IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LIVERPOOL COUNTY COURT
(His Honour Judge Holman)
Royal Courts
of Justice
Strand
London WC2
Friday, 21st May
1999
B e f o r e :
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MR. C. COVENEY (instructed by Messrs Lowick McKay, Altrincham, Cheshire) appeared on behalf of the Applicant/First Defendant.
The first defendant, John Haynes, seeks permission to appeal from part of the order of His Honour Judge Holman in the Liverpool County Court on 19th March 1999. By that part of the order the judge, who had by his judgment determined two issues adversely to Mr. Haynes, gave possession of Flat 9, Tudor Mansions, Beech Road, Birkdale, to the third defendant, Rimmer Brothers Development Limited ("Rimmer"). Permission to appeal was refused by the judge.
I must summarise, as briefly as I can, the complicated background to this case. On 25th November 1988 Mr. Haynes and his then wife, the second defendant, Angela Haynes, purchased from Rimmer, the freeholder and landlord, a 999-year lease of the flat for £125,000. The lease contained covenants by the tenant to pay the rent and other payments and not to make alterations to the flat without the landlord's consent. It also contained the usual provision for forfeiture for breach of covenant. On 29th September 1989 Mr. and Mrs Haynes charged the flat by way of legal mortgage to the plaintiff, Abbey National PLC, as security for a loan of £120,000 and interest, and that amount was further increased by £30,000 on 24th September 1989.
Mr. and Mrs Haynes fell into arrears. Abbey National commenced proceedings against them. On 11th January 1991 Abbey National obtained an order for possession. On 28th August 1991 Abbey National took possession, but on 11th October 1991 Rimmer entered the flat and purported to forfeit the lease on the basis of breaches of covenant. On 6th March 1992 Abbey National issued a summons in the Chancery Division, joining Mr. and Mrs Haynes and Rimmer, claiming declarations that the purported forfeiture was invalid, that Mr and Mrs Haynes' interest as tenant and Abbey National's interest as mortgagee still subsisted and, in the alternative, claiming relief against forfeiture. On 2nd April 1992 Mr. Haynes issued like proceedings against Rimmer. On 29th June 1994 Abbey National issued further proceedings against Mr. and Mrs Haynes and Rimmer, claiming further relief, including against Rimmer damages (including aggravated and exemplary damages). The various proceedings were consolidated.
However, on 6th December 1995 two Tomlin orders were made by the judge. One, to which Abbey National and Mr. and Mrs Haynes and Rimmer were parties, recorded the terms of settlement reached between them relating to Mrs Haynes. That included an order and an agreed term that "all rights and interests (including to seek relief from forfeiture)" which were vested in Mrs Haynes were to be transferred to Mr. Haynes. She was to be released from all liabilities and obligations owed to Abbey National and Rimmer as if the mortgage and the lease had been made with Mr. Haynes alone. The other Tomlin order ("the second order") recorded the terms agreed between Abbey National and Rimmer. Its drafting leaves much to be desired. It was ordered that Abbey National's claims against Rimmer be dismissed, and the agreed terms included the payment by Rimmer to Abbey National of £113,000 in settlement of all its claims in the proceedings. Another term was the waiver of claims by Rimmer against Abbey National. By paragraph 3 of the schedule to the order, Abbey National was not to have, or give the impression of having, any interest in the flat and/or the action and/or the settlement and/or otherwise. The sum of £113,000 has been paid to Abbey National.
On 7th December 1995 the judge ordered that Mr. Haynes' claim against Rimmer be adjourned generally. On 26th November 1995 Mr. Haynes re-occupied the flat. On 8th January 1997 Rimmer issued further proceedings against Mr. Haynes, seeking a summary order for possession. Those proceedings were also adjourned and consolidated with the previously consolidated proceedings. By its pleadings Rimmer claimed that the lease had been forfeited. Mr. Haynes and Rimmer agreed that certain issues called for decision and two of them were heard by the judge on 10th February 1999. They were (1) whether the schedule to the second order contained an exercise of Abbey National's power of sale in favour of Rimmer, and (2) whether Rimmer was entitled to be subrogated to Abbey National in respect of the payment of £113,000. The judge held on the first issue that Abbey National had, by the second order, exercised its power of sale as mortgagee. On the second issue the judge held that Rimmer was entitled to be subrogated.
To summarise the current position, there has been no agreement reached between Mr. Haynes and Rimmer as to whether the lease of the flat was validly forfeited by Rimmer on 11th October 1991, nor, if it was so forfeited, whether Mr. Haynes is entitled to relief from forfeiture. If it was forfeited, then Abbey National lost any security in the flat unless relief from forfeiture could be obtained and no question of subrogation arises without such relief. If it was not validly forfeited or if relief from forfeiture is obtained by Mr Haynes, then Mr. Haynes does retain an interest in the flat, but that is subject to any rights of Abbey National as mortgagee and of Rimmer by subrogation and as landlord. As between Abbey National and Mr. Haynes no settlement has been reached, although Abbey National has received from Rimmer £113,000 which may have to be brought into account. Other moneys are owed by Mr. Haynes to Abbey National. It is perhaps unfortunate that the questions of forfeiture and relief from forfeiture have not yet been determined.
