England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE ORDERS OF
DEPUTY MASTER MARK AND
DEPUTY MASTER MATHEWS

		Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
		21 December 2016

MR JOHN BALDWIN QC:

1. This is an appeal by the first and second defendants (Mr and Mrs Hall) from the order of Deputy Master Mark dated 9 January 2015 whereby he refused to adjourn each and every aspect of the hearing of an application by the Claimant (Hawk) for summary judgment and proceeded to grant judgment on part of the claim. He made an order to the effect that Hawk is entitled to the beneficial interest in certain property (the Property) and he made an order that Mr and Mrs Hall execute a document transferring the legal title to Hawk. Mr and Mrs Hall have refused to comply with that order and they have not sought to justify their position.
2. Following the order of Deputy Master Mark, Hawk made an application for possession of the Property. The matter came before Deputy Master Mathews on 18 March 2015 and on 14 April 2015 he gave judgment dismissing the application, holding that a bare trustee in possession, who had been ordered by the court to transfer the legal title to the beneficial owner, but had refused so to do, had a better right to possession than the beneficial owner. If the appeal against the order of Deputy Master Mark is dismissed, Hawk appeals the order of Deputy Master Mathews, contending that it is contrary to all known jurisprudence, especially that which has developed since the Norman Conquest.
3. By a Claim Form issued on 11 February 2014 and Particulars of Claim dated January 2014 Hawk sought an order for repayment of a sum of money (some £310,000) alternatively restitutionary remedies on a proprietary basis or in personam or damages or further or other relief. Mr and Mrs Hall instructed Churchers Bolitho Way, solicitors, (CBW) and a defence was filed on 17 March 2014. Not much appears to have happened thereafter until October 2014.
4. On 7 October 2014 Mr and Mrs Hall were adjudged bankrupt pursuant to creditor's petitions presented on 21 August 2014 by a Mr Baxendale- Walker. On 4 November 2014 Mr David Clements of Harrisons Business Recovery and Insolvency Ltd was appointed as the Trustee in Bankruptcy. It is common ground that the effect of the bankruptcy order was to vest the beneficial interest in any property of Mr and Mrs Hall in their Trustee.
5. Meanwhile, by email of 8 October 2014 CBW confirmed to Hawk's solicitors (Johnsons) that they remained on the record for Mr and Mrs Hall and would do so until service of any Notice of Change. They said they were awaiting a decision on Legal Aid.
6. On 9 October 2014 Hawk issued an application under CPR Part 24 and on 16 October 2014 it served the application and the evidence in support and stated that the application would come before the court on 9 January 2015 at 11.00 am. That will have alerted CBW to the time when any evidence which Mr and Mrs Hall might wish to rely upon would have to be served (since it is prescribed by CPR Part 24.5(1)).
7. The date for service of any evidence which Mr and Mrs Hall might wish to rely upon at the hearing of Hawk's application for judgment on 9 January 2015 came and went and CBW made no contact with Johnsons until 8 January 2015.
8. Meanwhile on 6 January 2015 Mr Clements emailed CBW stating that he had reviewed the documents in respect of the summary judgment application, that there were no funds in the estate to enable representation on the 9 January, that given the application rested significantly on the agreement between the Halls and Hawk, to which the Trustee was not a party, the evidence of the Halls would be of paramount importance and he had little to add. The email stated that Mr Clements would await the outcome of the hearing and whatever decision was made and would act accordingly as Trustee. I infer from that email that the Trustee saw no inherent flaw in Hawk's case and was content to leave the matter to the Master.
