England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY

		In the Birmingham Civil Justice Centre The Priory Courts 33 Bull Street Birmingham B4 6DS
		11th March 2008

JUDGE PURLE:

1. This is, firstly, an appeal from a decision of Deputy District Judge Caun, sitting at the Birmingham County Court on 6^th March of this year
2. On that occasion, Mr. Edgington, the solicitor advocate for Mr. and Mrs. Gill, who are the Defendants in the claim in which Deputy District Judge Caun gave judgment, sought, without notice, relief challenging the propriety of a possession order that was made in the Kidderminster County Court on 8^th August of last year.
3. The order for possession was made by way of enforcement of a charging order. There is presently no challenge before the court as to the propriety of the charging order. The charging order was made absolute on 1^st May 2007. Significantly, it creates a charge over the property of Mr. and Mrs. Gill in respect of a judgment debt dating back to 16^th February of last year in the sum of £37,000-odd.
4. There is also a further application listed before me in the Chancery Division to enforce that charging order, in case the challenge to the possession order should succeed.
5. As I have said, there is presently no challenge to the charging order, though I should record that there was, within the last week or two, an application made to District Judge Cooke to set aside the judgment which forms the basis of the charging order. That application failed. However, the time for appealing has not expired and that may (I am told) be appealed, at least by Mrs. Gill. I say nothing as to the merits of any such appeal because that matter is not before me.
6. The matter came before Deputy District Judge Caun, as I say, on 6^th March and he refused the application. The matter then came before me and I gave permission to appeal as it seemed to me that there was a clear point raised as to the jurisdiction of the county court to enforce this charging order.
7. I am bound to say that the history of this case gives a great deal of ammunition to those who press for the creation of a single civil court because the entirety of the problem that has arisen relates to jurisdictional distinctions between the county court and the High Court. Sitting, as I do, both as a Section 9 Judge in the Chancery Division, and as a Circuit Judge, I can move from one category to the other just by so declaring, though it may (at least in theory) require a change of robes and a different form of judicial address. On today's appeal I sit as a Circuit Judge. As regards the further application to enforce the charging order, I sit as a High Court Judge. Thankfully, I am not robed. I have, of course, been addressed with courtesy (though indistinguishably) in both capacities.
8. Many of us who sit in the Chancery Division (and others too) are sceptical as to the virtues of a single civil court. The history of this case, however, gives even we 'Doubting Thomases' food for thought.
9. The jurisdictional position is this. Section 23(c) of the County Courts Act 1984 limits the jurisdiction of the county court in relation to the enforcement of a charging order to cases where the judgment sum does not exceed £30,000, which this judgment sum does, though not by a massive amount. The county court has no jurisdiction to enforce the charging order without the parties' consent or an Order of the High Court transferring proceedings started in the High Court to the County Court. This is a little curious, as the county court's jurisdiction to make a charging order is for practical purposes unlimited: see section 1(2) of the Charging Orders Act 1979. The only exception relates to funds in court, where the appropriate court is that in which the fund is lodged, which may or may not be a county court. Nevertheless, when it comes to enforcement, the proceedings have to be started in the High Court where the judgment exceeds £30,000, usually in the Chancery Division.
10. There is an irony in reaching that conclusion in this respect. In the recent decision of National Westminster Bank plc v King [2008] EWHC 280 (Ch), David Richards J reviewed and approved the practice of the Chancery Division in London under which it appears that Chancery Masters, as a matter of course, consider all enforcement applications in relation to charging orders at an early stage with a view to determining whether it is appropriate to transfer the proceedings to the home county court and very often do so, notwithstanding the fact that the jurisdictional limit is exceeded. David Richards J confirmed that the power of the High Court to transfer such cases to the county court is unfettered by jurisdictional constraints. It, therefore, appears, although I am to some extent speculating, that, had this matter begun in the Chancery Division in London, there is every chance that the Chancery Master would have transferred it to the county court in Birmingham. That did not however enable the Claimants to start in the county court. Having started in the county court, the Claimants exposed themselves to the risk of a jurisdictional point being taken and it has been taken today.
11. Mr Edgington's point seems to me to be unanswerable and, indeed, Mr. Robertson-Smith, for the Respondent to the appeal, acknowledged as much in his frank and helpful submissions. In those circumstances, given that Mr. Robertson-Smith also acknowledged that I had power, sitting as a county court judge on appeal from Deputy District Judge Caun, to set aside the earlier possession order, I do so.
12. I was concerned that there was a paucity of explanation as to why the point was not taken earlier than it was. So far as Mr. Edgington is concerned, I can see why he did not take the point in terms earlier, though he did take a different or allied jurisdictional point on the application to set the original judgment aside, because he had not seen the possession order. However, there is no direct explanation from his clients. I have been told that they knew nothing about the possession order at the time it was made. No evidence on the point has been put in on this appeal. Mr. Edgington does however tell me that is what his evidence would have been. I might, I suppose, have required that to be confirmed by a witness statement. However, Mr. Robertson-Smith did not press this point upon me but candidly accepted that, if an order was made without jurisdiction, as he almost conceded it had been, then it ought to be set aside.
13. I say he almost conceded it had been because he did take one point arising out of the judgment of David Richards J in the case I have mentioned. In paragraph 10 of that judgment David Richards J observed that there is a possible complication depending on whether the charged property is in the sole name of the debtor or in joint names. Here, of course, the property is in joint names and David Richards J went on to speculate that, in such a case, the court might have jurisdiction under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 ("TLATA"). Under Article 2(1)(p) of the High Court and County Courts Jurisdiction Order 1991, the county court has an unlimited jurisdiction under section 14 of TLATA.
14. David Richards J observed in paragraph 11 of his judgment as follows:

