What Happens When Equity and Registration Collide?
In a recent joint judgment (Judgment) of the ADGM Court of First Instance, delivered by Justice Paul Heath KC in July 2025, the Court addressed this question directly in a dispute over the ownership of several residential units on Al Reem Island. Though the facts arose from transactions long predating ADGM’s jurisdiction, the Court’s reasoning carries profound consequences for every stakeholder in the Abu Dhabi real estate market, from developers and investors to legal practitioners navigating between mainland and ADGM systems.
This Judgment is arguably the first significant judicial exploration of indefeasibility of title under the ADGM Real Property Regulations 2024 (“Regulations”), and the scope of the “equitable obligation” exception in section 24(f). It represents a decisive moment in shaping property jurisprudence in the ADGM’s rapidly expanding real estate landscape.
What further strengthens its authority is the fact that the Judgment has since been challenged twice by the claimants through applications for permission to appeal, both of which were refused by the ADGM Courts. The case has therefore reached finality, with the Court repeatedly affirming the legality and reasoning in the decision. This procedural closure reinforces the Judgment’s standing as a cornerstone precedent in defining how the principles of registration and equity coexist under the Regulations.
This article is a part of our ADGM Practices.
Background
The dispute concerned four residential units located on Al Reem Island. The relevant sale and purchase agreements dated back to the period between 2010 and 2014, a time when the registration of Abu Dhabi real estate was governed by the mainland regime under the Department of Municipalities and Transport (DMT). The applicable framework then comprised Law No. 3 of 2005 Concerning the Regulation of Real Estate Registration in the Emirate of Abu Dhabi, Law No. 19 of 2005 Concerning Real Estate Ownership and later Law No. 3 of 2015 Concerning the Regulation of the Real Estate Sector in the Emirate of Abu Dhabi, read together with Chairman’s Decision No. 246 of 2015, which set out the procedures for registering real estate transactions and transfers.
When responsibility for Al Reem Island shifted to the Abu Dhabi Global Market (ADGM), those registrations, or the lack of them, created a hybrid legal space. On 1 January 2025, all Al Reem properties formally came under the ADGM Real Property Regulations 2024, effectively using the Torrens-style model of title registration.
This shift meant that disputes born under one regime were to be adjudicated under another. The units in question, though developed and sold years earlier by a mainland developer, were ultimately registered in 2022 under DMT and migrated into the ADGM Register upon its implementation. The claim before the ADGM Court thus required consideration not merely of title documents, but of the relationship between two legal systems.
The Legal Issues: Registration, Equity, and the Limits of Indefeasibility
The principal questions before the Court were:
- Whether the registered proprietor’s title was indefeasible under sections 22 and 23 of the Real Property Regulations 2024; and
- Whether an “equitable obligation” under section 24(f) could override indefeasibility, allowing earlier purchasers to assert ownership rights.
The Judgment also examined whether earlier mainland statutes, particularly Law No. 3 of 2015 and Decision No. 246 of 2015, shaped the responsibilities of a developer, and whether their proof-of-payment provisions still held relevance for interpreting developer obligations post-transition.
Each case involved a counterclaim by individuals (Defendants) who asserted that they had purchased and fully paid for their respective units long before the Claimant developer acquired the entire building from the original developer.
The Courts’ Analysis
Continuity of Corporate Personality
A preliminary issue was whether the claimant entity, which had transitioned from a DMT-licensed company to an ADGM-continued company, had the right legal persona to maintain the claims. Applying the relevant section of the ADGM Companies Regulations 2020, the Judgment confirmed that property and liabilities of a continued company subsist uninterrupted on continuation. It was held that the entity’s continuity was preserved, allowing it to sue, but also binding it with any pre-existing knowledge or obligations. Thus, the claimant’s “ADGM continuation” did not cleanse its title of historic equities.
Developer Obligations and the Legacy of Mainland Law
The Court observed that Abu Dhabi Law No. 3 of 2015, specifically Article 30, imposed a clear duty on developers, upon completion of a project, to register final site and floor plans and transfer sold units to buyers who had settled full payments. Chairman’s Decision No. 246 of 2015 reinforced this duty, requiring proof of payment prior to registration.
Although these mainland provisions no longer directly governed the ADGM registry, the judge treated them as part of the factual and legal context explaining how unregistered purchasers had acquired enforceable rights. Where developers failed to complete those transfers, equitable ownership arose, capable of protection under section 24(f) of the Regulations.
