Kevin Michael Wishart v Credit & Mercantile Plc
| Jurisdiction | England & Wales |
| Judge | Lord Justice Sales,Lord Justice Tomlinson,Lord Justice Longmore |
| Judgment Date | 06 July 2015 |
| Neutral Citation | [2015] EWCA Civ 655 |
| Docket Number | Case No: A2/2014/2068, A3/2014/2029 |
| Court | Court of Appeal (Civil Division) |
| Date | 06 July 2015 |
[2015] EWCA Civ 655
Lord Justice Longmore
Lord Justice Tomlinson
and
Lord Justice Sales
Case No: A2/2014/2068, A3/2014/2029
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
MR KERR QC (sitting as a Deputy High Court Judge)
HC13B00758
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr P Rainey QC & Mr T Polli (instructed by Glovers Solicitors LLP) for the Respondent
Mr R Tager QC & Mr N Mendoza (instructed by Haynes Orme) for the Appellant
Hearing date: 15 May 2015
Introduction
This is an appeal in relation to a judgment of Mr Tim Kerr QC (sitting as a Deputy Judge of the High Court) – [2014] EWHC 1746 (Ch)– in which he dismissed a claim by the appellant ("Mr Wishart") to have an overriding interest enforceable against the respondent ("C&M") based on an entitlement in equity to ownership of a house in Kent called "Dalhanna" and, by reason of such overriding interest, to be entitled to the proceeds of sale of Dalhanna.
Dalhanna is on registered land. It was purchased in May 2010 by Kaymuu Limited ("Kaymuu"), a company controlled and wholly owned by Mr Sami Muduroglu ("Sami"). In June 2010, Kaymuu was registered as the legal owner of Dalhanna.
Sami was at the time of the purchase a close friend of Mr Wishart. It has now emerged that Sami is a fraudster who acted contrary to Mr Wishart's interests, which Mr Wishart believed he was acting to promote. On 22 June 2010, Sami caused Kaymuu to borrow £500,000 from C&M in return for a charge given by Kaymuu over Dalhanna by way of mortgage. C&M's charge was registered. Mr Wishart was in occupation of Dalhanna at this time.
Sami took the money borrowed from C&M for himself and then lost it all gambling. He has since disappeared and has been declared bankrupt. Kaymuu defaulted on the loan.
C&M exercised its rights under the mortgage, issued proceedings to obtain possession of Dalhanna and then arranged for Dalhanna to be sold in October 2012 for £1.1 million. C&M seeks to retain £694,072.75 from the net proceeds of sale ("the main sum"), to realise its security. Mr Wishart claims this sum as against C&M, contending that his beneficial ownership of Dalhanna was an overriding interest at the time of the registration of C&M's charge, when he was in occupation of Dalhanna, and so has effect in priority to that charge.
The balance of £328,158 ("the surplus") has been paid into court, to await the outcome of these proceedings. Mr Wishart claims this sum, on the basis of his beneficial ownership of Dalhanna, as part of the proceeds of sale of Dalhanna. C&M claims that it is entitled to recoup its legal costs of these proceedings out of the surplus, as part of the monies covered by its charge on the proper construction of the mortgage deed, as registered.
At first instance, Sami's trustee in bankruptcy also claimed that the surplus should be paid to Kaymuu, and hence should be treated as part of Sami's estate. However, the judge rejected that claim and the trustee has not sought to appeal. In this court, therefore, the contest in respect of the surplus is simply one between Mr Wishart and C&M. We were told by Mr Rainey QC, for C&M, that even if it is found to be entitled to recoup its legal costs out of the surplus there will still be a residual balance left in court. Mr Rainey accepted that C&M had no claim to this balance and that, even if Mr Wishart failed on all other points in issue before this court, since no other person had an extant claim to the balance Mr Wishart would be entitled to be paid that money.
The judge held: (i) Mr Wishart was the beneficial owner of Dalhanna from the time when Dalhanna was acquired by Kaymuu, by reference to the equity recognised in Pallant v Morgan [1953] 1 Ch 43 ([125]–[165]); (ii) Mr Wishart was in occupation of Dalhanna at the date C&M's charge was registered, and a reasonably careful inspection of the land at that date would have revealed that he was in occupation ([186]–[195]); however, (iii) Mr Wishart's interest in Dalhanna did not qualify as an overriding interest as against C&M under section 29 of and paragraph 2 of Schedule 3 to the Land Registration Act 2002 ("the 2002 Act"), because of the operation of a principle akin to an estoppel identified by Lewison J (as he then was) in Thompson v Foy [2009] EWHC 1076 (Ch); [2010] 1 P&CR 16 at [142], by reference to the judgment of Farwell J in Rimmer v Webster [1902] 2 Ch 163, at 173, following Brocklesby v Temperance Permanent BS [1895] AC 173 ("the Brocklesby principle"); therefore C&M's charge took effect as against Mr Wishart and C&M succeeded in its claim to be paid the main sum ([166]–[185]); and (iv) on proper construction of the mortgage deed, C&M is only entitled to recover its costs of the proceedings against Kaymuu to obtain possession of Dalhanna, and is not entitled to recover the costs incurred in defending the claim brought by Mr Wishart to be paid the main sum and the surplus ([196]–[214]).
