REF/2012/0614

 

ADJUDICATOR TO HER MAJESTY’S LAND REGISTRY

LAND REGISTRATION ACT 2002

 

IN THE MATTER OF A REFERENCE FROM HM LAND REGISTRY

 

BETWEEN:

F&H (DIDSBURY) LTD

APPLICANT

and

(1) JOHN MICHAEL PLANT

(2) JANICE PLANT

(3) EDWARD BOND

RESPONDENTS

 

Property Address: Land adjoining Green Meadows, Station Road, Styal, Wilmslow, Cheshire SK9 4JP

 

Title Number: CH340806

 

Before: Mr Simon Brilliant sitting as Deputy Adjudicator to HM Land Registry

 

Sitting at: IAC Manchester, Piccadilly Exchange, Piccadilly Plaza, Manchester M1 4AH

 

On: 18 February 2013

 

Applicant’s Representation:             Mr M Grantham, solicitor.

 

First Respondent’s Representation:            Did not appear.

 

Second Respondent’s Representation:        In person.

 

Third Respondent’s Representation:          Did not appear.

 

DECISION

 

Charging order – first and second respondents were the joint owners of land both at law and in equity – applicant obtains judgment against second respondent - second respondent executes a document assigning or purporting to assign her beneficial interest in the land to the third respondent – district judge makes interim and final charging orders over the second respondent’s interest in the land in favour of the applicant - applicant applies to register a restriction to protect the charging orders – respondents object -  issues as to whether the respondents are entitled to object in light of the charging orders having already been made and whether the assignment to the third respondent was a sham or not. 

 

Snook v London and West Riding Investments Ltd [1967] 2 QB 786, National Westminster Bank Ltd v Stockman [1981] 1 WLR 67, First National Securities Ltd v Hegerty [1985] QB 850, Yorkshire Bank plc v Elliott (2007) REF/2005/0256, Commercial First Business Ltd v Choudhry (2012) REF/2011/0713-0716.

 

Introduction

 

1.         These proceedings raise the following dilemma.  A judgment debtor owns a beneficial interest in land.  Following the judgment, the judgment debtor assigns the beneficial interest to a third party.  The judgment creditor applies to the court for a charging order on the judgment debtor’s beneficial interest.   The district judge makes an interim and then a final charging order. 

 

2.         The judgement creditor applies to Land Registry to enter a restriction in the proprietorship register of the property in order to protect the charging orders.  An objection to the application is made on the basis that when the charging orders were made the judgment debtor no longer had any beneficial interest on which the charging order could bite. 

 

3.         The dispute is referred to the adjudicator.  Is the adjudicator bound by the court order and required to direct the registrar to give effect to the application, as one deputy adjudicator has held?[1]  Or is the adjudicator bound to determine the question himself and to direct the registrar to reject the application if appropriate, as another deputy adjudicator has held?[2] 

 

4.         And what is to happen, as both parties agree has happened in this case, if the district judge has expressly said when making the final charging order that he is not going to determine whether or not the judgment debtor any longer has any beneficial interest in the property, but that it is up to Land Registry to decide whether the charging order should be registered?

 

The parties

 

5.         In these proceedings F&H (Didsbury) Ltd (“F&H”), the applicant, is the judgment creditor.  F&H was incorporated in 2007 and was the commercial vehicle through which a solicitors’ practice operating in Didsbury, and known as Farrell & Hobbs, operated.  This practice no longer operates and the successor entity is Salehs LLP.  However, the judgment debt remains the property of F&H which accordingly is the correct applicant in these proceedings.  F&H is represented by Salehs LLP in these proceedings. Mr Grantham, who was the solicitor at the time dealing with the charging orders, appeared on behalf of F&H although he has now moved practices.

 

6.         Mrs Plant, the second respondent, is in now aged 63 and is the judgment debtor.  She has represented herself before me. Mr Plant, the first respondent, is her husband.  Mr Bond, the third respondent, is now aged 85 and is Mrs Plant’s father. Neither Mr Plant nor Mr Bond attended the hearing.

