A broader perspective

Where an objection to the registration of a restriction against the registered title to a property is referred to a Land Registry adjudicator, is the adjudicator required to determine merely the applicant's alleged interest of a beneficial entitlement to a property, or should the adjudicator also question whether it is necessary or desirable to enter a restriction to protect the right claimed? In the recent case of Jayasinghe v Liyanage [2010] EWHC 265 (Ch), the court considered for the first time the manner in which Land Registry adjudicators should carry out their statutory functions.

The appellant applied for a restriction against a property of which the respondent was the proprietor. The appellant claimed she had 'sufficient interest in the making of the entry' under section 43(1)(c) of the Land Registration Act 2002 (LRA) on the basis that she was the sole beneficiary under a resulting trust. The respondent opposed the application. Following a trial, the adjudicator found for the respondent and cancelled the restriction.

Whereas the registrar can enter a restriction for the 'purposes of protecting a right or claim in relation to a registered estate or charge' (section 42(1)(c)) the matter must be referred to the adjudicator if it is not possible to dispose of an objection by agreement (section 73(7)). In her appeal to the High Court, the appellant submitted, inter alia, that the adjudicator's function waslimited to merely ascertaining whether the applicant had an arguable claim within the meaning of section 42(1)(c) and should not have embarked on a trial of that claim. This process should have been left to the competent court to carry out in the usual way while the restriction remained in place.

In deciding against the appellant, Briggs J found that section 108 and section 110 of the LRA conferred on the adjudicator broad discretion to decide whether to deal with the matter himself, or refer the matter to court. If the adjudicator decides on the former, he is given the same powers as the High Court to make orders for rectification or setting aside of certain documents.

The adjudicator was therefore correct in conducting a trial of the matter.

In advocating further the adjudicator's jurisdiction in such matters, reference was made to The Adjudicator to Her Majesty's Land Registry (Practice and Procedure) Rules 2003 (the PPR) which expressly incorporates the overriding objectives, akin to that in the Civil Procedure Rules. Viewed as a whole, Briggs J affirmed that the PPR 'contains a procedural code plainly designed to enable the adjudicator to resolve... substantive rights, rather than merely to conduct a summary process designed to ascertain whether an arguable claim exists'.

The court held that the adjudicator could decide not merely whether the applicant had a relevant right or claim, but also the additional question of whether it was necessary or desirable for the purposes of protecting that claim. Both these questions fell within what was described in section 73(7) as 'the matter' to be referred to the adjudicator.

Notwithstanding Briggs J's affirmation that the adjudicator is the right person to determine disputes under section 73(7), referring the matter to an adjudicator is also arguably the more logical step.

The parties involved would save on the increased costs if a matter was otherwise referred directly to a 'competent court'.

The adjudicator is also required to deal with a matter in a way that is proportionate to the claim, doing away with any unnecessary procedural formalities while also striving to deal with the matter moreexpeditiously. The adjudicator is independent of the Land Registry and is required to give written reasons for his decisions, making the entire process transparent. There is of course still recourse to appeal to the High Court if a person feels aggrieved by an adjudicator's decision.

Is it necessary or desirable?

As noted above, while an applicant may be entitled to apply to enter a restriction, simply ascertaining whether the applicant has an arguable claim is by no means the whole of the adjudicator's task. A person may have sufficient interest to a claim where it may not essentially be necessary or desirable to enter that restriction to protect a right or claim. Some examples of situations in which an adjudicator may consider it necessary or desirable for an entry to be made are as follows:

• to prevent unlawfulness; for example where trustees are required to obtain consent to a disposition but breach their trust;
• to secure that interests under a trust of land are overreached; and
• as with the case of Jayasinghe, to protect a right or claim under a resulting trust.

However, a restriction cannot be registered under section 43(1)(c) if the interest can be protected by notice. As a restriction is simply a means of preventing an entry on the register, unlike a notice a restriction confers no priority. Also, a claim under section 43(1)(c) can only be protected in relation to a registered estate or charge, and not in relation to a beneficial interest or charge '“ other than a beneficial interest arising under a trust.

The need for 'sufficient interest'

The case of Jayasinghe is also a reminder that a person must have 'sufficient interest' in the making of an entry of a restriction on the register under section 43(1)(c). The definition of 'sufficient interest' can be interpreted widely. While the Land Registration Rules 2003 provide a list of the classes of persons to be regarded as included in section 43(1)(c), this is by no means exhaustive. Some examples include:

• a person who has an interest under a trust of land where a survivor of a joint proprietor (unless a trust corporation) is unable to give a valid receipt for capital money;
• a donee of a special power of appointment;
• charity commissioners; and
• a trustee in bankruptcy.

The LRA does not provide further detail as to what may constitute having 'sufficient interest' for this purpose. It is open to applicants and practitioners to persuade the registrar of the applicant's entitlement and should be able to supply evidence to satisfy the registrar that the applicant has sufficient interest.

An interesting scenario arose in the case of Republic of Croatia v Republic of Serbia [2009] EWHC 1559 (Ch). Croatia claimed it had sufficient interest in entering restrictions on the register for properties in the UK owned by the former Socialist Federal Republic of Yugoslavia (the SFRY), which now consists of six constituent republics including Croatia. The courts held that Croatia, as a successor to the state of the SFRY and pursuant to a treaty agreement between the sovereign states in relation to the distribution of the properties, had sufficient interest for the purpose of seeking a restriction. However, this case was distinguished in the case of Jayasinghe; in the latter case the matter referred to the adjudicator looked at not only whether the applicant had an alleged interest under section 43(1)(c) but also whether it was necessary or desirable to enter the restriction.

Applicants eager to use section 43(1)(c) as a means of intimidating a registered owner should be aware this is as not as straightforward as simply making a statement in form RX1 when the interest claimed holds no water. In Jayasinghe, the applicant fell into the classes of persons regarded as having sufficient interest, i.e. an interest arising under a resulting trust, on the assertion of her having, inter alia, paid instalments under the mortgage and redeemed the mortgage. However, the adjudicator concluded that the applicant's case was fiction and that her evidence was unreliable and implausible. The applicant may be seen to have made the initial investment and pay off the mortgage, but this was utilising funds which the respondent had given her and the applicant had not made any financial contribution from her own resources. Before applying for a restriction, there is a statutory duty on those applying not to exercise their right to apply without reasonable cause, and, where an application for a restriction is made without reasonable cause, the applicant could be liable to compensate those who suffer damage as a result.

The same test of 'sufficient interest' is applicable when looking to disapply a restriction in relation to a disposition. However, given that a registrar will in the first instance need to be satisfied an applicant has sufficient interest in the entering of a restriction, if the restriction still serves the same purpose as when it was entered on the register it is unlikely the registrar will make an order to defeat that purpose unless it is to prevent an invalid or unlawful disposition.