9. By an email of 8 January 2015 to Johnsons, CBW stated that it had just spoken with Mr Hall and that (i) Mr and Mrs Hall would be representing themselves henceforth and that Notice of Change of Acting was to be filed that day, (ii) Hawk's application was opposed, and (iii) Mr Hall's father passed away that morning and that Mr and Mrs Hall would be making an application to adjourn the hearing scheduled for the following day. It went on to say that CBW would be assisting the Halls that day.
10. On 8 January 2015 Mr and Mrs Hall made an application for an adjournment of the hearing listed for 9 January 2015 and the reason given was that Mr Hall's father had passed away unexpectedly that morning and that neither he nor his wife was able to attend. The application went on to explain that the Halls had applied for Legal Aid, that initially it had been refused and that there had been an appeal against that refusal. It went on to explain that the Adjudicator on the appeal had, at first, accepted the Hall's application but it had subsequently been refused on financial grounds, and that they had learned of this on 6 January 2015. The application also stated that Hawk's application was opposed.
11. There is a transcript of the hearing before Deputy Master Mark. It is evident that his initial reaction to the circumstances of Mr and Mrs Hall was to adjourn the application but then he thought that he should consider the matter because if the application were to fail in any event, there would be no point in adjourning it. It was at this stage that Mr Grant QC, counsel for Hawk, pointed out that Mr and Mrs Hall, as a consequence of their bankruptcy and section 306 of the Insolvency Act 1986, no longer had any beneficial interest in the Property.
12. Mr Grant submitted that it was appropriate to continue with the hearing with respect to matters with which the Halls had no concern and he was agreeable to an adjournment with respect to other matters, such as whether there should be an order for possession of the Property. The Master then went through various concerns he had about the case and made the order which is the subject of this appeal. He did not give a separate judgment setting out his reasoning.
13. The time prescribed for appealing the Master's order had expired by 13 February 2015 and on that day Hawk made an application for an order for possession of the Property. That matter came before Deputy Master Mathews on 18 March 2015 and judgment was given on 14 April 2015. Hawk was represented by counsel, Mr Hall appeared in person and the application was dismissed but permission to appeal was granted.
14. On 25 March 2015 Mr and Mrs Hall issued an application out of time for permission to appeal the order of Deputy Master Mark.
15. On 10 May 2015 Hawk issued its notice of appeal against the order of Deputy Master Mathews.
16. Mr and Mrs Halls' application for permission to appeal came before Mr Fancourt QC on 21 January 2016^[1] and Mr Hawkin (instructed by the Bar Pro Bono Unit) appeared on behalf of Mr and Mrs Hall. The judge considered there to be two initial difficulties: the need for an extension of time and the issue of the Halls' standing. He dealt with the latter first.
17. Mr Hawkin argued that the Halls should be allowed to appeal in order to establish that the proceedings were an abuse of process, either because of the circumstances in which the cause of action was assigned to Hawk or because of the ulterior purpose for which Mr Baxendale-Walker is controlling the proceedings in order to victimise the Hall family.
18. The judge referred to evidence which may establish the propositions for which Mr Hawkin was contending and he considered the matter to be sufficiently arguable for the purposes of the application. Having dealt with all other matters (including the issue of relief from sanctions) he was persuaded to grant permission to appeal out of time in relation to three matters only:

