Morgan and Others v The Legal Aid Board
| Jurisdiction | England & Wales |
| Judge | Mr Justice Neuberger |
| Judgment Date | 12 April 2000 |
| Judgment citation (vLex) | [2000] EWHC J0412-15 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 12 April 2000 |
| Docket Number | CH 1999-M-No.0112 |
[2000] EWHC J0412-15
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BRISTOL DISTRICT REGISTRY
Mr Justice Neuberger
CH 1999-M-No.0112
Miss Jane Collier (instructed by the Legal Aid Board) appeared on behalf of the Part 20 claimant.
Mr Stephen Jourdan (instructed by Messrs. Burges Salmon, of Bristol) appeared on behalf of the Part 20 defendants.
This is an approved Judgment of the Court and I direct that no further note or transcript be made.
The Hon Mr Justice Neuberger Dated: 12th April 2000
MR. JUSTICE NEUBERGER
Introduction
The issue which I have to determine is whether the Legal Aid Board ("the Board") is entitled to a charge, pursuant to Section 16(6) and/or (7) of the Legal Aid Act 1988, over two pieces of freehold land ("the land"), which are part of Field Farm, Appleton, Gloucestershire ("the Farm"). The land consists of 33 acres ("the 33 acres") and 73 acres ("the 73 acres") respectively registered under Title Nos.: ON87380 and ON87389 at the Gloucester District Land Registry. The issue is of some difficulty and also of some significance.
The Facts
Colin, David, Margaret, Derek, Richard and Nigel Morgan ("the Morgans") traded as an agricultural partnership ("the partnership") on the 33 acres, owned by Margaret Morgan ("Margaret"), and the 73 acres, owned by Margaret, David and Colin Morgan ("the Claimants"). On 3rd October 1989, the Morgans entered into two legal charges ("the mortgages") with Barclays Bank PLC ("Barclays") whereby the Claimants covenanted to pay all monies owed to Barclays by the partnership on demand; by the first of the mortgages, Margaret charged the 33 acres, and by the second of the mortgages, the Claimants charged the 73 acres, to Barclays as security for the repayment of these monies.
On 31st July 1991, the Claimants purported to grant an annual tenancy ("the first tenancy") to S Morgan & Sons Ltd ("the Company") of the73 acres; on the same day, Margaret granted a tenancy ("the second tenancy") to the Company of the 33 acres. The following month, the Morgans dissolved the partnership and transferred the farming business to the Company.
On 7th August 1991, Barclays issued a writ out of the High Court against the Morgans for £818,266.25, being the amount then outstanding on the current account of the partnership. On 25th September, the Morgans served a Defence and Counterclaim in this action ("the first action"), whereby the Morgans claimed damages against Barclays for breach of contract, negligence and misrepresentation. During October 1991, Barclays issued a summons for summary judgment and also served a Reply and Defence to Counterclaim, to which the Morgans served a Reply on 18th December 1991.
On 31st January 1992, the District Judge ordered summary judgment in the first action in favour of Barclays in the sum of £500,000, but gave unconditional leave to the Morgans to defend as to the balance of Barclays' claim. The Morgans served a Notice of Appeal some seven days later. The appeal was heard on 20th May, 21st May and 2nd June 1992, and His Honour Judge Laurie gave the Claimants unconditional leave to defend, save that the Claimants were put on terms that they did nothing to devalue or prejudice Barclays' security; Barclays was given liberty to apply for judgment for £500,000 in the event that the tenancies were binding on it.
Meanwhile, on 12th May 1992, the Company had issued a writ out of the High Court against Barclays claiming a declaration that the Company was tenant under the first and second tenancy ("the tenancies") and that the tenancies were binding on Barclays as mortgagee of the land. Barclays served a Defence and Counterclaim in this action ("the second action") and joined the Morgans as parties to the Counterclaim. In their Defence and Counterclaim in the second action, Barclays alleged that the tenancies were shams or fraudulent devices, and in any event not binding on Barclays. On 19th February 1993, the Morgans and the Company served a Reply and Defence to Counterclaim in the second action.
On 2nd October 1992, Legal Aid was granted to the Claimants in the first action "to include continuing to defend [the] proceedings… up to but excluding trial". On 7th October 1992, the Claimants were each granted Legal Aid in the second action to "continue to defend the Counterclaim… up to but excluding setting down".
