Kensington Mortgage Company Ltd v Mr Cyril Eugene Mallon

JurisdictionEngland & Wales
JudgeSir Gerald Barling
Judgment Date27 September 2019
Neutral Citation[2019] EWHC 2512 (Ch)
CourtChancery Division
Docket NumberCase No: DOOHD107
Date27 September 2019

[2019] EWHC 2512 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS & PROPERTY COURTS IN LEEDS

CHANCERY APPEALS (ChD)

Royal Courts of Justice

Rolls Building, Fetter Lane, London, EC4A 1NL

Before:

Sir Gerald Barling

(sitting as a Judge of the High Court)

Case No: DOOHD107

Between:
Kensington Mortgage Company Limited
Claimant and Respondent
and
(1) Mr Cyril Eugene Mallon
First Defendant
(2) Mr Ghulam Mustafa Zaman & Mrs Jamila Zaman
Second Defendants and Appellants

and

Louise Brittain (Trustee in bankruptcy of 1 st Defendant)
Defendant to Second Defendants' Part 20 claim

Mr Clifford Payton (instructed by TLT Solicitors) for the Claimant and Respondent

Mr Paul Lakin (instructed by Handslaw Solicitors) for the Second Defendants and Appellants

Hearing dates: 10 April 2019, 18 June 2019 and 2 July 2019

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.

Sir Gerald Barling

Introduction

1

This application for permission to appeal is subject to an order I made on 23 November 2018 for a “rolled up” hearing, to the effect that if permission was granted the appeal would follow immediately. As is usual in such cases, I have heard full argument on the grounds of appeal rather than dealing separately with the issue of permission.

2

Also before me is an application for permission to amend the grounds of appeal to add a further ground, Ground 5, relating to proprietary estoppel.

3

The appeal is against an order for possession and related orders made by His Honour Judge Davey QC (“the Judge”) on 31 May 2018 following his judgment on 27 April 2018. The possession order is in respect of the Appellants' family home, a terraced house in Dewsbury (“the House”).

4

The Appellants, Mr and Mrs Zaman, were the joint Second Defendants in the proceedings in the court below. They are represented in the appeal by Mr Lakin of counsel, who did not appear below. The Respondent to the appeal (the Claimant in the court below) is Kensington Mortgage Company Limited, who was represented in the appeal and below by Mr Payton of counsel.

5

There were two additional parties in the underlying claim: the First Defendant, Mr Cyril Mallon, and Ms Louise Brittain, who is Mr Mallon's trustee in bankruptcy. Ms Brittain is the Part 20 Defendant to a counterclaim by the Second Defendants. Neither Mr Mallon nor Ms Brittain have played any part in the appeal.

The facts

6

The facts are not in dispute. Their source is in large measure the evidence provided to the Judge by Mr and Mrs Zaman and Mr Zaman's school friend, Mr Mohammed Fadia who, with his wife, originally owned the House. Mr Mallon did not give evidence or take part in the trial below. The following summary of the facts is mainly drawn from the clear and succinct account set out in the Judgment.

7

In about 2000 Mr and Mrs Zaman, who lived in Dewsbury, wished to move to a bigger property as their family was growing. The Zamans agreed with Mr and Mrs Fadia that they would buy the House for £55,000. The Zamans raised and paid £33,000. It was agreed that the balance would be paid at £1,000 per month, and that in the meantime the Zamans could move into the House which would be transferred to them once the balance of the purchase price was paid. The agreement was put into writing but no copy was available at the trial.

8

The Judge found as a fact that the Zamans had moved into the House by the autumn of 2002, having regard to correspondence addressed to them there from their bank and local authority in relation to council tax. It is common ground that the Zaman family have lived in the House since then.

9

Mr Zaman ran a wholesale meat business. In the course of that business, in 1997, he met Mr Mallon, who lived in Northern Ireland where he carried on business supplying meat. Mr Mallon's business, called Carna Meats, supplied its products to Mr Zaman. By 2002 Carna Meats was Mr Zaman's sole meat supplier and the two men had become good friends, visiting each other's homes.

10

The meat was bought by Mr Zaman mainly on credit, and re-sold also on credit on a wholesale basis to his retailer customers. Mr Zaman began to suffer cash flow problems, and by 2002 he owed Carna Meats about £32,000. Mr Mallon threatened to stop supplies of meat unless the debt was paid in full. A discussion between the two men took place at Mr Zaman's commercial premises in Batley. Mr Zaman indicated that the debt would be paid in full, but if supplies were stopped the business would have to close down. Mr Mallon said he would consider the matter. There were further meetings to discuss how the debt would be paid. At a final meeting at the House, Mr Zaman mentioned that he had now paid for that property and that it was to be transferred into his and Mrs Zaman's names. During this meeting Mr Mallon suggested that the House be transferred into his name as security until the debt was cleared. Mr Zaman agreed to this, and that he would pay £300 per week in addition to paying for new meat supplies as they arose. On this basis Mr Zaman calculated that the debt to Carna Meats would be paid off in just over 2 years. The agreement was purely oral.

