REF/2009/1234 and 1235
 
ADJUDICATOR TO HER MAJESTY’S LAND REGISTRY
LAND REGISTRATION ACT 2002

IN THE MATTER OF A REFERENCE FROM HM LAND REGISTRY

    BETWEEN
 
MOHAMMED IQBAL

 APPLICANT

and

(1)	 MOHAMMED USMAN NAJEEB
(2)	GMAC-RFC LIMITED
(3)	WEBB RESOLUTION LIMITED
 
RESPONDENTS

Property Address:  118 Church Street, Paddock, Huddersfield HD1 4UD 
Title Number: WYK367155
 
Before: Mr. Michael Mark sitting as Deputy Adjudicator to HM Land Registry

Sitting at: Huddersfield Magistrates Court
On: 7 February 2011

Applicant Representation: Mr Benjamin Caswell, Counsel
Respondent Representation: n/a
___________________________________________________________________________

DECISION

Validity of power of attorney when executed while the donor has severe mental problems.  Revocation of power.  Purported exercise of power by donee to transfer the property to his own son.  Effect of delay by Applicant to protect his position after becoming aware of what had happened.

Cases considered:
Drew v Nunn (1879) 4 QBD 661
Nouri v Marvi, [2005] EWHC 2996 Ch; [2006] 1 EGLR 71
Barclays Bank v Guy, [2008] EWCA Civ 452
Guy v Pannone, [2009] EWCA Civ 30

1.	For the reasons given below, I shall direct the Chief Land Registrar to give effect to the application of the Applicant dated 11 March 2009 to alter the register to re-instate the Applicant as registered proprietor.

2.	The hearing was attended only by the Applicant (“Mr. Iqbal”), his solicitor, counsel and two witnesses.  The Second Respondent had sold to the Third Respondent its interest in the charge which Mr. Iqbal sought to remove from the charges register, and then took no further part in the proceedings.  By letter dated 3 February 2011 its solicitors wrote to the Adjudicator that in the interests of saving costs the Third Respondent would not be attending the hearing.

3.	The First Respondent, Mohammed Usman Najeeb (“Usman”) had acted through solicitors throughout.  By letter dated 26 January 2011, his solicitors made an extremely late application to adduce further witness statements, bearing various dates in mid-December 2010.  They were told in response by letter from the Adjudicator dated 28 January 2011 that they would have to apply at the hearing for permission to call the additional witnesses.  The solicitors responded by letter dated 3 February 2011 with an application to come off the record on the grounds, inter alia, that they were without instructions.  They stated that Mr. Mohammed Najeeb, the father of Usman was critically involved in all the dealings with this matter on behalf of his son; that he was aware that the trial was listed for 7 and 8 February but instead of putting them in funds and providing proper instructions he had gone to Pakistan and they had received a fax from him asking if they could adjourn the matter.  A copy of the fax was included.  Mr. Najeeb stated that he had gone to Pakistan because another son was very poorly there and was in hospital, and asked for the case to be re-fixed for the first week in March.  A medical certificate was enclosed that Mr. Mohammed Imran Najeeb (presumably the son in question) was suffering from P.U.O. and would remain unfit for 3 weeks from 24 January to 17 February 2011.  I understand P.U.O. to be pyrexia of unknown origin, that is an unexplained fever.

4.	The solicitors, understandably, did not themselves apply for an adjournment, which would not have been granted on this evidence.  No reason was given why, with this hearing long fixed and Mr. Najeeb well aware of it, he chose to go to Pakistan apparently on the basis of a medical certificate that his son would be unfit for 3 weeks.  Further, it was not suggested that Usman was not available for the hearing, yet he did not appear.  In those circumstances I concluded that I was not satisfied with such reasons as had been given for Usman’s absence were justified and that it would be unjust to adjourn the hearing.

