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August 2018

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Sparkasse Koln Bonn v Cutts [2018] EWHC 1879 (Ch) Charging order – third parties – case management – assessment of subsequently produced declaration of trust GBQ Investments Ltd v Mortgage Express (Unrep) Ch D 4 July 2018 Mortgages – redemption action – duplicate proceedings – grounds on which court would refuse to strike out
Case name Neutral citation Legal points Case summary Facts Held Comment Sparkasse Koln Bonn v Cutts [2018] EWHC 1879 (Ch) Charging order – third parties – case management – assessment of subsequently produced declaration of trust The court gave case management directions and went on to determine a defence to the enforcement of a charging order, based on a subsequently produced declaration of trust. In 2010 SB obtained a money judgment in Germany for £1.3M against Mr C and in 2015, after obtaining a European Enforcement Order (see CPR 74), obtained a final charging order in respect of a residential property in London as to which Mr C was the registered proprietor. SB issued a CPR Part 8 Claim for an order for sale. Mrs C, who was in occupation of the property, was joined in as a second defendant, although she also issued her own separate TOLATA proceedings in which she claimed that Mr C held the property on trust for them both as beneficial tenants in common in equal shares. In evidence, both Mr & Mrs C relied on an express declaration of trust apparently made in 2003. The issues were (1) how to case manage the claims, and (2) what substantive order to make. Case management Although there was nothing in CPR 8 or CPR 73 .10C that permitted service of Points of Claim and Defence etc, the court was given wide powers in CPR 3.1(2)(m) to take any other step or make any other order for the purpose of managing the case and furthering the overriding objective. It was preferable to do this rather than direct that the case proceed as a Part 7 Claim, which can be cumbersome and likely to be more costly than adopting a hybrid approach. Substantive order The court acknowledged that a charging order does not specify the extent of the interest charged. That is in issue which may have to be determined at the enforcement stage under CPR 73.10C. On a careful assessment of the evidence, there were substantial inconsistencies in the way Mr & Mrs C put their respective cases in relation to their arrangements generally; the execution of the declaration of trust; the financing arrangements; the work done; and their subsequent conduct; as well as problems in correctly identifying the [relevant] property (it comprised three properties). The court also felt it was impossible to ignore the late stage at which the declaration of trust was produced, which bore all the hallmarks of being made long after the event. Further, the court was not satisfied that there was any common intention sufficient to support a constructive trust claim, or any promises and detrimental reliance sufficient to found a proprietary estoppel. All in all, the court considered that Mrs C had put forward an extremely muddled and unconvincing case that is an attempt to re-write history. Mrs C’s claim was dismissed and the court gave direction for the sale of the property. When lenders seek to enforce mortgages or charging orders, they are occasionally met with third party claims, which are ‘constructed’ to defeat or reduce any recovery. This decision (Chief Master Marsh) is instructive both in relation to case management, and robust decision-making. As well as joining in as a defendant a person who claims to have a beneficial interest in the property, the court will need to consider how the claim should be case managed to trial. In this case the Master adopted what he called a ‘hybrid’ approach of requiring Points of Claim, in order to require the claimant to properly plead and particularise the basis of their claim, no doubt with half an eye on how the claim would need to be tested at trial. Having regard to the quality and consistency of the evidence at trial, the court was able to make robust findings of fact.
Case name Neutral citation Legal points Case summary Facts Held Comment GBQ Investments Ltd v Mortgage Express (Unrep) Ch D 4 July 2018 Mortgages – redemption action – duplicate proceedings – grounds on which court would refuse to strike out The High Court allowed a second claim for redemption to proceed and refused to strike it out on the basis that there had been no substantive determination of the issues in the claim. GBQ contracted to purchase 5 properties. There were problems on completion, and it obtained an order for specific performance which required the execution of Forms TR1. The properties were subject to mortgage with ME which GBQ tried to redeem but ME refused, so in 2017 GBQ commenced separate CPR Part 8 proceedings for an order for redemption, and for the discharge of the charges. The claim was struck out for procedural irregularity. GBQ subsequently obtained a without notice injunction granting it relief, but without disclosing the order striking out the claim. The injunction was discharged. In 2018 GBQ commenced the present proceedings to appeal against the discharge of the injunction and for relief from sanction against the strike out of its claim. ME submitted that the claim was identical to the 2017 proceedings and should also be struck out as an abuse of process. Although the two claims related to the same allegations and fell squarely within the power to strike out as an abuse of process under CPR 3.4(2)(b) on the basis that the 2018 proceedings amounted to a collateral attach on the decisions made in the 2017 proceedings, the court still retained a discretion as to whether to strike out the claim. In this case, the court would allow the 2018 claim to proceed. The 2017 proceedings had been vitiated by fundamental procedural defects and there had been no substantive determination by the court of the underlying dispute. This was a slightly unusual claim against a mortgage lender requiring it to discharge a number of mortgages over properties which had been bought by a purchaser (not the mortgagor). In the absence of a transcript, it is difficult to see what the substantive objection was, although one assumes it was about the adequacy of the redemption consideration. In practice, a court will be reluctant (in the absence of other abuse of process) to strike out a claim or issue which has not been substantively determined on its merits. However, once determined, the court will usually be astute to prevent repeat litigation.