On 2nd April 1993, Barclays' solicitors telephoned the solicitors acting for the Morgans and the Company stating (according to the latter solicitor's note) "that Barclays will accept £230,000 in full and final settlement of the Morgan matters". This proposal was, in principle, acceptable to the Morgans, but they did not have sufficient assets themselves to be able to raise £230,000. In his affidavit, Mr Peter Williams ("Mr Williams"), the Morgans' solicitor says that it was:
"extremely difficult for them to obtain facilities with another Bank in order to fund the proposed agreement with [Barclays]. Further, where the opportunity to obtain funding existed, it was to provide facilities for the Company (which by this stage had established a trading record) as opposed to the Morgans themselves (who had no current trading record)".
There then followed negotiations as to the precise terms of the consent order then negotiated between the solicitors. On 21st July 1993, the solicitors acting for the Morgans wrote to Barclays solicitors stating that a provision in the agreed order "for the discharge of the [mortgages]" was "an absolute requirement on the part of the Morgans if they are to raise the finance to discharge the payment to [Barclays]". In their reply, Barclays' solicitors agreed "that the security be released" but:
"only when you confirm to us that you hold the sum of £200,000 in your client account and that upon discharge of the security the same will be sent to use by telegraphic transfer."
The bank which was prepared to provide facilities to the Company was Clydesdale Bank PLC ("Clydesdale"), but, according to Mr Williams, Clydesdale's offer of funds to the Company was:
"on condition that the Company acquired the freehold interest in the… land so that the security which Clydesdale would be able to take would be against the freehold land rather than the leasehold interest".
The negotiations through the solicitors to settle the two actions, and the attempts to obtain funding from Clydesdale both proved successful. Accordingly, the Morgans, the Company and Barclays entered into two orders ("the consent orders") in "Tomlin" form disposing of the first and second actions. The order in the second action was agreed on 9th August, and was passed and entered on 12th August, 1993. In summary, this provided as follows:
(1) The Morgans and the Company were to pay Barclays £200,000 on 9 th August 1993
(2) The Morgans and the Company were to pay Barclays £30,000 by 1st December 1993;
(3) If and when the £200,000 was paid, Barclays would enter into an agreed form of compromise of the first action in full and final settlement of all claims and, in particular, "Barclays would undertake to do all acts necessary to release the land from the [mortgages]".
(4) If the instalment of £30,000 was not paid, Barclays was entitled to sue for it.
(5) Each party was to bear its own costs, but there was to be Legal Aid Taxation of the costs of each of the Morgans.
12. On the same day, 9th August 1993, Margaret transferred the 33 acres to the Company for £150,000, and the Claimants transferred the 73 acres to the Company for £80,000. The Company contemporaneously granted a mortgage over the land to Clydesdale, as security for the Company's borrowing from Clydesdale, and in particular the £230,000 which Clydesdale was advancing to the Company to enable it to pay for the two transfers of the land. This money was then used, as I understand it, by the Claimants to pay the £230,000 due to Barclays under the terms of settlement of the second action.
The £200,000 having been paid to Barclays pursuant to the settlement of the second action, Barclays, the Company and the Morgans entered into the consent order to dispose of the first action, on 16th August 1993. The terms upon which the first action was compromised effectively mirrored those of the second action. The parties have complied with their respective obligations under the consent orders.
When the Company was acquired in 1991, Richard and Nigel Morgan each held one of the two shares issued by the Company. Immediately following the settlement, further shares were issued so that Richard, Nigel, Colin and David Morgan each had five shares and Derek Morgan had four shares. I understand that that remains the position today.
The Board and the Claimants have each issued an application for a determination as to whether, as a result of the terms of the consent order, the Board has a charge over the land.
The Statutory charge
It is common ground that the Board funded the legal costs of the Claimants in both actions, and that, in this connection, the Board has paid £66,871.36 in relation to the first action, and £8,739.77 in relation to the second action, which it has not recovered. The issue between the parties is whether the Board is entitled to a charge over the land, i.e the 33 acres and the 73 acres, by virtue of Section 16(6) and/or 16(7) of the 1988 Act. Although the land is now owned by the Company, it is the Claimants rather than...
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