REC/2014/0028

PROPERTY CHAMBER, LAND REGISTRATION DIVISION
FIRST-TIER TRIBUNAL

B E T W E E N:

ASHOO DUA

Applicant

And

MAS LIMITED

Respondent

Property address: 47 Sudbury Avenue, Wembley, London HAO 3AN

Before: Judge Michell

Alfred Place, London

12th November 2015

Applicant’s Representation: Mr Shashi Dua
Respondent’s representation: Mr Mark Diggle of Counsel instructed by BG Solicitors LLP 

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DECISION
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APPLICATION TO SET ASIDE A DEED OF TRANSER OF CHARGE- LAND REGISTRATION ACT 2002 S. 108(2) – APPLICATION TO STRIKE OUT UNDER RULE 9(2)(A) - WHETHER TRIBUNAL HAS JURISDICTION- WHETHER DEED WAS A DOCUMENT EFFECTING A QUALIFYING DISPOSITION- REQUIREMENTS OF LRA AS TO TRANSFER OF BENEFIT OF A CHARGE    
1.	The Applicant, Mrs Dua made an application to the Tribunal under Section 108(2) of the Land Registration Act 2002 to set aside a Deed of Transfer dated 21^st February 2009.  The Deed of Transfer is expressed to transfer the benefit of a charge made between Mrs Dua and AD Supply Ltd from AD Supply Ltd to MAS Ltd.. At the hearing before me on 12^th November 2015 I struck out the application under Rule 9(2)(a) of the Tribunal Procedure(First-tier Tribunal)(Property Chamber) Rules 2013 on the basis that the Tribunal has no jurisdiction to set aside the Deed of Transfer.  I set out my reasons for doing so below.    

2.	The chronology and material facts set out here are substantially but not wholly taken from the Decision of Judge McAllister given in this Tribunal on 23^rd July 2015.
 
3.	Mrs Dua entered into a legal charge with AD Supply Limited on 23 July 2007 (‘the Charge’) The total sum advanced was £74,995. The term of the loan was 6 months. The interest rate was 2% per month. The Charge was secured over 47 Sudbury Avenue, Wembley (‘the Property’). Mrs Dua had purchased the Property in December 2003 as a buy to let investment. She and her family live next door at 49 Sudbury Avenue. The Property is registered with title number P14569. The Charge was registered on 31 July 2003. There is a prior registered charge in favour of the Bank of Scotland.

4.	The Respondent was registered as proprietor of the charge, in place of AD Supply Limited on 16 March 2009. AS Supply Limited was dissolved on 20 September 2011.  I shall return later to the method by which the charge was transferred.

5.	The Respondent issued possession proceedings against Mrs Dua in the Willesden County Court on 23 May 2012. The total due under the Charge as at 23 April 2012 was said to be over £110,000. 

6.	On 22 June 2012 Mrs Dua signed a letter acknowledging the continued forbearance of the Respondent in respect of her contract with them and agreed to pay the monthly instalments and to repay the entire sum due if the hearing scheduled for 25 June was adjourned. The court duly adjourned the hearing, and ordered that the claim be struck out if no claim to restore was made by 25 June 2013.

7.	On 19 June 2013 the Respondent applied to restore the proceedings on the basis that, whilst monthly repayments had been made, Mrs Dua had failed to address the question of how she would repay the balance outstanding. 

8.	On 11^th September 2013, Mr Broadbent made a witness statement in the County Court proceedings.  At paragraph 2, he stated
	“On 21/02/2009 AD Supply Ltd transferred the benefit of the Charge to the 	[Respondent].  I attach hereto marked IB1 a true copy of the Transfer of Mortgage 	together with notice of assignment addressed to the [Applicant] and dated 25^th 	February 2009”.
 He exhibited to that witness statement  at IB1 a copy of the Deed of Transfer.   The Deed of Transfer recites that AD Supply Ltd had agreed with MAS Ltd to transfer the benefit of the Charge to MAS Ltd..  The operative part of the Deed of Transfer reads
	“In consideration of the sum of …(£108,180.61)(receipt of which the Lender hereby 	acknowledges) the Lender with full title guarantee transfers the benefit of the 	Mortgage to the transferee”.
Thereafter and until the day of the first hearing before me, everyone involved in this matter appears to have proceeded on the assumption that if the Charge was transferred at all then it was transferred by the Deed of Transfer.        	

