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June 2018

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Budhdeo v The Alternative Bridging Corporation (Cheval) Ltd [2018] EWHC 1294 (QB) Practice and procedure – effect of CPR 24.3(2)(a)(i) and CPR 55.8(1) Williams v Broadoak Private Finance Ltd [2018] EWHC 1107 (Ch) Order on administration for sale of property subject to security – Para 71, Sched B1, Insolvency Act 1986 Publications: Updated HM Land Registry Practice Guides 36a and 75
Case name Neutral citation Legal points Case summary Facts Held Comment Budhdeo v The Alternative Bridging Corporation (Cheval) Ltd [2018] EWHC 1294 (QB) Practice and procedure – effect of CPR 24.3(2)(a)(i) and CPR 55.8(1) A mortgage lender is not prevented by the restriction on obtaining summary judgment in CPR 24.3(2)(a)(i) from applying for a money judgment on admissions under CPR 14. C agreed to advance D £540,000 to be secured on mortgage, but only paid £467,000 which was net of rolled up interest and fees. D admitted receipt but raised various objections, including mistake as to the lending terms. Following default in repayment C issued proceedings and obtained summary judgment for £467,000, with the balance of the claim proceeding to trial. D sought permission to appeal, and raised a number of procedural points, which are dealt with in the judgment. One of them was to contend that it was not open to the judge to have granted summary judgment for a money sum in proceedings for possession of residential premises against a mortgagor, as a result of the restriction in CPR 24.3(2)(a)(i), because, it was contended, there was a specific regime for possession claims in CPR 55, and this is subject to the requirement in CPR 55.8(2) that where the [possession] claim is genuinely disputed on grounds which appear to be substantial, case management directions will be given, including allocation to track, to enable the issues to be tried. It was contended that the present claim was caught by CPR 55 because it included a claim for possession, whether or not it also included a separate claim for relief by way of money judgment. If this submission was correct, then taken to its logical conclusion, it has the most odd consequence that if the District Judge concludes that the claim for possession is genuinely disputed on grounds which appear to be substantial under CPR 55.8(2) but at the same time it is absolutely plan that at least a certain sum of money for which monetary relief is claimed is also due and owing, the court is prohibited from doing anything other than allowing the matter to rumble on to trial, even on the undisputed money claim. However, it was not necessary to determine that point because here liability for the money sum had been admitted in the Defence so that the court was able to grant judgment on admissions. Thus, the particular tension between CPR 24.3(2) and CPR 55.8(2) only matters in a case where the liability on the non-possession claim is clear to a summary judgment standard but not actually admitted sufficiently in a form and substance to give rise to judgment on admissions under CPR 14. D’s appeal on this ground would accordingly be dismissed. Despite producing a ‘most odd consequence’, CPR 24.3(2)(a)(i) prevents the court from granting summary judgment against a defendant for any relief in proceedings for possession of residential premises against a mortgagor. Although this case contains an interesting analysis of whether ‘proceedings for possession’ in CPR 24.3(2)(a) mean the same as a ‘possession claim’ in CPR 55, this is the effect of CPR 24.3(2)(a). The judge got around this by concluding that if an amount is admitted, the lender could obtain judgment on admissions under CPR 14. Of course, lenders can get around it by simply issuing a separate (not a Part 55) claim for a money judgment, that is, if they can actually do something with a money judgment before requiring to obtain possession.
Case name Neutral citation Legal points Case summary Facts Held Comment Williams v Broadoak Private Finance Ltd [2018] EWHC 1107 Order on administration for sale of property subject to security – Para 71, Sched B1, Insolvency Act 1986 The court made an order for the sale of property free of security interests and determined the order of distribution of the net proceeds of sale. The Joint Administrators of a company applied under Para 71, Sched B1, Insolvency Act 1986 for permission to dispose of partially developed freehold premises as if they were not subject to certain security interests. There were three classes of respondent (1) a private finance company which provided security to the company for the purpose of securing an advance for the development of the premises; (2) a company which had acquired an option (now lapsed) to acquire two of the apartments in the development, and (3) various purchasers who had paid deposits and contracted to purchase apartments off-plan. It was considered that administration would produce a better result for creditors than winding-up, hence the application for sale. Under Para 71, an order may be made where the court thinks that the disposal of the property is likely to promote the purpose of the administration in respect of the company, and is subject to the condition that there be applied towards discharging the sums secured by the security (a) the net proceeds of disposal of the property, and (b) any additional money required to be added to the net proceeds so as to produce the amount determined by the court as the net amount which would be realised on a sale of the property at market value. Having considered the options available, the court concluded that the only realistic option was a sale of the development free of the secured interests. As to the order of priority of the securities affected, the court directed itself in accordance with ss 28-29 Land Registration Act 2002 – a registered chargee takes subject to any prior mortgages and charges which are protected by notice or are overriding interests but free from all others. There were three categories of purchasers – Category A being purchasers who had registered unilateral notices before the charge; Category B being purchasers who registered unilateral notices after the charge; and Category C being purchasers who have not yet registered any interest in the property. The court therefore made an order as to the distribution of the net proceeds of sale in favour of (1) the Category A purchasers to the extent of the value of their deposits, with interest at 5% plus costs; and (2) the chargee to the extent of £4,409,593 representing the total sums advanced with contractual interest at the standard rate to the date of administration, and then interest at the default rate [there being no decision on the entitlement to costs]. It was not considered that the property would sell for a sum in excess of those amounts, but if it did, the Administrators would apply for further directions. There are restrictions on enforcing charges and securities against a company in administration and (as in this case) a power for an administrator to dispose of property free of security, albeit subject to an appropriate order in respect of the distribution of the proceeds of sale, which (subject to the value of the property) should protect the interests of a properly secured creditor with priority.