5.	The property in dispute, 118 Church Street, Paddock, Huddersfield, was a residential investment property and was at one time owned by Mr. Najeeb with good leasehold title under a lease for 999 years from 29 September 1868.  The title was registered at HM Land Registry under title WYK367155.  In late 1999, he sold it to Mr. Iqbal.  In Usman’s Statement of Case, the consideration was stated to have been given as £25,000 but it was said that the transfer was not intended to convey the beneficial interest but to have been a way of re-financing the property.  It was said that no funds towards the acquisition were provided by Mr. Iqbal.  A witness statement to the same effect was provided from Mr. Najeeb also stating that he paid all the outgoings on the sale which would normally have been paid by the purchaser.  I also note that a witness statement was also provided by Usman from Shahida Awan that he had arranged a mortgage of £37,200 with Bristol and West Building Society, describing the transaction as being to release equity from the property for Mr. Najeeb’s benefit.  Mr. Iqbal has stated in evidence that in addition to the mortgage monies he gave Mr. Najeeb about £3000.  That mortgage was not in evidence, nor was the transfer to Mr. Iqbal.  However, the mortgage offer to Mr. Iqbal, dated 7 August 1999, was in evidence and it gives the purchase price as £41,000 and the total loan as £37,159.  

6.	It is clear from the Land Registry entries that Bristol and West Building Society was registered as chargee at the same time as Mr. Iqbal was registered as proprietor, and that the date of its charge was 10 September 1999.  I am satisfied that the mortgage was for at least £37,159 and in the absence of any satisfactory evidence to the contrary in the absence of Mr. Najeeb, I also accept Mr. Iqbal’s evidence that he contributed about £3000 to the purchase price.  It is clear that it must have been Mr. Iqbal who executed the mortgage, and not Mr. Najeeb, and that it was therefore Mr. Iqbal who was responsible for the repayment of the sums secured by the mortgage.  

7.	If Mr. Najeeb has simply wanted to borrow against the security of the property, he could have done so without transferring the title to Mr. Iqbal.  I am satisfied that Mr. Iqbal became the beneficial owner of the property and that Mr. Najeeb released equity from the property by selling it.  There may have been some arrangement between them at the time, as it is common ground that Mr. Najeeb continued to collect the rent for the property and that Mr. Iqbal left it to him to get on with it.  Mr. Najeeb also claimed to have spent money on the property, and to have made the mortgage repayments.  He may well have done so, but in his absence I am not willing to infer that he spent more than he collected by way of rent.  No account ever seems to have been provided or sought and any claim by either party based on a relationship of principal and agent may well now be statute barred.  In the context of his collection of the rent and his being left to manage the property by Mr. Iqbal, any payments made by him, if they had been proved, would not seem to be consistent only with an agreement that he should have an equitable interest in the property and the payments were not a detriment only incurred on that basis, as contended in Usman’s Statement of Case.

8.	In any event, so far as the mortgage payments are concerned, there is an account and a letter in the trial bundle (pp.359 and 363) from Bristol and West to Mr. Iqbal dated 8 January 2004 that his bank had refused to make his direct debit payment , and asking for payment of the mortgage instalment of £179.37.  Other direct debit payments for 2001-2002 are shown at p.357.  It is plain therefore that mortgage payments were made by direct debit on Mr. Iqbal’s account, and that Mr. Najeeb’s claim to have paid the mortgage is untrue, unless he is saying that he made the payments into the account to enable those debits to be met.   

9.	Mr. Iqbal was married to the sister of Mr. Najeeb’s wife.  The marriage got into difficulties, and on 7 January 2004 the wife left Mr. Iqbal.  By a power of attorney dated 28 January 2004 Mr. Iqbal appointed Mr. Najeeb his attorney “to act in the sale transfer charge disposal of whole or part of my property … 118 Church Street, Paddock, Huddersfield, HD1 4UD”.  The recital to the power of attorney stated that “I am unable to attend to my affairs in Pakistan”, although there were no such affairs in Pakistan and Mr. Iqbal had no plans to go there.  It also gave Mr. Najeeb’s address incorrectly as 118 Church Street.  

10.	Clause (4) provided that “Any act or thing done after the revocation by my death or otherwise shall be valid unless notice in writing of such revocation has been received by the person or persons company or companies or other body or bodies for the time being with my Attorney hereunder”.   As expressed, the clause does not make sense, but I infer that the word “dealing” has been omitted in error after the words “for the time being”.

