Chess Pieces
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Case name Neutral citation Legal points Case summary Facts Held Comment Premium Jet AG v Sutton [2017] EWHC 186 (QB) Charging order – entitlement to obtain interim charging order – extent of final charging order – foreign judgments – sham transactions – s 423 Insolvency Act 1986 – determination of beneficial ownership The court could make an interim charging order, the effect of which was to preserve property, pending any challenge to the registration of a foreign judgment. The court went on to consider the extent of the debtor’s beneficial interest in the property. C obtained a judgment against D in Swiss Francs from a court in Zurich, which it applied to register in the QBD pursuant to the Lugano Convention. On 19th February 2015, the court made the order, but on terms that any appeal or execution on the judgment will not issue until after one month (or the determination of any appeal). On 13th March 2015, C applied for and obtained an interim charging order against D’s beneficial interest in property. D opposed the making of a final charging order, producing a declaration of trust made in 2011 which purported to declare that he only had a 1% interest in the property, and contending that the interim charging order should be set aside as premature, since it constituted taking steps to enforce the judgment. While C did not assert that the declaration of trust was a sham, it did contend that it should be set aside under s 423 Insolvency Act 1986 as a transaction which was intended to defraud creditors. (Master Kay QC) Although it is logical that the rules would seek to prevent a foreign judgment being enforced before the opportunity to challenge its registration had passed, the Lugano Convention specifically provides that orders may be made for the preservation of property in the meantime (Art 47 and CPR 74.9(4)). Although a final charging order is clearly a step in the enforcement of a judgment, obtaining an interim order does no more than preserve property pending the final charging order being made. It is therefore permissible to obtain an interim order before the expiry of the period prescribed for any challenge to the registration of a foreign judgment. As to the beneficial ownership of the property, and whether the declaration of trust should be set aside, the court concluded on the evidence that the presumption of joint beneficial ownership which followed the joint legal title, was capable of being rebutted, since there was adequate evidence that it was regarded as belonging to D’s wife. Given the terms of the declaration of trust, the court would only make a final charging in respect of D’s 1% beneficial interest. This case contains some useful analysis of the principles to be applied in CPR 74.9 for the enforcement of foreign judgments, in the context of applications for interim and final charging orders; sham transactions; s 423 Insolvency Act 1986 and also the determination of beneficial ownership.
Case name Neutral citation Legal points Case summary Facts Held Comment Kamran v Davenport (unrep) QBD 4 May 2017 Charging orders – interest of debtor as trustee – s 2(1)(b) Charging Orders Act 1979 In order to give effect to a judgment made against a person in his capacity as trustee, it was open to the court to make a final charging order in respect of an interest in property which is held by that person as a trustee, and without reference to the beneficiary. Following unsuccessful proceedings, D obtained a judgment for costs against Mr K which it secured by a final charging order over property of which Mr K was the sole legal owner. Mrs K appealed on the basis that as a result of an express declaration of trust, she was the sole beneficial owner, so that she should be treated as the only trustee of the property, and that furthermore since she had not instructed or authorised the proceedings which resulted in the judgment for costs, they could not be charged on the property. (Morris J) Since Mr K was the sole registered proprietor at HM Land Registry, it followed that insofar as beneficial ownership was vested in another individual, he held the property on trust for the purposes of s 2(1)(b)(i) Charging Orders Act 1979. The declaration of trust made no difference to this. Since Mr K had brought the unsuccessful proceedings in his capacity as a trustee, any benefit or liability was on behalf of the trust. The 1979 Act specifically allowed for a charging order to be made in respect of a trust interest, without reference to whether the beneficiary had consented. The beneficiary might have a separate remedy against the trustee. As a general rule, the court will make a charging order in respect of (1) the debtor’s beneficial interest in property (s 2(1)(a) Charging Orders Act 1979); or (2) the whole legal estate of property held on trust if (a) the judgment or order was made against that person as trustee (as in the present case); or (b) the whole beneficial interest is held by the debtor; or (c) where there are two or more debtors all of whom are liable for the same debt, and they hold the entire beneficial interest between them (s 2(1)(b) Charging Orders Act 1979). For some useful practical guidance, see HM Land Registry Practice Guide 76: Charging Orders.
Case name Neutral citation Legal points Case summary Facts Held Comment Bakrania v Lloyds Bank Plc (unrep) First Tier Tribunal 13 April 2017 Alteration of register – principles to be applied – overriding interests - overreaching The Tribunal directed the cancellation of an application to alter the register to remove the registered proprietors and a charge they had entered into In 2010 Mr & Mrs S purchased a property for £440,000, and were registered as proprietors, subject to a mortgage in favour of the bank for £330,000. In 2012 B’s, the former owners, applied to alter the register to remove Mr & Mrs S and the bank’s charge, on the basis that there had been a fraudulent transfer from Bs to fraudsters who subsequently sold on to Mr & Mrs S. It was accepted that Bs had not executed the transfers, so that Mr & Mrs S had been registered by a ‘mistake’ within the meaning of Para 5(a), Sched 4, Land Registration Act 2002. Bs also contended that at the time of the two transfers, they remained in actual occupation, so as to give them an overriding interest within the meaning of Para 2, Sched 3, Land Registration Act 2002 The power to correct a mistake includes the consequences of a mistake (MacLeod v Gold Harp Properties [2015] 1 WLR 1249; Knights Construction (March) Ltd v Roberto Mac Ltd [2011] 2 EGLR 124) so that there was jurisdiction to remove Mr & Mrs S, and the bank. However, the 2002 Act does not provide absolute indefeasibility. In the event of an alteration which involves rectification, the powers are restricted where the registered proprietor is in possession. In such a case no alteration may be made without his consent unless he has by fraud or lack of proper care caused or substantially contributed to the mistake, or it would for any other reason be unjust for the alteration not to be made. On the evidence, neither of these exceptions applied, and under Para 6(3), applying the test in Paton v Todd [2012] 2 EGLR 19, there are exceptional circumstances which justify not making the application. Bs overriding interest claim also failed. Having regard to the authorities (Link Lending v Bustard [2010] 2 EGLR 55) Bs were not in actual occupation at the time of the transfers and their occupation would not have been obvious on a reasonably careful inspection. In any event, their interests (even if overriding) would have been over-reached by a transfer by two trustees (Birmingham Midshires Mortgage Services Ltd v Sabherwal (2000) 80 P & CR 256; Baker v Craggs [2016] EWHC 3250). Application cancelled, with costs. This is another, useful and comprehensive decision, from the First Tier Tribunal which covers the usual range of issues which often arise on applications for alteration of the register, including the removal of a registered charge. It also helpfully summaries the principles to be applied in considering overriding interests and overreaching (something which is frequently overlooked in practice).