Goldcrest Distribution Ltd v Charles Joseph McCole and Others
| Jurisdiction | England & Wales |
| Judge | Master Matthews |
| Judgment Date | 30 June 2016 |
| Neutral Citation | [2016] EWHC 1571 (Ch) |
| Docket Number | Case No: HC-2016-000033 |
| Court | Chancery Division |
| Date | 30 June 2016 |
[2016] EWHC 1571 (Ch)
Master Matthews
Case No: HC-2016-000033
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
James Collins QC (instructed by DAC Beachcroft LLP) for the Claimant/Applicant
Zoë Barton (instructed by PCB Litigation LLP) for the Second Defendant/Respondent
Hearing dates: 25 April, 10 May, 12 May
Introduction
This is my judgment on an application by the Claimant by notice dated 3 March 2016 for an order pursuant to CPR rule 13.3 to vary the order of Deputy Master Rhys dated 17 February 2016. By this order the Deputy Master gave judgment in default of defence for the Second Defendant on her counterclaim, and dismissed the Claimant's claim as against the Second Defendant, with certain other consequential orders. The application is supported by a witness statement dated 22 March 2016 of Mark John McGuire with one exhibit, and a further witness statement from him dated 22 April 2016, and opposed by the witness statement dated 18 April 2016 of Jonathan Robert Felce.
The first hearing of the application was on 25 April 2016, but the time allowed was not enough, and it continued on 10 May 2016 and 12 May 2016. Even then it was not quite concluded, and written submissions were made subsequently on one point, concluding on 20 May. James Collins QC appeared for the Claimant (applicant) and Zoë Barton appeared for the Second Defendant (respondent). The First Defendant, who is the Second Defendant's husband, did not appear and was not represented. The Third Defendant, who is the First Defendant's trustee in bankruptcy, was represented by Eileen McErlean, who, however, held only a watching brief. It is right to add that Mr Collins QC and his solicitors were not appointed to represent the Claimant until after the order of 17 February had been made, when they replaced the legal team acting until then.
Background
The application is made in the context of a claim commenced against the First Defendant and the Second Defendant alone by claim form, together with Particulars of claim, on 27 February 2015, in the Slough County Court. The claim sought possession of a residential property known as 9 Woodcote Place, Ascot ("the Property"), of which the First Defendant and Second Defendant are and since 1996 have been the joint registered proprietors. The claim is made under a legal charge dated 2 July 2014 entered into by both the First Defendant and the Second Defendant ("the Charge"). The Charge was intended to secure the First Defendant's liability under a guarantee by deed dated 6 March 2014, but varied on 2 July 2014, which he alone had given of the liability of his company, Ascot Cable and Power Solutions Ltd ("Ascot"), arising under a stock purchase agreement dated 23 June 2014 with the Claimant. At the date of issue of proceedings, the money claim intended to be so secured was said to be in excess of £1.4 million.
Prior to the issue of the claim, however, a number of important events had taken place. The original deed of guarantee was dated 6 March 2014, and was supported by an earlier, purported charge of the Property executed by the First Defendant. This charge was however not executed by the Second Defendant, so it is common ground that it could not be effective to create a charge of the legal estate in the Property. On 19 May 2014 a bankruptcy petition had been presented against the First Defendant by an unrelated third party. On 30 June 2014 the Claimant made a bankruptcy search against the First Defendant, revealing the existence of the petition. On 2 July a variation of the guarantee was made, and the Charge was executed by both the First Defendant and the Second Defendant. On 14 January 2015 the Claimant appointed LPA receivers of the Property pursuant to the charge. On 19 January 2015 the First Defendant was adjudicated bankrupt. The First Defendant's letter informing the Claimant of the adjudication appears to have crossed with the letter serving the claim form on the First Defendant and Second Defendant.
