REF/2015/0702

PROPERTY CHAMBER LAND REGISTRATION

FIRST-TIER TRIBUNAL

IN THE MATTER OF A REFERENCE

UNDER THE LAND REGISTRATION ACT 2002

 

 

BETWEEN

ROBERT ALFRED HURST

ANN STEPHANIE HURST

 

APPLICANTS

and

 

NICHOLAS JAMES TREPPASS

 

RESPONDENT

 

Property Address: 73 Southway, London NW11 6SB

 

Title Number: NGL369279

Before: Judge Owen Rhys

Sitting at:  10 Alfred Place London WC1E 7LR

On: 10^th May 2016

Applicant representation:                 Mr Hurst in person

Respondent representation:             In person

           

________________________________________________________________________­__________

D E C I S I O N

__________________________________________________________________________________

THE APPLICATION

1.      By an application in Form AP1 dated 9^th March 2015, the Applicants applied to Land Registry to alter the register relating to 73 Southway, London NW11 6SB (registered as title number NGL369279 and referred to herein as “the Property”) by removing from the Charges Register a Legal Charge dated 15^th March 2001 (“the Legal Charge”).  The Applicants are the registered proprietors of the Property, and the Respondent is the proprietor of the Legal Charge.   The application was opposed, and on 15^th October 2015 the Chief Land Registrar referred the dispute to the Tribunal.  There was an oral hearing before me, at which the parties represented themselves (Mr Hurst representing his wife for this purpose).  Both Mr Hurst and Mr Treppass are solicitors.

 

THE BACKGROUND

2.      I have taken much of the history of the dispute from various judgments that have been put in evidence before me, most particularly the comprehensive judgment of Briggs J (as he then was) dated 7^th May 2010, and of Deputy Master Henderson dated 25^th November 2009, in the proceedings to which I refer below.  The dispute between the parties dates back to an extremely acrimonious dissolution of the partnership known as Malkin Janners, in which they were both partners, as long ago as 1990.  It seems that Mr Hurst challenged the financial consequences of the dissolution, and initiated an ultimately unsuccessful High Court claim. He appealed the decision to the Court of Appeal and again to the House of Lords, but always unsuccessfully.  At each stage of these proceedings orders for costs were made against him, including orders specifically in favour of Mr Treppass as one of the Defendant partners.   In 1997 Mr Treppass issued proceedings against Mr Hurst to recover these costs and obtained a charging order over Mr Hurst’s interest in the Property, which was his and Mrs Hurst’s matrimonial home and registered in both their names.  In May 1997 Mr Treppass obtained an order for sale and, in September 2000, a possession order and yet further orders for costs. On 14^th March 2001 the parties entered into a Deed of Settlement (“the Settlement”).  By this agreement, it was agreed that Mr Hurst owed a total sum of £74,000 in respect of the numerous costs orders made against him; Mrs Hurst guaranteed payment of that sum; repayment was to be made by 14^th September 2001 or on earlier completion of the sale of the Property; late payment carried interest at the rate of 8% per annum; and Mr Treppass would not enforce his possession order for a period to allow a sale of the Property by the Hursts.  The settlement included a number of other provisions, including an obligation on the Hursts to execute a Legal Charge to secure Mr Hurst’s liabilities.  This Legal Charge was executed on the following day and registered in the Charges Register of the Property on 26^th March 2001, and is the subject-matter of the present dispute.  That was not, however, the end of the matter, by any means.  The Property was not sold as envisaged by the Settlement, and in September 2001 the Hursts attempted to obtain a stay of the possession order, both before the Chancery Master and the Judge.  These attempts failed.  Meanwhile, a bankruptcy petition by his former partners resulted in Mr Hurst being made bankrupt in April 2001.