"It has been suggested that this leads to the anomalous position that a county court has a limited jurisdiction in the generally simple case of the charge over a property in the debtor's sole name but an unlimited jurisdiction in the generally more complex case of properties in joint names. Some support for this may be derived from the presence in the 1991 order of Article 2 (4) restricting jurisdiction under sections 89 to 92 of the Law of Property Act in the absence of an equivalent provision for the enforcement of charges under section 14 of the 1996 Act."

15. In the next paragraph he continued:

"This issue does not arise for decision in this case because the property in question is in the sole name of the debtor."

I pause there. I consider that the issue does not arise for decision in this case either. The property with which we are concerned, namely, property at 368 Redditch Road, Kings Norton, Birmingham, is in joint names, it is true, but the judgment debtors are also the same two people. So there is no difference of identity between the legal owners and the judgment debtors. The possible anomaly to which David Richards J referred arose only where the judgment debtor was one only of more than one co-owners so that a charging order could only take effect on his equitable share.

16. David Richards J, in any event, went on to express the view that the apparent anomaly did not exist for the reasons he gave and, for what it is worth, I agree with him. However, like him, the point does not arise for decision in this case. It would arise were the judgment to be set aside on any possible appeal against Mrs. Gill but not against Mr. Gill. In that event, any charging order could only take effect on Mr. Gill's beneficial interest and the anomaly would have to be faced up to directly. That, however, is a future question and, as I have said, the judgment of David Richards J (with which I presently agree) provides a very strong indication albeit obiter that there is nothing in the point anyway.
17. There is accordingly no ground for contending in this case that the county court had jurisdiction to make the order that was made in August of last year for possession. Paradoxically, a County Court normally has exclusive jurisdiction under CPR 55.3. in possession proceedings, including those brought by a mortgagee. However, the primacy of the Chancery Division of the High Court in the enforcement by sale of a charging order (where the County Court limit is exceeded) is confirmed by CPR 73.10 and PD 73 para 4.2.
18. CPR PD 55 at para 7.2 also confirms that a party seeking to enforce a charging order by sale should follow the procedure set out in CPR 73.10 and the Part 55 procedure should not be used.
19. Possession claims (especially where residential property is concerned) commonly involve the exercise of a discretion, e.g., under section 8 of the Administration of Justice Act 1973 or section 85 of the Housing Act 1985. The unlimited jurisdiction of the county court in respect of TLATA applications extends to amongst other considerations possession, sale and the charging of an occupation rent. County Court Judges (including District Judges) are therefore well versed in the niceties of possession proceedings and property litigation generally. One would have thought that they are equally well suited to deal with the enforcement of charging orders. The practice of the Chancery Division in London to consider transfer to the home County Court at an early stage confirms this.
20. In addition, Mr Justice Lloyd (as Vice-Chancellor of the County Palatine of Lancaster) and Mr Justice Hart (as Chancery Supervising Judge for the Midland, Wales and Chester and Western Circuits) have on 7^th July 2004 issued guidance to District Judges, Deputy District Judges and others as to the range of county court cases which ought to be transferred to a Chancery county court (i.e., one with specialist judicial experience): see the current edition of Mithani: Director's Disqualification, Division XI at [4401]. Specifically included within the category of cases which need not be referred to a Chancery county court are:

(i) Proceedings relating to residential mortgages (unless a serious issue arises, for example, as to the occupation rights of a third party and as to whether the mortgagee's rights prevail over those of such a third party);

(ii) Claims to enforce a charging order.

