Kevin Munday and Carolyn Munday v Mr Hilburn and Mr Fields
| Jurisdiction | England & Wales |
| Judge | Mr Justice Nugee |
| Judgment Date | 17 December 2014 |
| Neutral Citation | [2014] EWHC 4496 (Ch) |
| Docket Number | Case No: CH/2014/0132 |
| Court | Chancery Division |
| Date | 17 December 2014 |
[2014] EWHC 4496 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Court No. 11
7 Rolls Building
Fetter Lane
London
EC4A 1NL
The Honourable Mr Mr Justice Nugee
Case No: CH/2014/0132
Mr D Lightman appeared on behalf of the Appellants
Mr A Solomon appeared on behalf of the Respondents
Introduction
This is an appeal from an order of His Honour Judge Dight sitting at the Central London County Court made on 10 February 2014 (and as drawn up dated 12 February 2014) by which he struck out the claimants' claim and ordered them to pay the defendants' costs of the action and an interim payment of £20,000.
The claim had been brought by Mr Kevin Munday and his wife, Mrs Carolyn Munday, and was a claim for damages for fraudulent misrepresentations, together with various alternative claims for financial relief. The basis on which His Honour Judge Dight struck out the claim was, briefly, that Mr Munday had been made bankrupt in 2011 and his claims had vested in his trustee in bankruptcy. It was, therefore, an abuse of process for him to pursue them in this action.
The claimants appeal relying, among other things, on the fact that on 29 January 2014 Mr Munday's bankruptcy was annulled and, therefore, there is no abuse of process. Permission to appeal was given by Peter Smith J on 11 April 2014.
Facts
Mr and Mrs Munday had bought a house at 265 Malden Road, New Malden, Surrey in 2002 as a family home. I can take, conveniently, a statement of the other pertinent facts from a judgment given by Mr Recorder Chapman QC on 27 February 2014 in related proceedings in which the current defendants sought possession of the property from the current claimants. He said this at paragraph [2]:
'2. The defendants [that is Mr and Mrs Munday] were the owners and occupiers of the house subject to various mortgages. They fell into arrears on their mortgages which they were unable to pay and by 2009 the first mortgagee was threatening to take possession of the property and sell it.
3. Mr Fields and Mr Hilburn were in partnership together in a firm called Fast Track Homebuyers. Their business involved offering homeowners a sale and rent back scheme under which the homeowner would sell their house to Fast Track for a price well below market value but raising enough money to pay off their debts on terms that they were granted an assured shorthold tenancy and an option to buy back the property at a price which gave Fast Track a profit on the deal.
4. The scheme was attractive to distressed homeowners because it held out the prospect of being able to pay off their debts while remaining in their home. Mr and Mrs Munday were introduced to Mr Hilburn and had a meeting with him on 6 October 2009. He offered them a sale and rent back scheme. On 24 November 2009 they entered into such a scheme with Mr Hilburn but there is a dispute between the parties which I have to resolve as to the exact terms of the scheme.'
He then proceeded to resolve that dispute and at paragraph [8] said:
'8. I find that the transaction took place on 24 November 2009 and was as summarised by the defendants' own solicitors in a letter before claim dated 24 February 2012. First, the Mundays transferred the property to Mr Hilburn for a consideration of £193,000. Second, Mr Hilburn granted the Mundays an assured shorthold tenancy in the property for a term of two years at a monthly rent of £1,250 and by agreement Mr Hilburn deducted from the purchase price the sum of £30,000 amounting to two years' rent in advance.
9. Thirdly, Mr Hilburn granted the Mundays an option to purchase the property on 24 November 2011 at a price of £249,000 plus a sum to compensate Mr Hilburn for any expenditure on the property during the option period.'
Going ahead to paragraph [13], he said:
'13. After completion of the transaction the parties purported to amend the transaction by executing a replacement option agreement dated 1 December 2009. However, this seems to have been just a draft document with many blanks and I am doubtful whether it was certain enough to be valid. For example, it did not specify when the option was to be exercised.
14. However, the option agreements of 24 November and 1 December 2009 both contain the following material clauses. One, that the option was not exercisable if the Mundays were in material breach of their tenancy. Two, that the option should not be registered against the title of the property and, three, that Mr Hilburn would not sell or otherwise dispose of the property to a third party without requiring the third party to enter into an identical option agreement with the Mundays.'