 

3.      After a long legal battle between the Hursts and Mr Hurst’s trustee in bankruptcy,  Mrs Hurst bought out Mr Hurst’s interest in the Property for a sum of some £257,603.  On any footing, therefore, by this time (August 2006) Mrs Hurst had become the sole beneficial owner of the Property.  It seems that the entire sum paid to the trustee was used to discharge his costs of defending some 14 different applications by Mr Hurst. The total costs of the trustee are said to have been in the region of £400,000.  When Mr Treppass became aware of the sale to Mrs Hurst, he wrote to Mrs Hurst’s solicitor, inviting payment of the then outstanding debt of £32,000, as an alternative to a further attempt to enforce the original possession order. This resulted in the commencement in March 2007 of a further claim HC07C00850 (“the Section 284 claim”) initially by Mr Hurst alone, although subsequently Mrs Hurst was joined as a party.  By this claim, the Claimants sought a declaration that the Legal Charge was void by virtue of the provisions of section 284 of the Insolvency Act 1986, and also sought to set it aside on the grounds of misrepresentation.  Mr Treppass defended the claim on a number of grounds, relying on the terms of the Settlement, and also counterclaimed for an order of the Court ratifying the Legal Charge if otherwise void under s.284.  The Hursts’ claim in its entirety was struck out by Master Bowles as an abuse of process.  However, that part of the claim which was based on s.284 was restored on appeal.  It seems that Mr Hurst then sought to obtain summary judgment against Mr Treppass on the basis that his ratification counterclaim had no real prospect of success.  This application failed before Deputy Master Henderson, who, having considered the witness statements in considerable detail, concluded that the ratification claim did have a real prospect of success for the purposes of CPR Part 24.  He went on to hold that the issue whether the ratification claim could be determined summarily against Mr Treppass had already been judicially determined twice in the same proceedings, and therefore that the attempt to pursue the issue amounted to an abuse of process.  He recorded that the application before him was “totally without merit”, but declined to make a civil restraint order at that time although considered whether to do so.  At paragraph 47 of his judgment, Deputy Master Henderson also concluded that there was a “real prospect” of Mr Treppass successfully arguing that the Legal Charge took effect against Mrs Hurst and her legal and beneficial interest in the Property.

 

4.       The Section 284 claim was overtaken by yet another High Court claim issued by Mrs Hurst in 2009, reference HC09C04819 (“the Misrepresentation claim”).  By this claim she sought an order that the Settlement should be set aside for alleged misrepresentation and/or economic duress by Mr Treppass.  Mr Treppass counterclaimed against both Mr and Mrs Hurst for payment of the sums due under the Settlement, with interest, and for a declaration that the Property was subject to an equitable charge over Mrs Hurst’s beneficial interest pursuant to the Settlement.  Meanwhile the Section 284 claim came on for hearing before Kitchen J in February 2010.  It seems that the parties, and indeed the Judge, realised that the Misrepresentation claim, if successful, would render the Section 284 claim unnecessary, since the setting aside of the Settlement would necessarily cause the Legal Charge to be set aside.  The Section 284 claim was compromised, in that the claim and counterclaim were stayed by consent, and costs were reserved to the trial judge on the Misrepresentation claim.  As Briggs J put it at paragraph 13 of his judgment: “The third claim was, however, overtaken by the present claim.  It was stayed by agreement in February 2010 and is now live only as to costs.”  Mr Treppass applied to strike out the Misrepresentation claim as an abuse of process, and at paragraphs 65 and 66 of his judgment Briggs J explained why he was acceding to the application:

“65.     Further, in my judgment, the whole claim, that is the claim now before me, amounts to an abuse of process.  Misrepresentations one to four constitute, in my judgment, a collateral attack on the judgment of Carnwath J, the Court of Appeal and the House of Lords in Hurst v Bryk, that is claim one.  In any event, misrepresentations one and four are, for the reasons which I have already given, wholly misconceived.  Misrepresentation five is an abuse for the reasons which I have already set out.

66.       The main purpose of the Settlement, made between Mr and Mrs Hurst on the one hand and Mr Treppass on the other, was to put an end to further litigation between the parties about matter arising from the disastrous partnership in which Mr Treppass and Mr Hurst were both partners.  However, nothing in the present claim comes, or could conceivably come, at a trial near to undermining that agreement.  Therefore, this claim should be struck out as an abuse of process.”

5.      The Judge directed that Mr Treppass’s application for summary judgment on the counterclaim should be adjourned to the Master, and that application duly came on before Deputy Master Smith on 25^th May 2011.  The counterclaim included, of course, the claim for a declaration that the Settlement created an equitable charge over the Property.  At paragraph 32 the Deputy Master referred to some authorities cited by Mr Thom QC, Counsel for Mr Treppass, which he summarises (at paragraph 33) as follows:

“It is clear from these authorities that the appropriation of a property to a debt will create an equitable charge.  In the present case it is clear from the deed of Settlement that the property at 73 Southway was to stand charged fro the payment referred to in the Deed of Settlement. On the face of it, therefore, the Deed of Settlement will have operated as an equitable charge.”

