Hughmans Solicitors v Central Stream Services Ltd - (in Liquidation) and Another
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BRIGGS,Mr Justice Briggs |
| Judgment Date | 11 May 2012 |
| Neutral Citation | [2012] EWHC 1222 (Ch) |
| Docket Number | Case No: 9508 OF 2007 |
| Court | Chancery Division |
| Date | 11 May 2012 |
[2012] EWHC 1222 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Briggs
Case No: 9508 OF 2007
Mr Mark Warwick (instructed by Hughmans Solicitors) for the Claimant
Mr Daniel Lewis (instructed by Moon Beever) for the Respondents
Hearing dates: 30 April 2012
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.
Introduction
This is an application by Hughmans Solicitors against Central Stream Services Limited (in liquidation) ("the Company") and Stephen Hunt (its liquidator) for an order for payment out of the proceeds of sale of a property known as 3 Tisdal Place, London SE17 1QQ ("the Property") of the sum of £19,000 odd, to which Hughmans claim to be entitled as a judgment debt supported by a final charging order against the Property. The judgment debt arose from a claim for professional fees for work done by Hughmans as solicitors to a Mr Davidson, the registered proprietor of the Property at the time when the charging order was obtained.
The respondents claim a prior secured right to the whole of the net proceeds of sale of the Property by virtue of the contractual terms of the schedule to a Tomlin Order dated 13 June 2008 ("the Schedule") made by way of compromise of proceedings by the Company, by its liquidator, against Mr Davidson. Hughmans acted for Mr Davidson in those proceedings and signed the Schedule on his behalf. The issues, concisely argued by counsel at the hearing of this application in the ordinary applications list (being Mr Warwick for the applicant and Mr Lewis for the respondents) may be summarised as follows:
(1) Did the Schedule give rise to a proprietary interest of the Company in the Property?
(2) If so, did the obtaining of the charging order, and its protection at HM Land Registry by a unilateral notice, have the effect of conferring priority in favour of the applicant over the Company's interest?
The Facts
Mr Davidson was the second defendant to the Company's claim. The single recital to the Schedule recorded that the company and Mr Davidson had agreed to settle the Company's claim by the Company accepting the net sale proceeds of the Property, following payment of certain debts of Mr Davidson, "provided always that the Claimant (the Company) shall receive not less than £100,000." The operative terms of the Schedule may be summarised as follows. Paragraph 1 contained a provision for judgment against Mr Davidson for £10.2m if he should be shown to have mis-stated his assets pursuant to an earlier disclosure order made by Lindsay J in December 2007. Paragraph 2 provided that the Property should be sold for such price as might be agreed by the parties or in default of agreement as determined by the Court. Paragraphs 3 and 4 provided for Mr Davidson to have conduct of the sale, for his solicitors Hughmans to have conduct of the conveyancing work, subject to a reporting obligation to the Company, and for the parties to agree (or for the court to nominate) estate agents for the purposes of marketing.
Paragraph 6 provided as follows:
"The proceeds of sale of the Property shall be applied as follows and in the following order of priority (save for the avoidance of doubt provided always that the Claimant shall receive not less than £100,000.00):
6.1 to discharge the mortgage secured thereon in favour of National Westminster Bank;
6.2 in payment of £100,000 to the Claimant;
6.3 in payment of Hughmans's reasonable conveyancing costs and disbursements in connection with the sale;
6.4 in payment of the estate agent's fees;
6.5 in payment of the following debts of the Defendant:
(a) any shortfall showing on the completion statement in relation to the sale of 52 Park View Road;
(b) the reasonable fees and disbursements of Hughmans in connection with this action;
(c) debt owing to National Westminster Bank in connection with personal loan account, the subject of a Judgment in the Northampton County Court under claim number 8QR50189;
(d) debt owing to National Westminster Bank in connection with credit card reference 5522 1395 0007 7395;
(e) debt owing to MBNA in connection with credit card account reference 4129850349499133;
(f) debt owing to Egg in connection with credit card account reference 4627654919450309.
6.6 In payment of any remaining balance to the Claimant."
Paragraph 7 provided for the Company to remove a restriction registered against the Property upon receipt of payment pursuant to Paragraph 6. I infer that this was a restriction designed to give notice of a freezing order earlier obtained against the Mr Davidson from Lindsay J on 18 December 2007. Paragraph 8 provided for the Company to be entitled to the outstanding balance of the judgment debt of £10.2m (less amounts received pursuant to Paragraph 6), should Mr Davidson enter into a IVA or become bankrupt. Paragraph 9 contained a standard form full and final settlement provision.
The Tomlin Order itself provided in the usual way for a stay of the proceedings against Mr Davidson, save for the putting into effect of the terms of the Schedule, and for the discharge of the freezing order upon receipt by the Company of the funds referred to in Paragraph 6 of the Schedule.
It appears to have been assumed by the Company, Mr Davidson and Hughmans at the time of the making of the Tomlin Order that the net proceeds of sale of the Property would be sufficient to discharge the mortgage debt owing to National Westminster Bank, the initial £100,000 payment to the Company and at least some of Mr Davidson's debts, including Hughmans' fees and disbursements in connection with the action, referred to in Paragraph 6.5(b) of the Schedule. Unfortunately, the subsequent fall in the property market undermined this assumption.
Hughmans ceased to act for Mr Davidson in November 2009. In March 2010 they commenced proceedings for unpaid fees against him, leading to the obtaining of a judgment for £15,635.83 plus interest in default of defence, amounting in total to £19,004.18 inclusive of interest, on 12 April 2010. On 29 April Hughmans obtained an interim charging order in relation to the Property and, after duly notifying the Company by its liquidator (and obtaining an acknowledgment of receipt) Hughmans obtained a final charging order on 27 August 2010, which they made the subject of a unilateral notice at HM Land Registry.
In October 2011 the liquidator's solicitors served a form requesting the removal of the unilateral notice in relation to the Property, so as to permit it to be sold. Hughmans having declined, an arrangement was reached pursuant to which the notice would be removed, and the Property sold, but a sufficient sum out of the net proceeds (after paying National Westminster Bank) retained on client account by the liquidator's solicitors to protect Hughmans' claim to priority.
The Property was eventually sold so as to produce net proceeds of sale (after paying National Westminster Bank) of only £49,104.07. Thus, the priorities set forth in Paragraph 6 of the Schedule would lead to the whole of that sum being payable to the Company pursuant to Paragraph 6.2.
Did the Schedule to the Tomlin Order confer upon the Company a proprietary interest in the Property?
Mr Lewis for the respondents put his case under three headings: Equitable Charge, Declaration of Trust and Estoppel. Relying on Palmer v Carey [1926] AC 703, he submitted that the Property and its proceeds of sale constituted a fund from which, pursuant to a contract for valuable consideration, the Company was to be paid £100,000, in priority to all other claims upon it, save only the first mortgage of National Westminster Bank plc. The Company's rights in relation to the £100,000 therefore had all the traditional characteristics of an equitable charge.
Mr Warwick for Hughmans based his response on the following dictum of Lord Neuberger MR in ...
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