18.1. That the Deputy Master was wrong to refuse the Defendants' application to adjourn the whole of the hearing on 9 January 2015.

18.2. That the Deputy Master was wrong to hold that the Defendants had no standing to be heard on the application for summary judgment and should have held that the Defendants had standing to argue that the proceedings were an abuse of process

18.3. That the Deputy Master was wrong to conclude that the Claimant's claim to be (by an assignment from a trust) the beneficial owners of the Property was in all circumstances suitable for summary judgment.

19. With respect to the evidence Mr Hawkin was relying on at the permission hearing, the judge expressly emphasised that he was making no decision about whether the Halls would be permitted to rely on any evidence not before Deputy Master Mark and said that if they did wish to rely on further evidence they must issue an application.
20. Mr Fancourt QC also ordered that Hawk's appeal against the order of Deputy Master Mathews be heard at the same time as the appeal against the order of Deputy Master Mark.
21. On 5 February 2016 Hawk issued a Respondent's Notice and, in addition to setting out the matters on which it intended to rely, stated that the Halls should not be heard on the appeal by reason of their contempt of court in refusing to comply with the order of Deputy Master Mark.
22. On the 20 July 2016 the court issued to the parties a notice to the effect that the hearing of the appeals would take place in a 3 day window commencing 7 December 2016.
23. In accordance with the Chancery Guide, Hawk filed its skeleton argument for use on the appeal. In addition to setting out its arguments on both appeals it drew attention to the fact that no application had been made by the Halls to adduce fresh evidence on the appeal and, accordingly, the only evidence which the court should consider was that which was before Deputy Master Mark. The skeleton proceeded on the basis of the evidence before the court in January 2015.
24. Service of Hawk's skeleton argument on the Halls prompted an immediate response and on 6 December 2016, the day before the hearing window opened, the Halls issued an application to rely on a raft of fresh evidence.
25. At the hearing on the 8 December 2016 I considered the application to adduce fresh evidence and, for the reasons expressed in a separate judgment, refused the application. In brief, my reasons were that the application was far too late and most of the material could easily have been obtained for use at the hearing in January 2015.
26. Accordingly, I turn to review the transcript of the hearing before Deputy Master Mark in the context of the matters before him and the arguments that I have heard. The first matter is that of the standing of the Halls to contest the appeal.
27. I was referred to Heath v Tang [1993] 1 WLR 1421 and James v Rutherford-Hodge [2005] EWCA Civ 1580 which provide clear support for the proposition which Hawk advanced and which was to the effect that on the appointment of a trustee in bankruptcy the bankrupt is divested of his interest in his property and, accordingly, has no standing to institute an appeal from a judgment about that property.
28. Mr Hawkin, for Mr and Mrs Hall, accepted the general principle contended for by Mr Grant but submitted that matters were different if a bankrupt could rely on an abuse of process, or, at least, arguably so. Mr Hawkin was unable to draw my attention to any authority which supported his submission but relied upon the fact that abuse of process is of a wider public importance and, therefore, even a bankrupt should be permitted to make representations to the court in circumstances where otherwise the court's process was being abused.
29. Mr Hawkin submitted that this litigation was being conducted as part of a vendetta being conducted by Mr Baxendale-Walker against his clients and that this, of itself, was sufficient to give standing.
30. There was no evidence before Deputy Master Mark and there is none before me which supports Mr Hawkin's contentions of abuse of process by Mr Baxendale-Walker or anyone else.
31. The Halls' Defence, filed in March 2014, refers to abuse of process and relies on these proceedings continuing in the Queen's Bench Division in London whilst there were connected proceedings ongoing in Bristol. Moreover it was said that those connected proceedings contained allegations inconsistent with those made in these proceedings. However, both those matters are now water under the bridge since the present proceedings are now in the Chancery Division and the Bristol proceedings are no longer extant. The Defence does not plead any vendetta or abuse of the kind now relied upon by Mr Hawkin.
32. Mr Hawkin also submitted that counsel for Hawk should have drawn the Deputy Master's attention to the judgment of Males J in Bluebird Productions v Natasha Anastasia Eustace [2014] EWHC 1095 (QB) in which, it was said, important background and other relevant matters are set out. Hawk's response, as I understood it, was that Respondents to a summary judgment application may file such evidence as they might wish and that it was not for his clients to take on that task. In terms of time, there was plenty of opportunity prior to the hearing in January 2015 for evidence to be filed and, moreover, subsequent to the judgment of Mr Fancourt QC, there was plenty of opportunity to make a timely application to adduce fresh evidence. There was no satisfactory explanation for the failure to comply with proper procedure and litigants, including those acting in person, have some responsibility to engage with the court process.
33. Mr Hawkin also relied on the right to a fair trial enshrined in Article 6(1) of the ECHR. That right, however, is only in respect of matters in which a party has an interest. The consequence of the bankruptcy is that Mr and Mrs Hall no longer have any beneficial interest in the Property, and the person that did have an interest, the Trustee, was content to leave the matter to the Deputy Master. The consequence of inactivity by Mr and Mrs Hall is that there is no evidence upon which they can rely to support a case of abuse of process.
34. In my judgment the Deputy Master was right to proceed on the basis that Mr and Mrs Hall had no standing with respect to the beneficial interest in the Property and right not to adjourn the summary proceedings in that respect.
35. Nevertheless, and in relation to the Halls' third ground of appeal and generally, I asked Mr Hawkin to draw my attention to any matters relied upon by Hawk which did not stand up to scrutiny or which might give the Halls an arguable defence or which might otherwise be a reason for the claim going to trial. I wanted to look at the case on the assumption that the Halls did have standing in order to see whether the court of its own motion could see that summary judgment should not be granted. Hawk's case was based on the allegation that Mr Baxendale-Walker had given some

£300,000 to the Halls for the purchase of the Property, which money did not belong to him but was trust monies to which he was not entitled. By virtue of an assignment, Hawk had the right to recover the monies and restore the trust property.