 

At paragraphs 34 and 35 he considered the counter-arguments put forward by Mr Hurst.  The second of these arguments was that – in effect – any equitable charge arising under the Settlement will have merged in the Legal Charge once it had been granted.

 

6.      In paragraphs 36 and 37 of his judgment, the Deputy Master dealt with these points.  In paragraph 36 he explained why he agreed with Mr Thom that on the true construction of the Settlement, the creation of the equitable charge was intended to survive the grant of the Legal Charge.  Accordingly, “the equitable charge created thereby has not merged in the Legal Charge.”  In Paragraph 37, which is in the following terms, he explained his second answer to Mr Hurst’s argument:

“It also seems to me that the Deed of Settlement operates as an equitable charge for the following reason.  The Deed of Settlement was an agreement to grant a legal charge.  The Legal Charge which was granted appears to be void under section 284, even if it might have been effective as against Mrs Hurst.  Given that the Legal Charge is void, there is no legal charge that Deed of Settlement can be said to have merged into.  Therefore the Deed of Settlement should continue to stand as an equitable charge.”

 

The Order made by Deputy Master Smith was relied on.  The Deputy Master ordered Mrs Hurst to pay a liquidated sum to Mr Treppass (including interest), and declared that Mr Treppass had an equitable charge over 50% of Mrs Hurst’s beneficial interest in the Property to secure all payments due under the Settlement.  He also made an order for the sale of the Property and gave consequential directions.  There is no mention in the Order or in any recital that the Legal Charge was void.

MR HURST’S ARGUMENTS

7.      Mr Hurst’s application is based on a very simple proposition.  I should say that initially he also relied on a Limitation Act argument but withdrew that prior to the hearing before me.  His only point is that the Legal Charge is void under s.284, since the Legal Charge was executed after the commencement of his bankruptcy, and therefore the entry in the Charges Register is no longer appropriate and should be removed.  He has developed this argument a little, contending that Mr Treppass (though his Counsel) had conceded before Deputy Master Smith that the Legal Charge was void, and this was reflected in the finding of Deputy Master Smith in paragraph 37 of his judgment.  He argues that the registrar, and the Tribunal, has no choice in the matter.  The Legal Charge, although validly entered in the register, is void and the register must therefore be altered to remove it.

 

MR TREPPASS’S ARGUMENTS

8.      Mr Treppass opposes the application on the following grounds:

a.       The issue of the validity of the Legal Charge was not before Deputy Master Smith when he delivered his judgment. He was only considering the existence of the claimed equitable charge. His view expressed in paragraph 37 was obiter.

b.      He disputes that any concession was made to the effect that the Legal Charge was void.  The purpose of seeking the equitable charge was to guard against the possibility that the Legal Charge might be void – a “belt and braces” approach.

c.       The issue of the validity of the Legal Charge – and his claim for ratification by the Court – was the subject-matter of the Section 284 proceedings which are stayed. Unless and until the stay is lifted it is not open to Mr Hurst to challenge the Legal Charge.

d.      In the discussion between Mr Hurst and Briggs J after he had struck out the Misrepresentation claim, Mr Hurst expressly acknowledged that the Legal Charge would remain on the register until the Property was sold.

 

THE LEGAL FRAMEWORK

9.      Section 284 of the Insolvency Act 1986 is in the following terms: “(1) Where a person is adjudged bankrupt, any disposition of property made by that person in the period to which this section applies is void except to the extent that it is or was made with the consent of the court, or is or was subsequently ratified by the court.”  Accordingly, a disposition of property by the bankrupt is treated as being void “except to the extent that it ……….. was subsequently ratified by the court.” In the present case, it is common ground that the disposition effected by the Legal Charge was made by Mr Hurst after the commencement of his bankruptcy and therefore falls within s.284. 