11.	The power of attorney was executed by Mr. Iqbal in the presence of a solicitor in a firm called Redfearns.  There is no suggestion that the solicitor was more than a witness or that any advice as to the effect of the power of attorney was given to Mr. Iqbal.

12.	Mr. Najeeb had then already placed the property on the market through estate agents.  A letter from his solicitors, Rasool, dated 27 January 2004 referred both to urgent instructions from him to prepare the power of attorney in a telephone conversation on 26 January, but also indicated that a firm of estate agents, Boultons had been instructed on the sale.  By letter of 10 February 2004 to Rasool, Boultons confirmed that a sale had been agreed in the sum of £78,500.

13.	In early March 2004, however, there is a telephone attendance note on Rasool’s file that Boultons had rung to state that “Mr. Iqbal is contesting the power of attorney given to Mr. Najeeb”.  There is then a note “Do not proceed until matter clear”.  It is plain that the problem was communicated to the purchasers’ solicitors who refer in a letter to Rasool dated 5 March 2004 to a telephone conversation the previous day in which Rasool advised that “the Power of Attorney may not be valid”.

14.	By letter dated 15 March 2004, Rasool wrote to the purchasers’ solicitors that “Mr. Mohammed Iqbal telephoned this office on 8th March 2004 to advise that he is revoking the Power of Attorney and has instructed Musa A. Patel & Co. Solicitors to serve the Notice of revocation.  I understand from my discussion with the selling agent that Mr Haq from Musa A. Patel Solicitors has been in touch with them on the matter.”  The letter went on to ask for the return of the contract documentation and apologised for the inconvenience.  It also stated that Boultons would be “speaking to Mr. Najeeb and Mr. Iqbal to ensure that such an episode is not repeated.”  

15.	There followed a further letter from the purchasers’ solicitors complaining that Mr. Najeeb had insisted on ringing their clients at home wanting to discuss compensating them for their wasted time and money, and asked that Rasool advise him by letter to stop doing this.  The request was complied with, Rasool writing to Mr. Najeeb accordingly by letter dated 23 March 2004.

16.	From January 2004, the mortgage payments to Bristol and West stopped abruptly. There was a threat of repossession, but in January 2005 Mr. Najeeb purported to exercise the power of attorney to sell the property to his son, Usman, for a stated price of £95,000 out of which the mortgage was redeemed by him, the total arrears being £39,979.77.  There is no suggestion that Mr. Iqbal, who had been suffering from mental health problems since January 2004, was aware of this supposed sale or that any part of the purchase price was paid to him or accounted for.  Further, when Usman applied for finance on the security of the property in August 2006, he gave the price he had paid as £83,000 (trial bundle, p.395).  He also claimed that there was a then existing mortgage on his current home for £84,000 (p.398) but, as appears from p.392, he was not living at the property but at 7 Cobcroft Road Huddersfield, where he also stated that he was living with relatives and had been living there since June 2002.  He also gave his date of birth as 12 March 1986, so that he was only 19 years old in August 2005.  He also stated at p.393 that he was employed by Raj Superstores at 7a Cobcroft Road and was earning £32,000 per year.  The estimated value of the property was stated at p.395 as £125,000.  The information given by him on the form included further statements that the property was freehold, that the loan was required for home improvements and that it was to be his primary residence. It was not freehold, although there is a later letter dated 1 July 2008 from the freeholder to Mr. Najeeb or the current owner at the property offering to sell the freehold for £630.

17.	Nothing then appears to have happened until September 2005 when Mr. Iqbal noticed a ‘For Sale” notice outside the property.  He realised that somebody was trying to take away his property, he managed to discover that it had been transferred to Usman, who had put the property on the market, and on 23 September he contacted the police.  He also contacted his present solicitors, and by an authority dated 9 October 2005 he authorised Bristol and West to provide them with information as to the mortgage he had had.  The solicitors contacted Bristol and West by letter dated 12 October 2005.  They were eventually able to confirm by letter dated 30 December 2005 that the redemption had been dealt with by Redfearns and that it would appear that the sale had been dealt with by Mr. Najeeb as Mr. Iqbal’s attorney.  

