REF/2008/0632

The Adjudicator to Her majesty’s Land Registry
LAND Registration act 2002

IN the matter of a reference from hm land registry

BETWEEN
KUSUM JAYASINGHE
APPLICANT

and

DON LIYANAGE
RESPONDENT

Property Address: 37 Reading Road, Hallfield Estate, London W2 6HD

Title Number: NGL360534

Before: Mr Rhys sitting as Deputy Adjudicator to HM Land Registry

Sitting at: Victory House

On: 20th and 21st April 2009

Applicant representation:  		Mr Olaiton (Solicitor)
Respondent representation:		Ms Muir (Counsel)

D E C I S I O N

The Application
1.	On 29th October 2007 the Applicant applied to the Land Registry in Form RX1 to register a standard form restriction against Title No NGL360354, being a dwelling-house known as 37 Reading Road, Hallfield Estate, London W2 6HD ("the Property").  The Property was and is registered in the name of Don Liyanage, of 237 Horse Shoe Drive, Waterbury, Connecticut, USA.  The grounds of application are stated in Box 13 of the Form RX1 as follows:
"By reason of the applicant providing the original purchase funds, paying the original charge in favour of Halifax Building Society, and later redeeming that charge, and bearing all costs throughout, and receiving all income from the premises, there exists a resulting trust in her favour"
The Respondent, who is the registered proprietor, objected to the application, on the grounds that the Property belonged to him both legally and beneficially.   Since the dispute could not be resolved by agreement, it was referred to the Adjudicator on 15th May 2008, pursuant to section 73(7) of the Land Registration Act 2002.  I heard this case on 20th and 21st April 2009.  Both parties were legally represented.  The Applicant, her partner Mr Mahmood, and the Respondent, all gave evidence and were cross-examined on their witness statements.  The Applicant is the aunt of the Respondent, although, according to her, their relationship is (or, rather, was) more like that between a mother and son.

The Applicant's Case
2.	She says that in around 1986 she became interested in buying an investment property in London.  She already owned a house - 25 Brampton Road, Kingsbury, NW9 9BX ("the Brampton Road property").  She contacted various people in the property business, including a Mr Suresh Fernando, who helped her look for a property and also helped to arrange a mortgage.  This Mr Fernando, according to her, advised her that since she already had a mortgage on the Brampton Road property, it would be impossible to obtain another loan for a second property.  He therefore suggested that the Property should be vested in the name of a nominee.  He said that he had a friend called Mr Don Liyanage - not to be confused with the Respondent, her nephew, whose full name is Don Wimal Kithsiri Liyanage -  who could hold the Property for her.  The Applicant agreed to this and met Mr Don Liyanage to confirm the arrangement.  Contracts were exchanged for the purchase of the Property on 18th December 1986.  The Applicant provided £3500 from her own resources, and the remainder was raised on a mortgage from the Halifax Building Society.  By 1991, she had completely lost touch both with Suresh Fernando and with her nominee Don Liyanage.  However, she continued to rent out the Property, using the rental income to service the mortgage.

3.	On 24th February 2004 she redeemed the mortgage on the Property with a payment of £39,000 out of her own monies.  Having discharged the mortgage, she decided that she wanted to sell the Property.  However, there was a problem.  Mr Don Liyanage, the registered proprietor, and nominee for her, could not be found.  Therefore she struck on the idea of obtaining a Power of Attorney from the Respondent - her nephew, Don Wimal Kithsiri Liyanage, also known as Don Liyanage - which would enable her to execute any necessary documents.  Although, on her case, her nephew Don Liyanage was not the registered proprietor, nevertheless she took advantage of the fact that he had the same name.  There was, however, no sale in 2004, and she put Property sale on hold during a period of illness.  She decided once again in 2007 that she wanted to sell.  However, according to her the Power of Attorney had been lost, and she asked the Respondent to execute a new one.  According to her he refused to do so, citing potential tax complications, and she therefore decided to execute a form of transfer of the Property into her own name, by forging the signature of "Don Liyanage" on the Form TR1.    This document was submitted to the Land Registry on 4th May 2007 for registration.  The Land Registry wrote to "Don Liyanage" at the Property on 16th May 2007, seeking confirmation that the transfer was made in accordance with his wishes, and the Applicant returned the letter endorsed with a forged signature confirming that “Don Liyanage” did indeed consent to the transfer.  This is how the Applicant deals with these events in her Statement of Case:
"15.	In early 2007, the Applicant again made plans to sell.  This time, rather than use the fact that the registered proprietor had a name similar to the Respondent, the Applicant drew up a transfer in Form TR1 and lodged the same at the Land Registry on 4 May 2007.  The signature was forged by the Applicant based upon the signature appearijg on the mortgage deed.  The Applicant acknowledges that this was not the ideal way to deal with the matter but she did not believe that she was acting in a dishonest nanner since the Property belonged to her beneficially anyway.
16.	The Land Registry wrote to the registered proprietor on 16 May 2007 in order to get confirmation that the transfer was legitimate.  Again, the Applicant forged the signature confirming agreement."