 

10.  The application to alter the register is made under section 65 of and Schedule 4 to the Land Registration Act 2002 (“the Act”).  Paragraph 5 of Schedule 4 reads as follows:

The registrar may alter the register for the purpose of—

(a) correcting a mistake,

(b) bringing the register up to date,

(c)giving effect to any estate, right or interest excepted from the effect of registration, or

(d) removing a superfluous entry

 

Sub-paragraph (3) of paragraph 6 reads as follows:

 

(3)  If on an application for alteration under paragraph 5 the registrar has power to make the alteration, the application must be approved, unless there are exceptional circumstances which justify not making the alteration

 

However, whatever the basis for the application for alteration, if it is successfully made out there is a presumption that the register will be altered “unless there are exceptional circumstances which justify not making the alteration”.   In other words, there is a residual discretion vested in the Land Registry (and this Tribunal) to refuse alteration of the register if there are exceptional circumstances which justify refusal.  Such circumstances will of course vary from case to case.

 

CONCLUSIONS

11.  If Mr Hurst satisfies me, on the balance of probabilities, that the Legal Charge is void – and therefore of no effect and unenforceable – it would at first blush be right to remove it from the register.   Mr Hurst’s application could be made under Sch.4 paragraph 5(a), (b) or (c), any of which grounds give the registrar power to alter the register. The central question, therefore, is whether the Legal Charge is now of no effect and unenforceable.  In my judgment Mr Hurst is unable to satisfy me of this, for the following reasons:

a.       A relevant disposition by a bankrupt is not automatically void – it is only void “except to the extent that it ……….. was subsequently ratified by the court.”  In other words, the disponee’s claim (if any) for ratification from the court must be determined before it can be known whether the disposition is void.  In the present case Mr Treppass did indeed seek ratification (by way of counterclaim in the Hursts’ Section 284 claim) and that application has been stayed by agreement.  Unless and until the court rules on that claim – for which purpose it would be necessary to lift the stay – it cannot be said (on the balance of probabilities) that the Legal Charge is void.

b.      In this connection, it has been held more than once in the Section 284 claim that Mr Treppass’s claim for ratification is arguable.  The Hursts attempted to obtain summary judgment on this issue against Mr Treppass, an application refused by Master Bragge on 10^th July 2007, from which leave to appeal was refused, and once again by Master Bragge on 3^rd June 2009.  Further, Deputy Master Henderson considered the point afresh and also decided that the claim to ratification should go to trial and could not be decided summarily (see paragraph 46 of his judgment).  

c.       Furthermore, it has been held (see the judgment of Deputy Master Henderson at paragraph 47) that the disposition effected by the Legal Charge, even if void as against Mr Hurst, may nevertheless be effective to charge Mrs Hurst’s beneficial interest in the Property.  He reached this conclusion when refusing the Hursts’ application for summary judgment on this point.  Mr Hurst submitted to me that this submission was untenable as a matter of law, but unless and until he successfully appeals Deputy Master Henderson’s judgment he is bound by it.  In the discussion between Briggs J, Mr Hurst and Mr Thom QC at the conclusion of the hearing at which the Misrepresentation claim was struck out, Mr Thom told the Judge that Kitchen J had taken the firm view that the Legal Charge remained effective as against Mrs Hurst’s interest in the Property, and Mr Hurst did not correct this statement (see page 95 of the Bundle).  This related to the Section 284 claim which was stayed by agreement. In further discussion (see pages 99-100) Mr Hurst expressly accepted that the Legal Charge would remain on the register since his claim to set aside the Settlement had failed, and the Section 284 claim had been stayed.

d.      The judgment of Deputy Master Smith, which is central to Mr Hurst’s claim, does not have any meaningful bearing on the issue as to the validity of the Legal Charge.  The application before him was an application for summary judgment by Mr Treppass on his claim to a money judgment and an equitable charge based on the Settlement itself, not on the Legal Charge executed pursuant to it.  The validity of the Legal Charge was the primary issue in the Section 284 claim which had been “parked” by virtue of the agreed stay in 2010.  He was not and could not have been invited or required to rule on this issue.  Any comments that he made about the validity of the Legal Charge were obiter at best.