18.	Meanwhile, Mr. Iqbal’s solicitors had already discovered that Redfearns had dealt with the sale and had written to them by letter dated 27 October 2005.  They were then sent a copy of the power of attorney by Redfearns.  I accept the evidence of Mr. Iqbal that as a result of his mental illness he had no recollection at all of the events surrounding either the creation or the purported revocation of the power of attorney.  By letter dated 25 November 2005, Redfearns wrote that they had received their client’s instructions. They do not make it clear if their client was Mr. Najeeb or Usman, although they did state that the sale was on hold until the matter was resolved, and their client would look to Mr. Iqbal for compensation for any loss suffered by him if the sale fell through.  The letter referred Mr. Iqbal’s solicitors to Rasool who had prepared the power of attorney.

19.	Rasool were contacted on 1 December 2005 and their file was obtained on 28 February 2006.  After going through the file and taking further instructions, Mr. Iqbal’s solicitors wrote to Redfearns by letter dated 20 April 2006 that they intended to instigate proceedings for rectification of the title documents and asked if they had instructions to accept service.  Redfearns replied that they were taking instructions, but despite reminders in May, July and August, nothing further was heard from Redfearns.

20.	In September 2006, Usman granted a charge over the property to the Second Respondents to secure an advance from them and that charge was registered on 5 October 2006.  It was only on 9 November 2006 that the Applicant applied for a restriction to be entered on the register to protect his interest.  An objection was made by Usman, who claimed that he had bought the property from a family member (an unusual way of describing his father) in November 2004 under a power of attorney.  In April 2007 the matter was referred to the Adjudicator and a Statement of Case was served on behalf of Mr. Iqbal.  Directions were given for a Statement of Case by Usman but none was served despite the making of an unless order.  I note that when an extension of time was requested, although the only Respondent was Usman, the request dated 29 November 2011 came from Usman and Mr. Najeeb referring to their statement, and a further document was received from Mr. Najeeb stating that he was in Pakistan because his 95 year old mother was ill, there being no indication that Usman was not in England.

21.	As a result of the failure of Usman to serve a Statement of Case, the Chief Land Registrar was directed to give effect to the application for the restriction.  It was then Mr. Najeeb, and not Usman, who sought permission to appeal in a handwritten faxed letter from Pakistan, and stating that he wanted to put his case forward.  There was no suggestion that he was acting for the actual Respondent, Usman, or that he regarded Usman’s interests as in any way different from his own.  

22.	In due course, in April 2008, an order was made in that reference that Usman should pay £2620.25 costs to Mr. Iqbal.  I am told that that sum remains unpaid.

23.	The main contention on behalf of Mr. Iqbal is that the power of attorney was not his deed on the basis that he was so mentally ill when he executed it that he did not realise what he was doing.  It is plain from the medical evidence I have seen that Mr. Iqbal was suffering from depression at the time, as well as a bout of alcoholism, and his mental state deteriorated.  There was also evidence the he suffered from delusions during this period.  I did not find the evidence of his GP, Dr Manohar Singh, as to when and how this occurred entirely satisfactory, being based on hearsay accounts insofar as it related to any delusionary state before early February 2004.  I accept the evidence I am satisfied from the medical and other evidence that Mr. Iqbal did regularly suffer from delusions in this period.  I accept the evidence of both the GP and a friend, Robin Beardsley, that Mr. Iqbal had been very depressed and had been drinking to excess every day.  Mr. Beardsley stated, and I accept, that Mr. Iqbal would be rational until he had been drinking and that he did not appear to be delusional before he started drinking.

24.	It is also plain that (1) Mr. Iqbal saw his GP on 28 January 2004, when he stated that he felt upset as his family had left him.  There is nothing in the GP’s notes of that visit to indicate that Mr. Iqbal was unable to understand what was happening although he was understandably upset and depressed.  The only step taken by the GP on that occasion was to prescribe codeine.  The opinion of the GP was in effect that Mr. Iqbal was unwise to appoint Mr. Najeeb to look after his affairs although he was not capable of looking after the property at the time, and probably did not know what he was doing when he signed the power of attorney.

25.	Against that I bear in mind that Mr. Iqbal signed it in front of a solicitor, and while the solicitor was only a witness, he would be unlikely to have witnessed the signature had Mr. Iqbal been clearly incapable of knowing what he was doing.

