Eagle Star Insurance Company Ltd and Henry Karasiewicz and 1 Helen Karasiewicz
| Jurisdiction | England & Wales |
| Judge | LADY JUSTICE ARDEN,LORD JUSTICE MUMMERY,LORD JUSTICE SIMON BROWN |
| Judgment Date | 25 April 2002 |
| Neutral Citation | [2002] EWCA Civ 940 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | B2/2001/2394 |
| Date | 25 April 2002 |
[2002] EWCA Civ 940
IN THE SUPREME COURT OF JUDICATURE
CIVIL DIVISION
ON APPEAL FROM THE HIGH COURT
CENTRAL LONDON COUNTY COURT
ADMINISTRATIVE COURT LIST
The Royal Courts of Justice
The Strand
London
Lord Justice Simon Brown
Vice President of the Court of Appeal, Civil Division
Lord Justice Mummery
Lady Justice Arden
B2/2001/2394
MR C BAKER(instructed by JR Jones, 56A The Mall, Ealing Broadway, London W5) appeared on behalf of the Appellant
MR N CLAYTON (instructed by Bretherton Price Elgoods, 123 Promenade, Cheltenham) appeared on behalf of the Defendant
Thursday 25 April 2002
This is an appeal against the order of His Honour Judge Wakefield, sitting in the Central London County Court, dated 22 October 2001. By the judge's order it was declared that Mr and Mrs Karasiewicz were entitled beneficially in equal shares to 50 Mount Pleasant Road, Ealing Common, London W5 ("the property"). The order also provided for the proceeds of sale of the property to be applied in repaying the amount due to the respondent in this appeal, Eagle Star Insurance Company Ltd ("Eagle Star") by way of subrogation to Berkeley Bridging Plc ("Berkeley"), assuming an initial advance of £158,290.50 and the addition of interest not exceeding the lower of the rates charged from time to time by Berkeley and Eagle Star, so that the total came to £311,934.88 as at 12 October 2001. The appellant, Mrs Karasiewicz, does not appeal against the declaration of beneficial interest but appeals against the second order which entitled Eagle Star to become a secured creditor over the property by way of subrogation to Berkeley.
Since the appeal is limited to the second point, it is not necessary for me to summarise the facts that occurred as they were found by the judge in his extensive judgment. Briefly, Mr and Mrs Karasiewicz moved into the property in 1990. The property was built on the garden of another property at Woodfield Road, of which the judge found that Mr and Mrs Karasiewicz were joint beneficial owners in equal shares. On 4 August 1989 the property was charged in favour of Berkeley. There was an issue as to whether Mrs Karasiewicz signed that charge. The judge held that she signed it but that her signature was equivocal and worthless. She was therefore not personally liable on the Berkeley charge. Moreover, the judge held that Eagle Star did not rely in any way on her signature to that charge, and no question of estoppel arose by reason of it in favour of Eagle Star.
In March 1990 the property was charged in favour of Eagle Star to secure the sum of £165,000. That document of charge was executed by Mr and Mrs Karasiewicz in favour of Eagle Star. In 1992 Mr Karasiewicz left the property but Mrs Karasiewicz has continued to live there. At the time of the Berkeley charge Mrs Karasiewicz was not in occupation of the property and accordingly the Berkeley charge bound her beneficial interest because it was not at that point in time an overriding interest for the purpose of section 70(1)(g) of the Land Registration Act 1925, but by the date of execution of the Eagle Star charge she was in occupation of the property and accordingly she had an overriding interest pursuant to section 70(1)(g) of the 1925 Act.
The judge held that Mrs Karasiewicz was not bound by the Eagle Star charge because she did not consent to it, and there is no appeal on that count. The judge in his judgment then turned to subrogation. The judge found that Eagle Star had advised the solicitors to Mr Karasiewicz that a form of consent was necessary, to which Mrs Karasiewicz's signature should be obtained. However, that form was never sent and never executed. The judge said that it must have been overlooked. Nonetheless, Eagle Star proceed to advance the principal sum of £165,000, of which £158,290 went to redeem the Berkeley charge.
The judge held that if Eagle Star were unable to rely on subrogation, Mrs Karasiewicz would have received a substantial benefit at Eagle Star's expense since Eagle Star had paid off the Berkeley loan. Accordingly her share of the property would be free from that loan and enhanced in value at the expense of Eagle Star. Eagle Star would be limited to its security on Mr Karasiewicz's half share. The judge held that Eagle Star was entitled to be subrogated in Berkeley in reliance on a passage from the speech of Lord Hoffmann in Banque Financiere v Parc (Battersea) Ltd [1999] 1 AC 221 at 234. Lord Hoffmann held that the test for subrogation was, first, whether the defendant would be enriched at the plaintiff's expense, second, whether such enrichment would be unjust and, third, whether there were nonetheless reasons of policy for denying a remedy. The judge held that Mrs Karasiewicz would be enriched at Eagle Star's expense and it would be most unjust if this were the case. There was no reason of policy for denying subrogation and in his judgment the conditions for subrogation were met. Accordingly he held that Eagle Star was subrogated to the rights of Berkeley although, as the terms of the order make clear, he did not consider that Eagle Star could be better off than Berkeley. On the footing of subrogation he made an order for possession of the property.
Mrs Karasiewicz appeals to this court with permission of Mantell LJ. Mr Christopher Baker on her behalf makes a number of submissions. He submits primarily that Eagle Star did not expect to obtain a charge unless Mrs Karasiewicz gave her consent. It knew full well that it would not obtain a charge unless that happened. Therefore it was unjust for it to obtain a remedy by subrogation. Mr Baker distinguishes cases where subrogation has been allowed in which the lender was defeated by circumstances of which he was unaware.
Mr Baker submits that there is no distinction between this case and the case of Banque Financiere, on which the judge relied, and the case where a creditor advances money to repay a secured creditor. The juridical basis, he submits, remains the same in both situations. He took us to the Banque Financiere case. The facts of that case are complex. Very shortly summarised, the position was that a lender had lent money through an intermediary from whom it took an assignment of the unsecured debt due to the ultimate borrower. The lending was on an unsecured basis. It was on the footing that another group company of the borrower would not seek repayment of its debt in priority to the lender. The loan was in fact used to pay a secured debt. The House of Lords held that the lender was entitled to be subrogated to the security of the lender repaid as against the group company in question, which was also itself a secured creditor. So it was a very special situation, where there was a very limited form of remedy granted in order to reverse unjust enrichment as between the group company and the new lender.
Mr Baker submits that there is, as I have said, no distinction between that case and the case where a creditor advances money to pay a secured creditor. The juridical basis, he submits, remains the same. It must be shown that any enrichment is unjust and moreover the benefit which (in this case) Eagle Star obtains by subrogation enables the protection given to Mrs Karasiewicz's overriding interest by the law to be circumvented. In this regard, in the course of his submission at the court's request Mr Baker took the court to a decision which was not available to...
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