Halifax Plc v Omar
| Jurisdiction | England & Wales |
| Judge | Lord Justice Jonathan Parker,Lord Justice Laws,Lord Justice Simon Brown |
| Judgment Date | 20 February 2002 |
| Neutral Citation | [2002] EWCA Civ 121 |
| Docket Number | Case No: B2 2001 0258 and 0258A |
| Court | Court of Appeal (Civil Division) |
| Date | 20 February 2002 |
[2002] EWCA Civ 121
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION (His Honour Judge Howarth)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Simon Brown
Lord Justice Laws and
Lord Justice Jonathan Parker
Case No: B2 2001 0258 and 0258A
Mr Geoffrey Zelin (instructed by DLA) for the claimant/respondent
Mr Alexander Hill-Smith (instructed by The Sethi Partnership) for the defendants/appellants
INTRODUCTION
This appeal raises the question of the availability of the remedy of subrogation as against an innocent third party purchaser.
The appellants is Mr El Said Omar (the second defendant in the action). He appeals, with permission granted by Chadwick LJ on 4 May 2001, against an order made by HHJ Howarth on 17 January 2001 declaring that the interest of Mrs Maria Garcia as the registered proprietor of a leasehold flat known as Flat 178, Park West, Edgware Rd, London W2, is subject to an equitable charge in favour of Halifax plc (the claimant in the action and the respondent to the appeal), and that such equitable charge ranks ahead and in priority to and free from any interest or other rights of Mr and Mrs Omar or either of them in or in relation to the flat. The order also contains orders for possession and sale.
The background to the dispute which led to the order may be summarised as follows.
Mrs Garcia has at all material times been, and she remains, the registered proprietor of the leasehold title to the flat. In May 1990 an individual calling himself Mr Khan fraudulently applied to the respondent for an advance of £189,000 on a proposed purchase of the flat from Mrs Garcia at a price of £210,000, the advance to be secured by a first legal charge on the flat. The respondent in due course offered an advance of £147,000. The offer was accepted by Mr Khan. The respondent, following its usual practice, instructed Mr Khan's solicitor, a Mr Rodney Thompson of Messrs Thompsons, to act for it in the transaction. Mr Thompson duly reported on title. In early July 1990 the respondent sent a cheque for the advance to Mr Thompson. On 10 July 1990 contracts were exchanged for the purchase of the flat by a company owned by Mr Khan called Unitbase Ltd at a price of £132,000. Two Transfers were executed by Mrs Garcia, each of which is dated 10 July 1990. One such Transfer is in favour of Unitbase Ltd, and states the purchase consideration to be £132,000. The witness to Mrs Garcia's signature on this Transfer gives an address in the Philippines. The judge found that this Transfer was stamped some nine months later, in April 1991. The other such Transfer, which has not been stamped, purports to transfer the title to the flat, at the direction of Unitbase Ltd, to Mr Khan. The consideration paid by Unitbase Ltd is stated to be £132,000 but the amount of any consideration paid by Mr Khan to Unitbase Ltd is left blank. The witness to Mrs Garcia's signature on this Transfer is a solicitor with an address in London. Neither of the Transfers has been registered, nor has any further dealing been entered on the register of the leasehold title to the flat. No legal charge was executed in favour of the respondent, although initially some repayments of the respondent's loan were made (amounting to £1891.67).
The judge found that the entirety of the purchase price of £132,000 was paid out of the respondent's advance, and there is no appeal against that finding.
On 2 April 1991, following its discovery of the fraud and of the fact that it did not have a legal charge, the respondent lodged at H.M. L and Registry a caution against dealings with the leasehold title. Shortly thereafter it commenced an action against Mrs Garcia, Unitbase Ltd and Mr Khan, claiming to be entitled by subrogation to an equitable charge over Mrs Garcia's interest in the flat. The respondent did not join the appellants as defendants in that action, since it was not at that time aware of their interest in the matter.
On 14 December 1993 HHJ Maddocks granted the respondent summary judgment against Mrs Garcia under Order 14 of the former Rules of the Supreme Court, declaring that Mrs Garcia's leasehold interest in Flat 178 was subject to an equitable charge in favour of the respondent to secure £147,000 (i.e. the full amount of the advance) and ordering that her interest be sold. The order recites that it was made with consent of Mrs Garcia, and that Unitbase Ltd had been dissolved.