36. In this context Hawk did not contest certain facts which it said had been asserted by the Defendants. These were:

36.1. In 2012 the Defendants were living at the Property as tenants under an Assured Shorthold Tenancy. The Property was owned by a Mr Martin.

36.2. Mr Baxendale-Walker offered to buy the Property for the Defendants.

36.3. On or about 26 October 2012 the Defendants (via their solicitors) received total sums of £310,230 from the BWP bank account, being the account which was used to hold Trust monies. This money was a purported gift from Mr Baxendale-Walker to the Defendants.

36.4. This money was intended for and applied to the purchase of the Property by the Defendants. The purchase took place on about 6 November 2012. The purchase price was £300,000 and on that date the owner, Mr Martin, executed a TR1 in favour of the Defendants. The Defendants have been subsequently registered as freehold owners of the property.

36.5. In addition the Defendants received the balance of the money (i.e. £10,320) for the purpose of paying the professional fees and disbursements associated with the transaction and/or received such professional services and disbursements without paying for them themselves.

37. With that background, the first matter which Mr Hawkin drew to my attention was that the assignment agreement whereby Hawk acquired title to sue was not witnessed. This is true but was not required for the instrument to be valid so does not take the matter any further. He then pointed out that the signatures for both assignor and assignee were a) illegible and b) rather similar to each other. Again, this is not a matter which raises any arguable defence. It is also of note that neither of these points were relied upon in the Defence.
38. Next Mr Hawkin pointed out that there were no documents disclosed to support the evidence of Ms Popikova that the purchase of the Property was arranged so that the Halls could arrange a mortgage and it was submitted that this failure to give disclosure undermined the bona fides of the purported trust. It was common ground, however, that the Halls gave no consideration for the monies received and, in any event, disclosure had not been requested and refused, so I cannot see how the matter helps the Halls. Furthermore and as set out above, for the purposes of the application Hawk accepted that the sums provided to the Halls by Mr Baxendale-Walker were provided by way of gift.
39. Finally it was said that there was no witness statement from the Trustees of the purported trust and that the case had all the hallmarks of litigation pursued as an abuse of process. Although there was no witness statement from a Trustee, there was clear evidence of the trust and its purposes. As for the second of these two points, there was no sufficient material before the Deputy Master to suggest an abuse of process.
40. Mr Grant QC contended that none of the matters relied upon by Mr Hawkin went to undermine the evidence Hawk had presented to the court in witness evidence and I think he is right about that.
41. Moreover, Mr Grant contended that even if Mr Baxendale-Walker were pursuing a vendetta then that would not give a defence on the facts, relying on JSC BTA Bank v Ablyazov [2011] EWHC 1136 (Comm) and the cases therein cited. Mr Grant submitted that the present case was quite different from one in which a party was using the court's process to obtain something to which he was not entitled (a genuine abuse case). Here the complaint was merely of vindictiveness or general antagonism to the Halls, which was nothing to the point (cf. Broxton v McClelland [1995] EMLR 485, 497).
42. With respect to whether there were other matters which give rise to a compelling reason why the claim should have gone to trial, Mr Hawkin relied on the content of his written submissions. These in turn relied entirely upon evidence which was not before the court and therefore did not advance the position.
43. I have considered all the matters before me and despite the helpful submissions of Mr Hawkin have concluded that Deputy Master Mark was entitled to refuse the adjournment in relation to the issue of beneficial title to the property and go on to make the order which he made. Accordingly, I dismiss the appeal against his order.
44. I now turn to the appeal against the order of Deputy Master Mathews upon Hawk's application for possession of the Property. The Deputy Master's judgment on the point is short and it is convenient to set it out in full:

23 I now turn to the first part of the application, concerning possession, which in fact at the hearing I dealt with last. The Claimant relies on its equitable interest in the property, and the concomitant lack of any such interest for the First and Second Defendants, both established by the order of Deputy Master Mark. It also relies on the fact that the order requires the Defendants to transfer the outstanding legal title to the property to it. Taken together, these two things, says Mr Hackett, entitle the Claimant (who is out of possession and has never been in possession) to possession as against the First and Second Defendants (who are and remain in possession, albeit without the consent of the Claimant).

