Gelley & Ors v Shepherd & Anor

A foreign judgment obtained by fraud may be denied recognition only where the fraud was operative. The order must have been procured by the fraud, in the sense that without it the order would not have been made or there was a real possibility that it would not have been made.

Proceedings issued in a company’s name without proper authority are vulnerable to challenge as not being the company’s claim. Ratification ordinarily relates back, but cannot validate an unauthorised claim after trial and judgment where lack of authority was raised and established.

A trespasser in possession has a superior possessory title against persons lacking a better right, although the true owner remains entitled to demand possession.

The proceedings concerned competing claims to possession of land registered first to CILBVI, a British Virgin Islands company, and later to Comvecs following an unauthorised and fraudulent transfer. Mr Shepherd had entered under a licence which was terminated in December 2008, but remained in occupation. Mr Gelley and Nor-Dem subsequently attempted to exclude him and removed goods from the land.

CILBVI had been dissolved but was restored to the BVI register by an order made in January 2011. His Honour Judge Walton held that the restoration order was tainted by fraud and ineffective in England. He consequently held that Mr Shepherd, though a trespasser, had a better right to possession than CILBVI, Comvecs, Mr Gelley and Nor-Dem.

The appeal concerned recognition of the BVI restoration order, authority to act for CILBVI, and the effect of section 58 of the Land Registration Act 2002.

1. Appeal allowed in part. The January 2011 BVI restoration order had to be recognised in England. The exception for a foreign judgment obtained by fraud is carefully delimited. Fraud is operative only if, without it, the foreign order would not have been made or there is a real possibility that it would not have been made. That approach followed Jet Holdings Inc v Patel and was consistent with Owens Bank Ltd v Bracco.

2. Although Mrs Gelley deliberately presented a false picture to the BVI court, the fraud did not procure the restoration order. Full disclosure would have revealed compelling reasons to restore CILBVI: it owned the land, restoration protected the company and its innocent stakeholders, and it enabled the company to seek correction of the land register. Restoration is not a penal jurisdiction, and the relevant discretion would not have been exercised to punish an unnecessary lie. The High Court therefore erred in treating the BVI order as ineffective.

3. The challenge concerning Mrs Gelley’s authority was dismissed. The case advanced at trial depended upon agreement between Mrs Gelley and Mrs Cail, but the judge found that Mrs Cail had not agreed to the relevant actions. New arguments based on the earlier grant of administration and section 109(6) of the BVI Business Companies Act 2004 could not fairly be introduced on appeal because they would have required further evidence and argument.

4. CILBVI’s possession counterclaim was not properly authorised. A defendant may challenge proceedings issued in a company’s name without authority. Although a principal may ordinarily ratify an unauthorised claim with retrospective effect, ratification cannot occur after trial and judgment where lack of authority was pleaded and established.

5. The ground based on section 58(1) of the Land Registration Act 2002 failed. At trial the appellants had conceded that section 58(2) applied because a registration requirement remained unmet. They could not withdraw that concession on appeal. It was unnecessary to decide the wider effect of registration following a fraudulently procured transfer.

6. The order was varied to declare that CILBVI had owned the land since 1996 and was entitled to demand possession. Mr Shepherd’s possession remained superior to that of Mr Gelley, Nor-Dem and Comvecs until the Court of Appeal’s judgment. Comvecs had never owned the land or been entitled to possession. The balance of the appeal was dismissed.

1. Court of Appeal (Civil Division): In [2013] EWCA Civ 1172, the court allowed the appeal in part. It recognised the BVI restoration order and varied the declarations concerning ownership and possession, but dismissed the remaining grounds.

2. High Court, Chancery Division: His Honour Judge Walton held that the BVI restoration order was ineffective in England because it was tainted by fraud. He declared that Mr Shepherd had a possessory right superior to those of CILBVI and Comvecs, despite being a trespasser.