Thames Valley Housing Association Ltd & Others v Elegant Homes (Guernsey) Ltd & Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 27 October 2009 |
| Neutral Citation | [2009] EWHC 2647 (Ch) |
| Court | Chancery Division |
| Date | 27 October 2009 |
| Docket Number | Case No: HC08C03537 |
[2009] EWHC 2647 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Mann
Case No: HC08C03537
Mr. A. Pay (instructed by Messrs. Andersons) for the Claimants.
Mr. D. Halpern Q.C. (instructed by Barlow Lyde Gilbert LLP) for the Second Defendant.
Mr. J. Taylor (instructed by Messrs. Ahmed & Co) for the First Defendant.
Hearing date: 7 th October 2009
Introduction
This is an application made by the first two claimants to enforce an undertaking given by the second defendants (“Willmetts”) given in the course of a conveyancing transaction. In these proceedings those two claimants seek to enforce that undertaking and they made an application for summary judgment. That is the application that came before me. At the end of the argument I announced my decision, which was that the undertaking would be enforced and an appropriate order made. Because of other matters that had to be dealt with (including a summary judgment application against the first defendants) it was not convenient to give my reasons at the time and I announced that I would give them later. This judgment contains those reasons.
The facts
The first two claimants (“the associations”) are associated companies, and are both housing associations. The third claimants (“Andersons”) are their solicitors. The first defendant (“Elegant”) is a developer and Willmetts were its solicitors. For the purposes of carrying out the development referred to below, Elegant borrowed money from the third defendant (“the Bank”). There is a third party (Mr MacPherson) who is a person who is said to be the owner and/or controller of Elegant. Although he figures in some of the events surrounding those with which I have to deal, I will not need to refer to him again.
In 2007 Elegant was minded to acquire a development site at Windsor Road, Bray, in Berkshire. In order to acquire and develop it it sought finance from the Bank, and the Bank agreed to provide finance for both purposes. It also had other properties and borrowings were required for that other development as well. It was intended to develop the Bray land by dividing it into 30 units and building a house on each of them. An internal Bank document in 2007 records the “Payment Terms” as being “one bullet repayment on sale of finished units”. That particular reference became an important point in the argument of Mr David Halpern QC, who appeared for Willmetts, as will appear below. It appears from that provision that the Bank at least intended that it would be repaid by a series of repayments, made as and when each of the various units, when completed, were sold in their completed state. The contractual and proprietary documentation, however, did not reflect that. The Bank's facility letter for the Bray project was dated 30 th April 2007 and provided that the facilities (£6.277m) would be repayable on demand at all times, despite the fact that it was described as a “Term Loan”. Elegant was to provide security for the loan as set out in the “Security Documents” set out in schedule 1 to the facility letter. Those documents included:
“1.1 A first and only debenture from the Borrower.
1.2 A first and only legal charge over the [Bray] Property.”
A debenture was already in place. It was dated 20 th May 2005 and was in the familiar form – a fixed charge on all freehold and similar properties and a floating charge on a lot of other assets. I do not need to set out its provisions. A fixed charge was given over the Bray property on 1 st June 2007; it secured all monies due from Elegant to the Bank. I do not need to set out any of the provisions of that document either. The important point to note about both of them is a negative – none of them contained any conceivable reference which would support the notion that the Bank would be obliged to release any particular part of the Bray property on payment of anything less than the whole of the outstanding debts due from Elegant to the Bank. The structure as it appears from those documents, and without prejudging the validity of a submission made by Mr Halpern, was a familiar one. The Bank was prepared to lend (and did lend) the costs of buying the land and a percentage of the development costs. It apparently expected to be paid piecemeal by sales of the plots, and no doubt would be highly likely to accept repayment in that manner because it was hardly likely that it would be repaid in any other way. The borrower would wish to pay in that manner because it was from sales of individual plots that it was going to get its money in respect of the development. In other words, that particular repayment mechanism seems, on the face of the contractual documents, to be a matter of commercial practicality rather than legal entitlement, though the documents do contain provisions which forbid sales of any of the properties without the Bank's consent. The Bank would be highly likely to consent to proper sales because, as I have observed, it was not going to be repaid in any other way short of full scale security enforcement.
