Prescott Place Freeholder Ltd v Constantin Batin
| Jurisdiction | England & Wales |
| Judge | Mr Justice Richards |
| Judgment Date | 14 June 2023 |
| Neutral Citation | [2023] EWHC 1445 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2020-002144 |
and
[2023] EWHC 1445 (Ch)
Mr Justice Richards
Case No: BL-2020-002144
IN THE HIGH COURT OF JUSTICE
BUSINESS & PROPERTY COURTS OF ENGLAND AND WALES
PROPERTY, TRUSTS & PROBATE LIST (Ch)
Rolls Building
Fetter Lane
London, EC4A 1NL
Michael Walsh (instructed by Judge & Priestley LLP) for the Claimants
Nathaniel Duckworth (instructed by Ashurst LLP) for the Second Defendant
Jamal Demachkie (instructed by Priority Law Limited) for the Interested Party
The First Defendant did not appear and was not represented
Hearing date: 12 May 2023
Approved Judgment
I direct 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.
This judgment was handed down remotely at 10am on 14 June 2023 by circulation to the parties or their representatives by email and by release to the National Archives.
A. INTRODUCTION
This judgment deals with matters consequential on the judgment (the “Trial Judgment”) that I handed down on 3 March 2023. I will not seek to summarise the Trial Judgment and instead will treat this judgment as a continuation of the Trial Judgment. Words and phrases defined in the Trial Judgment have the same meaning in this judgment unless I specify otherwise.
At trial, D1 and D2 put forward untrue evidence as to the date on which various documents effecting transactions in connection with the Property were executed. Much of the Trial Judgment was concerned with the making of factual findings including as to the true dates of execution of these documents. It is therefore convenient to introduce the issues with which I now deal with a brief chronology that draws on the various factual findings made in the Trial Judgment:
i) SD became registered proprietor of the Property in 2004.
ii) The 2004 Trust Deed was executed on 5 July 2004. By the 2004 Trust Deed, SD declared that he held the property on trust for D2 absolutely.
iii) On or around 7 May 2014, SD and D1 executed the 2014 Transfer that transferred the Property to D1 for a consideration of £125,000. D1 was registered as proprietor of the Property with a deemed date of registration of 29 May 2014. The 2014 Transfer resulted in D1 taking free of D2's beneficial interest under the 2004 Trust Deed.
iv) The 2014 Transfer was a “relevant disposal” for the purposes of s4 of the 1987 Act. That triggered C1's right under the 1987 Act to seek to acquire the freehold interest in the Property from D1. On 25 February 2019, the Claimants commenced the County Court Proceedings seeking an order under s19 of the 1987 Act requiring D1 to convey the freehold interest in the Property to C1.
v) Some time between 4 April 2019 and 7 June 2019, D1 and D2 executed the 2014 Trust Deed. That document was executed during the course of the County Court Proceedings and backdated to make it appear as though it was executed on or around 29 May 2014. Neither D1 nor D2 asserted in the County Court Proceedings or the FTT Proceedings that D2 had a beneficial interest in the Property that had any bearing on the application of the 1987 Act.
vi) On 25 October 2019, HHJ Lethem made the Section 19 Order that required D1 to convey the freehold interest in the Property to C1 “on the same terms as [D1] acquired the freehold of the Property, or alternatively on terms as may be determined by the [FTT]”.
vii) C1 entered a unilateral notice in respect of the Section 19 Order in the Charges Register of the freehold title at HM Land Registry on 11 November 2019.
viii) After the Section 19 Order was made, and before 14 January 2021, D1 and D2 executed the Equitable Leases granting long leases over Flats 36C and 36E to D2 for no premium and a nominal rent. The Equitable Leases were backdated to make it appear as though they had been executed in 2014. Their purpose was to devalue the freehold interest that C1 was entitled to acquire pursuant to the Section 19 Order. They were backdated, with an intention to mislead, in order to disguise the fact that they were granted after the Section 19 Order.
ix) The Equitable Leases take effect in equity only because no application was made to register them as legal estates within the time period specified in s6 of the LRA. No notice has been registered against the freehold title of the Property in respect of the Equitable Leases. Indeed, since 15 January 2021, D2 has been subject to an injunction that restricted his ability to register interests arising out of the Equitable Leases at HM Land Registry.
x) By its decision of 12 April 2021, the FTT determined that the consideration that C1 should pay to acquire the Property in accordance with the Section 19 Order was £125,000.