e.       In any event, the paragraph relied on by Mr Hurst (paragraph 37) cannot fairly be read in context as recording any concession by Mr Thom QC that the charge is void.  Mr Thom’s position on the validity of the charge is recorded in paragraph 36 – namely, “Paragraph (7) [of the Settlement] must have been intended to survive the grant of the legal charge and is still capable of being carried into effect, and so I think Mr. Thom is right in saying that the equitable charge created thereby has not merged in the Legal Charge.”  The Deputy Master then goes on to say that “It also seems to me that the Deed of Settlement operates as an equitable charge for the following reason…….. The Legal Charge which was granted appears to be void under section 284, even if it might have been effective as against Mrs Hurst.  Given that the Legal Charge is void, there is no legal charge that Deed of Settlement can be said to have merged into.”  It does not appear that this argument was put forward by Mr Thom, and seems to have been the Deputy Master’s own (obiter) conclusion. 

f.       In any event, the passage relied on specifically states that “The Legal Charge which was granted appears to be void under section 284, even if it might have been effective as against Mrs Hurst.” (my emphasis).  This reflects the finding in the Section 284 claim that the Legal Charge was arguably effective against Mrs Hurst’s share.

 

12.    For all these reasons, therefore, I conclude that in the particular circumstances of this case, Mr Hurst has been unable to satisfy me that the Legal Charge is void and therefore there is no jurisdiction to alter the register.  Certainly, it is capable of being void, but as matters now stand it is not demonstrably void.  If I am wrong on this point, and the register should, on the face of it, be altered, I must still consider whether exceptional circumstances exist such as to justify a refusal to make the alteration.  In my judgment, there are exceptional circumstances, namely:

a.       First, given Mr Treppass’s unresolved claim for ratification, it would not be right to deprive him of the benefit of the Legal Charge until the court has adjudicated on the point.

b.      Secondly, by the same token, having agreed to a stay of the Section 284 claim, Mr Hurst should not be permitted to raise the invalidity of the Legal Charge by the back door, without obtaining the Court’s decision on the point. Indeed, in the Section 284 claim, he not only sought a declaration as to its invalidity, but also sought an order directing the Land Registry to remove the Legal Charge from the register – precisely the same relief as he has sought by way of his AP1.  I regard this tactic as the clearest possible abuse of process by the Hursts – one of many instances of this throughout the unhappy course of the litigation between the parties. Indeed, such conduct has led to the grant of a civil restraint order against Mr Hurst on a previous occasion.

c.       Thirdly, given the fact that it has already been decided in the Section 284 claim that Mr Treppass has an arguable case that the Legal Charge is valid as regards Mrs Hurst’s interest in the Property – even if void as regards Mr Hurst’s interest – it would clearly not be wrong to deprive Mr Treppass of the benefit of the Legal Charge until that issue has been finally resolved as between him and Mrs Hurst.

d.      Fourthly, given the existence of these various unresolved issues, the effect of removing the Legal Charge at this point is to deprive Mr Treppass of the benefit of his security over the Property as agreed by the Hursts in the Settlement.  I have already recorded that in 2007 Mrs Hurst became the sole beneficial owner of the Property, having purchased Mr Hurst’s share from the trustee in bankruptcy.  Given that the court (in the Misrepresentation claim) has declared that the Settlement created an equitable charge over half of Mrs Hurst’s beneficial interest (i.e her original one-half), Mr Treppass might have thought himself secured even if the Legal Charge ultimately turns out to be void, and he does not obtain ratification.  However, in correspondence between Mrs Hurst and Mr Treppass within the last two weeks relating to another matter, it was disclosed for the first time that in June 2009 Mrs Hurst had purported to assign her entire beneficial interest in the Property to her children in equal shares. Given the history of this matter, and the consistent and sustained attempts by the Hurst, over some 15 years, to avoid their clear obligations under the Settlement, this is almost certain to give rise to further arguments over priority as between Mr Treppass and these beneficiaries, however unmeritorious those arguments might be.  Indeed there is already a dispute as to Mr Treppass’s entitlement to a charging order over Mrs Hurst’s share.  In the circumstances, unless and until the Legal Charge is declared to be void by the court, it should remain on the register by way of protection for Mr Treppass.

 

13.   For all these reasons, I shall direct the Chief Land Registrar to cancel the Applicants’ application dated 9^th March 2015.  I propose to make an order that the Applicants should pay the Respondent’s costs, and direct him to file and serve a Statement of Costs by Friday 20^th May 2016 with a view to a summary assessment.  The Applicants may file and serve any submissions on costs (including any points of dispute on the costs statement) 7 days thereafter.

 

Dated this 12^th day of May 2016

 

 

 

BY ORDER OF THE TRIBUNAL