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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Cheval Bridging Finance Ltd v Bhasin & Anor [2008] EWCA Civ 1613 (12 December 2008)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2008/1613.html
Cite as: [2008] EWCA Civ 1613
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BRENTFORD COUNTY COURT
(HIS HONOUR JUDGE MARCUS EDWARDS)
Strand, London, WC2A 2LL |
||
B e f o r e :
LORD JUSTICE WILSON
and
LORD JUSTICE LONGMORE
____________________
| CHEVAL BRIDGING FINANCE LTD |
Respondent |
|
| - and - |
||
BHASIN & ANR |
Appellant |
____________________
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Miss N Sandells (instructed by Brightstone Law) appeared on behalf of the Respondent.
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Crown Copyright ©
- The appellant, Mrs Bhasin, has lived at 9 Long Drive, Acton, London, W3, since May 1975. She occupied the property under a secure tenancy. The house was purchased by her, under the London Borough of Ealing "right to buy" scheme, in about 1988. It was registered in her sole name. Some years after purchasing the house Mrs Bhasin married Mr Arun Bhasin and he moved in. On September 12 2003 a 25-year mortgage over the property was taken out with I Group. The amount advanced by I Group was about £210,000. The mortgage advance was for the erection of an extension, which became a ground floor flat for Mrs Bhasin's mother, who was living there.
- A few months later Mr Bhasin left Mrs Bhasin and their three children. This caused Mrs Bhasin to be fearful that she would have a short term difficulty meeting the monthly mortgage payments with I Group. At around that time Mr and Mrs Hastings, whom she had known for some time, told her that they could assist her with her financial difficulties. Mr Hastings told Mr Bhasin that he was a practising solicitor who could not only help her financially but also draw up all the necessary legal documents to protect her interest in the property. He worked, so she thought, with a firm of solicitors called Kings Solicitors. In fact he had been struck off.
- Mr and Mrs Hastings represented to Mrs Bhasin that they would arrange to pay off the I Group mortgage in its entirety so that she would not have to worry about monthly payments and they would also take over legal title to her home during this period but would hold it on trust for her benefit. She, they said, would be able to live in the property rent free and have an option to repurchase it. At that time (that is, the time of the transfer to Mr and Mrs Hastings, which Mrs Bhasin agreed to), Mr and Mrs Hastings took out a new mortgage on the property with a mortgage provider called GMAC-RFC Ltd (to which I will refer as "GMAC"). Apparently the Hastings had some difficulty in servicing the loan from GMAC and they turned to Cheval, the respondent, which is a small commercial lender specialising in subprime loans to persons who may have problems with repayment.
- In February 2006 the Hastings obtained a nine-month bridging facility at a monthly interest rate of 1.4% compound. That was used to pay off the GMAC loan, but the Hastings paid neither interest nor principal on the Cheval Bridging Finance money. Meanwhile, during the course of 2006 Mrs Bhasin was arranging to repurchase the property from Mr and Mrs Hastings and was able to arrange for a new mortgage in her sole name. She instructed solicitors in that connection in about May 2006 with an anticipated completion date of August 2006. She was not informed of the existence of the mortgage with Cheval, nor that Mr and Mrs Hastings were in arrears with the mortgage of the property until she received a letter from Cheval's solicitors concerning repossession of the property at about the end of July 2006.
- Now, less than three years after the loan was made, some £529,000, even after payment of £100,000 by Mr Hastings, remains owing on an advance of some £285,000. Proceedings were commenced by Cheval against Mr and Mrs Hastings to enforce the mortgage in August 2006. Mrs Bhasin was notified of the proceedings and she was granted permission by the court to be joined and to file a defence in the action. Mr and Mrs Hastings did not defend the mortgage proceedings but did appear at the hearings. In August 2007 Mrs Bhasin issued proceedings against Mr and Mrs Hastings and Kings Solicitors for damages for breach of trust and fiduciary duty.
