HSBC Bank Plc v Dyche and Another

JurisdictionEngland & Wales
JudgeJudge Purle QC
Judgment Date18 November 2009
Neutral Citation[2009] EWHC 2954 (Ch)
CourtChancery Division
Docket NumberClaim No 8BM30108
Date18 November 2009

[2009] EWHC 2954 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

BIRMINGHAM DISTRICT REGISTRY

Priory Courts,

33, Bull Street,

Birmingham B4 6DS

Before:

His Honour Judge Purle QC

(sitting as a High Court Judge)

Claim No 8BM30108

Between:
Hsbc Bank PLC
Claimant
and
(1) Amanda-Jane Margaret Dyche
(2) Alfonso Collelldevall
Defendants
and
Nigel Fox
Third Party

Mrs S Putnam (instructed by DG Solicitors) for the Claimant

Mr T Weekes (instructed by Burley & Geach) for the Second Defendant

The First Defendant and the Third Party did not appear and were not represented

Hearing dates: 10 th and 11 th June 2009

Judge Purle QC
1

The Claimant mortgagee ("HSBC") seeks possession of a house at 3 Tonbridge Road, Whitley Coventry ("the Property"), which is registered at HM Land Registry under Title No WM81067.

2

HSBC has 2 registered mortgages dated 19 th December 2002 and 17 th January 2003 respectively, and is owed in excess of £80,000 by the First Defendant ("Mrs Dyche"), who was the mortgagor in each case.

3

Mrs Dyche is the registered proprietor of the Property, and is the daughter of the Second Defendant ("Mr Collelldevall").

4

Mr Collelldevall claims to be the beneficial owner of the Property, where he has lived since 1976. His wife also lived there until her death in August 1994.

5

Mr Collelldevall also claims that his beneficial interest is an overriding interest having priority over HSBC's 2 mortgages.

6

HSBC disputes Mr Collelldevall's beneficial interest and says that any interest of Mr Collelldevall was overreached by one or other of (or a combination of) a transfer to Mrs Dyche and the 2 HSBC mortgages.

7

Mrs Dyche was made bankrupt in November 2006. The Third Party is her Trustee in Bankruptcy. Neither of them has taken any part in these proceedings. Mrs Dyche has not given evidence.

8

Mr Collelldevall was also formerly a bankrupt, having been made bankrupt on 12 th October 1988. As mentioned, he was then living at the Property with his wife. They were, immediately prior to the bankruptcy, joint tenants of the Property beneficially as well as legally. The effect of the bankruptcy was to sever the beneficial joint tenancy. Mr Collelldevall was discharged from his bankruptcy on a date which has not been identified more precisely than "early 1994".

9

Following Mr Collelldevall's bankruptcy, he and his wife were anxious to remain in the Property, which was their home. It appears that the Trustee in Bankruptcy obtained an order for sale of the Property in August 1992, which was not enforced. Subsequently, in November 1993, the then mortgagee, Coventry Building Society, obtained a possession order. That order also was not enforced.

10

On 28 th January 1994, the Property was transferred by the Collelldevalls to Mrs Dyche and her husband, with the concurrence of Mr Collelldevall's Trustee in Bankruptcy, for £25,000. I shall call this "the 1994 transfer". The Coventry Building Society's mortgage (in the sum of £5,481.77) was discharged on completion. £18,000 was also paid to Mr Collelldevall's Trustee in Bankruptcy, increasing the dividend in the bankruptcy. The purchase price bore no relation to the Property's actual value, which was much more than £25,000. The price was set to meet the Collelldevalls' immediate financial needs and commitments.

11

Mr Collelldevall's case is that the Property was acquired by the Dyches for himself and his wife. In the light of his bankruptcy, the Collelldevalls were unable to obtain a mortgage in their own names. It was therefore agreed, he says, that the Dyches would obtain a mortgage from Lloyds Bank ("Lloyds") for £17,000, which they did. The Property was (he says) transferred to the Dyches against a promise by them that it would be retransferred to the Collelldevalls once the £17,000 (which was treated as a loan from the Dyches to the Collelldevalls) and interest were repaid. The loan and interest were then calculated to be repayable by monthly instalments of £282.21 over 10 years, which corresponded to the monthly sums due under the Lloyds mortgage. The balance of the "purchase price" of £25,000 was provided by Mr Dyche, who borrowed £8,000 from a friend.

12

In effect, therefore, the Dyches were, according to Mr Collelldevall, acquiring the Property, and entering into the Lloyds mortgage, as nominees for himself and his wife.