 

The three titles of Green Meadows

 

7.         Mr and Mrs Plant’s family home is Green Meadows, Station Road, Styal, Wilmslow, Cheshire SK9 4JP.  This is a detached three bedroom house of about 2,370 square feet, including the garage and studio, within gardens of about 0.6 acres which include a swimming pool and tennis court. 

 

8.         Mr and Mrs Plant have owned Green Meadows since 1998.  Green Meadows is held under three separate titles and Mr and Mrs Plant are the joint registered proprietors of each of them:

 

(1)        The freehold of the house with the front and the rear garden (“the house”) is registered under title number CH307408. 

 

(2)        The long lease of the house is registered under title number CH340796.[3]

 

(3)        The freehold of the land to one side and the rear of the house, which includes further gardens, the swimming pool and the tennis court (“the land”), is registered under a separate title, CH340806. 

 

The landlord’s proceedings

 

9.         Mr Plant is a businessman.  In 2008 he was leasing commercial premises in Manchester from Philip J Davies (Holdings) plc (“the landlord”).  Mr Plant came under pressure from the landlord to charge Green Meadows as security for the payment of the rent.  On 12 June 2008 Mr Plant executed a charge in favour of the landlord over the freehold and leasehold titles of the house, but not over the land, (“the 2008 charge”).  Mr Plant was also supposed to have procured the execution of the 2008 charge by Mrs Plant. But, regrettably, he forged her signature on the 2008 charge.

 

10.       The effect of this was to sever the beneficial joint tenancies of Mr and Mrs Plant in the freehold and the leasehold titles of the house, and to charge Mr Plant’s share of the beneficial interest in each title to the landlord.[4]

 

11.       Later in 2008 the landlord commenced proceedings against Mr and Mrs Plant in the Manchester County Court for possession of the house under the 2008 charge (“the landlord’s proceedings”). On 6 May 2010 a bankruptcy order was made against Mr Plant.

 

12.       At the conclusion of the landlord’s proceedings on 7 June 2010 HH Judge Holman made an order for the sale of the house under section 14 of the Trusts of Land and Appointment of Trustees Act 1996.  For reasons which do not concern me, the house has not yet been sold.

 

The judgment debt

 

13.       F&H represented Mrs Plant (but not Mr Plant) in the landlord’s proceedings. Mrs Plant failed to pay F&H its fees.  F&H commenced debt proceedings against Mrs Plant in the Manchester County Court, and on 14 August 2010 it entered judgment in default against Mrs Plant in the sum of £19,476.41 including interest and costs.

 

14.       F&H has obtained final charging orders to enforce the judgment debt on Mrs Plant’s beneficial interest in both the freehold and leasehold titles of the house.  F&H has protected those charging orders by restrictions entered in the proprietorship registers of both titles.  These proceedings do not concern those two titles.

 

15.       F&H was not aware when it obtained its default judgment that the land was registered under a separate title to the house. These proceedings solely concern the title to the land. 

 

 

The 2012 assignment

 

16.       On 4 January 2012 Mrs Plant and Mr Bond went to the offices of Savilles (Cheadle) Ltd, specialist conveyancing solicitors trading under the style Savilles Solicitors.  They executed a deed of assignment (“the 2012 assignment”) which was witnessed by Mr Brian Saville, who is a solicitor and director of the Savilles (Cheadle) Ltd.

 

17.       There is no suggestion made by F&H that the assignment was not executed on that day, or that it was not properly executed or witnessed, or that Mr Bond lacked the mental capacity to execute the assignment.  Mr Bond did not attend the hearing.  But having asked questions of Mrs Plant during her evidence about Mr Bond’s health I am satisfied that he did have the mental capacity to execute the assignment.

 

18.       I should add that Mr Saville appears to be a competent conveyancer.  He took the point for the first time, which no one else had taken in the landlord’s proceedings, that the 2008 charge should not have been registered as a legal charge in the charges register of the freehold and leasehold titles of the house, as only Mr Plant’s beneficial interest in each title had been charged.  As a result of this advice Mrs Plant successfully applied in 2012 to Land Registry to remove the 2008 charge from these two titles.