24 I disagree. An equitable owner in possession of land but with no legal title may well have the right to sue a third party for trespass or other interference with possession. But that is not this case, and we need not consider it now. By virtue of the order of Deputy Master Mark, the Claimant has the entire equitable interest in the property. The Defendants, in possession, on the other hand have the legal ownership. I cannot see any basis on which this Claimant has a better right to possession of the land at law than these Defendants. Nor does the additional fact that there is an order of the court that the Defendants transfer the legal estate to the Claimant transmute the equitable interest of the Claimant into something giving such a right to possession.

25 Moreover, I do not think the position would be different if the First and Second Defendants were, contrary to my earlier holding, not still the legal owners. They are in possession and the Claimant must make a positive case for a better right to possession than them. This it cannot do. I entirely accept that a beneficiary entitled in possession under a trust of land may be entitled as against the trustee to occupy the land, subject to exceptions and to the imposition in some cases of terms, under provisions of the Trusts of Land and Appointment of Trustees Act 1996 . But that is not what the Claimant asked for in this case, and it certainly did not put any evidence forward to support such an application. What the Claimant wanted was essentially to put an end to the trust by calling in the legal title under the well-known rule in Saunders v Vautier. (I record here that this was in fact the only authority referred to during the hearing on either side.) But the Claimant already had an order to do that, under the order of Deputy Master Mark. The problem was that the Defendants did not comply with the order.

26 Accordingly, in my judgment, the Claimant fails to establish any better right to possession of Sandpipers Lodge than the persons in possession, the First and Second Defendants, and the application is dismissed. It will of course be different once the Claimant has the legal title. Then the presumption would be that the legal title carries the right to possession, and the Defendants having no equitable interest would in principle be unable to resist this. I will hear the parties on the question of consequential orders.

45. Mr Grant accepted that the Deputy Master was right to recognise that for Hawk to succeed it had to show a better right to possession than Mr and Mrs Hall (see e.g. Asher v Whitlock (1865) 1 LR 1 QB 1) but submitted that the rest of the Deputy Master's reasoning was perverse and patently wrong.
46. Mr Grant submitted that the confusion in the Deputy Master's reasoning was evident from paragraph 25 of his judgment where he said that Hawk had not asked for an order for possession but merely sought to put an end to the trust by calling in the legal title under the rule in Saunders v Vautier. Mr Grant submitted that the Deputy Master was clearly mistaken. He pointed out that the application notice sought an order for possession in clear terms and the witness statement filed in support also made clear that Hawk was seeking an order requiring the Halls to give possession of the property.
47. I am satisfied from the documents before the court that the Deputy Master made an error when he stated that Hawk had not asked for an order for possession.
48. Mr Grant attacked the reasoning of the Deputy Master by pointing out that if it were sound then Mr and Mrs Hall were gaining a positive advantage by being in contempt of court and refusing to transfer legal title to Hawk, a matter which he submitted was contrary to principle. He also drew attention to paragraph 26 of the decision which appeared to recognise that if the Halls did comply with the order of the court, then the order for possession would follow. This, he said, illustrated the absurdity of the Deputy Master's conclusion. He also submitted that the inevitable consequence of the conclusion was increased costs and no more, again a factor which might suggest something had gone wrong.
49. It seems to me that the short point is this. In the context of land, does a bare legal owner in possession have a better right to possession than the beneficial owner in circumstances where (a) the beneficial owner has the benefit of an order of the court requiring that legal owner to transfer the legal title to him but (b) the legal owner refuses to comply with that order?
50. Mr Grant drew to my attention the explanation for the rule in Saunders v Vautier given in §12-008, Megarry and Wade; The Law of Real Property (8th ed 2012):

Where there is a bare trust T, the trustee must obey Z's (i.e. the beneficiary's) instructions about the disposition of the land. Z may therefor call for an outright conveyance to him. It is pointless to keep the legal and equitable interests separated where only one person is entitled to the whole beneficial interest. This is equally true if the trustees are expressly given duties to perform, e.g. to sell, or to accumulate the income, provided that all such duties are for the benefit of one person only, and that person is of full age. That is the basis of the rule in Saunders v Vautier.