In this court, the main appeal is by Mr Wishart against the judge's ruling at (iii) above, regarding application of the Brocklesby principle. C&M seeks to uphold that ruling, but has also issued a respondent's notice under which it contends that the judge erred in his conclusion at (i) above and in finding that Mr Wishart had any beneficial interest in Dalhanna; on this argument, C&M submits that Kaymuu was at all material times the legal and beneficial owner of Dalhanna. C&M does not contest the judge's factual findings relevant to his conclusion at (ii) above. However, it appeals in respect of the judge's construction of the mortgage deed, at (iv) above. C&M submits that it is entitled to recover the entire legal costs of these proceedings, both in relation to the initial steps to recover possession of Dalhanna and in relation to defending its entitlement to receive the main sum and the relevant part of the surplus against Mr Wishart's claims in these proceedings to be entitled to them.
As I explain in detail below, I would dismiss Mr Wishart's appeal in relation to the judge's ruling on application of the Brocklesby principle at (iii) above. I would allow C&M's appeal in relation to the construction of the mortgage deed at (iv) above. Since Mr Wishart's appeal is to be dismissed, it is unnecessary to reach a definitive conclusion in relation to C&M's respondent's notice to contest the judge's ruling at (i) above. I would wish to reserve my opinion on this point.
The factual background
The judge has set out the detailed and rather convoluted factual background with commendable clarity. It is unnecessary to repeat all the detail in this judgment. The main points to be drawn from his judgment are as follows.
Mr Wishart and Sami met in about 1998 and became close friends and business associates. Between 1999 and 2004 they undertook a number of property development projects together. Sami had entrepreneurial flair while Mr Wishart developed good contacts with building contractors and is good at getting things done and bringing developments to fruition. There were never any formal written contractual arrangements between Sami and Mr Wishart. Sami was the wealthier participant and took the lead in their projects.
They had a loose understanding that their financial arrangements were, as Mr Wishart put it, "50–50", but the judge doubted that Mr Wishart received anything like 50% of the profits and found that the arrangements were largely improvised and based on friendship and trust ([6]).
In March 2004 Mr Wishart was remanded in custody on serious criminal charges. While in custody, he executed a general power of attorney in favour of Sami, which was revoked on his release from prison. Mr Wishart stood trial and was convicted on certain of the charges and was sentenced in July 2005 to six and a half years in prison. He was only released in June 2007.
Meanwhile, in about February 2005, Sami was disqualified from acting as a company director for five years.
These events meant that Sami's brother, Eren Muduroglu ("Eren"), became involved in assisting them to run their business ventures. Eren had a background as a City financial trader.
Eren took over as director of various companies in which Sami had an interest. To raise finance for their business ventures, Eren signed personal guarantees and gave security for loans. In return, he expected to participate in any profits. There was a loose informal understanding between him and Sami as to how he would participate in any profits from the development projects which was itself subject to further discussions to be held between Eren, Sami and Mr Wishart at such times as profits appeared to be imminent ([10]–[11]).
In 2007, Eren, Sami and Mr Wishart became interested in acquiring for development a cemetery site at Kemnal Manor in Bromley ("the cemetery"). The judge found that the three men had a common intention that although Mr Wishart was not involved in financing the project he would assist in organising the development of the site and would receive a share in the eventual proceeds ([13]–[14]). Again, the arrangement was left as a loose and informal one, with details to be filled in by discussion between them later, when the project bore fruit.
The financial arrangements to acquire the cemetery were convoluted. They are described by the judge at [15]–[22]. Mr Stephen Koehne, the responsible solicitor at Stephenson Harwood, acted for Sami and Eren. It was arranged that funding would be provided by Ulster Bank...
To continue reading
Request your trial
-
Mortgage Express v Lambert
...not, he does not. No further element is material: Williams & Glynn's Bank Ltd v Boland [1981] AC 487, 504 (Lord Wilberforce); Wishart v Credit & Mercantile plc [2015] EWCA Civ 655, [2015] 2 P & CR 15 at [46] (Sales LJ). ii) Schedule 3 paragraph 2 does not create rights. It preserves rights ......
-
Bank of Scotland Plc v Peter Lisney Hoskins
...claim was bound to fail. A third problem? 63 The claimant made a further point. It referred me to Wishart v Credit & Mercantile plc [2015] EWCA Civ 655, where a series of cases were examined, and a principle referred to as the Brocklesby principle (from Brocklesby v Temperance Permanent BS......
-
Huseyin Ali v Ismet Dinc
...where the most recent Court of Appeal authority is the judgment of Sales LJ (as he then was) in Wishart v Credit & Mercantile plc [2015] EWCA Civ 655, [2015] 2 P & CR 15. Resisting this approach, counsel for C raised a pleading point, suggesting D3 was not entitled to run this argument as ......
-
UBS AG v Rose Capital Ventures Ltd
...analysis by Newey J in Bank of Scotland v Hussain [2010] EWHC 2812 (Ch) and the Court of Appeal in Wishart v Credit & Mercantile plc [2015] EWCA Civ 655. Two recent summaries of the Brocklesby principle illustrate how it operates: (1) In Thompson v Foy [2010] 1 P&CR 16 Lewison J explained t......