 

19.       The recitals to the 2012 assignment read as follows:

 

            WHEREAS

 

A          [Mrs Plant] is entitled to a one half share in [the land] and the net proceeds of sale and the net rents and profits until sale of it free from incumbrances (“the Seller’s Interest”)

 

B          [Mrs Plant] has agreed to sell and [Mr Bond] has agreed to buy [Mrs Plant’s] interest for the sum of £25,000.00

 

C         The trustees of the legal estate in [the land] are [Mrs Plant] and [Mr Plant] of Green Meadows, Station Road, Styal, Wilmslow, Cheshire SK9 4JP

           

20.       Recital A contains one assertion that it is plainly inaccurate.  Mrs Plant’s one half beneficial interest in the land was not free from incumbrances at this time.  The charges register shows that the land was subject to legal charges of Lloyds TSB Bank plc dated 31 July 2006 and Barclays Bank plc dated 10 April 2008.

 

21.       As to recital B, it is a matter of contention between the parties whether or not Mr Bond gave any consideration for the 2012 assignment to Mrs Plant.  I consider this further below. Recital C is accurate.

 

22.       Following these recitals the deed continues:

 

            NOW THIS DEED WITNESSES as follows:

 

            Assignment of Seller’s Interest

 

            In consideration of the payment by [Mr Bond] to [Mrs Plant] of the sum of £25,000.00 (receipt of which [Mrs Plant] acknowledges) [Mrs Plant] with full title guarantee assigns to [Mr Bond] the Seller’s Interest and all other rights if any she may have in or to [the land] TO HOLD to [Mr Bond] absolutely

 

Mrs Plant’s case on the 2012 assignment

 

23.       Mrs Plant accepts that Mr Bond did not pay her £25,000 in cash on the occasion of the 2012 assignment and that the statement otherwise is not accurate.  However, Mrs Plant’s case is that this assignment of her beneficial interest in the land was for value.  Her evidence is that in late 2005 or early 2006 Mrs Plant approached Mr Bond for a short term loan.  This was to assist Mr Plant’s financial problems with the landlord.  Mr and Mrs Plant owned life policies which were due to mature shortly and it was proposed that the monies from those policies would be used to pay back Mr Bond.  It was never intended that Mr Bond would make a gift of the money as it was part of his savings he required for funding his retirement.

 

24.       In January 2006 Mr Bond gave Mrs Plant a cheque for £58,000.  There has been disclosed a copy of Mr Bond’s bank statement showing that £58,000 left his account by cheque on 24 January 2006.  There has also been disclosed a copy of Mrs Plant’s bank statement showing that £58,615 was paid into her account on 20 January 2006.  I accept the evidence that at this time Mr Bond did indeed pay £58,000 to Mrs Plant.

 

25.       There has also been disclosed a copy of a letter from The Prudential Assurance Company Ltd dated 10 October 2008 showing that the surrender value of the life policies was £60,177.29.

 

26.       Mrs Plant says that because of Mr Plant’s continuing financial difficulties the proceeds of the life policies were used in supporting the business and on household expenditure rather than in repaying Mr Bond.  It was agreed within the family that instead of repaying the loan from the proceeds of the life policies that the loan would be secured on Green Meadows.  But the death of Mrs Bond in August 2011 diverted attention from this being done.

 

27.       Mrs Plant obtained a valuation of the land from Savills dated 15 November 2011.  She says that the report values the land as being worth between £30,000 and £50,000.  Although this is less than the amount owing to Mr Bond it is the only asset she has with which to repay him.  She asserts that Mr Bond has value for the 2012 assignment because in exchange for the ownership of her interest in the land he has relinquished his claim to repayment of the loan.

 

F&H’s case on the 2012 assignment

 

28.       Mr Grantham says that the 2012 assignment and the restriction protecting it are a sham, designed to frustrate both the execution of F&H’s judgment debt and the order for sale of Green Meadows obtained by the landlord.  Although the land itself is not subject to the order for sale, as a matter of practicalities the house will not be sold in a difficult market if ownership of the land is not transferred to the buyer as well at the same time.

 

29.       Mr Grantham accepts that a number of points he originally took are not good points in so far as he had assumed that Mrs Plant had purported to transfer her legal estate in the land to Mr Bond.  He now acknowledges that she had only purported to transfer her beneficial interest.

