REF/2010/1096/1098

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

IN the matter of a reference from hm land registry

BETWEEN

Ghulam Ghaus

APPLICANT

and

(1)	Gateway Homes UK Limited
(2)	Clydesdale Bank PLC

RESPONDENTS

Property Address: 8 Rose Street, Oldham, OL8 1UA
Title Number: LA325852

Before: Mr. Colin Green, sitting as Deputy Adjudicator to HM Land Registry

At: Manchester Magistrates Court, Crown Square, Manchester 
On: Tuesday 6th and Wednesday 7th December 2011

Applicant Representation:		Michael Wilkinson of counsel, instructed by Linda Myers

First Respondent Representation:		Elis Gomer of counsel, instructed by Cohen Cramer

Second Respondent Representation:	Camilla Chorfi of counsel, instructed by Addleshaw Goddard

DECISION

KEYWORDS:	Application for alteration of the register by former registered proprietor by his reinstatement as proprietor and removal of a charge, based on a forged transfer to the First Respondent. Found that the Applicant’s signature had been forged so that there was a correction of a mistake, and the alteration amounted to rectification. The First Respondent was not in physical possession at the date of the application, and there were no exceptional circumstances that would justify refusing the alteration. 
CITATIONS:	Section 131 and Schedule 4 to the Land Registration Act 2002; rule 20(1) of the Land Registration Rules 2003; Ruoff & Roper, Registered Conveyancing; Jourdan, Adverse Possession (2nd Edition); Hoskings v. Harding 2009/0844 	  

