ON APPEAL FROM THE HIGH COURT OF JUSTICE
BIRMINGHAM DISTRICT REGISTRY
(HIS HONOUR JUDGE PURLE QC)
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE CARNWATH
LORD JUSTICE LLOYD
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Myriam Stacey ( instructed by Higgs and Son Solicitors ) appeared on behalf of the Respondent.
Crown Copyright ©
Lord Justice Lloyd:
"I apprehend that, if it [that is to say sham] has any meaning in law, it means acts done or documents executed by the parties to the 'sham' which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create."
"...it is trite law that the court will not give its assistance to the enforcement of executory provisions of an unlawful contract whether the illegality is apparent ex facie the document or whether the illegality of purpose of what would otherwise be a lawful contract emerges during the course of the trial..."
To the same effect Lord Browne-Wilkinson said at page 369C:
"Neither at law nor in equity will the court enforce an illegal contract which has been partially but not fully performed."
Lord Lowry agreed with them both in terms.
"From these authorities the following propositions emerge:
(1) property in chattels and land can pass under a contract which is illegal and therefore would have been unenforceable as a contract; (2) a plaintiff can at law enforce property rights so acquired provided that he does not need to rely on the illegal contract for any purpose other than providing the basis of his claim to a property right; (3) it is irrelevant that the illegality of the underlying agreement was either pleaded or emerged in evidence: if the plaintiff has acquired legal title under the illegal contract that is enough."
"52. ... What Mr Jackson has to do is to demonstrate that something is due under the purported charge. He has not demonstrated that because the charge is a sham, as are the underlying invoices. Even if I accept, as I am invited to do, the charge at face value, it is not to be assumed all these years later that even if anything was due it still remains as due. Once one embarks upon the inquiry as to what is due then that necessarily takes us into the genuineness of the original invoices, which are mere pieces of paper not intended to have any legal effect. What is more, to the extent that any of them have been acknowledged, they have been acknowledged in the name of Runbir Limited and not in the name of Mr Vickers. The acknowledgement in the charge is suggesting something is ineffective, because that, as with the rest of the document, is a sham, not intended by either of the parties to have legal effect.
53. It seems to me, therefore, that all Mr Vickers is doing is relying upon his ownership and his right to have the land charges and other entries protecting the purported charge removed, because there is nothing due and never was. A charge can only come into or remain in being if there is some genuine indebtedness, actual, prospective or contingent, which it secures. That is inherent in the concept of a charge, which is a security for an obligation. If there is no obligation, there is no charge. Here, there never was an obligation which the charge was intended to secure. Therefore, there is no charge. The parties never intended there to be a charge."
Lord Justice Carnwath :
Lord Justice Maurice Kay:
Order: Appeal dismissed