Unadministered estates are not immune to adverse possession claims

The Court of Appeal (CoA) was faced with the question of whether the statutory trust that automatically arises under Section 33 of the Administration of Estates Act (AEA) 1925 upon a person's death intestate qualifies as a "trust" under Paragraph 12 of Schedule 6 to the Land Registration Act (LRA) 2002, thereby preventing a claim of adverse possession against the land.

Background:

The dispute concerns a strip of land that runs between the properties of Mr. Mohammed Nazir's children at 37 Lower Rushton Road and Mrs. Begum at 1 Gurbax Court.

The appellants' father, Mr. Mohammed Nazir, owned Lower Rushton, including the disputed land, and was the registered freehold owner from 1980. Mr. M. Nazir died intestate on 21 March 2010. On 23 October 2019, the appellants obtained Letters of Administration in respect of their father's estate. On 19 April 2022, the appellants became the registered proprietors of the disputed land and, on 23 August 2022, they executed a deed of trust stating that they held the disputed land on trust for themselves as tenants in common in equal shares.

Mrs. Begum owns 1 Gurbax Court, which her late husband purchased in 1998. She inherited the property in October 2021 following his death in November 2020. Mrs. Begum claims ownership of the disputed land through adverse possession, asserting that she and her late husband occupied it for over 10 years.

The High Court ruled in favour of Mrs. Begum in 2022, concluding she had acquired title through adverse possession. The appellants appealed the decision.

Decision:

The CoA dismissed the appeal. Lord Justice Zacaroli started by analysing the statutory trust arising on the administration of a deceased's estate based on Section 9(1) of the AEA 1925. The Court ruled that the statutory trust imposed by Section 33 is a mechanism for the administration of a deceased's estate. While it places fiduciary duties on personal representatives, it does not create the classic separation of legal and beneficial ownership that characterises a conventional trust. The personal representatives hold the full legal title to the assets for the purpose of administering the estate. The Court noted, “It is in this respect closely related to the "trust" which arises pursuant to statute on the bankruptcy of an individual or liquidation of a company.”

Analysing the ‘subject to a Trust’ in Paragraph 12 of Schedule 6 to the LRA 2002, the Judge interpreted it as referring to a conventional trust where there are trustees holding the legal title for the benefit of identifiable beneficiaries who have an equitable interest in the land. Lord Justice Zacaroli established that the exception within paragraph 12 presupposes a scenario where there are beneficiaries with a present right to enjoy the land. In the context of an unadministered estate under Section 33, the ultimate beneficiaries (e.g., those entitled on intestacy) do not automatically have an immediate "interest in possession" in the specific land.

Implications:

This case establishes that a statutory trust under Section 33 of the AEA 1925 is a temporary measure for estate administration and does not constitute the type of "trust" that Paragraph 12 of Schedule 6 to the LRA 2002 was intended to protect from adverse possession claims. Consequently, a statutory trust arising on intestacy under Section 33 does not automatically prevent a claim of adverse possession against the deceased's land. The reason for this narrow interpretation of the term trust is based on the view that Section 33 trusts are a mechanism for administration rather than a conventional trust involving a distinct separation of legal and beneficial ownership with beneficiaries holding an immediate interest in possession.

The judgement’s emphasis on the "interest in possession" requirement within the exception of paragraph 12 highlights the importance of the nature of the beneficiaries' interest. In the context of an unadministered estate, beneficiaries typically have a right to the due administration and a share of the residue, which is not necessarily an immediate right to possess specific land. This distinction is crucial in determining whether the trust falls within the exclusionary provision.