13

I am mindful that I need to proceed with caution when considering the nature and effect of arrangements entered into many years ago, especially when they are raised to defeat the claims of third parties, such as HSBC, who are in no position to call positive evidence of their own in rebuttal. I am nevertheless satisfied that the agreement alleged by Mr Collelldevall is made out on the evidence. In addition to Mr Collelldevall's own evidence, and that of his other daughter Lynne (whose source of knowledge was mainly though not exclusively her parents and not Mrs Dyche) the agreement alleged by Mr Collelldevall is corroborated by the fact that the loan repayments were made (including a payment in kind). There are also references to the loan arrangement, and the fact that £8,000 was borrowed by Mr Collelldevall from a friend, in contemporaneous letters from Mrs Collelldevall to Lynne. There is also a receipt for the £8,000 loan but it is so indistinct that I cannot place any reliance on it. I do however accept Mr Collelldevall's evidence that this money was borrowed from the friend in question. In addition, a letter from Mrs Dyche dated 31 st May 2006 (written when she was very much at arms length from her father) clearly recognises the loan arrangement relating to the £17,000, and that payments have been made, including a payment in kind of an amount larger than that relied upon by Mr Collelldevall. Mrs Putnam (for HSBC) whilst testing the evidence by cross-examination, did not seriously challenge it. This was entirely understandable and proper, as she was in no position to amount an effective challenge.

14

Mr Weekes for Mr Collelldevall submits that the arrangements had the result that the Property was following the 1994 transfer held on constructive trust for the Collelldevalls. I agree.

15

The facts I have recited are, in my judgment, sufficient to give rise to a common intention constructive trust. The Collelldevalls agreed to transfer the Property upon the faith of a clear agreement or understanding that the Property would thereafter be held for them. That agreement and understanding was acted upon by their transferring the Property (at a price bearing no relationship to its true value) into the names of the Dyches, providing £8,000 (which they borrowed from a friend) towards the "purchase price", treating the remaining £17,000 as a loan to them by the Dyches and making repayments to the Dyches corresponding broadly to the sums falling due under the Lloyds mortgage. I say "broadly" because arrears accrued until repayments by Mr Collelldevall began in 1995, though he was doing work for the Dyches for which he was given credit, and higher monthly payments were then made by him in an endeavour to cover the shortfall, though he missed some months later on as well. The last cash payment was made in January 2003.

16

The requisite common intention is also to be inferred from the simple fact that the Collelldevalls continued to have sole beneficial use of the Property as their home. Although the solicitors' correspondence at the time of the 1994 transfer highlighted the need to give vacant possession, it was neither given in fact nor ever intended to be given.

17

The fact that the Dyches were under no immediate obligation to transfer the Property to the Collelldevalls while the loan instalments were outstanding does not alter my conclusion. A right of reimbursement (and associated right of retainer) is not inconsistent with acting as trustee, but an incident of doing so: see, generally, Lewin on Trusts, 18th edition, at paragraphs 1–28; 21–44. As Lord Hoffmann also observed in Ingram v IRC [2000] 1 A.C. 293 at 305:

"But a trustee in English law is not an agent for his beneficiary. He contracts in his own name with a right of indemnity against the beneficiary for the liabilities he has incurred."

18

Mrs Putnam contends that the agreement under which the Property was transferred to the Dyches was repudiated by late payment. As, however, late payment was accepted, there is nothing in this point. Had there been an accepted repudiation, the result would have been the same, as the Property was held on trust throughout. That would merely have entitled the Dyches to exercise their right of recoupment against the Property, or to sue Mr Collelldevall for the balance of the loan.

19

Mrs Dyche in July 2004 claimed that the arrears position was such that she had to take out a further loan. She had previously taken out a further loan from Lloyds, but this was for her own purposes, and not occasioned by any arrears. She went on to demand payment of £25,000, but never advanced any convincing explanation of why it was thought to be due.

20

Mr Weekes likens the position in the present case to a pre-1925 mortgage, which was effected by what was in form an absolute conveyance. Equity however recognised the pre-eminence of the right to redeem, with the consequence that the mortgaged property was owned by the mortgagor, subject to the mortgage: In re Sir Thomas Spencer Wells, Swinburne-Hanham v Howard [1933] 1 Ch 29, 52

21

Mr Weekes also relies on In re Duke of Marlborough, Davis v Whitehead [1894] 2 Ch 133. In that case, the Duchess of Marlborough transferred a lease to her husband solely to enable him to raise money on mortgage. The wife's evidence was that, subject to the mortgage being repaid, the house was to come back to her, a situation similar to the present one. Stirling J, following Haigh v Kaye (1872) 7 Ch App 469 (a decision of the Court of...

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