A2 Dominion Homes Ltd v Prince Evans Solicitors
| Jurisdiction | England & Wales |
| Judge | Mr Englehart QC |
| Judgment Date | 15 July 2015 |
| Neutral Citation | [2015] EWHC 2490 (Ch) |
| Docket Number | Case No: HC-2013-000216 |
| Court | Chancery Division |
| Date | 15 July 2015 |
[2015] EWHC 2490 (CH)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Royal Courts of Justice
Strand
London
WC2A 2LL
Mr Robert Englehart QC
Case No: HC-2013-000216
In the matter of
Mr Rosenthal appeared on behalf of the Claimant
Mr Denehan appeared on behalf of the Defendant
(As Approved)
Digital Transcript of WordWave International Ltd trading as DTI 8 th Floor, 165 Fleet Street, London EC4A 2DY Tel No: 020 7404 1400 Fax No: 020 704 1424 Web: Email: (Official Shorthand Writers to the Court)
This is the trial of a preliminary issue in an action for professional negligence brought against a firm of solicitors. The claimants are the successors to a housing association, the Acton Housing Association Ltd. I shall refer in this judgment to " Acton" since the fact that the present claimant is the successor has no bearing at all on the issues before me. As I have already mentioned, the defendants are a firm of solicitors, who acted at the material time for Acton.
The case concerns a block of 33 flats in a building known as Stephenson House, Bletchley. The background to the issues before me, which turn on the application of the Land Registration Act 2002, are as follows. On 9 December 2005 the then owners of the building, Remitone Properties Ltd, entered into an agreement for a lease with Acton. I say agreement for a lease but I should have said an agreement for, in fact, 33 long leases. The purchase price was £3,730,540. However, it was an agreement which envisaged a delay between contract and completion. Completion was not to take place until 15 working days after Acton had received notice of practical completion of works to the flats which were envisaged. It was, effectively, a building lease, or building leases.
Under the agreement, however, Acton had to pay, and did pay, a deposit of £1.25 million. Shortly after the agreement for the leases had been made the defendant firm, the solicitors, caused a unilateral notice to be entered against Remitone's freehold title to the building.
However, on 17 May 2007, possibly inconsistently with the agreement for lease — I know not — Remitone granted a charge over its freehold title in the building to HSBC Bank Plc. Following the granting of this charge, and in order no doubt to protect its loan to Remitone, HSBC made an application on 12 June 2007 to the Land Registry to register its charge. Shortly thereafter, but within the priority period, the defendants then made an official search of the register on behalf of Acton, given that it was contemplated that leases would be entered into in implementation of the agreement for the leases. A certificate was issued by the Land Registry. That certificate said an application to register a charge in favour of HSBC Bank Plc had been lodged for registration on 12 June 2007 at 15:10:14 seconds, but the Land Registry was not yet in a position to approve it and complete the registration by entry in the register. Nevertheless, the pending application had priority over the disposition protected by this result. The pending application was HSBC's application to register its charge, and the result referred to was the result of the solicitors' search.
Following that, on 17 July 2007 leases of the 33 flats were in fact granted pursuant to the agreement for leases. Each lease created a lengthy term backdated to 1 January 2006. It is common ground that the leases were granted strictly in accordance with and pursuant to the agreement for leases. On 22 August 2007 a notice was registered against Romitone's freehold title in respect of HSBC's charge, Then, on 9 November 2007 a notice was registered against Romitone's freehold title in respect of the 33 leases to Acton. I understand that Acton remains lessee under 29 of those leases, but under four of them underleases have been created.
Acton makes a number of complaints against its former solicitors, the present defendants. I need not go into that, but one issue which arises fairly and squarely in the litigation is whether the charge in favour of HSBC has priority over the leases granted to Acton. It will be obvious, I say straightaway, that the leases themselves were registered in the Land Registry after the registration of HSBC's charge. Registration of the unilateral warning in respect of the agreement for the leases was however, of course, effected some considerable time before registration of HSBC's charge.