Background
1.	The consolidated references that I have to determine arise out of the application of the Applicant, Ghulam Ghaus, for alteration of the above title to reinstate himself as registered proprietor of the property 8 Rose Street, Oldham (“the Property”) and for the removal of the Second Respondent’s charge from the charges register.
2.	Mr. Ghaus was registered as proprietor on 20th July 2007. By a transfer dated 2nd December 2009 he purportedly transferred the Property to Gateway Homes UK Ltd., the First Respondent, for £30,000.00. Gateway funded the purchase with the assistance of a draw down on a loan facility provided by the Second Respondent (“the Bank”). On 31st March 2010 Gateway was registered as proprietor and the bank’s charge was entered in the charges register.   
3.	Mr. Ghaus applied for alteration of the register by a form AP1 received by the Land Registry on 17th May 2010, on the basis that he had not signed the transfer – his signature had been forged – and that until he discovered the Respondents’ registration, he was ignorant of any transaction concerning the Property.
Findings
4.	I heard evidence from Mr. Ghaus, and he was cross-examined at length on his two witness statements. His account of what had happened in cross-examination (and re-examination) made reference to a number of significant matters, not contained in his statements. I accept however, that such omissions were entirely genuine, and that Mr. Ghaus was an honest witness. He gave his evidence in a mixture of English and German (through an interpreter) and I consider that the additional matters he mentioned – which one would normally expect to see in his statement – were as the result of language difficulties with his solicitor (primarily carried out with the assistance of an Urdu translator) and that Mr. Ghaus has a tendency to give only the most basic answers to questions. Without wishing to offend him, I do not consider that he has the imagination to invent the further matters that only came to light during the course of his evidence. In addition, save in respect of issues concerning the changing of locks at the Property and the occupation of a Mr. Ahmed from December 2010 to January 2011, Mr. Ghaus’ evidence was largely uncontested. 
5.	In summary, the relevant history is as follows. After Mr. Ghaus purchased the Property in June 2007 he allowed the sellers to remain in occupation as tenants, as their own purchase had fallen through. They vacated in November 2007. Mr. Ghaus then let the Property to a Mr. and Mrs. Concannon, who continued in occupation until September 2009. Mr. Ghaus agreed to allow two persons described as their sons – Paul and Steve Stringer – to continue as tenants. 
6.	On 6th October 2009, Scott McArdle, an employee of Gateway, was telephoned by a person claiming to be ‘Mr. Ghaus’ (I will use scare quotes when referring to the person (or persons) who impersonated Mr. Ghaus). He said that he was the owner of the Property, and he wished to sell it quickly due to a divorce. Gateway specialises in purchasing property with quick completion times, in exchange for a lower purchase price. On the basis of a desktop appraisal, Mr. McArdle telephoned ‘Mr. Ghaus’ later that day and offered £37,500.00, which was accepted. The relevant paperwork, including a draft contract, was sent to ‘Mr. Ghaus’ at the Property, and a signed contract was returned a few days later.
7.	Mr. McArdle then instructed Gateway’s solicitors, Lupton Fawcett, to deal with the purchase, and he recommended the firm of Bromets Jackson Heath (“Bromets”) to act on behalf of ‘Mr. Ghaus’. Bromets provided ‘Mr. Ghaus’ with a client care letter and client identification request, which requested that his identity be verified by an independent solicitor. On 9th October 2009 ‘Mr. Ghaus’ attended on Gary Burns – a partner in Wrigley Claydon, solicitors of Oldham – who certified the identification documents supplied to them: a drivers licence card with photograph, in the name of “Ghulam Ghaus” at the address of the Property; and a bank statement from an account with Barclays in the name of “Mr G Ghaus” at the address of the Property.
8.	On about 10th October certified copies of the identity documents were returned to Keely Thomas of Bromets, who was dealing with the transaction. Kelly Thomas took the certification of identity at face value, and proceeded with the purchase on behalf of ‘Mr. Ghaus’ in the usual way. A survey of the Property was carried out on 20th October 2009, as a result of which Mr. McArdle negotiated a reduction in the purchase price to £30,000.00. Bromets, on behalf of ‘Mr. Ghaus’ and Lupton Fawcett on behalf of Gateway, agreed a completion date of 2nd December 2010, on which date the purchase was completed. Mr. McArdle arranged to meet ‘Mr. Ghaus’ at the Property to collect the keys, but he did not turn up. Shortly thereafter Mr. McArdle arranged for the locks to be changed.
9.	In December 2009 Paul and Steve Stringer stopped paying their rent. Mr. Ghaus had difficulty contacting them, but eventually, in early February 2010, he spoke with Steve Stringer on the telephone, who agreed to drop off the keys to the Property with Mr. Ghaus, in return for him waiving the rent arrears. A key was given to Mr. Ghaus, but it did not work. Concerned about what had happened – and unaware of the above transaction – Mr. Ghaus went to see a local estate agent who warned him to be careful, as local gangs were stealing identities and fraudulently selling houses. Mr. Ghaus was advised to change the locks and secure the Property. Two days later Mr. Ghaus went to the Property with a local builder to change the locks. 