At the beginning of 2008 Elegant agreed to sell six of its plots to the first claimant and three others to the second claimant. For the purposes of this application there is no need to distinguish between those two sets of plots, and I can treat them as being overall one purchase and treat the first two claimants as being one purchaser. Those two claimants instructed Andersons to act in the conveyancing; Elegant instructed Willmetts. The partner acting at Willmetts was a Mr Gilbert. The plots sold were not to have houses built on them at the time of sale, contrary to the basis on which the Bank understood it was providing funding. The Bank documents demonstrate that it was expecting that the plots would only be sold once houses had been constructed on them. In this case the arrangement between Elegant and the associations was that houses were to be constructed by Elegant for the two associations after the sale of the bare plots, pursuant to a JCT contract.
Obviously, the associations required that their plots be free of any charge, and in order to achieve that Willmetts gave undertakings to procure the discharge of the charges in the usual way. The undertakings were given by the replies to requisitions and by the application of the Law Society's Code for Completion by Post and were to the following effect:
(a) Willmetts were asked (in requisition 6.1): 'Please list the mortgage or charges secured on the property which you undertake to redeem or discharge to the extent that they relate to the property on or before completion…'. In response, Willmetts stated 'We undertake only in respect of the charge in favour of Bank of Scotland plc dated 1 June 2007 and registered on 16 January 2008…'
(b) Willmetts were asked (in requisition 6.2): 'Do you undertake to redeem or discharge the mortgages and charges listed in reply to 6.1 on completion and to send us form DS1, DS3, the receipted charge(s) or confirmation that notice of release or discharge in electronic form has been given to the Land Registry as soon as you receive them'. Willmetts gave this undertaking by responding 'Confirmed'.
(c) The following undertaking was given pursuant to the Code: '[Willmetts] undertake (i) to have the seller's authority to receive the purchase money on completion; and (ii) on completion to have the authority of the proprietor of each mortgage or charge specified under paragraph 3 [which included the Bank's charge] to receive the sum intended to repay it.'
(d) They also gave this undertaking, via the Code: 'Willmetts undertake….(ii) to redeem or obtain discharge for every mortgage or charge so far as it relates to the property specified under paragraph 3 which has not already been redeemed or discharged'.
Willmetts accepts that these undertakings were given.
Exchange of contracts and completion took place on the same date, namely 11 th April 2008. The contracts and transfers were executed by Mr Gilbert and another member of Willmetts' staff pursuant to a power of attorney. On that date, the two associations sent Willmetts the aggregate purchase price for the two plots, namely £675,000.
Unfortunately, despite their undertakings, Willmetts did not procure the discharge of the Bank's charge over the nine plots; nor did it send the purchase price to the Bank. About two weeks after completion, Mr Gilbert procured that the sale proceeds less about £7,000 were sent to Elegant, and paid into a separate account that it had at Barclays Bank. The Bank of Scotland knew nothing about the sale at the time. It did not consent to it.
Over the following months Andersons chased Willmetts for the promised release of the Bank's security. By and large they were fobbed off. Andersons began to rely on the undertaking, and by the end of 2008 the senior partner of Willmetts became involved. I do not need to set out the detail of these contacts. At the beginning of March 2009 Mr Gilbert sent his partners an email in which he apologised for the mess he had left them in in relation to various matters and summarily resigned. Since then he has not been available to Willmetts to explain what happened in this transaction and why it happened.
On 24 th October 2008 Andersons had sent a pre-action protocol letter to Willmetts. On 7 th November 2008 Willmetts, via solicitors now separately instructed by them, asked for some time before the issue of proceedings. A little time was given and there was more debate in correspondence about that. However, nothing came of the delay, and on 12 t...
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Thames Valley Housing Association Ltd and Another v Elegant (Guernsey) Ltd and Others and Another (3) Howard MacPherson (Part 20 Defendant)
...which were the claims before me. On 29 October 2009 Mann J gave judgment for TVHA against Willmett for breach of the undertaking: [2009] EWHC 2647 (Ch). Willmett's insurers paid the amount required to satisfy BOS (£1,355,433.13) and the charge was released over Plots 1–9. The transfer to TV......