 

30.       Nevertheless there remain a number of points for him to make in so far as any assignment of Mrs Plant’s beneficial interest is concerned.

 

31.       First, he says that no independent third party would have touched the 2012 assignment with a barge pole.  Who would want to buy part of someone else’s garden, which is already subject to two legal charges?

 

32.       Secondly, he says that it is inconceivable that a 63 year old lady would want to transfer a valuable asset to her 85 year old widowed father who is in poor physical health.  This is the very converse of sensible estate planning.

 

33.       Thirdly, he draws my attention to the fact that the alleged repayment of the loan took place some six years after the loan, and over three years after the surrender of the life policies and that there is no independent evidence that Mr Bond’s cheque for £58,000 was a loan rather than a gift.

 

34.       Fourthly, he says that the 2012 assignment is on the face of it inaccurate in that it suggests that Mrs Plant’s beneficial interest was not subject to any incumbrances, when it was, and that £25,000 was actually paid to Mr Bond, when it was not.

 

35.       Fifthly, he correctly submits that the valuation evidence of Savills relied upon by Mrs Plant as showing that the land is worth between £30,000 and £50,000 says no such thing.  What the report says is that one would expect a buyer of the house to pay between £30,000 and £50,000 to include the land as well. The report is not evidence of the market price of the land if sold as a separate parcel.

 

36.       Sixthly, he says that it is suspicious that the restriction entered in respect of Mr Bond’s purported interest gave Green Meadows as his address.  This would enable Mrs Plant to intercept any notices sent to him by Land Registry.  This is not a point I find particularly persuasive as Mr Bond has gone to live with Mrs Plant whilst retaining his own home, and he is aware of the proceedings and the 2012 assignment as he has served evidence in these proceedings dealing with the events which have occurred.

 

37.       Seventhly, he says that no notice of the 2012 assignment was given to either of the registered chargees.

 

38.       Eighthly, he says the fact that Mrs Plant rather than Mr Bond objected to the original application shows that she still has an interest in the land.  This is a bad point as anyone can object to an original application to enter a restriction.[5]

 

My conclusion on the 2012 assignment

 

39.       In my judgment there are really two separate issues here which have become conflated.  First, did the 2012 assignment validly transfer Mrs Plant’s beneficial interest in the land to Mr Bond?  Secondly, if it was a valid assignment, did Mr Bond give value for it?

 

40.       The second question is not a matter I have to decide for the purpose of these proceedings.  It may become relevant if at any time an application is made under the Insolvency Act 1986 in relation to the 2012 assignment.

 

41.       In considering the first question which is whether the 2012 assignment was a sham or not I have to refer to the classic definition of what a sham is.  This is to be found in the judgment of Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786, 802C-F:

 

            As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a "sham," it is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it 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. But one thing, I think, is clear in legal principle, morality and the authorities ... that for acts or documents to be a "sham," with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating.

 

42.       I have taken account of all that Mr Grantham has urged upon me, but I am of the clear view that the one thing that Mrs Plant and Mr Bond were agreed upon was that Mrs Plant was to divest herself of her beneficial interest in the land and that Mr Bond was to acquire it.  There is no evidence that there was some secret deal between them whereby Mr Bond was to hold the beneficial interest transferred to him on trust for Mrs Plant.  The 2012 assignment was not, in my judgment, a sham but it was a valid assignment.

 

43.       Immediately after the 2012 assignment was executed an application was made to register a restriction in the proprietorship register of the title to the land to protect Mr Bond’s beneficial interest, and such a restriction was entered with effect from 5 January 2012.  No application has been made to Land Registry by F&H to remove this restriction.

 

44.       F&H only became aware for the first time that the land was held under a separate title from the freehold of the house when Mr Grantham received a witness statement made by Mrs Plant dated 23 January 2012.  This witness statement was made in the course of an unsuccessful application by Mrs Plant to set the default judgment aside which was dismissed by the district judge on 26 January 2012.