10.	At this point I should explain the layout of the Property. It is a mid-terrace house, with a back yard. There were two locks to the front door from the street: a mortise lock and a Yale lock. There was not a lock to the gate to the back yard, but the back (kitchen) door had a lock. On this occasion, Mr. Ghaus and the builder changed the front door mortise lock, and rendered the Yale lock inoperative. They also changed the back door lock. Mr. Ghaus found that the window pane to the back door was broken, and this was covered with wood. Two planks of wood were nailed to the door frame, above and below the window pane, and a bolt placed on the back door for added security. The planks and bolt have remained in place. I also find that the back door lock remained in place, and was only changed in January 2011 as Mr. Ghaus was concerned that it only worked with difficulty. 
11.	In the meantime, Gateway had decided to place the Property in an auction to be held on 17th February 2010. The agents visited the Property and found that locks had been changed, and a Mr. Christie arranged for them to be changed again. I find that it was only the front mortise lock that was changed. The Property did not sell at auction.
12.	Subsequently, on 25th March 2010, Mr. Ghaus visited the Property to find that the front door mortise lock had been changed. He made enquiries of neighbours, and was put in touch with Raja Maqsood, who had sought to buy the Property at the auction. Learning that someone was trying to sell the Property, Mr. Ghaus visited Oldham police station to report his concerns, and made an appointment for 27th March. On the following day (28th March) Mr. Ghaus arranged for the front mortise lock to be changed again. The next day he telephoned HSK solicitors – who had acted on his purchase of the Property – and asked them to investigate further. HSK wrote to Mr. Ghaus on 31st March, informing him that he was still the owner of the Property. Lupton Fawcett did not apply to register gateway as proprietor and to register the bank’s charge until 31st March, and therefore any search carried out before that date will have shown Mr. Ghaus to still be the proprietor, with no record of an application for a new registration.   
13.	At the end of April 2010, Mr. Ghaus visited the Property, and found post that had been opened. He was concerned someone was still able to gain entry, and had the front door mortise lock changed again. Gateway discovered the lock had been changed and on 6th May 2010, arranged for the front mortise lock to be changed. Mr. Ghaus visited the Property on the way to an appointment with the police on 10th May and found the lock had been changed, and returned on 11th May with a mechanic to have the front door mortise lock changed again. He went to his current solicitors on 12th May, who by this stage were able to determine that Gateway had been registered as proprietor, subject to the Bank’s charge. An application to alter the register was put in hand, dated 14th May and received and entered up by the Land Registry on 17th May 2010. 
14.	Towards the end of June 2010, Clare Painter of Gateway’s property agents, arranged for locks to be changed again (only the mortise lock was changed) for which she was invoiced on 30th June. Shortly thereafter, on 30th June, Mr. Ghaus attended at the Property with the mechanic, who changed the lock again. Since then there have been no further changes of lock by anyone other than Mr. Ghaus. 
15.	I also find that in December 2010 a Mr. Abubakr Ahmed took up residence at the Property, by arrangement with an estate agent friend of Mr. Ghaus, and stayed for about 6 weeks, although frankly it is astonishing he stayed that long given that the weather was bitterly cold and there was no electricity or gas heating available at the Property due to vandalism at the time of the Stringers’ occupation.
Relevant law 
16.	Paragraphs 5 and 6 of Schedule 4 to the Land Registration Act 2002 provide:
“5 Alteration otherwise than pursuant to a court order
(1)	The registrar may alter the register for the purpose of—
(a)	correcting a mistake,
(b)	bringing the register up to date,
(c)	giving effect to any estate, right or interest excepted from the effect of registration, or
(d)	removing a superfluous entry.
6(1)	This paragraph applies to the power under paragraph 5, so far as relating to rectification.
(2)	No alteration affecting the title of the proprietor of a registered estate in land may be made under paragraph 5 without the proprietor's consent in relation to land in his possession unless—
(a)	he has by fraud or lack of proper care caused or substantially contributed to the mistake, or
(b)	it would for any other reason be unjust for the alteration not to be made.
(3)	If on an application for alteration under paragraph 5 the registrar has power to make the alteration, the application must be approved, unless there are exceptional circumstances which justify not making the alteration.
(4)	In sub-paragraph (2), the reference to the title of the proprietor of a registered estate in land includes his title to any registered estate which subsists for the benefit of the estate in land.”
17.	The issues I have to decide are as follows.
Was Mr. Ghaus’ signature to the transfer of 2nd December 2009 a forgery?
18.	There is an expert handwriting report from Dr. Audrey Giles, which concludes that the degree of difference between the signature to the transfer and comparison signatures of Mr. Ghaus amounts to very strong positive evidence to suggest the view that the transfer signature was written by someone else. Indeed, it is clear that Mr. Ghaus has been the victim of identity theft. This is established by his evidence, and also the copy of the driving licence produced to Wrigley Claydon on 9th October 2009, and the bank statement. The person whose photograph appears on the driving licence is clearly not Mr. Ghaus, and DVLA have confirmed that the licence is not genuine as the driver number does not exist on DVLA’s database. The Barclays Bank account is genuine, but was opened in Mr. Ghaus’ name at the branch of Barclays at which he also has an account. His address for that account is his home at 29 Greengate, Hale Barns, Altrincham, not the Property. 
19.	I should also make clear that Gateway was also unaware of the identity theft, and relied on the identity check of the solicitors who acted for the seller (who in turn relied on Wrigley Claydon’s identity verification) and the Bank’s involvement has been limited to approving the loan of funds for the purchase. 
