Helden v Strathmore Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Newey |
| Judgment Date | 30 July 2010 |
| Neutral Citation | [2010] EWHC 2012 (Ch) |
| Docket Number | Case No: HC09C00868 |
| Court | Chancery Division |
| Date | 30 July 2010 |
[2010] EWHC 2012 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mr Justice Newey
Case No: HC09C00868
Mr David H. Christie (direct access) for the Claimant
Mr Fred Philpott (instructed by Neumans) for the Defendant
Hearing dates: 20, 21, 24 and 25 May 2010
Approved Judgment
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.
Mr Justice Newey:
These proceedings principally concern a loan to the Claimant, Mr Charles Helden, of about £1 million. Mr Helden borrowed the money to enable him to buy an apartment at 58 Chelsea Crescent, Chelsea Harbour in London.
It is Mr Helden's case that the agreement for the loan infringed the Financial Services and Markets Act 2000 (“ FSMA”) and is, as a result, unenforceable. The Particulars of Claim also include a claim for damages (of £1,250,000) for loss which Mr Helden says that he has suffered as a result of the breach of FSMA.
By its Defence, the Defendant, Strathmore Limited (“Strathmore”) denies any breach of FSMA but asks that, if necessary, it should be allowed to enforce the loan agreement notwithstanding any breach. A Counterclaim seeks an order for possession of 58 Chelsea Crescent and also judgment for the sums said to be due from Mr Helden. In this connection, Strathmore alleges that additional loans of £25,000 and £91,509 were secured on 58 Chelsea Crescent.
On 29 July 2009 Master Moncaster directed that issues relating to Mr Helden's damages claim should be dealt with after the other issues in the case.
The facts
This section of the judgment contains an account of the factual history.
Until 1983, Mr Helden was a commercial conveyancing clerk specialising in leases. He then became a mortgage broker, but he gave up work for a period after his first wife was diagnosed as suffering from cancer in 1999. Following his wife's death in 2002, Mr Helden decided to undertake property development on a full-time basis.
In 2004 Mr Helden joined forces with Mr John Jordan, an experienced house builder and property developer. The two acquired a company called C & J Construction Limited (“C & J”). Mr Helden and Mr Jordan each held 50% of the shares, and both were directors.
Strathmore's only shareholders are Mr Peter Ashton and his wife Mrs Pauline Ashton. In the past, Mr Ashton was the company's sole director and Mrs Ashton its secretary. On 24 July 2006, Mrs Ashton was appointed as a director in Mr Ashton's place, and the Ashtons’ son Stephen as secretary. When giving evidence, however, Mrs Ashton described herself as “just a signatory” and said that she was reliant on her husband.
Mr Ashton left school aged 16 and became an insurance clerk. By the early 1970s, he was managing the dollar trading desk of a leading discount house. In about 1976, he moved to a Swiss investment company in the West End of London, before running the London office of Lombard Wall International Limited from about 1981 to 1986. At that stage, he decided to work for himself, and he subsequently used Strathmore as the vehicle with which to build up a portfolio of commercial properties. From the late 1990s, however, the portfolio was reduced, and Strathmore is now left with only one small industrial unit. Another family company, Sandworth Limited (“Sandworth”), was set up for a one-off property transaction.
It is plain that Mr Ashton has very considerable financial acumen. However, he has never attended any courses on financial matters, nor acquired any post-school qualifications.
Mr Helden was introduced to Mr Ashton through Coldham Shield & Mace, a firm of solicitors in Chingford. Mr Helden had used Coldham Shield & Mace for a couple of years, and Mr Ashton had used them for many years. In the autumn of 2004, Mr Helden and Mr Jordan were seeking to buy some premises at 23 Catherine Place, London through C & J but needed additional funding. Mr Helden asked Mr Neil Wright, a solicitor who was then at Coldham Shield & Mace, whether he knew of anyone whom C & J could approach for funding. Mr Wright suggested the Ashtons, and C & J was subsequently lent £300,000 by Sandworth to assist with the purchase of 23 Catherine Place. Later in 2005, Sandworth made a loan of some £5.4 million to enable Rye Enterprises Limited, another company associated with Mr Helden and Mr Jordan, to buy a property at 63 Eaton Square in Belgravia. Mr Jordan also borrowed money from Sandworth to acquire a house at Tewin Wood in Hertfordshire in the name of WBB Property Services Limited.