11

Mrs Zaman was aware of this agreement. Mr Zaman also informed Mr Fadia who, with his wife, was the vendor. Mr Zaman said that the Mr Fadia was “cautious” about transferring the House to Mr Mallon. Mr Fadia said that he had told Mr Zaman that he should not do it, but that the latter had told him to go ahead, despite Mr Zaman acknowledging the risk. Mr Fadia rang Mr Zaman from his solicitor's office when he was about to sign the transfer, and asked whether Mr Zaman was sure he wanted this to be done. Mr Zaman assured him that he did and that it was only until the debt owed to Carna Meats was paid off. Accordingly, Mr Fadia instructed his solicitor to transfer the House into Mr Mallon's name.

12

A TR1 was completed by Mr and Mrs Fadia dated 23 July 2003, recording the transfer of the House by them to Mr Mallon for a consideration of £55,000. On the form this sum was declared to have been received by Mr and Mrs Fadia from Mr Mallon. The TR1 was received by the Land Registry on 18 August 2003 and the Proprietorship Register was duly updated on that day, stating under the heading “Title Absolute: 18 August 2003, proprietor: Cyril Eugene Mallon”.

13

The Judge found that the transfer had been made “in accordance with the clear intentions and the clear instructions of all three men”.

14

On 8 December 2003 Mr Mallon applied to a finance company called igroup Limited for a buy-to-let mortgage based on a valuation of the House at £130,000. The application was accepted, and Mr Mallon borrowed £103,999 to be repaid in monthly instalments over 30 years. The mortgage (“the First Mortgage”) was created on 9 January 2004 and registered at the Land Registry on 13 January 2004. In 2005 Mr Mallon took out a second mortgage on the House with a different mortgage provider (“the Second Mortgage”).

15

Mr Mallon's buy-to-let mortgage application to igroup Limited was supported by what purported to be shorthold tenancy agreement dated 1 December 2003 in respect of the House between Mr Mallon as landlord and Mr Zaman as tenant at a calendar monthly rent of £700. The agreement provides for a six month term beginning on that date. It purports to be signed by Mr Zaman.

16

Mr Zaman's evidence, accepted by the Judge (who stated that both Mr Zaman and Mr Fadia were honest witnesses), was that he knew nothing of this tenancy agreement, had paid no rent and had signed no such document; therefore, his apparent signature was a forgery. He also said that he knew nothing of any mortgage or any arrears until 2016, when a formal notice concerning one of the mortgages was sent to the House.

17

The Judge accepted that igroup Limited had made all the enquiries of Mr Mallon they could reasonably be expected to have made, and had received satisfactory answers, including as to his actual address (which was in Northern Ireland). He noted that their valuer, a Mr Jones, had recorded in his report that at the time of his valuation inspection the occupants of the House were “the applicants” (presumably a reference to Mr Mallon) and that in the section headed “Person Present at Survey” he had noted “Mr Mallon and family”. The Judge commented that these matters would hardly have been recorded without some inquiry being made.

18

Mr Mallon paid the monthly instalments on the First Mortgage until about the end of 2014, from which time arrears began to accumulate. The same appears to have occurred with the Second Mortgage.

19

The Respondent is the successor to igroup Limited. The Respondent's proprietorship of the legal charge constituted by the First Mortgage was registered at the Land Registry on 9 June 2016.

20

In the meantime, by about the beginning of 2006 Mr Zaman had cleared the debt of £32,000 owed to Carna Meats. From this time Mr Zaman, who was still buying meat from Carna Meats, regularly raised with Mr Mallon the fact that he should now transfer the House into Mr and Mrs Zaman's names. Mr Mallon reassured Mr Zaman that he would sort the matter out soon. However, he did not effect the transfer, and in 2016 he was made bankrupt. Ms Brittain was appointed his trustee in bankruptcy.

The proceedings

21

In February 2017 the Respondent, as registered proprietor of a legal charge over the House, issued a claim for possession of the property and for mortgage arrears and costs against Mr Mallon. In June 2017 Mr and Mrs Zaman were joined as joint Second Defendants to the claim. In August 2017 they served an Amended Defence and Counterclaim, which included counterclaims against both the Respondent and against Mr Mallon and Ms Brittain (as the latter's trustee in bankruptcy). The pleading alleged inter alia...

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