 

 

F&H’s applications for charging orders on Mrs Plants interest in the land

 

45.       In the course of that witness statement Mrs Plant volunteered the fact that the land was held under a separate title.  No doubt she was quite relaxed about so doing at this juncture as she had by now divested herself of her beneficial interest in it, although she did not mention in her witness statement that she has done this.  This knowledge that a separate title to the land existed prompted F&H to make an application to Macclesfield County Court on 8 February 2012 for an interim charging order on Mrs Plant’s interest in the land.

 

46.       Section 1(1) of the Charging Orders Act 1979 (“the 1979 Act”) provides the power to make a charging order:

 

Where, under a judgment or order of the High Court or a county court, a person (the "debtor") is required to pay a sum of money to another person (the "creditor") then, for the purpose of enforcing that judgment or order, the appropriate court may make an order in accordance with the provisions of this Act imposing on any such property of the debtor as may be specified in the order a charge for securing the payment of any money due or to become due under the judgment or order.

 

47.       Section 2(1) of the 1979 Act provides for what property can be made the subject of a charging order:

 

… a charge may be imposed by a charging order only on—

 

(a)        any interest held by the debtor beneficially—

 

(i)         in any asset of a kind mentioned in subsection (2) below, or

 

(ii)        under any trust; or

 

(b)        any interest held by a person as trustee of a trust ("the trust"), if the interest is in such an asset or is an interest under another trust and—

 

(i)         the judgment or order in respect of which a charge is to be imposed was made against that person as trustee of the trust, or

 

(ii)        the whole beneficial interest under the trust is held by the debtor unencumbered and for his own benefit, or

 

(iii)       in a case where there are two or more debtors all of whom are liable to the creditor for the same debt, they together hold the whole beneficial interest under the trust unencumbered and for their own benefit.

 

48.       Land is included within the list of assets referred to in s.2(2).  It will be appreciated that s.2(1)(a)(ii) provides for a co-owner’s beneficial interest to be the subject of the charging order[6] and that s.2(1)(b) prevents a co-owner’s legal estate from being the subject of a charging order in a case such as this where there is a single judgment debtor who does not own the whole of the beneficial interest and who has not been sued as a trustee.  This point was not appreciated by Mr Grantham whose first closing submission was that, regardless of what Mrs Plant may have done with her beneficial interest, F&H was entitled to a charging order in respect of her interest in the legal estate.  I accordingly reject that submission.

 

49.       Section 3 of the 1979 Act includes the following:

 

(2)        The Land Charges Act 1972 and the Land Registration Act 2002 shall apply in relation to charging orders as they apply in relation to other orders or writs issued or made for the purpose of enforcing judgments.

 

(4)       Subject to the provisions of this Act, a charge imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor by writing under his hand.

 

(5)        The court by which a charging order was made may at any time, on the application of the debtor or of any person interested in any property to which the order relates, make an order discharging or varying the charging order.

 

(6)        Where a charging order has been protected by an entry registered under the Land Charges Act 1972 or the Land Registration Act 2002, an order under subsection (5) above discharging the charging order may direct that the entry be cancelled.

 

50.       The procedural aspects of a charging order are governed by CPR 70.3 – 70.10.  The order is obtained in a two stage process similar to the former procedure of a charging order nisi and charging order absolute. An interim charging order is obtained without notice and on a consideration of the papers without any attendance (r.73.4). A hearing follows where the interim order is made final or discharged (r.73.8).

 

51.       In the case of F&H’s application, it was dealt with very promptly by the district judge who made an interim charging order dated 9 February 2012 without a hearing.

 

52.       CPR 73.4(2)(b) provides for the court, when making an interim charging order, to fix a hearing to consider whether to make a final charging order.  The interim charging order directed that hearing to take place on 4 April 2012.

 

53.       CPR 73.5(1) provides that copies of the interim charging order, the application notice and any documents filed in support of it must, not less than 21 days before the hearing, be served on the judgment debtor and certain other categories of persons, including, if the order relates to an interest under a trust, on such of the trustees as the court directs.  Accordingly, in the case of an interim charging order on the beneficial interest of a co-owner of land, notice may be given to the co-owner of the legal estate.  But notice will not be given to an assignee of the judgment debtor’s beneficial interest of whom the court is at that time unaware.