26.	Mr. Iqbal also understood in early March 2004 that Mr. Najeeb was selling his property, and was able to take steps to prevent it.  He also appears to have been able to instruct solicitors to serve a formal notice to terminate the power of attorney, although in the event no such notice appears to have been served.

27.	In the end I am not persuaded that on the balance of probabilities Mr. Iqbal did not know what he was doing when he signed the power of attorney. He plainly needed help at the time, and chose, perhaps unwisely, to obtain that help from Mr. Najeeb.

28.	Nor am I satisfied that the authority would subsequently have been revoked by the mental disability of Mr. Iqbal.  It is true that the authority of an agent is terminated if the principal becomes incapable by reason of mental illness of managing his affairs, but I am unable to see that this would apply where the incapacity is partial only and is the result of alcoholism and extends only while the principal is drunk (cf Drew v Nunn (1879) 4 QBD 661, at pp.669-670).

29.	As pointed out in Halsbury’s Laws (5th ed (2008) vol.1, para.182, revocation need not necessarily be by formal instrument.  A deed may be revoked by word of mouth or the principal may intervene in the course of negotiation.  Mr Iqbal clearly revoked that power of attorney orally in March 2004 by intervening as he did, and although no formal notice was served, it is clear both that his revocation was recorded in writing by the agents and solicitors instructed by Mr. Najeeb and that Mr. Najeeb was aware of it, as his recorded conduct at the time indicates.  I am satisfied that as between Mr. Iqbal and Mr. Najeeb, the latter’s authority had been revoked.

30.	Usman is Mr. Najeeb’s son.  He was 19 in 2005 and was living with his family as I have already indicated.  There is no evidence as to whether he ever did go to live at the property, or indeed whether he ever intended to.  I note that he did not verify his own Statement of Case, and he provided no witness statement as one would have expected.  It was only under cover of a letter dated 26 January 2011 that his then solicitors sought permission to adduce a witness statement from him.  In that witness statement, dated 12 December 2010, he gave his address as 11 George Avenue Huddersfield.  There is no suggestion in it that he ever lived at the property.  There is almost nothing in this very late witness statement which makes it clear that he was not aware of the revocation when he supposedly purchased the property.  He was in any event well aware that it was his own father selling it to him.  He also states in it that “When we tried to sell the property he went to Boultons and told them not to sell it.  They rang my father and my father then transferred it to my name.  The agent said to Mr. Iqbal that they had been instructed by Mr. Najeeb and then they sold the property to me.”

31.	This suggests, although perhaps not clearly in the context, that it was he and his father who had tried to sell the property through Boultons, that Usman was well aware of what Mr. Iqbal had done to stop the sale and that it was in that context that his father had transferred the property to him.  He then goes on to say that the agent sold the property to him, although there is no disclosure by him of any documentation relating to the transfer to him and no reason for, or suggestion elsewhere of, any involvement by the agent in the transfer to him.  He did not choose to attend the hearing.

32.	I would add that the delay in submitting his and other witness statements is extraordinary in view of the fact that he was represented by solicitors (apparently financed until close to the hearing by his father) and those solicitors had been warned by the Adjudicator by letter dated 22 June 2010, when they had asked if they could submit further witness statements, they should be submitted as soon as possible to reduce the risk of prejudice being caused by their lateness.  In the absence of any witness statements despite that warning, an application by his solicitors for permission to submit further unspecified witness statements was refused by order of 4 August 2010.

33.	It is contended in Usman’s Statement of Case that Mr. Iqbal had not revoked the power of attorney by taking the steps that he did in March 2004.  I have already rejected that contention.  Usman’s case is based on the allegation that he did not regard the steps taken as a revocation.  I am not satisfied that that was so.  I am not even satisfied, in the absence of proper disclosure, that Usman provided any sum when the property was transferred to him.  The Bristol and West mortgage may have been redeemed but there is no evidence as to the source of those funds, and the amount needed to redeem was well short of the value of the property at the time.  There is no evidence that any solicitor at all was involved in this transfer and the transfer was plainly not at arm’s length.

