Newell v Tarrant

APPROVED JUDGMENT

Hearing: Tuesday 9 March 2004 —Friday 12 March 2004

Judgment: Wednesday 7 April 2004

I direct pursuant to CPR Part 39 PD6 that no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.

Introduction

This is the trial of an action in which the claimant, Mr Harold Anthony Newell ("Mr Newell"), who is a solicitor, seeks a declaration that the first defendant, Mr Stuart Stanley Tarrant ("Mr Tarrant") should not be registered as the proprietor of land and buildings at Chase Farm, Chipping Norton, Gloucestershire ("Chase Farm"). The second defendant, Mrs Felicity Wise, is currently the registered proprietor of Chase Farm, her title being registered at HM Land Registry under title number 0N153079. She was known throughout most of the key events in this dispute by her former married name of Mrs Ross and for the avoidance of confusion I will refer to her by that name throughout this judgment. Her late husband, Mr Hugh Ross, died in 1996 and she has since remarried. Mr Newell seeks both an order that Mrs Ross should execute a legal mortgage over the property in his favour as security for sums allegedly owed to him by her and a declaration that she holds Chase Farm for him as the beneficiary of an equitable mortgage over the property to secure the repayment of such indebtedness. On the other hand Mr Tarrant seeks by way of counterclaim a declaration that Mr Newell is not entitled to maintain a caution registered by him against Chase Farm and that the same should be cancelled.

On 17 May 1996 Mr Newell lodged the caution against Mrs Ross's title. The application for the caution was supported by a statutory declaration made on 16 May 1996 in which Mr Newell stated that until 16 January 1990 he had held the deeds of Chase Farm as solicitor for Mrs Ross and "had a lien on the deeds in respect of money on special loan accounts arranged on her behalf jointly with her husband at Midland Bank Moreton in Marsh and Lloyds Bank Evesham" Mr Newell explained that the deeds were handed over on the basis of an agreement and undertaking signed by Mr and Mrs Ross. The declaration continued that there was still money due on the said loan accounts and Mr Newell required Mrs Ross to execute a mortgage in his favour over Chase Farm. The legal effect of the alleged agreement and undertaking ("the undertaking") lies at the core of this action. The undertaking was in the form of a letter addressed to Mr Newell and drafted by him in the following terms:

"The Bungalow

Oxford Street

Moreton in Marsh

Gloucestershire

Dear Sir,

In consideration of you handing over to us the deeds of our land at Old Chalford, Oxfordshire and not exercising your lien over the same we hereby agree and undertake that in the event that the net proceeds of sale of our bungalow at 35 Oxford Street, Moreton in Marsh being less than the amount required to repay the [Bridging] Loans arranged by you on our behalf with Midland Bank, Moreton in Marsh and Lloyds Bank, Evesham we will pay to you the balance required to clear the said [Bridging] Loans and if we are unable to pay you the amount required immediately we will execute in your favour a mortgage over the said land at Little Chalford to provide you with security for such outstanding balance and the interest accruing thereon until repayment.

Dated this 16 ^th day of January 1990 [signed by Hugh Ross] [signed by Felicity Ross]

Harold Anthony Newell

T S Barkes & Son

Solicitors

Moreton in Marsh

Gloucestershire"

On 20 December 2001 Mrs Ross sold Chalford Farm to Mr Tarrant for £55,000. Mr Tarrant, who is Mrs Ross's employer, was well aware of Mr Newell's caution at the time of the purchase. When the solicitors attempted to register the transfer of the title at the Gloucester District Land Registry in late December 2001 Mr Newell objected on the grounds that he had the signed undertaking from the registered proprietor to execute a mortgage in his favour and that the undertaking had created an equitable charge. In the light of this objection the Land Registry decided to cancel the application, leaving the caution on the Register. This led to an exchange of correspondence between the solicitors representing Mr Tarrant and Mrs Ross, Mr Newell and the Land Registry. The correspondence culminated in a direction from the Land Registry dated 27 August 2002 that Mr Newell should issue proceedings in the Chancery Division on or before 25 October 2002 for the purpose of determining whether the caution should be cancelled or continue to have effect and whether the transfer should be registered. The claim form in this action was issued by Mr Newell's solicitors on 24 October 2002 in accordance with that direction.