4.	However, unknown to the Applicant, the Respondent's solicitors had written to the Land Registry on 14th May 2007, stating that he had signed a Power of Attorney but this could not now be found.  The letter states: "Our client now wishes to ensure that the Land Registry will only accept a transfer of this Title which is executed by our client personally."  Accordingly, the Land Registry did not act on the TR1 submitted by the Applicant, and that has never been registered.  Ultimately, these events led the Applicant to issue the RX1 application which has been referred to the Adjudicator.  In summary, therefore, the Applicant's case is that she was the true purchaser of the Property in 1986, that the Respondent has no interest in it and is not in fact the legal owner (since he is not the same Don Liyanage as the person who actually acquired the legal title in 1986), and she is therefore entitled to enter a restriction against the title.

The Respondent's Case
5.	The Respondent contends that the Property is owned by him, both legally and beneficially. He agrees that the Applicant was involved in the purchase in 1986, but only in the sense that she agreed to manage the lettting of the Property on his behalf, since he was living and working in the United States.  He says that he funded the purchase with a sum of £10,000, brought with him in the form of travellers' cheques when he came to London in December 1986 – his presence here being established by the entries on his passport.  Of the purchase price of £70,000, £7000 was paid in cash and the balance raised on mortgage. The remaining £3000 was paid to the Applicant to help with the mortgage repayments.   He says he signed the Mortgage Deed in favour of Halifax Building Society with the signature that he then employed, being the same signature as that which appears on his passport at the time.  He accepts that his signature subsequently changed, because it was too easy to copy and he was concerned about the possibility of fraud.  He says that he signed both the Contract for Sale, and the Mortgage Deed, in the offices of a solicitor, Mr Mark Fernando, who is named as the witness to his signature on the Mortgage Deed.  According to him, the Applicant had only a modest income, and it was his idea to purchase the Property.  Furthermore, there were times when the rental income was insufficient to discharge the mortgage repayments, and he allowed the Applicant to top up the payments using his bank account.  He gave her a book of signed, blank, cheques for this purpose.  He says that the Halifax mortgage was discharged by the Applicant in 2004, but utilising funds which he had given her.  He agrees that he appointed the Applicant as his Attorney, for the purposes of selling the Property in 2003.  The issue of a sale was raised once again in 2007, but on this occasion he was uneasy about allowing the Applicant to act on his behalf, and wanted to revoke the Power of Attorney. However, the Applicant said that the Power could not be found.  It was due to this unease that his solicitors contacted the Land Registry in May 2007, with the result that the purported TR1 dated 4th May came to light.  The Respondent's case, therefore, is that the Property has always been his both legally and beneficially, although the Applicant has managed it on his behalf and has retained income from it with his consent.  He says that the Applicant's case is a pack of lies, and she has no beneficial interest in the Property such as to entitle her to register a restriction.

The Burden of Proof
6.	Before I come to consider the evidence, and make the necessary findings, I make this preliminary observation.  At present, the Respondent is the registered proprietor of the Property.  He is Mr Don (Wimal Kithsiri) Liyanage and he resides at the address shown on the register.  There is no application before me to alter the register to substitute some other proprietor, despite the nature of the Applicant's case, which is to the effect that some other Don Liyanage is the true proprietor.  This being the case, the sole question before me is whether the Applicant can show that the Respondent holds the Property on a resulting trust for her.  The burden of proof is fairly and squarely upon the Applicant.  The Respondent does not have to prove anything, provided that he is the registered proprietor, although of course he may be obliged to rebut the presumption if the Applicant is able to prove that she was the true purchaser of the Property.

The Evidence - the Issues
7.	As I have said, I heard evidence from the Applicant, her partner Mr Mahmood, and from the Respondent.  All gave evidence on oath, and were cross-examined.  There was a serious conflict of evidence on a number of points, the principal issues being as follows:
7.1	Who paid the deposit on the Property, the Applicant or the Respondent?
7.2	Who signed the Sale Contract and Mortgage Deed?  The Respondent or another Don Liyanage?
7.3	What was the underlying purpose behind the purchase of the Property?  An investment for the Applicant or for the Respondent?
7.4	Whose funds were used to redeem the Halifax Building Society mortgage in 2004?  	Entirely those of the Applicant or, as the Respondent contends, indirectly his?
A resolution of these issues will go a long way towards resolving the central legal issue in this case, namely whether the Respondent holds the Property on a resulting trust, or on some other form of trust such as a constructive trust, for the Applicant.  However, the conflict of evidence which I have referred to is fundamental.  