9.	On 16 September 2013 Mrs Dua filed her defence and counterclaim. By paragraph 2(4) Mrs Dua did not admit that the Charge had been transferred by the Deed of Transfer and stated (at sub paragraph (a)) that she believed ‘that all documents and formalities necessary for lawful assignment of all rights and obligations form the Lender to the Claimant were not properly completed. That any contemporaneous or purported contemporaneous part completion was seriously inadequate and or seriously defective and in any event of no effect.’ The pleadings asked for all relevant documentation and averred that in the absence of strict proof the agreement (ie the Charge) is strictly unenforceable by the Respondent. The other defence raised relates to the allegation that the relationship between the parties was unfair within the meaning of the Consumer Credit Act 1974. Paragraph 2 of Counterclaim 1 repeated the allegation that the Transfer was unenforceable by the Respondent and claimed that the Applicant is entitled to be reimbursed for the sums paid by her to the Respondent.  

10.	It is the Applicant’s case that the Deed of Transfer was invalid because it did not comply with section 44 of the Companies Act 2006, which, in essence, requires that a document can only be validly executed by a company if it is under seal or signed by two authorised signatories or by a director of the company in the presence of a witness. In this case the Deed of Transfer was not under seal. As Mr Dibdin and Mr Broadbent signed in both capacities as directors and company secretary (and their signatures were not witnessed) the allegation is that the necessary formalities were not complied with, and accordingly the Charge was not transferred to the Respondent. 

11.	On 14 November 2013 the Respondent applied to strike out the defence and counterclaim.  On 13 December 2014 the court struck out paragraph 2(4) (b) and (c) of the defence. This related to a claim for provision of documents under the Consumer Credit Act. The order also provided that any application to amend the defence and counterclaim be made by 5 February 2014.

12.	A further order was made on 9 May 2014. The court ordered that the Respondent’s application to strike out those parts of the defence and counterclaim challenging the validity of the Transfer be adjourned pending the application made by the Applicant to this Tribunal. The matter was then adjourned to 14 September 2014. On that day, DJ Bloom struck out paragraph 2(4)(a) of the Defence and Counterclaim 1.

13.	The balance of the proceedings continues in the County Court, albeit that it has been transferred to the County Court sitting in Central London for hearing. It is anticipated that the case will be set down for trial shortly, and is likely to be heard in March 2016. The issue for the court will be whether there was an unfair relationship within the meaning of the Consumer Credit Act.

14.	In this Tribunal, the matter proceeded as follows. The first application was made  under section 108(2) of the Land Registration Act 2002 on 2 May 2014. This section confers on the Adjudicator (as the Tribunal was then known) the same jurisdiction to make any order which the High Court could make for the rectification or setting aside of a document which, amongst other things, effects a qualifying disposition of a registered charge.

 15.	The application was to remove the Charge from the register. In that form, the application was not accepted: Mrs Dua was informed that the jurisdiction under Section 108(2) is to set aside or rectify the underlying document, not the register. An application to rectify the register is one that is made to the Chief Land Registrar and not directly to the Tribunal.  A further application in the proper form was made on 18 September 2014 to set aside the Transfer. The basis is that the Transfer is a sham or that in any event the Transfer was never executed as a lawful deed, and is therefore of no effect.

16.	By order dated 13 November 2014 the Applicant was required to file and serve copies of the County Court proceedings. On 23 December, as stated above, a draft order was sent to the parties stating that it was intended to strike out the proceedings before the Tribunal as an abuse of the process. The reasons given were that the validity of the Transfer was a matter before the County Court, and that the effect of the orders drawn up on 14 May 2014 and 26 September 2014 was to strike out the entirety of paragraph 2(4) of the Defence. The order striking out the application to rectify the Transfer was, as stated above, made on 14 January 2015.

17.	The Applicant applied to set aside the order of 14^th January 2015. The matter came before Judge McAllister for an oral hearing on 14^th July 2015. Having considered the transcripts of the hearings in the County Court on 9 May 2014 and on 19 September 2014, Judge McAllister held that the question of the validity of the Charge was not a matter that was to be considered only in the County Court and which it was an abuse of process for the Applicant to raise before the Tribunal.
 
18.	At that hearing, counsel for the Respondent, argued (as he had previously done before the District Judge) that the proceedings in this jurisdiction were misconceived because the Respondent derives its title from the register, and not the Charge. He referred the learned judge to section 58 of the Land Registration Act 2002 which provides that: ‘If, on the entry of a person in the register as the proprietor of a legal estate, the legal estate would not otherwise not be vested in him, it shall be deemed to be vested in him as a result of the registration.’ This point is known as the conclusiveness of registration or indefeasibility of title.  Judge McAllister rejected this argument, on the grounds that if, for whatever reason, the Respondent is not entitled to be registered as owner of the Charge, the register may be rectified pursuant to the provisions of Schedule 4 to the Act.  The learned judge pointed out in her Decision that if the Applicant’s application to set aside the Transfer were successful then the register could be rectified to remove the Respondent as owner of the Charge unless, of course, there were exceptional circumstances which justify not making the alteration (paragraph 5(3) of Schedule 4). 

