David Michael Rose v Creativityetc Ltd
| Jurisdiction | England & Wales |
| Judge | Eyre |
| Judgment Date | 02 May 2019 |
| Neutral Citation | [2019] EWHC 1043 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: E30MA138 |
| Date | 02 May 2019 |
HIS HONOUR JUDGE Eyre QC
Case No: E30MA138
IN THE HIGH COURT OF JUSTICE
THE BUSINESS AND PROPERTY COURTS IN MANCHESTER
PROPERTY, TRUSTS, & PROBATE LIST (ChD)
Manchester Civil Justice Centre
1 Bridge Street West
Manchester M60 9DJ
Mr. Giles Maynard-Connor (instructed by Atticus Law) for the Claimants
Mr. Pepin Aslett and Mr. William Paris (instructed by Ralli Solicitors LLP) for the First Defendant
Hearing dates: 9 th, 10 th, 11 th April 2019
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HH Judge Eyre QC:
This is an application by the Claimants for permission to re-amend the Particulars of Claim. The proposed re-amendment seeks a declaration that particular mortgages were rescinded because they were entered as the result of fraud on the part of those controlling the First Defendant. In addition there is a challenge to the execution of one of the mortgages together with other minor re-amendments.
Both sides were agreed that relief should be given in respect of the late service of a number of witness statements. I can deal with that aspect of the matter shortly. In accordance with the approach laid down in Denton v T H White Ltd [2014] EWCA Civ 906 I must have regard to the seriousness of the default; the cause of the default; and the circumstances of the case as a whole. Delay in the service of a witness statement can be a serious default but whether it is in the particular instance will depend on the relevant circumstances. I am satisfied that in the circumstances here it is wholly appropriate to give relief. It suffices to say that the delay has been very short; the reasons for the delay were understandable; and there has been no material effect on the proper preparation for or determination of the substantive application.
There was no evidence before me from the Second Claimant although there were a number of lengthy witness statements from the First Claimant. Through Mr. Aslett the First Defendant noted the absence of evidence from Mr. Waxman. However, it was not suggested that there was any material difference between the positions of the First and Second Claimants. I will proceed on the same basis.
The Relevant History .
There is considerable dispute about the history of the dealings between the parties but for the purposes of the current application I need not trouble with much of that dispute and can simplify large parts of the background.
The First and Second Claimants are the registered proprietors of properties at Hillgate in Stockport. They hold the registered titles on trust for Dreadnought Ltd. Mr. Rose says that in turn he is the beneficial owner of Dreadnought.
In 2015 the First Defendant made loans to Dreadnought and to Karunia Holdings Ltd (“Karunia”). The First and Second Claimants gave guarantees and there were debentures, charges, and other connected documents. In July the First and Second Claimants executed a mortgage over part of the Hillgate land in favour of the First Defendant. The First Defendant says that the First and Second Claimants executed a further mortgage in respect of part of that land though those claimants now seek to put that execution in issue.
In July 2017 the First Defendant brought proceedings against Dreadnought and Karunia for repayment of £252,208 (“the Debt Claim”). Default judgment was entered on 4 th September 2017. On 10 th October 2017 a draft defence was put forward on behalf of Dreadnought and Karunia in support of an application to set the judgment aside. Mr. Rose signed the statement of truth on that draft. The draft defence set out a convoluted history of dealings with Mr. Nicholas Henesy averring that Mr. Rose had relied on the advice of Mr. Henesy. In essence it was said that the indebtedness was to be regarded as having been discharged by the proceeds of sale of a property in Bury Old Road. In September 2017 the First and Second Claimants had contracted to sell the Hillgate properties to the Fifth Claimant.