51. He also drew attention to Cowan v Scargill [1985] Ch 270, 286 where Megarry VC was examining the parameters within which trustees must exercise their powers:

The starting point is the duty of trustees to exercise their powers in the best interests of present and future beneficiaries of the trust, holding the scales impartially between the different classes of beneficiaries. This duty of trustees towards their beneficiaries is paramount. They must, of course, obey the law; but subject to that, they must put the interests of their beneficiaries first.

52. Mr Grant also drew my attention to the Trusts of Land and Appointment of Trustees Act 1996 and in particular to sections 6(1), 6(5), 6(6), 11(1) and 12(1) in support of his submissions:

6 General powers of trustees.

(1) For the purpose of exercising their functions as trustees, the trustees of land have in relation to the land subject to the trust all the powers of an absolute owner.

(2) Where in the case of any land subject to a trust of land each of the beneficiaries interested in the land is a person of full age and capacity who is absolutely entitled to the land, the powers conferred on the trustees by subsection (1) include the power to convey the land to the beneficiaries even though they have not required the trustees to do so; and where land is conveyed by virtue of this subsection—

(a) the beneficiaries shall do whatever is necessary to secure that it vests in them, and

(b) if they fail to do so, the court may make an order requiring them to do so.

(5) In exercising the powers conferred by this section trustees shall have regard to the rights of the beneficiaries.

(6) The powers conferred by this section shall not be exercised in contravention of, or of any order made in pursuance of, any other enactment or any rule of law or equity.

(7) The reference in subsection (6) to an order includes an order of any court or of the Charity Commission.

11 Consultation with beneficiaries.

(1) The trustees of land shall in the exercise of any function relating to land subject to the trust—

(a) so far as practicable, consult the beneficiaries of full age and beneficially entitled to an interest in possession in the land, and

(b) so far as consistent with the general interest of the trust, give effect to the wishes of those beneficiaries, or (in case of dispute) of the majority (according to the value of their combined interests).

12 The right to occupy.

(1) A beneficiary who is beneficially entitled to an interest in possession in land subject to a trust of land is entitled by reason of his interest to occupy the land at any time if at that time—

(a) the purposes of the trust include making the land available for his occupation (or for the occupation of beneficiaries of a class of which he is a member or of beneficiaries in general), or

(b) the land is held by the trustees so as to be so available.

Mr Grant submitted that these sections make clear (i) that a bare trustee cannot defy the wishes of his beneficiaries (ii) cannot rely on any rights if so to do would be contrary to an order of the court.

53. Mr Hawkin sought to uphold the Deputy Master's reasoning but he accepted that he could not support a contention that a trustee should be better off if he flouted an order of the court rather than complied with it. Moreover, he also recognised that paragraph 26 of the Deputy Master's judgment carried with it consequences which were contrary to the overriding objective; and that this was some indication that there might be a flaw in the approach.
54. It was accepted that CPR 70.2A provides a mechanism whereby the Halls' unjustified refusal to comply with the order of Deputy Master Mark can be circumvented, with the result that the consequence of the order of Deputy Master Mathews is likely to be increased costs and further use of court resources and nothing more.
55. In my judgment, Mr Grant's analysis is the correct one. A beneficial owner of land seeking possession of land has, in ordinary circumstances (such as this case), a better right to possession of the land than a bare legal owner who has been ordered by the court to transfer that legal title to the beneficial owner but refuses to comply, even when the bare legal owner is in actual possession of the land at the time the matter is adjudicated. Such seems to me to be in accord with common sense and the authorities and statutory provisions to which my attention was drawn. The contrary position is inconsistent with the duties of trustees and with the paramount importance of maintaining the authority of the court.
56. Accordingly, I allow the appeal against the order of Deputy Master Matthews. Again I would like to thank Mr Hawkin (and the Bar Pro Bono Unit) for his helpful submissions.

Note 1   his judgment is reported at [2016] EWHC 3099 (Ch)    [Back]