19.	Judge McAllister also rejected other submissions of Mr Diggle, namely that the Applicant was precluded from even challenging the validity of the Transfer because she was not a party to it and that the Applicant was estopped from challenging the Transfer because of the agreement she made with the Respondent in June 2012. The short answer to this point was that the agreement was made before the Applicant was aware of the Transfer. 

20.	Judge McAllister set aside the order of Judge Mark made on 14 January 2015 and gave further directions for trial. 

21.	The matter came before me for trial on 23^rd September 2015.  At that hearing, Mrs Dua was represented by counsel, Mr Simon Brilliant.  Counsel sought to run two arguments before me; firstly, that the Deed of Transfer had not been validly executed and secondly, that it was a sham.  I rejected the first argument on the basis that if the Deed of Transfer had not been validly executed then it was void and so not a document that could be set aside under Section 108(2).  There was insufficient time remaining on that day for the issue of whether the Deed of Transfer was a sham to be determined.  However, during the course of his submissions, Mr Brilliant produced a form TR4 which had been shown to him by the Applicant only shortly before the hearing.  I adjourned the hearing and gave certain directions.  

22.	The Respondent’s solicitors then obtained the file relating to the transfer of the benefit of the Charge.  The file was being held on behalf of the partners of the former solicitor’s practice, Messrs Martin and Haigh, which had acted for both AD Supply Ltd. and for the Respondent on the transfer of the benefit of the Charge.  They also made enquiries of HM Land Registry.  As the result, it was discovered that AD Supply Ltd. and the Respondent had executed a form TR4 dated 5^th March 2009 transferring the benefit of a number of charges, including the Charge to the Respondent.  That form had been sent to and received by HM Land Registry and the transfer of the benefit of the Charge to the Respondent was then registered by HM Land Registry.  All this information appears from the witness statement of Ms Jean Williams, a litigation clerk employed by the Respondent’s solicitors, dated 7^th October 2015.  

23.	When the matter came back before me for hearing on 12^th November 2015, counsel for the Respondent, Mr Diggle applied to me to strike out the proceedings on the basis that the Deed of Transfer was not a document that the Tribunal had jurisdiction to set aside under Section 108(2) of the Act.  That section gave the Tribunal power to set aside only a document effecting a qualifying disposition.  The Deed of Transfer was not a document effecting a qualifying disposition.  At the hearing, Ms Williams confirmed the contents of her witness statement and was cross-examined by Mr Dua on behalf of the Applicant.  It is clear that the TR4 was the document that was sent to Land Registry and on which the Land Registry acted in registering the transfer of the Charge.  

24.	AD Supply Ltd. as the registered proprietor of the Charge was entitled by section 24 of the Act to exercise “owner’s powers” in relation to the Charge.  Section 23(2) provides that owner’s powers in relation to a registered charge consist of 
	“(a) power to make a disposition of any kind permitted by the general law in relation 	to an interest of that description, other than a legal sub-mortgage”. 
A transfer of the benefit of the Charge is a disposition permitted by the general law.  A transfer is required to be completed by registration – s. 27(3) of the Act.  Section 25 provides that a registrable disposition of a registered charge only has effect if it complies with such requirements as to form and content as the rules may provide.  Therefore, there cannot be an effective transfer of a registered charge unless the requirements of the rules as to the form of transfer are complied with.  Rule 116 of the Land Registration Rules 2003 provides that a transfer of a registered charge must be in Form TR3, TR4 or AS2 as appropriate.  In this case, the transfer of the Charge was part of a transfer of a group or portfolio of charges.  Therefore, the appropriate form was TR4.  It follows that the document which effected the transfer of the benefit of the Charge was the form TR4 and not the Deed of Transfer.  In so far as is relevant, a “qualifying disposition” for the purposes of Section 108(2) is a registrable disposition.  The transfer of the Charge was a registrable disposition.  The document which effected that registrable disposition was the form TR4 and not the Deed of Transfer.

25.	It follows that the Deed of Transfer was not a document which effected a qualifying disposition.  It could not have been because the transfer of a Charge is only effective if made in one of the forms specified in the Land Registration Rules.

26.	I would add that there was no application before the Tribunal in respect of the form TR4 and it was not suggested by the Applicant that the form TR4 could be set aside.  In any event, the TR4 was not the subject of the application before me under Section 108(2). 

27.	I considered that it was just to make no order as to costs.  The application under Section 108(2) failed but the parties had concentrated on the Deed of Transfer because it was referred to in and exhibited to Mr Broadbent’s witness statement.  The Form TR4 could and should have been referred to by the Respondent.  On the other hand, the Applicant should have disclosed the TR4 prior to the first hearing before me.  No order for costs appeared to be the just order to make in all the circumstances.                    
     
BY ORDER OF THE TRIBUNAL

Dated this 16^th November 2015