Spencer Day v Tiuta International Ltd, and Another
| Jurisdiction | England & Wales |
| Judge | Lady Justice Gloster,Lord Justice Vos,Lord Justice Moses |
| Judgment Date | 30 September 2014 |
| Neutral Citation | [2014] EWCA Civ 1246 |
| Docket Number | Case No: A3/2013/2624 |
| Court | Court of Appeal (Civil Division) |
| Date | 30 September 2014 |
[2014] EWCA Civ 1246
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION
Mr Justice Sales
[2014] EWHC 4583 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Moses
Lady Justice Gloster
and
Lord Justice Vos
Case No: A3/2013/2624
Mr Mark Warwick QC (instructed by Spencer Day) for the Appellant
Mr Stephen Robins (instructed by Watson, Farley & Williams) for the Respondent
Hearing dates: Tuesday 8 th April 2014
Introduction
This is an appeal by the claimant and appellant, Spencer Day ("Mr Day" or "the Appellant") against the order of Mr Justice Sales dated 6 September 2013 ("the Order") whereby he:
i) struck out certain paragraphs of Mr Day's Particulars of Claim under CPR 3.4(2)(a), on the basis that those paragraphs were unsustainable in law (see paragraphs 1, 2 and 3 of the Order); and
ii) granted summary judgment in favour of the first defendant, and first respondent to this appeal, Tiuta International Limited (in administration) ("TIL"), on certain parts of TIL's Counterclaim under CPR 24.2, on the basis that Mr Day had no real prospect of successfully defending those parts of the Counterclaim (see paragraphs 4, 5, 6 and 7 of the Order).
The appeal raises issues as to the exercise of the right of subrogation of a chargee in circumstances where the chargor has an unliquidated cross-claim for damages.
Background
Mr Day is a businessman and developer. In March 2008 he acquired the freehold of a substantial residential property comprising about eight acres and known as The Long Barn, Dog Kennel Green, Ranmore Common, Dorking, Surrey, RH5 6SU and land adjacent thereto ("the Property"). On 28 August 2009, Mr Day borrowed £3,000,000 from Standard Chartered (Jersey) Limited ("Standard Chartered") in order to refinance the Property. This loan ("the SC Loan") was secured by a mortgage and legal charge in favour of Standard Chartered ("the SC Charge"). On 15 October 2010 Mr Day obtained planning permission which allowed him to demolish the existing house on the site and to redevelop it as a substantial, high-quality residence. However he needed substantial additional finance to fund the necessary redevelopment.
On 7 June 2011, Mr Day entered into a loan facility agreement with TIL ("the TIL Loan Agreement"), pursuant to which TIL agreed to lend Mr Day £6,600,000 to enable him to refinance his existing borrowings in respect of the Property (including the SC Charge) and a further £6 million to be drawn down in tranches, against architects' certificates, to enable him to redevelop the Property ("the TIL Loan"). On 13 June 2011 Mr Day executed a first legal charge in favour of TIL to secure the facility ("the TIL Charge") and received the first £6,600,000 tranche of the TIL Loan. £3,000,000 (or thereabouts) of that sum was used to repay the sums due to Standard Chartered under the SC Loan and to discharge the SC Charge. Thereafter additional sums were advanced to Mr Day amounting in total (together with the original tranche) to a sum of £7,866,782.70.
In his evidence on the summary judgment application Mr Day maintained that each payment made by TIL under the TIL Loan Agreement was persistently and systematically late, resulting in the risk of work by contractors ceasing and delays in the conduct of the development works. Mr Day also complained that, as a result, various contractors ceased working and had to be changed. He asserted that, completely to his surprise, on 5 July 2012, TIL was placed in administration and that, thereafter, no further funds were released to him in order to enable him to continue with the development of the Property. That meant that the Property was left in a half built state, exposed to the elements and incapable of completion, since Mr Day did not have other means of funding the development.
Pursuant to the terms of the TIL Loan Agreement, Mr Day's debt to TIL became repayable on 9 November 2012. However, Mr Day failed to repay the TIL Loan. He accepted before the judge and before us that he lacks the financial means to do so. As a result of his non-payment, on 28 January 2013, TIL appointed Joseph Anthony Pitt and Benedict James Nicholas Moon as joint receivers in respect of the Property under the Law of Property Act 1925 ("the Receivers"), with a view to its marketing and sale, and the subsequent application of the sale proceeds in reduction of the TIL Loan. The Receivers in turn appointed estate agents Savills to market the Property.
Mr Day took steps to oust the Receivers from possession. The Receivers re-entered the property and changed the locks, but Mr Day ousted them from possession again and resumed possession of it himself.
The current proceedings
On 4 April 2013, Mr Day issued proceedings against TIL, Sarah Helen Bell and Geoffrey Wayne Bouchier, the administrators of TIL ("the Administrators"), as second defendants (who are the second respondents to this appeal), the Receivers, as third defendants, and others asserting an unliquidated claim for damages and contending (inter alia) that he could set this claim off against the TIL Loan to release the Property from the TIL Charge and thereby invalidate the appointment of the Receivers ("the set-off argument"). He also sought orders seeking declarations that the appointment of the Receivers was void and injunctions that all marketing of the Property should cease until such time as the court should order otherwise.
