Gelley v Shephard and Petterson v Ross

Heather Viljoen reviews recent case law about land ownership and foreign judgment, and the impact of not having a deed of family variation

The appeal of Gelley v Shephard was against findings made in proceedings for possession of land. The original owner of the land was a company, CILBVI, incorporated in the British Virgin Islands (BVI). CILBVI was dissolved in 2001 after failing to comply with local regulatory requirements.

In 2007, CILBVI's former shareholder, Mr Blair, granted a licence for using the land to Mr Shephard. Following a breach by Shephard, Blair terminated the licence. Nevertheless, Shephard continued to trespass on the site.

Following Blair's death in 2009, his daughter (Mrs Gelley) sought to rectify the position of land ownership to remove Shephard. She arranged for a new company, Comvecs, to be incorporated and transferred title in the land from CILBVI to Comvecs - despite not being a director of CILBVI. Forged certificates confirming that CILBVI existed were also submitted, at the request of the Land Registry, in support of the registration application.

Subsequently, Gelley applied to the court in the BVI to reinstate CILBVI to the companies register. She made the application as a director of CILBVI, submitting a forged resolution confirming her appointment in 2007. She also made a number of false claims, including that the application was to enable her to gather her father's assets (i.e. the land). She did not reveal that the land had already been transferred to Comvecs. The court granted the application and CILBVI was restored to the companies register.

The trial judge held that the transfer of land from CILBVI to Comvecs was ineffective, having been obtained by fraud. At trial, counsel for Comvecs conceded that the Land Registry must be given evidence that CILBVI existed, as part of the registration process; forged certificates meant that this requirement had not been met.

In relation to the BVI order, the court held that this was "tainted by fraud" and did not, therefore, take effect in England. Therefore, neither Comvecs nor CILBVI had title to the land that was superior to Shephard's, even though he was trespassing.

These findings were challenged on appeal.

Despite the concession at trial, the appellants sought to argue that the registration of Comvecs at the Land Registry as owner of the land made its title conclusive. The court dismissed the argument: the appellants had not shown why the concession at trial (which prevents the fact of registration being conclusive) no longer applied.

The appeal on the BVI court order was, however, allowed. The court held that, for an English court not to recognise a foreign judgment on the basis of fraud, it was necessary to show that the fraud was operative in obtaining the foreign judgment.

Although the trial judge was entitled to find that Gelley had made misrepresentations and had sought to mislead the BVI court, the fraud was not operative in the required sense.

Evidence had been before the court that contradicted Gelley's misstatements and, even if the court had been fully informed of the true position, it would still have made the order it did.

Simply, CILBVI was the owner of the land and there was good reason for it to be restored to the register to protect its interests and those of its owners. CILBVI was, therefore, the true owner of the land at all material times and was entitled to demand possession from Shephard.

See Gelley v Shephard [2013] EWCA Civ 1172

 

Petterson v Ross

Romana Ross' executor applied to court to determine the liabilities in the estate and the proportionate abatement to specific legacies that would be required to meet these.

Although the estate was solvent, there were insufficient residuary assets to discharge the deceased's liabilities. The main liabilities were an outstanding mortgage against a property left to the deceased's daughter and a claim by the son for unpaid wages in relation to the deceased's business.

The deceased's children had agreed to sign a deed of family variation specifying that the business would be carried on by the son exclusively until sold. The sale proceeds would then be divided between the children in accordance with the deceased's will. In the event, the deed of variation was not drawn up or signed, but the son continued to run the business with the help of his wife and daughter. Wages for this were not paid.

The court upheld the agreement between the children, despite the lack of a deed of variation. It found that the verbal agreement was acted on by all the parties and was not conditional on a deed being drawn up or signed.

Following the agreement, the son was running the business as a sole proprietor and, as such, all liabilities incurred between the deceased's death and the date of sale were his responsibility. This included the wage claims, which could not, therefore, be claimed against the estate.

As for the other claims against the estate, the court was required to apply the rules on abatement set out in the Administration of Estates Act 1925. It had no discretion to decide on how specific legacies should be abated. With regard to mortgage, the Act made clear that it should be discharged out of the attached property, unless a contrary intention appeared in the deceased's will.

In this case, the deceased had clearly left the property to the daughter free of any mortgage or legal charge. The intention was, therefore, for the mortgage to be paid out of residuary assets together with the estate's other liabilities. As there were insufficient residuary assets, the liabilities were to be paid out of the specific legacies in proportion to the legacies' relative values. The required sums would either need to be raised by the beneficiaries or the assets sold.

It is worth noting the court's disappointment that the children had not decided out of court how to use the estate's assets to meet its liabilities. As all were of full age and capacity, this was entirely open to the children and would have avoided the substantial costs incurred in the proceedings, with the result that the estate was further diminished.

See Petterson v Ross [2013] EWHC 2724 (Ch)

 

Heather Viljoen is a solicitor at Michelmores

She writes regular case updates for Private Client Adviser