By late 2005, Mr Helden wished to buy 58 Chelsea Crescent as his home. He asked Mr Ashton for funding, and the Ashtons agreed to make a loan of £1 million. An initial payment of £50,000 was made in December 2005, in respect of the deposit on 58 Chelsea Crescent. A further £995,462.83 was advanced on 31 March 2006, when the purchase was completed. Mr Helden explained in evidence that he approached the Ashtons for reasons of speed.
Mr Wright said, and I accept, that it was initially envisaged that Mr Helden would effect the purchase through WBB Property Services Limited but that the idea was abandoned when it was realised that this would make re-mortgaging difficult.
Some manuscript notes made by Mr Ashton appear, on their face, to date from this period. The notes read as follows:
“Chelsea Harbour –£1m –5% [deposit] + delayed 3 [month] completion
–offer £950.
Loan 1 [year] @ 7 1/2%
–agreed PSA/PHA [i.e. Mr and Mrs Ashton] 8/12/05
–told NW [i.e. Mr Wright] 9/12/05”
The last two lines are in red ink, the earlier part in blue.
Mr Christie queried the authenticity of these and other manuscript notes in Mr Ashton's handwriting. I have no doubt that the documents are what they purport to be. The notes quoted in the previous paragraph, for example, were, in my judgment, made by Mr Ashton at about the time the relevant events were occurring. I reject any suggestion that the notes were concocted by Mr Ashton for the purpose of the present proceedings.
Mr Helden accepted that the loan was to be at an interest rate of 7.5% and for a year. At the time, Mr Helden expected to be able to repay within a year.
A draft promissory note was prepared in respect of the £50,000 payment in December 2005. This referred to interest at the rate of 7.5% per annum, but stipulated that the debt was to be treated as repaid if Mr Helden entered into “a legal charge in favour of Strathmore Limited for all monies owed to them secured on 58 Chelsea Crescent”. No signed version of the promissory note has been found, Mr Helden denied signing it, and Mr Wright said that he could not remember what had happened as regards the document. The likelihood, I think, is that it was never signed.
An agreement dated 19 December 2005 was entered into by Strathmore and Mr Ashton. One of the recitals to this agreement was in the following terms:
“Ashton intends to make a loan of approximately one million pounds … (‘the Loan’) through Strathmore to Charles Cleland Helden (‘Helden’) to enable Helden to purchase 58 Chelsea Crescent … (‘the Property’) at an initial interest rate of 7.5% p.a. the loan period to run for one year from the date of completion of the purchase of the Property and in the event that the Loan is not repaid within that time at a rate to be negotiated with Helden”.
The agreement went on to provide for Strathmore to take a charge over 58 Chelsea Crescent as security for repayment of the loan and for Strathmore to hold both the charge and any moneys received from Mr Helden on trust for Mr Ashton. There was provision for Strathmore to receive a fee of £1,000 on the loan's repayment.
While Mr Wright had no actual recollection of the 19 December 2005 agreement, he said that it looked like his. In my judgment, the document will have been drafted by Mr Wright.
On 31 March 2006, Mr Helden executed a legal charge (“the Charge”) in favour of Strathmore. This provided for 58 Chelsea Crescent to be charged “by way of a legal mortgage with the payment to [Strathmore] of the debt to be paid by [Mr Helden]”. “Mortgage provisions” which were incorporated in the Charge stipulated that Mr Helden would pay to Strathmore “on the Payment Day the amount of the Debt”. The “Payment Day” was given as 31 March 2007, but against “The Debt” and “Interest Rate” there was written “In accordance with the offer letter”. No such letter was in fact prepared. Mr Helden's then fiancée, now second wife, countersigned the Charge in the presence of an independent solicitor to confirm her consent. The Charge was duly registered at HM Land Registry.
Mr Wright of Coldham Shield & Mace acted for both Mr Helden and Mr Ashton/Strathmore. Mr Wright said in evidence that he now knew that he should not, in the circumstances, have been acting for both borrower and lender. He frankly accepted that he had made a mistake.
No one concerned appreciated at the time that there was any question of FSMA applying. Mr Wright explained that he was not familiar with the requirements of FSMA and so made no mention of it to Mr Helden or Mr Ashton (or anyone else). Neither did Mr Helden, Mr Ashton or Mrs Ashton realise that FSMA could be of any relevance.
At about the same time, Sandworth lent C & J about £2.3 million to enable it to repay sums the company had borrowed from United Trust Bank for the purchase of 23 Catherine Place and a site at Ninfield, East Sussex.
It was also at about this time that Mr Helden borrowed a further sum of £30,000 on a personal basis. On this occasion, Mr Helden signed a promissory note. By it, Mr Helden promised:
“to pay to...
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