 

54.       CPR 73.8 provides:

 

(1)        If any person objects to the court making a final charging order, he must—

 

(a)        file; and

 

(b)        serve on the applicant;

 

written evidence stating the grounds of his objections, not less than 7 days before the hearing.

 

(2)        At the hearing the court may—

 

(a)        make a final charging order confirming that the charge imposed by the interim charging order shall continue, with or without modification;

 

(b)        discharge the interim charging order and dismiss the application;

 

(c)        decide any issues in dispute between the parties, or between any of the parties and any other person who objects to the court making a final charging order; or

 

(d)        direct a trial of any such issues, and if necessary give directions.

 

55.       It is clear that the court has the procedural tools with which to conduct a detailed hearing at this stage if the judgment debtor alleges that he or she no longer has any beneficial interest in the property on which a charging order can bite, or if the assignee of the beneficial interest seeks to intervene to protect his or her beneficial interest.  Logic also suggests that where such an issue is raised, the court ought, before deciding whether or not to make a final charging order, consider whether or not the judgment debtor any longer has any beneficial interest in the property on which a charging order can bite.

 

56.       It should also be mentioned that even if the court does make a final charging order, an assignee of the beneficial interest can later apply to set it and any restriction protecting it aside : see s.3(5) and (6) of the 1979 Act, set out above, and CPR 73.9.

 

57.       However, experience shows that a detailed consideration of this nature prior to the making of a final charging order rarely takes place.  Applications for final charging orders are often put in a busy list with about 10 minutes allotted for each case. Some courts are inundated with them as explained in the White Book at paragraph 73.10.10:

 

            At the time of this edition the UK is recovering from a recession which saw two banks nationalised and most others receive Government help. Lenders remain concerned about their balance sheets.

 

A debt which would otherwise be a bad debt but which is then secured by a charging order will now appear on the balance sheet as an asset. This has led to many courts being inundated with applications for charging orders. The courts will make the order, subject to normal principles, but generally do so merely to give security rather than as a prelude to an order for sale. Unfortunately some courts are now receiving unmeritorious applications for an order for sale often made by an assignee in respect of small or modest debts (such as credit card debts) purchased at a knock down price. Such applications are likely to be dismissed as totally without merit and subject to an adverse costs order.

 

58.       Final charging orders are often made as a matter of routine.  Assignees of the beneficial interest rarely take part in the proceedings. As Mr Mark, an experienced deputy Chancery Master, said in Yorkshire Bank plc v Elliott (2007) REF/2005/0256

 

There is no evidence before me of what took place before the District Judge or of how the District Judge dealt with the First Respondent’s letter, but a common course in these circumstances is to make the charging order absolute, leaving the question whether there was any beneficial interest for it to bite on to be dealt with later, for example on an application for an order for sale, if necessary.  Whether that was so or not, however, nothing the District Judge did could involve any determination binding on the First Respondent as to whether the Second Defendant had any beneficial interest in the property upon which the charging order could bite.

 

59.       When Mrs Plant received the application for a final charging order she resolved to dispute it.  Although she did not comply with CPR 73.8(1) by filing her evidence at least seven days before the hearing, she did attend the count court office a day or two before the hearing fixed for 4 April 2012 and handed into the counter staff a small bundle of documents, including the 2012 assignment.  She also arranged with the staff for her case to be put at the back of the list at 3.0pm as she knew it would take more time than a routine application would.

 

60.       Both Mr Grantham and Mrs Plant gave oral evidence about what happened before District Judge Swan on 4 April 2012.  Mr Grantham, who conducted the case on behalf of F&H very fairly, told me that the district judge said that F&H had a valid judgment and an interim charging order and that he thought F&H was, on the face of it, entitled to a final charging order.  It was up to Land Registry to decide whether or not the charging order should be registered.  Mr Grantham accepted this approach at the time, thought matters should take their course and never considered seeking permission to appeal from this decision. 

