Victus Estates (2) Ltd v Shawbrook Bank Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan |
| Judgment Date | 27 August 2021 |
| Neutral Citation | [2021] EWHC 2411 (Ch) |
| Docket Number | Case Nos: CH-2020-000100 |
| Court | Chancery Division |
[2021] EWHC 2411 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
CHANCERY APPEALS
Rolls Building, Royal Courts of Justice
Fetter Lane, London, EC4A 1NL
Mr Justice Morgan
Case Nos: CH-2020-000100
CH-2020-000101
and
and
Ms Josephine Hayes (instructed by Lightfoot LLP) for Shawbrook Bank Ltd
Ms Josephine Hayes (instructed by Equivo Ltd) for OneSavings Bank plc
Mr Christopher Royle (instructed by Lupton Fawcett Solicitors) for Ms Munroe
Ms Amanda Eilledge (instructed on Direct Access) for Ms Benjamin
The other Respondents did not appear and were not represented
Hearing dates: 28 and 29 July 2021
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 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 has been handed down by the judge remotely by circulation to the parties' representatives by email and release to Bailii. The date for hand-down is deemed to be 27 August 2021.
Introduction
This judgment deals with two separate appeals which raise essentially the same issues. The first issue which arises is: where a property is owned legally and beneficially by A and B, and B forges A's signature on a transfer of the property and the transferee (C) knows of the forgery, is the transfer a sham and of no effect or is it effective to transfer B's equitable interest in the property to C? The second issue which arises is: if the transfer would not be a sham and where C charges the property to a lender, should the court as a matter of public policy, and applying the law as to illegality in relation to transactions, hold that B's equitable interest remains with B so that C does not acquire any interest and is incapable of charging any interest in favour of the lender?
The first appeal relates to a property known as 67 Cuckoo Avenue, London, W7 1BW (“Cuckoo Avenue”) where the dispute is between Ms Munroe and Shawbrook Bank Ltd (“Shawbrook”). The second appeal relates to a property known as 46 Rydal Gardens, Middlesex, HA9 8RZ (“Rydal Gardens”) where the dispute is between Ms Benjamin and OneSavings Bank plc (“OneSavings”). Adopting the initials used above, Ms Munroe and Ms Benjamin are in the position of A and Shawbrook and OneSavings are in the position of lenders with charges granted to them by C.
The cases concerning Cuckoo Avenue and Rydal Gardens were tried together in the county court. Ms Hayes appeared on behalf of Shawbrook and OneSavings at the trial and again on these appeals. Mr Royle appeared on behalf of Ms Munroe at the trial and again on appeal. Similarly, Ms Eilledge appeared on behalf of Ms Benjamin at the trial and again on appeal.
Cuckoo Avenue
Cuckoo Avenue is registered at HM Land Registry under Title Number NGL431328. The property was acquired by Ms Munroe and Mr Charles in September 1997. The transfer of the registered title was taken in their joint names and recorded that they were to hold the property as beneficial joint tenants. At the trial, Ms Munroe contended that the property was, from the outset, held on trust for her alone so that Mr Charles did not have any equitable interest in the property. The judge did not accept that contention and held that at all times until Mr Charles's bankruptcy on 2 August 2011 (to which I refer below), the property was held on trust for Ms Munroe and Mr Charles as beneficial joint tenants.
On acquiring Cuckoo Avenue in September 1997, Mr Charles and Ms Munroe mortgaged it to the Abbey National Building Society, which later became Santander UK plc.
On 2 August 2011, a bankruptcy order (“the first bankruptcy order”) was made in relation to Mr Charles. On 15 September 2011, a Mr Hicken was appointed as his trustee in bankruptcy. The order and/or the appointment of the trustee had the effect of severing the joint tenancy: see the discussion in Megarry & Wade, The Law of Real Property, 9 th ed. at para. 12–046. The result was therefore that the property was then held by Ms Munroe and Mr Charles on trust for Ms Munroe and for the trustee in bankruptcy, as tenants in common in equal shares.
Between August 2012 and May 2013, Mr Charles engaged in discussions with a Mr Agrawal who controlled various companies with the word “Victus” in their names. The judge described these discussions in some detail but it is not necessary on this appeal to refer to all of that detail. Essentially, what was proposed was that Mr Agrawal (whether by himself or through his companies) would provide funds (mostly if not entirely borrowed from others) which would be used to obtain the annulment of Mr Charles' bankruptcy and to discharge the existing charges on Cuckoo Avenue and Rydal Gardens in return for which some of Mr Agrawal's companies would acquire title to, or an interest in, Cuckoo Avenue and Rydal Gardens.
By an order made in the Kingston-upon-Thames County Court on 16 May 2013, the first bankruptcy order in relation to Mr Charles was annulled. The funds needed to secure the payment of Mr Charles' creditors and the fees and charges of the trustee in bankruptcy were provided by Mr Agrawal or one or more of his companies. The effect of the annulment was that the property was held by Ms Munroe and Mr Charles on behalf of themselves, as tenants in common in equal shares.