21. In the above circumstances, it may be thought that the retention by the Chancery Division of jurisdiction to enforce a charging order by sale in all cases above the County Court limit is somewhat dated.
22. Returning to the present case, Mr Robertson-Smith for the Respondent wisely did not rely upon CPR 55.3. He acknowledged that the objective was always to enforce the charging order by sale.
23. The result of the possession order has, of course, following its enforcement, been to turn the Defendants out of their home. It may well be that that is something which will turn out to have been justified. It seems likely, on what little bit I know about this case, that the High Court will choose to enforce the charging order and, indeed, there is before me, sitting as a Section 9 High Court Judge, a separate application issued in the High Court, Chancery Division, by the Claimants in the original Kidderminster County Court action to enforce the charging order. That was issued on Friday in response to the appeal and was listed at my direction before me today. Unfortunately, Mr. Edgington was not authorised to accept service on Friday, though he has undertaken to accept service today and the order that I am about to make will so recite.
24. In the circumstances, it seems to me that I should allow the appeal, set aside the order of Deputy District Judge Caun and accede to the application to set aside the order of Deputy District Judge Gibson, made on 8^th August 2007.
25. I shall also, for the sake of good order, make an order formally transferring the Kidderminster County Court proceedings to the High Court, Chancery Division, in Birmingham so that any future applications can all be brought before whichever district judge or Chancery judge is appropriate in conjunction with the charging order proceedings which were commenced on Friday.
26. The order that I shall make on the appeal is that the appeal is allowed. As I have said, the two orders that I have mentioned are set aside and I shall formally order the Claimants to restore possession to the Defendants, Mr. and Mrs. Gill. I think that follows anyway from the order I have made but I think Mr. Edgington is entitled to ask for that.
27. I then turn to the charging order proceedings themselves. I was very tempted to deal with these today. One entertains the suspicion, as I have said, that the outcome is bound to be the same but I do not think I can assume that. In support of the application that is made for sale and possession is evidence from an estate agent saying the best way of dealing with the sale is by auction. That is evidence which Mr. Edgington is entitled to answer if he wants to. Mr. Edgington says he also wants to put in evidence concerning the exercise of the court's discretion.
28. In my judgment Mr. Edgington is entitled to invite the court to approach the matter in that way. The questions of sale and possession go hand in hand. One of the problems with the procedure adopted in the Kidderminster County Court was that the application was treated like an ordinary mortgagee's possession claim. A mortgagee, of course, ordinarily has power of sale so only needs possession, not an order for sale. The power of sale is usually express and (if not express) arises automatically under the Law of Property Act 1925 where the mortgage is created by deed. This one was not. It was created by the order of the court and it takes effect as an equitable charge under hand. That does not carry with it a power of sale. It seems to me to be wholly inappropriate to ask for an order for possession except in the context of applying for an order for sale and that is where, jurisdictional questions apart, this case has gone seriously wrong. Possession alone was sought, with a view to applying for an order for sale subsequently.
29. I am aware, in saying that, that there is learning and at least one first instance authority to the effect that equitable mortgagees (at least where they are entitled to call for a legal mortgage) can ask the court for possession: see Barclays Bank Ltd v Bird [1954] Ch. 274. Well, they can certainly ask the court for possession but, in the context of a charging order, possession will only be given in support of an order for sale and an order for sale first has to be made. That involves an exercise of the court's discretion which has not yet been invoked. The discretion should not be invoked on what is an application on very short notice where the Defendants have not had the opportunity of putting in evidence. The timing of any order for possession also involves the exercise of the Court's discretion. As the forms which are annexed to CPR 73PD show, the order for possession will often not take effect until some time after the initial order for sale is made.
30. In those circumstances, therefore, upon the undertaking of Mr. Edgington to accept service on behalf of his clients, Mr. and Mrs. Gill, I shall adjourn the charging order application and direct that it be listed in due course before a district judge.
- - - - - - - - -