Bank of Scotland Plc v Ms Renata Joseph and Others (Defendants/ Appellant)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Patten,Sir Robin Jacob,Lady Justice Sharp |
| Judgment Date | 23 January 2014 |
| Neutral Citation | [2014] EWCA Civ 28 |
| Docket Number | Case No: B5/2013/2022 |
| Court | Court of Appeal (Civil Division) |
| Date | 23 January 2014 |
[2014] EWCA Civ 28
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BOW COUNTY COURT
HER HONOUR JUDGE WALDEN-SMITH
1PB43436
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Patten
Lady Justice Sharp
and
Sir Robin Jacob
Case No: B5/2013/2022
Mark Warwick QC and Charles Harpum (instructed by Colman Coyle Limited) for the Appellant
Tom Leech QC and Nicole Sandells (instructed by Walker Morris LLP) for the Respondent
This is a second appeal by the third defendant, Mr Enda Lyons, against an order of District Judge Dixon dated 8 th February 2013 by which he gave summary judgment in favour of the Bank of Scotland plc ("the Bank") in respect of its claim for possession of a flat in Docklands, East London: flat 23.03, 26 Hertsmere Road, London, E14 ("the Flat"). The first appeal against his order was dismissed by HH Judge Walden-Smith on 18 th July 2013 and permission for a second appeal was granted by Jackson LJ.
Although the facts of the case are not uncomplicated, the point in issue is a relatively short one; namely whether the Bank's subrogated claim to an unpaid vendor's lien takes priority over a registered charge in favour of a company called Wingfield Financial Heritage Limited ("Wingfield"). If that charge took effect subject to the Bank's prior equity then the Bank is entitled to enforce its lien against Mr Lyons because he acquired the Flat on a sale by Wingfield as mortgagee. Conversely, if Wingfield's charge has priority over any claim based on the Bank's lien then Mr Lyons acquired a title free from it and the Bank is effectively unsecured.
Before the District Judge and Judge Walden-Smith the issue of priority turned on whether a unilateral notice placed on the Charges Register of the title to the Flat on 4 th July 2006 "in respect of a mortgage dated 10 th March 2005 in favour of Bank of Scotland" was effective to secure the priority of the Bank's subrogated right to rely on the unpaid vendor's lien.
Both judges below held that it was so effective because the right of subrogation stemmed from the Bank's position as a secured lender based on the charge of 10 th March 2005 even though it is alleged by Mr Lyons that this charge was ineffective as a forgery. But the Bank now also relies on a new argument advanced by way of respondent's notice that even if the unilateral notice was not effective to protect its subrogated security it still enjoyed priority over the Wingfield charge by virtue of the principles set out in the decision of the House of Lords in Abbey National Building Society v Cann [1991] 1 AC 56. It contends that all that the original purchaser (a Mr Samad) ever enjoyed was an equity of redemption in the Flat subject to the unpaid vendor's lien. He was never able therefore to charge more than that interest to Wingfield. Wingfield and its successors in title never acquired more than the rights of Mr Samad to enforce the equity of redemption and consequently it was not necessary for the Bank to place a notice on the register of title in order to protect its interest.
Mr Lyons says that this argument runs contrary to the fundamental objective of the Land Registration Act 2002 ("the 2002 Act") that the register should provide a complete and accurate reflection of the state of the title of the land at any given time: see Law Commission Report No. 271 para 1.5. A failure to protect the Bank's prior interest by an entry on the register will have resulted in it being postponed to the subsequently registered Wingfield charge: see s.29(1) of the 2002 Act. The principle in Cann is, he submits, concerned with issues of priority between equitable interests and not with the preservation of those priorities in the context of a registered title.
Before going further into these arguments, it is convenient to set out the facts as far as we know them. The title to the Flat comprised a long lease dated 11 th March 2005 between No. 1 West India Quay (Residential) Ltd ("the Developer") as lessor and Abu Ubaida Mohammad Samad ("Mr Samad") as lessee which was granted for a term of 999 years (less 3 days) from 24 th June 2004. Mr Samad was registered as proprietor of the Flat under this lease on 11 th May 2005 under title number EGL487869. The price stated to have been paid on the grant of the lease according to the register was £965,000.