Does alteration of the proprietorship register to reinstate Mr. Ghaus as proprietor amount to the correction of a mistake under paragraph 5(1)(a) of Schedule 4?
20.	I consider that the alteration amounts to the correction of a mistake as the forged transfer was a nullity. It was not a valid disposition since it was not made in pursuance of Mr. Ghaus’s owners powers, nor by operation of law. There was no disposition that required to be completed by registration, so that the Chief Land Registrar was mistaken in recording the effect of the purported disposition, see; Ruoff & Roper, Registered Conveyancing at paragraph 46.026.   
Is the removal of the Bank’s charge from the charges register also the correction of a mistake?
21.	Again, I consider that this is the case, as the disposition that created the charge was void. If Gateway had been entitled to be registered, it would have had the power to grant a charge, but since the transfer to Gateway was void, the registration of the purported disposition creating the charge was a mistake, see: Ruoff & Roper at paragraph 46.031. 
Does the correction of the mistake amount to rectification?
22.	Paragraph 1 of Schedule 4 provides:
“In this Schedule, references to rectification, in relation to alteration of the register, are to alteration which—
(a)	involves the correction of a mistake, and
(b)	prejudicially affects the title of a registered proprietor.”
Clearly, the alterations will prejudicially affect the title of both Gateway and the Bank, so that this is a case of rectification of the register, to which paragraph 6 applies.
Was Gateway in possession of the Property at the relevant time?
23.	This requires the consideration of two issues: what is the relevant time, and what amounts to possession? 
23.1.	I consider that the relevant time is the date of the application to alter the register: 17th May 2010. This follows from the provisions of rule 20(1) of the Land Registration Rules 2003, which provides:
“Any entry in, removal of an entry from or alteration of the register pursuant to an application under the Act or these rules has effect from the time of the making of the application.”
23.2.	Section 131(1) of the 2002 Act provides:
“For the purposes of this Act, land is in the possession of the proprietor of a registered estate in land if it is physically in his possession, or in that of a person who is entitled to be registered as the proprietor of the registered estate.”
Section 131(2) provides for certain relationships where land in the possession of one person is treated as being in the possession of another, but none of those relationships apply in the present case. The issue therefore, is whether the Property was physically in the possession of Gateway as at 17th May 2010.
23.3.	I take the view that the test of physical possession (as distinct from constructive possession) is akin to the test of actual possession in cases of adverse possession: the physical, effective, single and exclusive control of land by a person who has and manifests the intention to control the property in their own right, see: Jourdan, Adverse Possession, Second Edition at paragraph 7-04. This is the view expressed by the editors of Ruoff & Roper at paragraph 46.013, and is supported by the decision of Michael Michell, sitting as a Deputy Adjudicator, in Hosking v. Harding at paragraphs 20 – 23. 
23.4.	Adopting that test in the present case, I do not consider that Gateway was in physical possession at the 17th May 2010. Of course, context is everything, and one cannot look at that date in isolation from the events surrounding it. Although occupation of a house is likely to be a sufficient condition for physical possession, I do not consider that it is a necessary condition. An unoccupied house is capable of being in the physical possession of a party in the sense required. Although Gateway had arranged for the locks to be changed in December 2009, they had also been changed back by Mr. Ghaus, who in February had also boarded up the back door and fitted a bolt to it. He retained the key to the back door that he had fitted. On 11th May 2010 he had the mortise lock changed, so that the position on 17th May, and until the end of June, was that Mr. Ghaus had both front and back door keys. In the light of this, I do not consider that Gateway could fairly be described as being in physical possession of the Property at that time: it did not have physical, effective, single and exclusive control of the Property. Without changing a lock, it was unable to gain entry.  
23.5.	Accordingly, since Gateway was not in physical possession at the relevant time, Mr. Ghaus does not have to establish either of the conditions in paragraph 6(2).
Are there exceptional circumstances which justify not making the alteration?
24.	Since there is power to make the alteration, under paragraph 6(3) of Schedule 4, I must direct that effect be given to Mr. Ghaus’ application unless there are exceptional circumstances which justify not making the alteration. Understandably, Mr. Gomer on behalf of Gateway did not seek to rely on this provision. The presumption expressed by paragraph 6 (3) is that ordinarily, once it is found that there has been a mistake and if paragraph 6 (2) does not apply, then the register will be altered. In order to justify a refusal to exercise the power the circumstances have to be “exceptional”, which is something more than merely “unfortunate”. I do not consider that the fact that the Respondents will be losing proprietary rights, and will have to apply for an indemnity under Schedule 8 to the 2002 Act, to be sufficient to regard the circumstances as exceptional.  
25.	I will therefore, direct that effect is given to the application, as if the Respondents’ objections had not been made.
Costs
26.	At the hearing, I set out briefly my conclusions on the above issues. The parties agreed an order for costs, which will be contained in the order.

Dated this 12 day of December 2011

By Order of The Adjudicator to HM Land Registry