 

61.       In cross-examination Mr Grantham recalled that the district judge’s reaction to Mrs Plant’s enquiry as to whether he had read the papers she had left with the court office, and to her submission that she had no beneficial interest in the land on which the charging order could bite, was to the effect:

 

            That is not why I am here, Mrs Plant, it is a matter for Land Registry.

 

62.       In her oral evidence Mrs Plant gave similar evidence.  She felt the district judge had been dismissive of her submissions and had told her it was a matter for Land Registry.  When I asked her if she had considered appealing from this decision, she said that she had not done so because she had been told she had to go to Land Registry.

 

 63.      Following the hearing on 4 April 2012 an order was drawn up on CPR form N87 which stated that the interest of Mrs Plant in the asset described in the schedule to the order stood charged with payment of £23,602.88 which was the amount then owing under the judgment debt.  The schedule simply referred to Green Meadows, but it is common ground that it should have referred specifically to the registered title to the land.  The district judge did not amend the standard order in any way to show that he had expressly declined to make any finding as to whether or not Mrs Plant did have any interest in the asset described in the schedule, and that the question as to whether or not she did have any such interest was to be decided by Land Registry.

 

The original application

 

64.       A charging order on registered land has to be protected on the register to prevent the proprietor transferring the land free of the equitable charge created by the charging order.  In a case such as this where the beneficial interest of one co-owner has been charged, the appropriate method of protecting the charging order is the entry of a restriction in standard form K in the proprietorship register of the title.[7]

 

65.       After F&H obtained the interim charging order on 9 February 2012, it made an application to Land Registry on 17 February 2012 in form RX1 to enter a restriction in the proprietorship register of the land (“the original application”).

 

66.       On 8 March 2012 Mrs Plant objected to the original application.  She wrote to Land Registry:

 

            I Janice Plant have no interest in this property as the land relating to the title is owned jointly by Mr John Michael Plant and Mr Edward Bond.

 

67.       As far as the legal title was concerned this statement was plainly incorrect as Mr and Mrs Plant remained the joint legal owners.  However, in respect of the beneficial interest was concerned this statement was correct as she had by then assigned her beneficial interest to Mr Bond.  On 15 March 2012 Mrs Plant wrote to Land Registry enclosing a copy of the 2012 assignment and drawing attention to the restriction protecting Mr Bond’s beneficial interest in the land.

 

68.       As a result of this objection and one made by Mr Plant, the dispute as to whether F&H was entitled to enter a restriction was referred to the adjudicator on 8 June 2012 under section 73(7) of the Land Registration Act 2002.  Mr Bond was added as another respondent during the course of these proceedings.

 

F&H’s case on the original application

 

69.       Mr Grantham made a number of submissions to me in his closing address.  These submissions fall into three categories.  First, he says that the 2012 assignment can be ignored as it is a sham.  Mrs Plant retains her beneficial interest in the land and therefore F&H is entitled to protect the charging orders it has obtained on that interest.  I have set out above my reasons for finding that the 2012 assignment was not a sham, so this submission fails.

 

70.       Secondly, Mr Grantham says that I should not be unduly concerned about Mrs Plant’s beneficial interest in the land as she remains a joint legal owner and that is sufficient.  I have explained above that s.2(1)(b) of the 1979 Act prevents a co-owner’s legal estate from being the subject of a charging order in a case such as this where there is a single judgment debtor who does not own the whole of the beneficial interest and who has not been sued as a trustee.  So this submission also fails.

 

71.       Thirdly, Mr Grantham says I should prefer the approach taken by Mr Rhys to that taken by Mr Mark and I should decline to go behind the order made by the district judge.  He draws my attention particularly to paragraph 5 of Commercial First Business Ltd v Choudhry (2012) REF/2011/0713-0716:

 

