence; and ordinary principles of authority and ratification govern whether acts purportedly done on behalf of a company bind it. The court held that although the applicant had deliberately misled the BVI court and that the transfer of the land to Comvecs was procured by fraud, the BVI order restoring CILBVI to the register should be recognised in England because the fraud was not operative in the sense that the BVI court would nonetheless have made the restoration to protect interests of the company and innocent third parties. The judge’s related declarations that the Part 20 Claimants were not and never were entitled to possession were therefore corrected so that CILBVI is treated as the true owner and entitled to seek possession; however the appeal against findings that Mrs Gelley lacked authority and other factual rulings was dismissed.

Background and parties: The appeal arose from possession and conversion proceedings about land at 630 Whessoe Road, Darlington. The respondents (Mr Shepherd and Albert Hill Skip Hire) occupied and used the land. The appellants included Mr Gelley, Collect Investments Limited (British Virgin Islands) (CILBVI) and Comvecs Intell Limited. CILBVI had been struck off the BVI register but was later restored by a BVI court order in January 2011.

Nature of the claim and procedural posture: At first instance His Honour Judge Walton decided two preliminary issues after trial and related hearings, concluding that the respondents had a superior right to possession as against the Part 20 Claimants and that the transfer of the land to Comvecs was procured by fraud. The appellants appealed on four principal grounds: (1) challenge to the judge’s conclusion that the BVI restoration order was not effective in England because it was "tainted by fraud"; (2) challenge to findings that Mrs Gelley had no authority to act for CILBVI or to authorise the resumption of possession; (3) challenge to the finding that the Comvecs transfer was of no effect, invoking Land Registration Act 2002 s.58; and (4) related challenges to the treatment of the BVI order.

Issues framed by the court:

• Whether the January 2011 BVI order restoring CILBVI should be recognised and given effect in England despite mis-statements to the BVI court.
• Whether Mrs Gelley had authority to act for CILBVI and to authorise eviction and seizure of goods.
• Whether Comvecs’ registration under the Land Register was conclusive under s.58 LRA despite being procured by forged documents.

Court’s reasoning and holdings: The Court of Appeal held that the exception to recognition of a foreign judgment on grounds of fraud is narrowly confined to cases where the fraud was operative in obtaining the foreign order (i.e. the order would not have been made but for the fraud or there is a real possibility it would not have been). Applying that test, the court concluded that, although fraudulent misrepresentations had been made by or with the authority of Mrs Gelley, the BVI court would nonetheless have restored CILBVI because restoration was necessary to protect the company and the interests of innocent third parties (including the deceased’s other heir). Accordingly the January 2011 Order was recognised in England and CILBVI was to be treated as the true owner of the land. The appeal was therefore allowed in part to correct the judge’s orders to that effect. The court dismissed the appellant’s other late or newly-raised arguments (including a belated reliance on relation-back of an earlier limited grant of probate, a new contention under s.109(6) of the BVI Business Companies Act 2004 and reliance on s.58(1) LRA) as unfair to introduce on appeal and without merit on the evidence. The court left rectification of the Land Register to the Registry to consider in the light of the judgment.

Appeal allowed in part. The Court held that the exception to recognition of a foreign judgment on grounds of fraud requires the fraud to have been operative in obtaining the foreign order; on the facts the January 2011 BVI order restoring CILBVI would have been made despite the mis-statements and should be recognised in England. Consequently CILBVI is to be treated as the true owner of the land and entitled to pursue possession; other factual findings (including lack of authority by Mrs Gelley to act for CILBVI and that the transfer to Comvecs was procured by fraud) were maintained and the appellant’s late legal arguments were rejected.

Appeal from the High Court of Justice, Chancery Division, Newcastle upon Tyne District Registry, judgment of His Honour Judge Walton following a four day trial and resumed hearings; appeal determined by the Court of Appeal (Richards LJ, Floyd LJ and Sales J) [2013] EWCA Civ 1172.