- The next relevant event is that in August 2007 a trial of some preliminary issues in the possession proceedings was ordered. The trial of those issues took place in October 2007 before His Honour Judge Edwards, who reserved judgment, and the judgment was handed down on December 17, 2007. The judge ordered Mrs Bhasin to give possession of the property and refused her request for an adjournment to assemble evidence to support an application for relief under section 36 of the Administration of Justice Act 1970. Broadly, section 36 provides that where a mortgagee brings an action for possession of a dwelling house the court may exercise certain powers if it appears to the court that, in the event of its exercising the relevant power, the mortgagor is likely to be able, within a reasonable period to pay any sums due under the mortgage. The relevant powers under subsection (2) include adjournment of the proceedings, a stay or a suspension of execution of the order, and postponement of the date for delivery of possession -- in each case for such period or periods as the court thinks reasonable.
- The judge refused the application for an adjournment and a stay. The reasons were these. In an application under section 36 the court looked for evidence on which the court could exercise its discretion to grant a stay or a suspension on the basis that the whole sum would be repaid within a reasonable period of time. The only matters before the court were that there was apparently an offer to pay £240,000 which had been made in September or October 2006, and that offer had no doubt lapsed. There was no evidence of the means of Mr and Mrs Hastings. The judge said that if there was strong and convincing evidence that the whole sum might be repaid in, say, three months or -- at a stretch -- six months, the court might grant a stay or a suspension, but there was no evidence on which a court could find that the outstanding sum could be repaid within a reasonable period of time. There had been nearly three months for Mrs Bhasin to assemble her evidence, and it was most unlikely that any evidence could be produced which would begin to satisfy the requirement that the whole mortgage loan could be paid off within a reasonable period. The application for an adjournment was made too late and there was no prospect of sufficient evidence being provided.
- The judge refused permission to appeal and Mrs Bhasin applied to this court for permission. On the application for permission, the grounds were these: she was not given sufficient notice that an order for possession would be made, and that in order to avoid it she would have had to adduce evidence that she would be likely to recover sums from Mr and Mrs Hastings; and therefore she had suffered a procedural unfairness. Next, the court failed to take into account the prejudice to her of a decision to refuse the adjournment. And finally, the court wrongly assumed that Mrs Bhasin would not be able to adduce any evidence that Mr and Mrs Hastings would not have assets to satisfy the judgment because the standard of proof for showing that the debt could be repaid was set much too high by the court.
- On February 19 2008, on the paper application, Carnwath LJ adjourned the application to be heard on notice, with the hearing of the appeal to follow if permission were granted. His reasons were that there appeared to be a realistic argument that there had been unfairness if Mrs Bhasin's solicitors were led by the court to understand that no substantive order would be made on December 17, 2007 and that, given more time, the case regarding possession would have been strengthened.
- Mrs Bhasin was directed by Carnwath LJ to submit evidence in support of the arguments on the permission application within 21 days and a stay of the possession order was granted pending the hearing of the application. The application came before Mummery and Arden LJJ on April 11, 2008. The court refused permission on the grounds put forward on behalf of Mrs Bhasin on the basis that the decision on the adjournment was essentially a matter in the discretion of the judge, and Mrs Bhasin's application to adduce further evidence was dismissed by this court. Permission to appeal, however, was given on two issues, but the substantive appeal envisaged by Carnwath LJ did not follow on that occasion because, it seems, there was insufficient court time and that is why the matter comes before this court today.
- The first issue was whether the judge had power to adjourn the making of the order for possession in order to await the outcome of the claim brought against Mr and Mrs Hastings, to which Cheval was not joined as a party, either section 36 of the 1970 Act, or under CPR 3.1.
- The second issue identified by this court on that occasion was whether the judge erred in law in accepting the concession that Mrs Bhasin fell within the definition of mortgagor as defined in section 39 of the 1970 Act and dealing with her applications under section 36, or whether he should have held that section 36 did not apply. It is not clear from the judgment of this court why the court thought that that point mattered in these proceedings, but it has become apparent on this appeal that whether Mrs Bhasin is a mortgagor for the purposes of section 36 may be relevant should she wish to obtain a stay of execution of any warrant of possession.
- We had the benefit of a detailed submission from Miss Sandells on the first point, which, like this court on the application for permission, she directed to the powers under CPR 3.1, and she included a lengthy discussion of what the power in the CPR was intended to deal with and whether the power conferred by CPR could be intra vires if it had the effect of affecting substantive rights. But it seems to me that the true question, if this point were relevant, would have been whether the court had the power to stay under the inherent jurisdiction, which has always been the alternative basis of the power to stay which has been considered in the case-law.