A later version of the register shows that on 9 th February 2011 Ms Renata Joseph was registered as proprietor of title number EGL487869. Although none of the transactional documents are included in the evidence, it appears from the entries in the proprietorship register that she was recorded as having paid £965,000 for the assignment of the lease on 10 th March 2005, although she was registered as proprietor much later. Some £820,250 of the purchase price was provided by way of mortgage loan from the Bank which took a charge from her over the Flat dated 10 th March 2005. It therefore appears that the grant of the lease to Mr Samad, its purported assignment to Ms Joseph and the charge to the Bank all took place simultaneously on 10 th or possibly 11 th March 2005 and that at some time on 11 th March 2005 Mr Samad granted to Wingfield a charge which it is said was intended to secure a guarantee.
The charge in favour of the Bank was protected by the unilateral notice entered on the register on 4 th July 2006 because Ms Joseph had still not by then become registered as proprietor so as to enable the Bank's charge to be substantively registered. The charge in favour of Wingfield was registered on 22 nd April 2010. The Bank's charge was eventually registered on 9 th February 2011 concurrently with the registration of Ms Joseph as proprietor. Mr Lyons subsequently acquired the Flat from Wingfield, of which he is or was a director, but has not yet been registered as proprietor of the title.
On 31 st March 2012 the Bank brought mortgage possession proceedings against Ms Joseph as the sole defendant based on her failure to pay any of the instalments due under the mortgage. In her defence she denied having executed the mortgage or any contract to purchase the Flat. She therefore denied any liability for the sums due but did not dispute the Bank's claim to possession.
On 31 st July 2012 Mr Lyons was added as a defendant and asserted in his defence that Wingfield's charge of 11 th March 2005 ranks in priority to the Bank's charge registered on 9 th February 2011 because, prior to its registration, the Bank had at most an equitable interest in the property which could not take priority over Wingfield's legal charge registered on 22 nd April 2010.
Eventually in October 2012, the Bank compromised its claim against Ms Joseph and withdrew its opposition to an application which she had made for the cancellation of the registration of the Flat in her name. Various witness statements were then served presumably dealing with the way in which title to the Flat was acquired. We have not been troubled with them on this appeal. From this evidence the District Judge ascertained that the Developer sold the Flat to Mr Samad on 11 th March 2005 not for £965,000 but for £733,400; that the transfer to Ms Joseph (which was dated 10 th March 2005) was executed on the same day purportedly for a consideration of £965,000; that to purchase the Flat Mr Samad used the monies provided by the Bank to Ms Joseph which were sufficient to cover the price payable to the Developer; that at some point on 10 th or 11 th March Mr Samad executed the charge in favour of Wingfield; and that on 18 th April 2011 Wingfield obtained possession of the Flat and sold it to Mr Lyons for £730,000 with the benefit of a mortgage from Nat West Home Loans, although it is accepted that this transaction was not necessarily at arms' length.
The District Judge found that the Bank's money had been used to pay the Developer and that it had accordingly become subrogated to the Developer's unpaid vendor's lien if and so far as the charge of 10 th March 2005 had not been validly executed. The judge therefore accepted (applying Abbey National v Cann) that Mr Samad never acquired more than an equity of redemption subject to the Bank's subrogated security in the form of the lien and that the charge which he granted to Wingfield was necessarily subject to the Bank's interest in the property. There is no challenge to those findings as part of this appeal.
The remaining issue therefore for the District Judge was whether the unilateral notice registered on 4 th July 2006 was effective to preserve the priority of the subrogated rights of the Bank over the subsequently registered Wingfield charge. The argument for Mr Lyons is simply that the notice specified the 10 th March 2005 mortgage as the interest to be protected whereas the Bank now seeks, in the alternative, to rely on the notice as supporting its priority in respect of an unpaid vendor's lien.
The District Judge rejected that:
"The only remaining question is whether registration of the notice by the Claimant was sufficient to protect its equitable interest in priority to Wingfield's. I have dealt with the effect of sections 28 and 29 of the Land Registration Act earlier in this judgment and an analysis thereof in Frankel. However, the Third Defendant argues that the wording of the notice makes reference to a mortgage, not the unpaid vendor's lien, and thus it is incapable of protecting the latter. Ms Sandells dismisses this, saying that the notice...
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Steven John Williams v Alter Domus Trustees (UK) Ltd (formerly Cortland Trustees Ltd)
...the point on appeal). 152 ION argued that the issue is governed by the decision of the Court of Appeal in Bank of Scotland v Joseph [2014] EWCA Civ 28. In that case BoS entered a unilateral notice described as “in respect of a mortgage dated 10 March 2005 in favour of Bank of Scotland”. At......