The positions of the parties in outline
The principal issue to be addressed is what form of order the court should now make in the light of the Trial Judgment. It was held in the Trial Judgment that it is an abuse of process for D2 now to assert any interest in the Property under the 2014 Trust Deed. For that reason, both parties focused their submissions on the rights if any that D2 retains, or should be permitted to retain, pursuant to the Equitable Leases.
The Claimants' position is as follows:
i) They already have the benefit of interim injunctions, including an injunction made by Zacaroli J on 8 February 2021 following a contested on-notice hearing. That injunction precludes D2 from marketing for sale any estate or interest in the Property and/or granting any interests out of D2's own interest (subject to exceptions). The injunction also precludes D2 from registering, or seeking to register, any estate or interest over the Property at HM Land Registry.
ii) Those injunctions should be continued as final injunctions. They should be supplemented with an injunction precluding D2, whether by himself, his agents or any other person, from going into occupation of the Property until the freehold title is conveyed to C1. That would preclude D2 from seeking to assert that his rights under the Equitable Leases are overriding interests by virtue of his actual occupation under paragraph 2 of Schedule 3 of the LRA.
iii) The Claimants advance a secondary argument to the effect that the court should exercise powers under s12B(5) of the 1987 Act so as to order that D1's transfer of the Property to C1 should result in C1 taking free of any interest of D2 under the Equitable Leases.
D2's position is diametrically opposed. He argues that:
i) The Claimants have no legal right or cause of action that could restrain D2 from protecting the Equitable Leases at HM Land Registry or from disposing of an interest in the Property. Accordingly, there is no proper basis for the court either to grant or continue the injunctions that the Claimants request.
ii) Even if the court does have the power to grant or continue the injunctions, it should not do so.
iii) The court should not simply decline to grant or extend injunctions made against D2. It should make a declaration that D2's rights under the Equitable Leases will bind C1 when the freehold in the Property is transferred pursuant to the Section 19 Order if either (a) D2 is in actual occupation of Flat 36C and/or Flat 36E by the time of the transfer of the Property to C1 or (b) the Equitable Leases are protected by notices in the registered title of the Property by the time the transfer of the Property to C1 is registered.
The application of Together to be joined in the proceedings
After the Trial Judgment was handed down, on 3 May 2023, Together First Commercial Finance Limited (“Together”) applied to be joined as a party to these proceedings under the provisions of CPR 19.2. At the hearing, I allowed Together's application and gave brief oral reasons in the interests of time. I said that I would provide fuller reasons in my reserved judgment and these are those reasons.
CPR 19.2 provides as follows:
(2) The court may order a person to be added as a new party if
(a) It is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or
(b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.
Given that Together is applying to become a party after service of the claim form, the consent of the court is required under CPR 19.4.
The background to Together's application is as follows:
i) As noted in the Trial Judgment, Together advanced money secured on the Property in 2017. More specifically it is the registered proprietor of a first legal charge over the property dated 29 August 2017 which was registered at HM Land Registry on 11 September 2017 (i.e. after the 2014 Transfer but before the Claimants served section 12B notices on D1 pursuant to the 1987 Act).
ii) Together's charge secures a loan of £950,000 advanced to D1 and D2. D1 and D2 are significantly in arrears on their loan and, because of these arrears, on 14 October 2022, Together appointed receivers (the “Receivers”) under the Law of Property Act 1925 (the “ LPA”).
iii) Together says that it has no record of ever being notified of the County Court Proceedings. It acknowledges that it received a letter from the FTT during the course of the FTT Proceedings on or around 10 March 2020. Together decided not to apply to join the FTT Proceedings at that time.
iv) Together says that it became aware of the present High Court proceedings in or around October 2022....
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