History of the proceedings
At the first hearing of the claim in the county court, on 14 April 2015, the First Defendant's trustee in bankruptcy was added to the proceedings as the Third Defendant. On 29 July 2015 the Second Defendant filed and served her defence and counterclaim. These had been settled by Ms Barton of counsel. In summary, her defence to the claim for possession was fourfold. First, the Charge amounted to a regulated mortgage contract (concerning the home of the First Defendant and Second Defendant and their daughter, Hayley), which was unenforceable because the Claimant was not licensed by the Financial Conduct Authority to perform regulated activities under the Financial Services and Markets Act 2000 (" FSMA") and the orders made thereunder (and of which this was one such security). Second, the Charge was void under the Insolvency Act 1986, s 284, as a disposition after presentation of a petition for the First Defendant's bankruptcy. Third, the Property was subject to a trust for the benefit of the daughter of the First Defendant and the Second Defendant, of which they were the trustees, and the Claimant did not take the Charge free of the trust. Fourth, the Charge was induced by the undue influence of the First Defendant practised on the Second Defendant, and of which the Claimant had notice. The defence gives full particulars of these various defences. It amounts to some 29 paragraphs.
The counterclaim, on the other hand, is very short. It reads as follows:
"30. The defence herein is repeated.
31. By reason of the foregoing, the Transaction [ ie the grant by the First and Second Defendants of the Charge] is unenforceable as a regulated mortgage contract and further or alternatively the Charge is void as a disposition after presentation of bankruptcy petition or voidable by reason of undue influence. As such, the Second Defendant seeks declaratory relief to that effect as appropriate and to set aside the Charge.
32. In the premises, the appointment of LPA receivers by the Claimant on or about 14 January 2015 is of no effect and declaratory relief to that effect is sought.
AND THE SECOND DEFENDANT COUNTERCLAIMS
(i) declaratory relief as aforesaid as to the Transaction being unenforceable, the Charge being void or voidable as the case may be and the appointment of the LPA receivers being ineffective;
(ii) such other relief as the Court deems fit."
The history of the litigation thereafter is complex, but important. On the same day as filing and serving her defence, 29 July 2015, the Second Defendant applied by notice for the transfer of the claim to the Chancery Division of the High Court. This application was listed for hearing on 14 August 2015, when there was also a case management conference to be held. On 11 August 2015 the Third Defendant and on 13 August the First Defendant agreed to the transfer. The Claimant however continued to object to it. However, also on 11 August, the Claimant and the Second Defendant did at least putatively agree an extension of time for the service of the defence to counterclaim to 28 August. Pursuant to CPR rule 15.4, as applied by CPR rule 20.3, the time for serving a defence to counterclaim would have been 14 days from the last date for deemed service upon the Claimant. This was apparently 14 August 2015. By CPR rule 15.6, the parties could extend time by agreement for up to a further 28 days, ie to 11 September 2015.
On 14 August the transfer application and the case management conference were not heard, but adjourned to after 16 October 2015. It seems that the putative agreement to extend time for the service of the defence to counterclaim to 28 August was abandoned, though in the event nothing turns on that. The Second Defendant chased the Claimant in relation to other aspects of the proceedings on 21 August, 8 September and 19 September 2015, though not the defence to counterclaim. On 1 October 2015 the Second Defendant chased the Claimant in respect of the defence to counterclaim, noting that time for service (whether extended or not) had now long expired. Nothing happened. It seems that the Claimant was considering whether to amend the particulars of claim in light of new information it had obtained, and then counsel was instructed to prepare the draft amended particulars.
On 24 November 2015, the Second Defendant issued an application notice for default judgment in relation to the counterclaim. This was listed for hearing on 14 December 2015. On 1 December 2015 the Claimant issued an application notice for permission to amend the particulars of claim, which was listed for hearing on the same date. But also on 1 December, the Claimant finally agreed to the transfer of the claim to the High Court. When the matter came before the District Judge on 14 December, he made the order transferring the matter to the Chancery Division. I add only that, although this appears to have been considered at an earlier stage by the Claimant, no application has been made for validation of the Charge under s 284(1) of the Insolvency Act 1986 (see the transcript of the judgment of Deputy Master Rhys at paragraph 7).
On 17 February 2016, Deputy Master Rhys heard the Second Defendant's application for default judgment, based on the Claimant's failure to file a defence to counterclaim, and the Claimant's application to amend the particulars of claim. Ms Barton represented the Second Defendant. The Claimant was represented at the hearing by counsel (not Mr Collins QC). At the end of the hearing the Deputy Master gave an extempore judgment in favour of the Second Defendant. For present purposes, the...
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