Mortgage Express v Lambert
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lady Justice Gloster,Mr Justice Cobb |
| Judgment Date | 17 June 2016 |
| Neutral Citation | [2016] EWCA Civ 555 |
| Docket Number | Case No: B4/2015/2620 |
| Court | Court of Appeal (Civil Division) |
| Date | 17 June 2016 |
[2016] EWCA Civ 555
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COUNTY COURT AT MAIDSTONE
HIS HONOUR JUDGE SIMPKISS
1PA06205
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lewison
Lady Justice Gloster
and
Mr Justice Cobb
Case No: B4/2015/2620
Robert Denman (instructed by Holden & Co LLP) for the Appellant
Nicole Sandells and Nicholas Broomfield (instructed by Eversheds LLP) for the Respondent
Hearing dates: 25 th May 2016
Approved Judgment
In the autumn of 2007 Ms Lambert was in desperate financial straits. She was unemployed and had borrowed money on the security of her leasehold flat in Maidstone; but was unable to keep up with the repayments. She was facing the prospect of being ordered to give up possession of her home at the behest of her mortgagee, Blemain Finance Ltd. At the time she owed about £24,500 although her flat was worth about £120,000. Through the internet she made contact with a company called Annonna Ltd, which was owned and run by Mr Sinclair and Mr Clement. They visited Ms Lambert at the flat. They told her, to her surprise, that the flat was only worth £30,000 and offered to buy her lease of it for that sum. They also told her that she would be able to continue living there indefinitely, rent free during the first year and at a rent thereafter of £250 per month. It is, I think, clear on the basis of the judge's findings of fact that the agreement to sell and the promise that Ms Lambert could stay in the flat after the sale were part of a single bargain.
She agreed to this proposal, and a firm of solicitors called Lovejoys acted on her behalf. The judge was very critical of the quality of the legal services that they provided. On 11 September 2007 Messrs Sinclair and Clement made an online application to Mortgage Express for a secured loan. They said in the application form that they were applying for a buy-to-let mortgage; that they were remortgaging, that the value of the flat was £120,000 and that they were applying for a loan of £102,000. On the following day Ms Lambert completed an "Overriding Interests Questionnaire" that her solicitors had sent her. The questionnaire informed her that it was necessary for her to disclose all overriding interests of which she was aware, and then listed the kinds of interest that fell within that description. One of the matters listed was "rights of persons in occupation". The form then said "If any of the above ARE applicable please enter details below". Ms Lambert returned the questionnaire without disclosing any rights. On 13 September Lovejoys wrote to Ms Lambert. They told her that their own research had revealed that flats like hers were selling at £115,000 to £120,000; and pointed out the substantial difference between that and the sale price. They asked Ms Lambert to confirm that she had decided to sell at that price of her own free will and had not been pressured into selling at the price. Ms Lambert gave the confirmation by countersigning the letter. On 17 September Lovejoys wrote to Ms Lambert explaining some aspects of the contract. These included the requirement to give vacant possession. On 1 October Ms Lambert had a conversation with Lovejoys in which, according to their attendance note, she confirmed that she was happy to sell at an undervalue because her main concern was to pay off her loan. She also appears to have told Lovejoys something about an arrangement for a tenancy. The judge was rightly critical of Lovejoys' failure to make any inquiry about the nature of the leaseback.
Matters proceeded towards exchange of contracts, although as a result of Messrs Sinclair and Clement changing solicitors there was a delay in obtaining a revised offer of a mortgage from Mortgage Express. In consequence they completed the purchase with the aid of a bridging loan. The amount of that loan was £30,000. Contracts for the sale by Ms Lambert to Messrs Sinclair and Clement were exchanged on 4 October 2007 with the completion date the same day. The contract price was £30,000. Ms Lambert sold with full title guarantee; and clause 6 of the special conditions provided that vacant possession would be given on completion. Clause 14 of the special conditions provided:
"Any Occupier(s) who sign(s) this Contract gives his/her consent to the sale and agrees that vacant possession will be given on the Completion Date free from any estate rights or interest he/she may have in the Property (if any)."
