Rashid v Nasrullah

Under the pre-2002 law, adverse possession depends on possession without the true owner’s consent, not on whether the squatter’s possession was unlawful or whether the squatter was registered as proprietor. A forged transfer may be void while registration nevertheless vests the legal estate in the registered proprietor. Where the fraud involved an outright taking, the beneficial interest may remain with the true owner under a constructive trust.

The limitation provisions apply to equitable interests. Fraud or dishonesty does not generally prevent time running, unless the case falls within a specific statutory exception such as the true-fiduciary rule. The doctrine of illegality cannot override the calibrated scheme of the Limitation Act 1980 and the Land Registration Act 2002.

MR2 was deprived of registered ownership of 40 Henley Street by a forged transfer in 1989. The fraudster was registered as proprietor and later gifted the property to his son, Farakh Rashid, who knew of the fraud and occupied the property as an investment.

MR2 applied to rectify the register in 2013. The First-tier Tribunal and the Upper Tribunal rejected the defence that title had been acquired by adverse possession. On appeal from the Upper Tribunal’s decision, the central issue was whether the registered proprietor’s possession could be adverse and whether the fraud and illegality doctrine prevented limitation from operating.

1. Appeal allowed. The Court of Appeal unanimously held that Farakh Rashid had acquired the benefit of the limitation provisions and was entitled to remain registered as proprietor.
2. Under the pre-2002 regime, possession requires factual possession and an intention to possess. Dispossession occurs when possession is taken without the true owner’s consent. Registration does not make otherwise non-consensual possession lawful for limitation purposes. JA Pye (Oxford) Ltd v Graham [2002] UKHL 30 was followed. Parshall v Hackney [2013] EWCA Civ 240 was irreconcilable with that authority and was not followed.
3. The forged transfer was void under section 114 of the Land Registration Act 1925, but registration vested the legal estate under section 69(1). Because the fraud was an outright taking without consent, the beneficial interest remained with MR2 and the registered proprietor held the legal estate on constructive trust. Argyle Building Society v Hammond (1984) 49 P & CR 148 and Swift 1st Ltd v Chief Land Registrar [2015] EWCA Civ 330 supported the effect of registration.
4. The gratuitous transfer to Farakh Rashid remained subject to MR2’s beneficial interest under section 20(4) and section 3(xv) of the 1925 Act. Section 18 of the Limitation Act 1980 applied limitation to that equitable interest. Section 21(1) did not assist MR2 because the fraudsters were not true fiduciaries; Williams v Central Bank of Nigeria [2014] UKSC 10 was applied.
5. After 12 years of possession without consent, section 75 of the 1925 Act operated with Schedule 12 paragraph 18 of the Land Registration Act 2002. Farakh Rashid therefore had both a defence to possession proceedings and an entitlement to registration. That entitlement constituted exceptional circumstances preventing rectification under Schedule 4 paragraph 3(3).
6. The illegality doctrine could be raised in a limitation case, but its scope was greatly reduced by the statutory scheme. Applying the approach in Patel v Mirza [2016] UKSC 42, the court held that illegality could not be used to defeat the carefully calibrated limitation rules. The court left open only extreme cases outside that statutory structure.
7. The FTT’s finding that the property had been treated as an investment and rented out was sufficient evidence of possession. No remission for further findings was required.

• Court of Appeal (Civil Division): [2018] EWCA Civ 2685 allowed the appeal.
• Upper Tribunal (Tax and Chancery Division): [2017] UKUT 0332 (TCC) rejected the adverse-possession defence and upheld the refusal to rectify the register.
• First-tier Tribunal: found that Farakh Rashid was in possession and refused the claim for rectification.