There is a contract of sale, or a purported contract of sale in relation to Cuckoo Avenue. The contract was dated 17 May 2013 and provided for the sale of the property by Ms Munroe and Mr Charles to Victus Estates (2) Ltd (“V2”) for £350,000 on 17 May 2013. The contract was signed by Mr Charles, and by Mr Agrawal on behalf of V2. The contract purported to be signed by Ms Munroe but it is now clear that she did not sign it and she did not authorise her signature to be placed on the contract; her signature was simply a forgery.
There is a form of TR1 in relation to Cuckoo Avenue. The TR1 was dated 17 May 2013. It named the transferor of the property as Ms Munroe and Mr Charles. It named the transferee of the property as V2. It stated that the consideration for the transfer was £350,000. The transfer was executed by Mr Charles. It may be open to argument whether the transfer was executed by V2 or by Victus Estates (3) Ltd (“V3”) but I will proceed on the basis that the intended transferee was V2. The transfer stated that it was with full title guarantee. The transfer purported to be signed by Ms Munroe but it is now clear that she did not sign it and she did not authorise her signature to be placed on the transfer; her signature was simply a forgery.
In connection with the transfer of Cuckoo Avenue to V2, Shawbrook lent £234,964.02 to V2. Part of these monies, some £55,168.14, was used to redeem the earlier charge in favour of Santander.
On 17 May 2013, V2 executed an all monies charge over Cuckoo Avenue in favour of Shawbrook. Clause 2 of the charge provided that to the extent that the charge did not otherwise charge the property by way of legal mortgage then V2 charged by way of fixed charge any and all of its present and future rights, title and interest in the property.
I understand that Mr Agrawal entered into a guarantee with Shawbrook in relation to the loan to V2, although a copy of the guarantee was not in the appeal bundle.
Following the transfer of 17 May 2013, V2 applied to the Land Registry to be registered as proprietor of Cuckoo Avenue and on 1 November 2013, it was charge duly registered as such. Following the charge of 17 May 2013, Shawbrook applied to the Land Registry to be registered as a charge in relation to Cuckoo Avenue and on 1 November 2013 it was duly registered as such.
On 2 December 2014, a second bankruptcy order was made in relation to Mr Charles. On 18 December 2014, a Mr Edwards was appointed as his trustee in bankruptcy.
On 26 June 2018, the county court in the present proceedings made an order recording various terms of settlement between some of the parties. So far as is now relevant, Mr Edwards as trustee in bankruptcy of Mr Charles came to an agreement with Ms Munroe under which it was agreed that Mr Edwards should transfer, and did transfer, to Ms Munroe all his beneficial interest, if any, in Cuckoo Avenue.
Rydal Gardens
Rydal Gardens is registered at HM Land Registry under Title Number MX159824. Rydal Gardens was acquired by Ms Benjamin and Mr Charles in March 2000. The transfer of the registered title was taken in their joint names and recorded that they were to hold the property on trust for themselves as joint tenants. At the trial, Ms Benjamin contended that the property was, from the outset, held on trust for her alone so that Mr Charles did not have any equitable interest in the property. The judge did not accept this contention and held that at all times until Mr Charles's bankruptcy the property was held on trust for Ms Benjamin and Mr Charles as beneficial joint tenants.
On acquiring Rydal Gardens in March 2000, Ms Benjamin and Mr Charles mortgaged the property to the Halifax Building Society, which later became the Bank of Scotland plc.
The bankruptcy order made in relation to Mr Charles on 2 August 2011 and/or the appointment of a trustee in bankruptcy had the effect of severing the joint tenancy so that the property was then held by Ms Benjamin and Mr Charles on trust for Ms Benjamin and for the trustee in bankruptcy, as...
To continue reading
Request your trial
-
Victus Estates (2) Ltd v Shawbrook Bank Ltd
...as to costs following the judgment which I handed down in these two appeals on 27 August 2021, the neutral citation of which is [2021] EWHC 2411 (Ch). There was an oral hearing in relation to certain consequential matters on 25 November 2021 and I gave an extempore judgment dealing with th......
-
Property Litigation Column: When Is A Sham Not A Sham?
...and Amanda Eilledge consider the impact of co-owner forgery following the decision in Victus Estates and others v Munroe and others [2021] EWHC 2411 (Ch). Introduction In Victus Estates and others v Munroe and others [2021] EWHC 2411 (Ch) the Court considered the position where one joint ow......
-
Property Newsletter: September 2021
...on the recent decision by Morgan J in Victus Estates (2) Ltd and others v Munroe; Benjamin v Victus Estates (1) Ltd and another [2021] EWHC 2411 (Ch), dealing with forgery, shams and the availability (or not) of the defence of illegality in property Claire Gallacher spins the wheel of quest......
-
Property Newsletter: September 2021
...on the recent decision by Morgan J in Victus Estates (2) Ltd and others v Munroe; Benjamin v Victus Estates (1) Ltd and another [2021] EWHC 2411 (Ch), dealing with forgery, shams and the availability (or not) of the defence of illegality in property Claire Gallacher spins the wheel of quest......
-
Forgery, Shams And The Defence Of Illegality In Property Transactions
...(2) Ltd and others v Munroe; Benjamin v Victus Estates (1) Ltd and another [2021] EWHC 2411 (Ch) Introduction What is the legal position where A and B jointly own a property; B forges A's signature on the transfer to C who is aware of the forgery; and C charges the property to D? Is the def......