The Torrens Concept and Section 24(f)
Sections 22 and 23 of the Regulations form the cornerstone of the Torrens system. They establish that once a person is registered as the owner of an interest in real property, that registration is conclusive evidence of ownership and the title is deemed indefeasible, except where the instrument itself provides otherwise. But this indefeasibility is not absolute. Section 24(f) carves out a narrow yet profound exception, for “an equitable obligation binding the registered owner as a result of the registered owner’s conduct.”
The Judment drew a direct comparison with Australian and New Zealand jurisprudence on the Torrens model, referencing to the relevant judgments applicable. The Court observed that, while those jurisdictions recognise “fraud” as the primary ground for defeating indefeasibility, the ADGM’s legislation expressly substitutes that with a broader “equitable obligation” standard, suggesting that conduct short of actual dishonesty may suffice.
In other words, indefeasibility under ADGM law protects the innocent, not the indifferent. A registered proprietor who knowingly takes title subject to the rights of another, or who benefits from another’s investment, may be bound by equitable obligations even without fraud.
Aligning Equity and Corporate Attribution
A pivotal part of the reasoning concerned the attribution of knowledge to the corporate claimant. Referring to relevant judgments it was held that the knowledge of the individual controlling the company, in this case, the entity’s ultimate owner at the time of acquisition, must be attributed to the company itself.
Because that individual had knowledge that several units had already been sold to prior purchasers, the company, upon registering itself as owner, acted with knowledge of pre-existing equitable interests. That knowledge gave rise to a constructive trust under s 24(f). The company could not therefore invoke the shield of indefeasibility.
The Findings: Constructive Trusteeship and Restoration of Title
The Court held that while registration under sections 22 and 23 confers conclusive ownership, that ownership is subordinate to any equitable obligation recognised under section 24(f).
The Court concluded that the registered proprietor in each case held the property as a constructive trustee for the true purchasers. The equitable obligation arose from conduct, namely, registering title despite knowing that the units were previously sold and paid for. The Court reaffirmed that a person who receives property knowing it belongs to another must hold it as a constructive trustee and restore it to its rightful owner.
Accordingly, the Court dismissed the claims for possession and damages by the registered proprietor and ordered the transfer of the title deeds to the purchasers (the defendants in each case) free from encumbrances.
The Court’s willingness to read mainland registration laws as part of the factual matrix (rather than a bar) marks a sensitive judicial effort to bridge overlapping regimes. In effect, historic mainland sale contracts, once void of registered documentation, now find protection under ADGM’s equitable exception.
The decision thus translates transitional uncertainty into doctrinal clarity: purchasers who paid under duly executed mainland contracts retain enforceable rights even after jurisdictional migration, provided the registered title-holder had notice of such rights.
By recognising constructive trusts over registered property, the ADGM Court brought property and equity into harmonious coexistence. The constructive trust is not a discretionary moral appeal; it operates as a legal consequence of wrongful retention of property known to belong to another.
This opens the way for claimants to seek specific performance, rectification, or order for transfer, even against registered proprietors.
Practical Takeaways
The decision is not just an academic milestone; it bears tangible practical lessons for all who operate within the ADGM real estate and investment ecosystem.
For Property Owners and Purchasers
- Registration remains the strongest form of proof, but it is not absolute if another party can demonstrate prior equitable ownership.
- Purchasers should retain clear evidence of sale agreements, payments, and correspondence, particularly for pre-ADGM transactions.
- Where disputes arise, having proof of full payment and dated contracts may determine whether equity intervenes on one’s behalf.
For Developers
- The ruling reaffirms the developer’s responsibility to ensure proper and prompt registration of units post-completion.
- Conduct suggesting indifference or selective registration of sold units may create equitable exposure.
- Developers must keep rigorous sale records and ensure compliance with ADGM registry standards.
For Investors and Financiers
- Due diligence cannot be limited to the register. Investors should trace historical sale documentation, especially for projects that converted to the ADGM jurisdiction.
- Registered ownership is secure only to the extent that it was acquired without knowledge of prior equities.
Concluding Reflections: Certainty and Conscience in Balance
This ruling will likely become a cornerstone in ADGM real estate history. It clarifies how equity and registration coexist and how the ADGM Courts will interpret obligations that arise from conduct rather than documents alone. In practical terms, it ensures that those who rightfully purchased, paid, and possessed property are not left behind by procedural transitions. In jurisprudential terms, it establishes ADGM as a maturing common law jurisdiction, one capable of balancing technical precision with equitable justice.