- But it seems to me that, in the circumstances of this case, the matter has become entirely academic for two reasons: the first reason is that whether there should be a stay, whether under CPR 3.1 or the inherent jurisdiction until the trial of Mrs Bhasin's action against Mr and Mrs Hastings, has become academic because the trial took place on July 30 and August 1, 2008 in the Queen's Bench Division. On August 1 Judge Hegarty gave judgment for Mrs Bhasin against Mr and Mrs Hastings. It is true that the assessment of damages is not due to take place until next week but Mr and Mrs Hastings were ordered to make an interim payment into court of £140,000 within 28 days and in fact nothing whatever has been paid.
- The second reason why it seems to me the point would have been academic is that there is no doubt that the factor which the court would take into account under section 36 and under any application under CPR 3.1 or the inherent jurisdiction would be, in the circumstances of this case, precisely the same: namely whether there is any real prospect that the mortgage debt could be discharged within a short period from the proceeds of the action. That is a very remote prospect given that Mr Hastings not only failed to pay the £140,000 into court but has used all the resources which were available to him to pay Cheval in order to avoid its enforcement of the charging orders which Cheval had obtained against him.
- So far as the second question is concerned, I have not found it easy to understand why it could arise on the appeal. The question is whether Mrs Bhasin was a mortgagor for the purposes of section 36. Certainly Cheval concedes that she could be regarded as the mortgagor and it would have been for Cheval to take the point that she had no standing under section 36. It seems to me that what the court must have had in mind on the permission application was that if she had no standing under section 36, that might have strengthened her claim for relief under CPR 3.1 or the inherent jurisdiction, but Cheval maintains its concession that Mrs Bhasin is a mortgagor for the purposes of section 36. Section 39(1) provides that "mortgagor" includes any person deriving title under the original mortgagor. The basis of Cheval's concession is this. Mrs Bhasin's claim is that she sold the property to Mr and Mrs Hastings on terms and that Mr and Mrs Hastings hold the property on trust for her to transfer it back if certain conditions are met. Consequently a new beneficial interest came into being on the transfer to Mr and Mrs Hastings, and that interest was carved out of Mr and Mrs Hastings' legal title to the property or derived therefrom. Consequently it is at least arguable that Mrs Bhasin is a person deriving title from the original mortgagor, in this case Mr and Mrs Hastings.
- I see no reason to go behind that concession and, in any event, it is not, in my judgment, a ground of appeal on which Mrs Bhasin relies or could rely. Consequently, in my judgment, the appeal must be dismissed on the two grounds upon which permission was given. This leaves a very unhappy situation. The house is worth about £380,000 on the open market. The amount outstanding on the mortgage is about £529,000 after payment by Mr Hastings of £100,000 recently, which he paid to avoid being evicted from his house, over which Cheval have a charging order. He has an equity of about £117,000 on three properties but a very large deficiency indeed on his residence in Brookmans Park. Cheval have a judgment against him for more than £500,000.
- Various proposals have been made by Mrs Bhasin for settlement of the matter. The latest proposal about which the court has been told was made in November, and that contained three elements: firstly that there be a transfer of the property from Mr and Mrs Hastings to Mrs Bhasin; secondly that Mrs Bhasin would pay £226,000 to Cheval; and thirdly Mr and Mrs Hastings would pay to Cheval the balance between £226,000 and the present value of the property. Cheval, the court was told, refused the offer because Mrs Bhasin could not show that Mr and Mrs Hastings agreed. There was no evidence that either Mrs Bhasin or Mr and Mrs Hastings could make the payments referred to in the proposal and there was no commitment to a timescale.
- Today Mrs Bhasin has said that the £226,000 which was the subject of her part of the offer is held in bank accounts, ready to be applied if there is a settlement. Cheval is, of course, in the wholly legitimate business of maximising its recoveries, but having been paid £100,000 by Mr Hastings, it has the prospect, with Mrs Bhasin's £226,000, of recovering at least the original amount advanced as recently as 2006 and, given Mr Hastings' keenness to preserve his home, perhaps the prospect of further recovery from him. I would hope that in these circumstances that an accommodation might be reached which would enable Mrs Bhasin to retain her home.
- I agree.
- I agree also.
Lord Justice Lawrence Collins:
Lord Justice Wilson:
Lord Justice Longmore:
Order: Appeal dismissed.