This will work, but since there is no identity or datetime column - there is no way to find which update row is newer. So if there are more updates on the same column, I just take the first alphabetically/numerically (MIN).
WITH CTE AS
(
SELECT ID, REF, MIN(Title) Title, MIN(Surname) Surname, MIN(Forename) Forename, MIN(DOB) DOB, MIN(Add1) Add1, MIN(Postcode) Postcode
FROM Table1
GROUP BY id, REF
)
SELECT
d.REF
, d.ID
, COALESCE(T.Title, d.TItle) AS Title
, COALESCE(T.Surname, d.Surname) AS Surname
, COALESCE(T.Forename, d.Forename) AS Forename
, COALESCE(T.DOB, d.DOB) AS DOB
, COALESCE(T.Add1, d.Add1) AS Add1
, COALESCE(T.Postcode, d.Postcode) AS Postcode
FROM CTE d
INNER JOIN CTE t ON d.ID = t.ID AND d.REF = 'D' AND t.REF = 't'
SQLFiddle DEMO
If identity column can be added, we can just rewrite the CTE part to make it more accurate.
EDIT:
If we have identity column, and CTE is rewritten to become recursive, actually whole other part of query can be dropped.
WITH CTE_RN AS
(
--Assigning row_Numbers based on identity - it has to be done since identity can always have gaps which would break the recursion
SELECT *, ROW_NUMBER() OVER (PARTITION BY ID ORDER BY IDNT DESC) RN FROM dbo.Table2
)
,RCTE AS
(
SELECT ID ,
Title ,
Surname ,
Forename ,
DOB ,
Add1 ,
Postcode ,
RN FROM CTE_RN WHERE RN = 1 -- taking the last row for each ID
UNION ALL
SELECT r.ID,
COALESCE(r.TItle,p.TItle), --Coalesce will hold prev value if exist or use next one
COALESCE(r.Surname,p.Surname),
COALESCE(r.Forename,p.Forename),
COALESCE(r.DOB,p.DOB),
COALESCE(r.Add1,p.Add1),
COALESCE(r.Postcode,p.Postcode),
p.RN
FROM RCTE r
INNER JOIN CTE_RN p ON r.ID = p.ID AND r.RN + 1 = p.RN --joining the previous row for each id
)
,CTE_Group AS
(
--rcte now holds both merged and unmerged rows, merged is max(rn)
SELECT ID, MAX(RN) RN FROM RCTE
GROUP BY ID
)
SELECT r.* FROM RCTE r
INNER JOIN CTE_Group g ON r.ID = g.ID AND r.RN = g.RN
SQLFiddle DEMO