Although Mr Tarrant is named as the first defendant in this action he has played only a very minor role in this affair. The main parties to this dispute are Mr Newell, who appeared by counsel, Mr John de Waal, and Mrs Ross, who appeared before me in person. However, I should make it clear at the outset that Mrs Ross and indeed the court were greatly assisted by the help given to her by Mr Stuart Cakebread, counsel instructed on behalf of Mr Tarrant. Mr Cakebread, whilst distancing his client from the factual disputes between Mrs Ross and Mr Newell and not seeking to represent Mrs Ross, helped to formulate submissions on her behalf in relation to some of the issues of law and fact that arose during the course of the trial. All of the points raised were matters which are likely to have been canvassed were Mrs Ross to have been represented. That assistance ensured the efficient use of court time and enabled the relevant issues in the case to be properly ventilated.

The history of this matter is rather complex and before dealing with the legal issues that arise I must refer to some of the detailed events that gave rise to the creation of the undertaking, in respect of which I make the following findings of fact.

The background facts

Mr Newell has practised for many years as a solicitor and since 1984 under the name of T S Barkes & Son from premises in Moreton in Marsh, Gloucestershire. Mrs Ross and her former husband first became acquainted with Mr Newell in 1986 when they sought legal advice from his firm in connection with a claim being made against them for mortgage arrears.

Mr and Mrs Ross moved to Moreton in Marsh in the summer of 1983 and purchased premises at 3 Oxford Street from which they traded as "The Greedy Grape Wine Bar". The premises comprised two attached buildings then known as 3 and 3A. In October 1984 Mr and Mrs Ross purchased the next door property, 5 Oxford Street and mortgaged both premises to Mercantile Credit Company Limited as security for an advance of £140,000. By the autumn of 1986 Mr and Mrs Ross were in arrears with their mortgage payments and it was in this context that they approached Mr Newell for help. The arrears of instalments amounted to £42,985.20. On 10 November 1986 Mercantile Credit issued a summons in the Evesham County Court for the possession of numbers 3 and 5 Oxford Street. In order to realise the funds required Mr Ross instructed Mr Newell to carry out the sale of a property owned by him at 57 Epirus Road, Fulham. The sale was completed on 28 January 1987 and the proceeds of £146,000 were sufficient to clear the arrears £46,810 then owed to Mercantile Credit.

In the meantime, whilst the sale of the property in Epirus Road was proceeding, Mr and Mrs Ross came across the property at Chase Farm, which comprised 7.4 acres including a derelict cottage, a stable block and a garage, near to the A34 trunk road. They were very taken with this property which they decided to purchase out of the surplus funds arising from the sale of Epirus Road. The purchase price was £16,000. On 23 December 1986 Mr Newell opened a client account (number 51039512) at the Moreton in Marsh branch of Midland Bank plc for Mr Ross in order to provide a bridging loan of £5,000 to enable this transaction to proceed. The account was closed on 30 January 1987. The contract for the purchase of Chase Farm was signed on 12 January 1987 and it is apparent from the document that shortly before it was signed the draft was amended to show Mrs Ross as the sole purchaser rather than her husband. In cross-examination Mrs Ross stated that the land had been put in her name because she was 32 years younger than her husband and he wanted her to have something of her own for herself and their young son. This evidence was challenged by Mr de Waal who asserted that the property was put in Mrs Ross's name in order to defeat an outstanding claim by the Inland Revenue against Mr Ross which became apparent in April 198I do not consider that that is correct and I accept Mrs Ross's evidence that she became the purchaser and beneficial owner of the land for the reasons she gave in evidence. This is a fact of some importance as will be seen below.

The plan by this stage was for Mr and Mrs Ross to convert Chase Farm to living accommodation and to develop the properties at 3 and 5 Oxford Street into six separate retail and residential units which could gradually be sold to third parties. In March 1987 Mr Newell once again opened an account number 51039512 in the name of...