34.	Whatever the meaning of the provision in the power of attorney protecting outside parties, they cannot protect the son of the donee of the power dealing with his father when he is on actual notice that the father has been told by the donor that he is not to sell the property.  The transfer is in all the circumstances also one where the duty of the agent to the principal conflicts with his personal interest even if it was a sale for full value.  In such circumstances, full disclosure is required first to the principal, whose consent had to be obtained.  In the present case there was clearly no such disclosure, and no such consent, and Usman was well aware of this.  For that reason too, he cannot rely on a transfer which was clearly in excess of his father’s authority.

35.	In all the circumstances, I find that Mr. Najeeb had no power to act as he did and that the purported transfer to Usman was invalid.  It follows that Usman was wrongly registered at the Land Registry.  I am also satisfied that Usman, even if he were to be treated as being in possession of property, has by fraud or lack of proper care contributed to the mistake and that it would be unjust for the reasons I have given for the register not to be rectified by removing his name and restoring that of Mr. Iqbal.

36.	The objection of the Second and Third Respondents would be a valid one if the application had also been to remove their charge from the register, for reasons which are spelled out in the Second Respondent’s Statement of Case.  The Second Respondent advanced money to somebody who was the registered proprietor over a year after that person had been registered and over 6 months after Mr. Iqbal’s solicitors had discovered what had happened and obtained the relevant files.  Even if Mr. Iqbal might have been excused for not seeking to enter a restriction before the situation had been clarified, no acceptable reason has been given why he should not have done so in the subsequent months, especially when Redfearns were failing to reply to correspondence and the matter was going nowhere.

37.	The power of the Chief Land Registrar to alter the register to correct a mistake is a discretionary one.  In this case, it appears to me that the Second Respondent loaned money on the security of the property at a time when, exercising reasonable care, Mr. Iqbal should have already applied to register a restriction against the property at the Land Registry.  Had he done so, it is likely that the loan would not have been made.  As Mr. Michael Rich QC, sitting as a Deputy Judge of the Chancery Division, stated in Nouri v Marvi, [2005] EWHC 2996 Ch; [2006] 1 EGLR 71, nothing was done with the urgency that such evidence of improper dealing demanded.  While I would not wish to be too demanding as to the time when that step should have been taken by Mr. Iqbal, it plainly should have been taken by June or July 2005, and possibly earlier.

38.	Arguments have been advanced on behalf of Mr. Iqbal based on a supposed Nelsonian blind eye on the part of the Second Respondent, of the type referred to by Lloyd LJ in Barclays Bank v Guy, [2008] EWCA Civ 452 on an application for permission to appeal.  As Lloyd LJ himself pointed out in Guy v Pannone, [2009] EWCA Civ 30, his judgment on that application ought not to be cited as authority, and I declined to follow it in a recent case on another point.  It is unnecessary for me to deal with the law in this respect, however, as there is no factual basis for any suggestion that the Second Respondent did turn a Nelsonian blind eye to Mr. Iqbal’s claims.  The most that could be said on the evidence before me is that had they considered Usman’s application with greater care they may have been dissuaded from lending to him because of inconsistencies in his application form.  There was nothing in those inconsistencies to give them any inkling of Mr. Iqbal’s claim.

39.	Those circumstances would have justified the Second and Third Respondents in opposing an application to remove their charge, but cannot be a basis for an objection to Mr. Iqbal being restored to the register subject to their charge, which is all that appears to have been claimed.  In case there were to be a further application to remove their charge, I also deal with an argument advanced that the Third Respondent is in a worse position than the Second Respondent was.  Although the Third Respondent was aware of the problem when it acquired what appears to have been part or all of the Second Respondent’s loan book, it is entitled to stand in the shoes of the Second Respondent.  If the position is that the Second Respondent would be entitled to retain its charge on the register and, once the dispute had been resolved, to sell it on that basis, I do not see why the charge should be removed because it has been sold in the meantime.

40.	The result is that Mr. Iqbal will regain the property but subject to the Third Respondent’s charge.  If he wishes to be free of it, he will have to take appropriate proceedings against Usman and Mr. Najeeb for an order that they pay off the sums that are secured by it, or for such other remedies as he may be advised.

Dated this 17th day of February 2011

By Order of The Adjudicator to HM Land Registry