Mr. Coveney for Mr. Haynes submits that the judge's reasoning on each of the two issues was faulty. He argues that the judge was wrong to conclude that Abbey National, by the second order, was selling the flat as mortgagee, having regard to the terms of the schedule to the order and to the surrounding circumstances. He also points to the stance adopted by Rimmer which he says is inconsistent with an effective sale by Abbey National as mortgagee. It is sufficient that I should say that it seems to me that the grounds in the draft notice of appeal relating to this issue are properly arguable and that the judge may have erred in his conclusion on this point.
Mr. Coveney also criticises the judge's reasoning on the subrogation issue. He argues that the judge could not hold that Rimmer was entitled to be subrogated to Abbey National without evidence of intention and that unjust enrichment would not be sufficient for subrogation. In my judgment, Mr. Coveney's submissions on this point are not well founded. As the House of Lords has recently held in Banque Financiere de la Cite v. Parc (Battersea) Limited [1999] 1 AC 221, subrogation may be founded upon the common intention of the parties, but there is another form of subrogation not based on common intention, and that is an equitable remedy to reverse or prevent unjust enrichment. As Lord Hoffmann said at page 232:
"It is a mistake to regard the availability of that remedy as turning entirely on the question of intention, whether common or unilateral."
I am not persuaded that Mr. Coveney could succeed on his argument relating to subrogation.
Mr. Coveney is also seeking a stay of a warrant of possession which is due to be executed on 24th May; hence the urgency of this application. Although I am of the view that the judge's reasoning on the first issue is open to question, I have more doubts as to whether an appeal would have a realistic prospect of success in relation to reversing the order made by the judge for possession. That is because the combination of the rights of Rimmer as landlord and the rights which it may have taken by subrogation from Abbey National, renders it difficult to see how Mr. Haynes could resist an order for possession.
His claim, whereby he seeks to have it declared that the forfeiture by Rimmer was invalid, alternatively whereby he seeks relief from forfeiture, is, we are told, going ahead and may be heard next month. It would be unfortunate if that case were to be fought on the footing of the judge's conclusion that Abbey National exercised its power of sale as mortgagee. There would be an estoppel against Mr. Haynes arguing to the contrary. This seems to me to be one of those rare cases where it is appropriate, despite my doubts as to the realistic prospect of success of the appeal, to allow the appeal to go ahead, so that Mr. Haynes has the chance of upsetting the judge's conclusion on the effect of the second order as being a sale by Abbey National under its powers of sale as mortgagee. In these circumstances, for my part, I would be prepared to give permission to appeal, but I would not be prepared to grant a stay of the warrant for possession.
I agree. I take the view that there is no realistic prospect of success in an appeal by Mr. Haynes against the order for possession made by the judge on 19th March 1999; but that, nevertheless, this is one of those unusual cases in which permission to appeal should be granted.
The reasons for my conclusion that an appeal has no realistic prospect of success, put shortly, are these. First, if the lease were validly determined by the re-entry by Rimmer on 11th October 1991, then, subject to the grant of relief from forfeiture, Mr. Haynes has no estate under the lease which could entitle him to be in possession of the property. Second, if relief from forfeiture were to be granted, then that grant would necessarily be on terms. Those terms would have to take account of the position of Abbey National as mortgagee of the lease, and the position of Rimmer as a person who has paid £113,000 towards the discharge of the mortgage debt. As between Mr. Haynes and Abbey National, Abbey National are entitled to possession of the property under the lease by virtue of the order made on 11th January 1991. I do not see how Mr. Haynes can claim to be in a better position in relation to possession as against Rimmer than he is as against Abbey National; insofar as Rimmer are entitled to stand in the shoes of Abbey National by way of subrogation. Third, if the lease were not determined by re-entry, then the lease and the mortgage have continued to subsist throughout. Again, as between Mr. Haynes and Abbey National, Abbey National are entitled to possession by reason of the order of 11th January 1991, and I do not see how Mr. Haynes can claim to be in a better position as against Rimmer.
The reason why, nevertheless, I think it right to give permission to appeal in this case is that, if permission is refused, Mr. Haynes will be faced in his claim in relation to the forfeiture of the lease - a claim against Rimmer which is yet to be determined - with an estoppel arising from the judge's first reason for reaching the conclusion which he did on the application for possession. If the judge were right in reaching the conclusion that the bargain between Abbey National and Rimmer, recorded in the Tomlin order of 6th December 1995, took effect as a sale by Abbey National to Rimmer of the leasehold interest - with, no doubt, a consequent merger of that interest in the reversionary interest of Rimmer as landlord - then Mr. Haynes' claims for relief from forfeiture will be defeated by the contention that there is no longer a lease in respect of which relief can be granted. Because, like my Lord, I take the view that the judge's first reason is open to serious question, it seems to me unjust that Mr. Haynes should be prevented from challenging that reason by an estoppel. The way of avoiding that injustice, as it seems to me, is to give permission to appeal; notwithstanding that I see no prospect that the appeal will lead to the setting aside of the possession order. But, in the circumstance that I see no prospect that the possession order will be set aside, it would be inappropriate to grant a stay of the possession order pending appeal.
Order: Application for permission to appeal allowed; stay refused; time for service of the notice of appeal extended to seven days; time estimate two hours.