Ms Lambert signed her part of the contract. In fact completion took place on the following day. Immediately before completion, but after exchange of contracts, Lovejoys provided answers to requisitions on title, which answered the requisitions on the basis that vacant possession was to be given on completion. The answer to requisition 1 also confirmed that there had been no changes in the written information given by or on behalf of the seller before exchange of contracts. On completion Blemain's secured loans were paid off out of the purchase monies with the aid of the bridging loan, and a small balance was paid to Ms Lambert. The TR1 form contained an acknowledgement by Ms Lambert that she had received the sum of £30,000 from the buyers; and a full title guarantee. Ms Lambert remained living in the flat. On 9 October 2007 Mortgage Express sent a new mortgage offer to Messrs Sinclair and Clement which they accepted. The amount of the loan was to be £102,000 plus £2,550 for fees. The offer also stated that the value of the property was £120,000. In conjunction with making the offer Mortgage Express also instructed Messrs Sinclair and Clement's solicitors, Beetenson & Gibbon to act on their behalf. On 15 October Beetenson & Gibbon wrote to Mortgage Express. In their letter they said:
"We … write to advise you that the purchase of this property is to be completed with the aid of bridging finance and immediately after completion is to be remortgaged to yourselves. We would be obliged if you would kindly confirm that this is acceptable to yourselves. We would advise you that the purchase price of the property in this instance is £30,000 and we would appreciate your requirements with regard to this. We can confirm that the Seller and Buyer are not related.
We believe that as in the past you will simply require an indemnity insurance for an amount of the loan plus 15% complying with 5.12 of the CML Handbook."
The reference to the indemnity insurance was a reference to the risk that in the event of the seller's bankruptcy her trustee in bankruptcy might apply to set aside the sale under the Insolvency Act 1986 as a sale at an undervalue. We were told that the indemnity insurance was provided although we have not seen it.
On 22 October Beetenson & Gibbon sent a report on title to Mortgage Express. This incorporated by reference the certificate of title set out in the appendix to rule 6 (3) of the Solicitors' Practice Rules 1990. This certified that Mortgage Express would obtain a good and marketable title free from any charges or onerous encumbrances, and that the purchase would be with vacant possession. The mortgage was completed on 26 October and the bridging loan was paid off out of the proceeds of the loan from Mortgage Express. The judge found at [48] and [50] that Mortgage Express was a bona fide purchaser for value and did not have notice of any equitable right of Ms Lambert's to set aside the sale to Messrs Sinclair and Lambert. On 21 January 2008 Messrs Sinclair and Clement were registered at HM Land Registry as proprietors of the lease, and the charge in favour of Mortgage Express was registered on the same day.
In July 2008, with the consent of Mortgage Express, Messrs Sinclair and Clement transferred the lease into Mr Sinclair's sole name. Mr Sinclair failed to keep up his repayments and in due course Mortgage Express appointed LPA receivers. In the meantime, Ms Lambert also fell into arrears with her rent, and the receivers began possession proceedings against her.
The original Particulars of Claim asserted that the flat had been let to Ms Lambert on an assured shorthold tenancy, and that the current rent was £600 per month. The Re-amended Particulars of Claim pleaded in paragraph 6 (g) that on or about 5 October 2007 Mr Sinclair granted Ms Lambert an assured shorthold tenancy in exchange for £250 per month in rent. Paragraph 13 (g) of Ms Lambert's Amended Defence also asserted that she had been granted an assured shorthold tenancy, and paragraph 16 of that pleading admitted paragraph 6 (g) of the Re-amended Particulars of Claim (apart from the amount of the rent).
Mortgage Express were joined as party to the proceedings because Ms Lambert's Defence and Counterclaim claimed that the transaction between her and Messrs Sinclair and Clement should be set aside on a number of different grounds. In the alternative she claimed a declaration that she was entitled to a leasehold interest in the flat "for a term of years (to be assessed) at a rent of £250 per month". HH Judge Simpkiss held that her claim to set the transaction aside on the grounds of undue influence and misrepresentation failed; but that the transaction should be set aside on the ground that it was an unconscionable bargain. The basis of his decision was that Ms Lambert was desperate, vulnerable, naïve and lacking in any business common sense or acumen; and that Mr Sinclair took unfair advantage of her by making her an offer which he knew to be dishonest. There is no challenge to that conclusion.
Somewhat surprisingly, in view of the agreed position on the pleadings, the judge found as a fact that there had been a written tenancy agreement, which has now been lost, for an unspecified term at a rent of £250 per month, which...
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