8.	In considering the evidence, and the different versions of the events, I am bound to have regard to the demeanour and performance of the witnesses under cross-examination, and indeed to the inherent probabilities of the matter.  The foundation of the Applicant's case is that the title to the Property was vested in a person called Don Liyanage, who agreed to hold the Property as her nominee.  This person had not previously been known to her, but was introduced by Suresh Fernando, the mortgage broker.  He happened to share his name with the Respondent - more or less - but was not the same person.  She did not obtain any written documentation from Mr Liyanage, so as to protect her interest or otherwise evidence the trust, and within a few years both Mr Liyanage and Mr Fernando had disappeared.  In later years, when she wanted to sell the Property, she took a Power of Attorney from the Respondent, not because he was the registered proprietor, but because he had a similar name to the "real" Don Liyanage.  However, when the Respondent refused to provide a new Power of Attorney, she decided that it would not be in any way improper to forge the signature of "Don Liyanage" on the TR1 and also on the form of consent provided by the Land Registry.  This is the Applicant's own evidence.  This story is highly implausible, and I think any tribunal would require convincing evidence from a party which seeks to support such a case.  Having heard the "live" evidence of the Applicant and Mr Mahmood, I regret to say that I entirely agree with the Respondent's characterisation of the Applicant's case as fiction.  The more that she gave evidence, the less convincing she was.  She could not explain the many inconsistencies and improbabilities within her own case.  Her blithe acceptance that she had forged documents submitted to the Land Registry, and her attempts to shrug off this conduct,  demonstrated to me that she had little understanding of right and wrong.  I regret to say that I found myself unable to accept any of her evidence as true, save insofar as it was corroborated by the Respondent or could be proved by contemporaneous documents.  

9.	By contrast, I found the Respondent to be, on the whole, a reliable and truthful witness, certainly as regards the main issues in the case.  I have to question his method of acquiring the Property, which must have involved some element of misleading the Halifax Building Society.  The Respondent was resident overseas, yet he gave a fictitious address in the Transfer dated 15th January 1987.   There may also be more to this case than meets the eye, in terms of the family dynamics However, I am only concerned with the specific allegations made by the Applicant in support of the restriction.  I am entirely satisfied that the Respondent was the purchaser of the Property, and that he signed the Sale Contract and the Mortgage Deed.  I have seen his passport dating back to the 1980s and there is an obvious resemblance between the signatures.  The Applicant did not call any expert evidence to establish forgery, but suggested that the signature on the passport had been forged after the event, despite the fact that it had clearly been over-stamped by the Passport Office.  I am also satisfied that the Respondent funded the purchase of the Property to the extent of the cash element, which I find to have been £7000.  He made himself liable to repay the mortgage, and did so, either by way of the rental payments, or by direct payments out of his bank account (by means of the pre-signed blank cheques he gave to the Applicant).  I find that the Applicant had limited means, and indeed the Brampton Road property was repossessed in the 1990s.  She would manifestly not have had any spare funds available to top up the mortgage repayments during the period of very high interest rates at that time.  I think that Mr Mahmood's evidence to the effect that he was able to assist with funds from his business was also fiction.   I also conclude that the repayment of the Halifax Building Society mortgage was indirectly funded by the Respondent as he states.

10.	It follows from these findings that the Applicant has failed to establish that the Property is held on any form of trust for her. On the contrary, it was bought as an investment by the Respondent, although it was also intended that the Applicant should obtain some benefit from the letting income, as indeed she did.  This is explicable on the basis that the Applicant had a very good relationship with her nephew, the Respondent, and it was only natural that he should want her to share in the investment to some extent, bearing in mind her own somewhat limited financial means.  I shall therefore direct the Chief Land Registrar to cancel the Applicant's application dated 25th October 2007.  Furthermore, with regard to costs, I see no reason why the Applicant should not pay the Respondent’s costs.  In view of the findings that I have made, and the nature of the evidence given by the Applicant and Mr Mahmood, I believe that an award of indemnity costs might be appropriate in this case.  Before making such an order, however, I will give the Applicant an opportunity to make written submissions, to be filed and served within 14 days of the date of this Decision.  The Respondent may reply within 7 days.  I also direct the Respondent to serve a detailed breakdown of his costs on the Applicant and on the Adjudicator within 7 days of the date of this Decision.

Dated this 12th day of May 2008

By Order of The Adjudicator to HM Land Registry