On 17 th October 2017 District Judge Obodai extended the time for further evidence to be served in support of the set aside application. On 4 th January 2018 a new draft defence and counterclaim was put forward on behalf of Dreadnought and Karunia. Mr. Rose again signed the statement of truth on that document which was exhibited to a witness statement from him. This draft pleading alleged a conspiracy between Mr. Henesy, the current First Defendant, and others to cause harm to Dreadnought and Karunia by a number of fraudulent misrepresentations which were set out. The draft did not refer to the mortgages over the Hillgate properties but part of the relief sought was “a declaration that the charges granted by way of security for the Loan be discharged/removed”. The matter came before District Judge Matharu on 24 th January 2018. Dreadnought and Karunia withdrew the former draft defence. However, the District Judge declined to allow them to rely on the further evidence (including the statement to which the draft defence and counterclaim was exhibited) and dismissed the application to set aside the judgment.
On 2 nd February 2018 the Second and Third Defendants were appointed as Law of Property Act receivers over the Hillgate properties.
On 16 th February 2018 solicitors acting for the Claimants asserted a right to redeem and sought a redemption statement in respect of the mortgaged Hillgate properties. This repeated a request which had been made on 26 th January 2018 on behalf of the First and Second Claimants. This request was followed on 22 nd February 2018 by the issue of the Part 8 claim form which commenced these proceedings. That claim form sought redemption in the form of an account of the sums due to the First Defendant and an order for delivery up and cancellation of the mortgages on payment of the sum found due on the account. That claim form was supported by a witness statement from Mr. Rose which did not challenge the validity or execution of the mortgages and in particular made no allegation that their execution resulted from fraud, misrepresentation, or conspiracy. At that time Mr. Mark Jones of JMW Solicitors was the solicitor for the Claimants. On 12 th October 2018 he made his fourth witness statement which was in support of this re-amendment application. He said that the allegations contained in the draft re-amendment Particulars of Claim had not been made at the outset of these proceedings “principally for commercial reasons” [13]. At [17] he explained that the Claimants had thought that the amount which the First Defendant would say was due would be £350,000 – £400,000 and that “on that basis it was a commercial decision for the Claimants simply to seek to redeem the securities.” This was because on redemption “they were confident of selling for an amount far exceeding what they paid out by way of redemption”. At [30] this was repeated when Mr. Jones accepted that some of the matters in the proposed re-amended pleading had been raised before and said “I cannot stress enough that the decision not to pursue the allegations at the outset of this claim was purely a commercial decision when the Claimants thought they would be able to quickly redeem and would have a property unencumbered which they could then sell for a profit”.
The matter came before the Vice-Chancellor on 23 rd April 2018. Mr. Timothy Polli QC represented the Claimants at that hearing. Mr. Polli had prepared a skeleton argument in advance of the hearing and at [34] that said Mr. Rose was “most concerned” about whether the advice given by Mr. Henesy had been given properly but that “any action C1 might take against Mr. Henesy and/or D1… will not challenge the validity of D1's charges nor seek to resist the enforcement of those charges – it cannot do so as C1 is party to this litigation seeking to redeem those charges.”
I have been provided with a transcript of the hearing before the Vice-Chancellor. In the course of the hearing there were a number of exchanges between the Vice-Chancellor and Mr. Polli. Those were concerned with the effect of the Claimants' actions in seeking redemption and with the First Defendant's contention that the cost of litigation about the validity of the mortgages was a contingency to be taken into account in calculating the amount secured. Mr. Polli referred to the Claimants' sense of grievance and to the fact that they had threatened to bring proceedings seeking the discharge of the securities on the footing that they had been wrongfully obtained. He then said “but now they are before the court seeking to redeem those securities and … they can't have it both ways. They have …taken the view that they are going to fund their way out of this—these securities and that will prevent them – they accept that — …from challenging the validity of the securities.” Mr. Polli went on to confirm that by seeking the redemption of the mortgages the Claimants had accepted their validity and that they could not thereafter seek rescission. He accepted the Vice-Chancellor's characterisation of bringing the redemption proceedings as having made an election. Mr. Rose was present at that hearing but, it is said, will assert that he did not understand the effect of those exchanges.
The Vice-Chancellor directed that the matter proceed by way of Particulars of Claim and Defence. On 30 th April 2018 the original Particulars of Claim were filed with a statement of truth again signed by Mr. Rose. These sought redemption of the mortgages but again made no challenge to their validity or...
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