It is in that context that Master Bowles on 11 February 2015 ordered as follows: "The following issue be tried as a preliminary issue, namely whether the legal charge granted by Remitone Properties Ltd ('Remitone') to HSBC Bank Plc over its freehold interest in the building known as Stephenson House, Bletchley, MK2 2EW, ranks in priority to the 33 leases granted by Remitone to the claimant by reason of the matters pleaded in paragraph 9 of the defence." That is a reference to a plea made in the defence as follows. Paragraph 27:
"(1) The agreement was protected by the unilateral notice referred to in paragraph 17 (the UN);
(2) The actual interest created by the agreement ranked in priority to the application to register the charge and the charge once registered by reason of the UN;
(3) Since the leases were granted pursuant to the agreement the leases also ranked in priority to the charge by reason of the UN and the leases continue to have priority over the bank's charge;
(4) Although according to the claimant it is a term of the charge that Remitone cannot grant leases without the bank's consent (which is not admitted subject to production by the claimant of the mortgage conditions) that did not apply to the leases which Remitone was contractually obliged to grant pursuant to the agreement, the priority of which was protected by the UN."
( Quote unchecked)
The hearing of the preliminary issue originally came before Mr Alan Steinfeld QC, sitting as judge of this division, on 15 May of this year. The deputy judge immediately queried the position of HSBC Bank Plc. In the judge's view the bank should be a party to this action because the preliminary issue was going to determine whether or not its charge had priority over the 33 leases. Accordingly, he ordered that the hearing of the preliminary issue should be adjourned. In the meantime, notice was to be given to the bank, statements of case were to be served on the bank and the bank was to become a party to the hearing.
The solicitors for the claimant have fully complied with all the requirements that Mr Steinfeld QC made and the bank has indeed filed a witness statement. But in the event the bank has decided that it does not wish to participate in this hearing at all. It follows, as I understand it, that the bank will be bound by my ruling on the preliminary issue. It has had every opportunity to make submissions but it has decided, no doubt for reasons of expense, not to take part.
Put shortly, the issue for me is whether the notice of the agreement to grant leases in the Land Registry gives priority to the leases subsequently granted pursuant to the agreement. For the defendant, Mr Denehan submits that the charge, that is the bank's charge, has priority over the leases. Of course, the actual leases themselves came subsequent in time. He makes, broadly, two submissions after referring me to the statutory scheme to which I will come in one moment. Mr Denehan's first submission is that one has to divorce the equitable interest arising from the agreement from the legal interest arising under the leases. They are different interests. One takes effect in equity and the other takes effect in law. He is not suggesting for one moment that the equitable interest has somehow been defeated by the bank's charge, but he says the legal interest arising from the leases takes effect subject to the charge.
The second submission Mr Denehan makes is that these 33 leases were void as against the bank because Acton did not have the consent of the bank before entering into the leases themselves. He refers me in that context to clause 9 of the bank's mortgage conditions which provides as follows: "You must not, without the bank's written consent, (1) agree to or give any licence or tenancy affecting the property; […] (3) in any other way, either create or dispose of, or agree to, any legal estate or legal or equitable interest in the property." It is quite plain under the conditions of the bank's charge that a mortgagor has to seek the bank's consent before entering into leases.
In his submissions he refers me to the certificate, the terms of which I have already recited, and he says that there we have the Land Registry saying these leases are going to be subject to the charge, since an application to register the charge is pending. He submits that that accurately shows the position. The second submission, as I have said, concerns the conflict between clause 9 of the mortgage conditions and the entry into these leases pursuant to the agreement. Mr Denehan refers me to certain authorities, particularly an extract from Fisher and Lightwood, which says as follows: "the mortgagor is unable to confer upon another a greater right he himself possesses. Thus, in the absence of a statutory...
To continue reading
Request your trial
-
Chedington Events Ltd (formerly Axnoller Events Ltd) v Nihal Mohammed Kamal Brake
...under CPR Part 31, the policy of the law is in principle the same. The judge and the parties in BDW Trading Ltd v Fitzpatrick [2015] EWHC 2490 (Ch) certainly assumed so. Where a party is compelled by law to supply information to another party as part of the legal process, this information ......