In response, by its defence and counterclaim dated by June 2013, TIL counterclaimed inter alia:
i) under paragraph (a) of the prayer, for the sum of £10,880,443.78 said to be due under the terms of the TIL Loan Agreement;
ii) under paragraph (b) of the prayer, for a declaration that the TIL Charge was valid and enforceable;
iii) under paragraph (c) of the prayer, for a declaration that the Receivers had been validly appointed;
iv) under paragraph (d) of the prayer, for a declaration that the Receivers were entitled to market the Property for sale;
v) under paragraph (e) of the prayer, for a declaration that TIL was entitled to an indemnity in respect of all expenses as it might incur the protection, maintenance or enforcement of its security as provided for in the TIL Charge;
vi) under paragraph (f) of the prayer, for an injunction to restrain Mr Day from interfering with the Receivers' possession of the Property.
TIL and the Administrators applied under CPR 3.4(2)(a) to strike out those paragraphs in the Particulars of Claim which raised the set-off argument, on the basis that such argument was contrary to a long line of binding decisions of the Court of Appeal, including Samuel Keller (Holdings) Ltd v Martins Bank Ltd [1971] 1 WLR 43; Mobil Oil Ltd v Rawlinson [1981] P.&C.R. 221, at 226; ( Barclays Bank plc v Tennet unreported, 6 June 1984) and National Westminster Bank plc v Skelton [1993] 1 All ER 242.
The well-known principle articulated in these cases can be summarised for present purposes (but subject to discussion as set out below) as follows: a mortgagor cannot unilaterally appropriate the amount of a cross-claim which is unliquidated and not admitted (whether a mere counterclaim, or a cross-claim for unliquidated damages which, if established, would give rise to a right of equitable set-off) in the discharge of the mortgage debt. It follows that, even where the quantum of the asserted, unliquidated cross-claim exceeds the amount of the mortgage debt, the mortgagee cannot be restrained from exercising his right to take possession of, and sell, the mortgaged property or, if appropriate, appointing receivers to sell the property, and applying the proceeds of sale in payment of his mortgage debt. (I refer to a "mortgage" debt, a "mortgagor" and a "mortgagee", but similar principles apply to a debt secured by a charge, and a chargor and a chargee, so the former references should, in this judgment, be taken to include the latter.)
In addition TIL sought summary judgment under CPR 24.2 in relation to the relief claimed under paragraphs (b), (c), (d) and (f) of the prayer to its counterclaim. TIL accepted before the judge, for the purposes of its summary judgment application, that Mr Day had arguable claims for unliquidated damages for breach of the TIL Loan Agreement in sums which might exceed the amount of the TIL Loan which was outstanding and which was outstanding at the time that the Receivers were appointed. It therefore did not seek summary judgment in respect of any outstanding part of the TIL Loan.
At the hearing of TIL's application on 6 September 2012, Mr Day, in addition to his first defence based on his set-off argument, sought to rely on a new (and previously unpleaded) allegation, that he had been induced to enter into the TIL Mortgage by fraudulent misrepresentations made on behalf of TIL, as to TIL's financial status and its ability to comply with the terms of the TIL Loan Agreement. This was based on the allegations set out in his witness statement dated 19 August 2013. Accordingly, Mr Day contended that, he was entitled to rescind the TIL Charge and that such rescission would operate so as to invalidate the appointment of the Receivers ("the rescission argument").
In response to the second defence, TIL contended before the judge that, even if Mr Day were able to rescind the TIL Charge for fraud, TIL would in any event be subrogated to the SC Charge, in accordance with...
To continue reading
Request your trial
-
UBS AG v Rose Capital Ventures Ltd
...restitution is an equitable remedy the maxim “he who comes to equity must come with clean hands” and the recognition in Day v Tiuta [2014] EWCA Civ 1246 at [51], [65] – [66] that the maxim was applicable in similar circumstances. 122 Taking the elements of the defence in turn: (1) Paragraph......
-
Charles Woodeson v Credit Suisse (UK) Ltd
...any claim by the bank (which has, in any event, not been made). 27 The submission is also inconsistent with what Gloster LJ in Spencer Day v Tiuta International [2014] EWCA Civ 1246 (para 11) called the well-known principle that “a mortgagor cannot unilaterally appropriate the amount of a c......
-
The Application for Interim Relief Under Section 11A of the Grand Court Act (2015 Revision) and Section 54 of the Arbtiration Act, 2012 Between (1) Leed Education Holding Ltd (2) National Education Holding Ltd (3) Hyde Education Holding Ltd Plaintiffs v Minsheng Vocational Education Company Ltd Defendant
...invoke rights or remedies available upon non-payment”; Megarry & Wade (9th ed.) at [24–028]; Gloster LJ in Day v Tiuta International [2014] EWCA Civ 1246 at [60]–[63]; and L:egatt LJ in Woodeson v Credit Suisse [2018] EWCA Civ 1103 at [51]–[66]. However, and happily, none of these decisio......
-
Mortgage debt and set-off rights: Woodeson v. Credit Suisse (UK)
...argument concerning the account was contrary to the well-established principle, set out in Spencer Day v. Tiuta International [2014] EWCA Civ 1246, that a bank can use the proceeds of sale of a property under a mortgage to discharge the mortgage debt without regard to any claim for set-off.......
-
Mortgage Debt And Set-Off Rights: Woodeson V. Credit Suisse (UK)
...argument concerning the account was contrary to the well-established principle, set out in Spencer Day v. Tiuta International [2014] EWCA Civ 1246, that a bank can use the proceeds of sale of a property under a mortgage to discharge the mortgage debt without regard to any claim for set-off.......