At about that time, the respondent learned that Mr and Mrs Omar were in possession of the flat, and that they claimed to be entitled to remain in possession. Accordingly the respondent commenced the present action against Mr and Mrs Omar, claiming a declaration that it is entitled to be subrogated to the rights of Mrs Garcia, and that in consequence it has a lien, alternatively an equitable charge, over the flat for the full amount of its advance (£147,000), and a declaration that its security rights take priority over any rights of Mr and /or Mrs Omar. The respondent also seeks an order for possession and sale of the flat.
The respondent had also been the victim of similar mortgage frauds carried out by Mr Khan, with the assistance of Mr Thompson, relating to Flats 528 and 546 in the same block (not being flats owned by Mrs Garcia). In the action it also claims similar relief in respect of those flats against their respective owners and /or chargees. However, this appeal is concerned only with Mrs Garcia's flat, Flat 178.
THE PLEADINGS
By its Re-Re-Amended Particulars of Claim the respondent states (in paragraph 2) that it is not aware of the basis upon which Mr and Mrs Omar claim to be entitled to remain in possession of the flat, but contends that such rights as they may have in relation to the flat do not have priority over the respondent's security rights. Paragraphs 2S and 2T of the pleading read as follows:
"2S. Had Unitbase not been paid then would have been indebted to Miss Garcia for the sum of £132,000 and the lien would have operated in equity as a charge over the property. Since no steps were ever taken to register either Unitbase Limited's or Mr Khan's titles to the property neither of them can have received anything more than an equitable interest in the property which would have been subject to Miss Garcia's lien had she not been paid.
2T. Miss Garcia having been paid off in full Unitbase Limited and /or Mr Khan have been enriched to the extent that (i) they no longer have any liability to Miss Garcia and (ii) their respective interests in the property were (subject to the Claimant's claims herein) freed from Miss Garcia's lien. Such enrichment has been at the expense of the Claimant whose money was used to pay Miss Garcia."
Paragraph 2U of the pleading alleges that the mortgage advance was obtained by fraud, and that any purported sub-sale from Unitbase Limited to Mr Khan was a sham. Paragraph 2V alleges that in all the circumstances the enrichment of Unitbase Limited and /or Mr Khan at the expense of the respondent was unjust.
On that footing, the respondent claims to be subrogated to the rights of Miss Garcia to the full extent of the advance, alternatively to the extent of £132,000, plus (in either case) all payments to the head lessors of the flat by way of rent or service charge, being payments which it would have been entitled to add to its security had the transaction been completed and a legal charge executed in its favour.
By his Re-Amended Defence and Counterclaim, Mr Omar alleges that he has been in possession of the flat since about 19 December 1990. He pleads that on that day Mr Omar contracted with Unitbase Ltd to purchase the leasehold interest in the flat for the sum of £150,000, £50,000 of that sum to be paid by way of deposit by 31 December 1990, with completion to take place on 31 December 1991; that it was a special condition of the contract that on payment of the deposit Unitbase Ltd would grant Mr Omar a 20-year lease of the flat at an annual rental of £2000; that the deposit was duly paid and a 20-year lease granted; and that on or by 31 December 1991 the balance of the purchase price was paid in full. He pleads that by a letter dated 31 December 1990 Thompsons undertook to h and over the L and Certificate on completion together with a Transfer from Mrs Garcia, thereby representing that Unitbase Ltd was itself entitled to be registered as proprietor of the leasehold title with a good an unencumbered title, and that there had been no dealings with the flat which would prevent Mr Omar from acquiring a good and unencumbered title on completion of his purchase from Unitbase Ltd. He further pleads that Unitbase Ltd and Mr Khan had themselves made representations to the same effect before contracts were exchanged.
In paragraph 15 of the pleading Mr Omar pleads that he relied on those representations in paying the balance of the purchase price, and that on such payment he obtained a Transfer of the flat executed by Unitbase Ltd and dated 31 December 1991, which Transfer has been duly stamped. In paragraph 16 he pleads that in breach of their undertaking Thompsons failed to deliver up on completion either the L and Certificate or a Transfer by Mrs Garcia. In paragraph 17 it is alleged that Mr Omar learned of the respondent's claims to an interest in the flat (I take that to mean that he learned of such claims for the first time) when, in March 1992, he attempted to register his purchase and was prevented from so doing by the caution against dealings...
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