At paragraph [16] he said:
'16. In November 2010, Mr Hilburn sold and transferred the property to Mr Fields as part of a scheme to refinance the transaction. In breach of the option agreement, Mr Hilburn failed to require Mr Fields to enter into an option agreement with Mr and Mrs Munday. The existence of the assured shorthold tenancy and option agreement were concealed from the new mortgagees, no doubt to facilitate grant of a new mortgage. However, Mr Fields accepts in these proceedings that he is bound by the assured shorthold tenancy and by the option agreement.
17. Mr Hilburn said in evidence that he did not get Mr Fields to execute an option agreement with the Mundays because he did not regard Mr Fields as being a third party. Mr Fields said in his evidence that he did not notify his lender of the tenancy and option agreement by mistake. I must say that I regard both those explanations as disingenuous. Mr Solomon sought to mount an argument that on a true construction of the option agreement Mr Hilburn did not have to procure execution of the option agreement by Mr Fields before completion of the sale of the property but I do not accept that argument.
18. It seems to me that on a true construction of the option agreement it must have been an obligation to procure execution of a new option agreement before completing the transaction because the execution of an option agreement could not be enforced after completion. In any event, Mr Fields has not executed an option agreement with the Mundays though he accepts that he is bound by the existing one.
19. By a notice dated 2 June 2011 the Mundays purported to exercise the option agreement of 24 November 2009 but there are no proceedings to enforce the option agreement and no reliance is placed on the notice of 2 June 2011 or on rights under the option agreement in these proceedings. No doubt the Mundays are not in a financial position to be able to exercise or to complete any option to repurchase the property.
20. It is common ground that the Mundays have paid no rent since 24 November 2011 other than payment of £1,250 on 3 July 2012. On 28 December 2011, Mr Fields offered the Mundays a new assured shorthold tenancy but they did not take up the offer. On 15 May 2012, Mr Fields served on the Mundays notice under Section 21 of the Housing Act 1988 requiring possession after 23 July 2012 or at the end of a tenancy period next after the end of two months of service of the notice. It is not disputed in these proceedings that the notice was prima facie valid if, as I have found, the parties were bound by the two-year assured shorthold tenancy.'
I need not read any more of that judgment. He went on to find that there was no defence to the claim to possession and ordered the Mundays to give possession and, indeed, possession, I understand, was taken.
To that account I need to add the following. On 15 February 2011 Mr Munday was made bankrupt. At some stage, I do not think I am told the exact date, the official receiver became the trustee in bankruptcy, no doubt under Section 295(4) of the Insolvency Act 1986 which provides that:
'As from the giving of notice under subsection (3) in a case in which no notice has been given under section 293(2), the official receiver shall be trustee of the bankrupt's estate.'
On 15 February 2012, Mr Munday was discharged from that bankruptcy. On 28 August 2012, which was, in fact, the same day as the initial hearing in the possession proceedings, the Mundays issued the claim form in these proceedings, initially in the Chancery Division of the High Court. The particulars of claim followed. I do not think I have the precise date. As originally issued, they sought, among other things, rescission and various claims to damages and other financial relief. However, pursuant to permission given on 7 June 2013 by Her Honour Judge Guggenheim, the particulars of claim were amended. The claim to rescission was dropped and the primary relief claimed was now damages for fraud, although there were various other claims for financial relief joined, such as damages for breach of fiduciary duty or breach of trust or breach of contract against the first defendant, who I should say is Mr Hilburn, and claims in dishonest assistance or knowing receipt and various other heads against the second defendant who is Mr Fields.
On 18 July 2013, the defence was amended. That included at paragraph 2. a plea referring to Mr Munday's bankruptcy as follows:
'It is understood that the First Claimant was declared bankrupt on 15 February 2011. The events underlying the claims took place prior to the bankruptcy, and all such claims therefore vest in the Trustee in Bankruptcy and not the First Claimant. No assertion to the contrary has been made by the First Claimant notwithstanding requests for the same from the Defendants. The following is without prejudice to the contention that the First Claimant may not bring these claims.'
A reply was served on 16 August 2013. So far as that plea of bankruptcy is concerned, the only plea in reply was paragraph 3. which was to this...
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