Ms Mitchell also submits that it is not open to the Adjudicator to make any findings as to the beneficial interests lying behind the legal ownership of the Property.  More precisely, she submits that the Respondents’ contention that the Judgment Debtors have no beneficial interest in the Property is unarguable.  She points to the fact that the court has made a final charging order in respect of the Judgment Debtors’ interest in the Property.  That order has not been appealed or set aside, and still stands.  She refers me to section 2(1) of the Charging Orders Act 1979 (“the 1979 Act”), which provides that “….a charge may be imposed by a charging order only on – (a) any interest held by the debtor beneficially…” .  Although there is a special provision relating to trusts – section 2(1)(b) – this was not the basis of the order made in this case.  Accordingly, she submits, the mere fact that a final charging order has been made in respect of the Judgment Debtors is conclusive as to the fact that they have some beneficial interest in it.  It is not for the Adjudicator to go behind the court order and seek to investigate the beneficial ownership.  However, that is not to say that the Respondents are unable to raise the issue at all.  Essentially, according to Ms Mitchell, they have three possible avenues.  First, they could apply to discharge, vary or appeal the final charging order – or, indeed, the District Judge’s decision to strike out their application dated 2^nd February 2011.  Secondly, they could raise the issue in court proceedings brought for that purpose.  It appears that there are or may be some proceedings on foot – to which the Bank of Scotland, as first chargee, is a party.  I asked Mr Choudhry about the progress of these proceedings, and why the Applicant had not been made a party, but I received no clear response.  Thirdly, the beneficial interests would be relevant on an application by the Applicant for an order for sale when the considerations identified in section 14 of the Trusts of Land and Appointment of Trustees Act 1996 come into play.  These are the only legitimate methods of re-opening the issue of beneficial ownership, as to which the Adjudicator has no jurisdiction.

 

72.       Mr Rhys accepted these submissions.  In paragraphs 7 and 8 he said:

 

In my judgment, the analysis provided by Ms Mitchell is compelling.  I do not see how, in the light of the provisions of the 1979 Act, it is open to the Adjudicator to go behind the decision of the District Judge and hold that the Judgment Debtors have no beneficial interest ....  Unless and until the final charging order is set aside it is conclusive.  The onus is on the Judgment Debtors or the Respondents to bring the matter back before the court.  If they choose not to, for whatever reason, they must take the necessary consequences.

 

I therefore conclude that the Respondents do not have a legitimate objection to the entry of a restriction in the register of the Property to protect the final charging order.  I have reached that conclusion on the basis of the legal analysis set out above.  Furthermore, this conclusion is in my judgment entirely consistent with the purpose behind the restriction process.  The restriction protects the judgment creditor’s equitable interest arising from the charging order.  It does not conclude the issue of beneficial ownership against the Respondents, as I have said.  However, it does mean that until such time as the charging order is set aside – it that ever happens – it remains effective and cannot be sidestepped by a sale or other disposition which would override the Applicant’s equitable interest.

Mrs Plant’s case on the original application

 

73.       In her skeleton argument Mrs Plant submits that the 2012 assignment was a valid transfer of her equitable interest in the land and that the assignment has been properly protected by the entry of the restriction in favour of Mr Bond.

 

Discussion

 

74.       I propose to follow the approach taken by Mr Mark as to what should happen where the judgment debtor claims to have assigned all his or her beneficial interest in the property the subject of the charging order prior to the order being made.  Mr Bond was not before the district judge on 4 April 2012 and was not a party to those proceedings.  He is a party to these proceedings.  Moreover, the district judge expressly left open the question as to whether Mrs Plant had any beneficial interest in the land to Land Registry.  I am exercising the registrar’s function as there is a dispute which has been referred to the adjudicator.

 

75.       As I have found that the 2012 assignment is valid it follows that Mrs Plant no longer had any interest in the land after 4 January 2012, and that she had no such interest when the charging orders were made respectively on 9 February 2012 and 4 April 2012.

 

Conclusion

 

76.       I shall direct the registrar to cancel the original application.

 

77.       Costs on the standard basis should follow the event.  Mrs Plant should serve on F&H’s solicitors and the adjudicator a schedule of her costs within 14 days of receiving this decision.  F&H’s solicitors are to respond to the schedule by serving on Mrs Plant and the adjudicator any objections and representations in respect of the amount being claimed within 14 days of receiving the schedule. Mrs Plant may, if she wishes, serve a reply on F&H’s solicitors and the adjudicator within seven days of receiving the objections and representations.

 

Dated 4 March 2013

 

 

 

BY ORDER OF THE ADJUDICATOR TO HM LAND REGISTRY