Red River UK Ltd v Sheikh & Anor [2008] EWCA Civ 1592

Case No A3/2007/2793,4,5

[2008] EWCA Civ 1592

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION

(MR JUSTICE MANN and MR JUSTICE BRIGGS)

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Dates: 28 August and 15 December 2008

Before

LORD JUSTICE RIMER

Between

(1) RED RIVER UK LTDRespondents/Claimants

(2) ISMAIL DOGANRespondent

(DAR Transcript of

WordWave International Limited

A Merrill Communications Company

190 Fleet Street, London EC4A 2AG

Tel No: 020 7404 1400 Fax No: 020 7831 8838

Official Shorthand Writers to the Court)

Mr Hugo Page QC and Mr Marc Beaumont (on 28 August 2008) for Defendants/Applicants

Mr Philip Newman (on 15 December 2008) (instructed by direct access) for Defendants/Applicants

Mr Meares (on 15 December 2008) (instructed by Messrs Isadore Goldman) for Claimants/Respondents

Judgment

Date 2008-12-15

[1]These are three renewed applications for permission to appeal. They first came before me on 28 August 2008 when I heard the argument on one application presented by Mr Hugo Page QC and adjourned the other two. Those two were presented by one of the two applicants, Ms Anal Sheikh, a solicitor, who appeared in person and sought, and was given, time to prepare a supplemental skeleton argument in support of the applications. I said I would give an oral judgment on Mr Page’s application at the same time as I ruled on the two adjourned applications. The applications have been re-listed today, a longer gap than I had expected.

[2]The claimants are(1) Red River UK Limited (“Red River”) and

(2) Ismail Dogan (“Mr Dogan”). They are the respondents to the proposed appeals. The defendants are (1) Anal Sheikh and (2) Rabia Sheikh, and I hope they will forgive me if, for clarity and brevity, I refer to them by their respective initials. RS is AS’s mother. They are the applicants.

[3]Mr Dogan is the majority shareholder in Red River, in which RS has a 35% shareholding. Red River’s only asset is a development site acquired in 2004. That property is subject to an “all moneys” legal charge in favour of the Bank of Scotland (“the BoS”) under a debenture of 11 August 2004. It prevents Red River from creating any charge over the property without the BoS’s consent. The claimants and defendants, who presumably once had a good commercial relationship, have fallen out. Their claims and cross-claims resulted in a settlement agreement dated 29 June 2007, which followed a mediation. Any hope that it would resolve their differences was short-lived. It quickly led to further litigation.

[4]By Clause 1 of the settlement agreement, the claimants were to pay the defendants £1.2m: £300,000 before 31 July 2007 and the balance (with interest on both payments) by 29 December 2009, with interest payments to be paid monthly starting in August 2007. By Clause 2, AS agreed within seven days to deliver up documentation enabling the removal of two restrictions on the title to the property that prevented its disposal without the defendants’ consent. That documentation was to be held to their order until payment of the £300,000. AS also agreed to procure the transfer to Mr Dogan of RS’s Red River shares. That was also to be done within seven days and the documentation delivered for that purpose was to be held to RS’s order until payment of the £300,000.

[5]By Clause 3, Red River agreed, on payment of the £300,000 and the provision of the clause 2 documentation, to enter into a legal charge in favour of the defendants “in a form approved by the Bank of Ireland and reasonably acceptable to [AS]”, being a charge which limited the sums to be advanced by the Bank of Ireland (“the BoI”) to £1.75m. Whilst the defendants argue to the contrary, it can be said, as the claimants do say, that the settlement agreement contemplated a composite transaction under which the BoI was to refinance Red River’s indebtedness and was to have a first charge providing security up to a capped limit and the defendants were to have a second charge securing the £900,000 and interest. The settlement agreement provided no detail as to the terms of the second charge beyond that it would entitle the defendants to demand repayment if Red River defaulted in any payment. That referred, presumably, to the interest payments.

[6]The defendants did not within seven days, or even by 31 July 2007, deliver the documents necessary to remove the restrictions. In consequence, the transaction did not proceed so as to enable Red River to pay the £300,000 by then due, which it intended to raise out of the BoI facility. Briggs J recorded in paragraph 8 of his judgment – the subject of one application before me – that Mr Page’s explanation of why AS had refused to comply with clause 2 was because of what she regarded as the claimants’ unreasonable refusal to lodge the second legal charge for exchange. Her concern was that there should be no moment when the property was affected neither by the restrictions nor by the second charge.

[7]That impasse led on 22 August 2007 to the issue by the claimants of the present proceedings for the delivery up by the defendants of the required documents and damages. They followed that up with an interim application to Kitchin J on 3 September 2007 for delivery up. By then the BoI had offered an advance of £1.75m to the claimants, who had executed in escrow a legal charge in its favour which was being held by the claimants’ solicitors. The defendants’ main concern was that it should not secure more than £1.75m lest their second charge might give them inadequate security. Their position, with which the claimants’ disagreed, was that the correct construction of the settlement agreement was that the BoI’s intended priority was to be up to a maximum amount of £1.75m including interest and costs.

[8]The application to Kitchin J was resolved by a consent order in Tomlin form (“the consent order”). The Schedule to it provided for the delivery of the required documentation by the defendants to the claimants’ solicitors by 10 September and for those solicitors to hold it to the defendants’ order pending(a) the payment of £300,000,

(b) the execution of the second legal charge, and

(c) the execution of a deed of priority dealing with the respective rights of the BoI and the defendants. It also resolved the issues between the parties as to the terms of the legal charge and the deed. Paragraph 4 of the Schedule included undertakings (i) by the defendants to enter into a deed of priority containing four listed provisions, and (ii) by the claimants to use reasonable endeavours to procure the BoI to enter into such a deed. The order required the defendants to use their best endeavours to provide their comments on the draft second charge and deed by 11 September or, at the latest, 13 September. Whatever the position under the settlement agreement, the defendants were contemplating a deal under which their legal charge ranked after the BoI charge and with a deed of priority.

[9]The consent order included a liberty to apply as to carrying the scheduled terms into effect and a more general such liberty in the event of disagreement. Pursuant to those liberties the claimants restored the matter before Briggs J on 20 September 2007. The defendants had by then provided some of the documentation required by the consent order but not, it was said, all of it. The claimants also wanted directions as to the form of the second charge, as to which the parties could not agree; and as to the deed of priority, in respect of which there was a complaint that the defendants had failed to provide their comments. The defendants wanted changes to the deed, to which it was said the BoI was not prepared to agree. The claimants asked the judge to settle the form of charge and deed.

[10]AS appeared in person before Briggs J and made it clear that the defendants wanted the settlement agreement to be performed. What she wanted at that stage was an adjournment so as to bring on inter alia an application for an order for the payment of the £300,000. Her application for an adjournment was refused. AS’s further point was that there was no point in the court settling the second charge and deed because, if they were settled in accordance with her assertion as to the true construction of the settlement agreement and consent order, the BoI would not agree to them or enter into the first charge. That point did not deter Briggs J from embarking on what was asked of him: the parties, in his view, would have to take the risk as to the BoI’s response.

[11]Briggs J concluded that AS had reached the view that the performance of the settlement agreement by the completion of the composite transaction was unlikely to serve the defendants’ interests. He settled the terms of the second legal charge. He did not also settle the deed of priority but did make rulings on issues raised by AS as to the extent to which it was or was not compliant with paragraph 4 of the Schedule to the consent order. The exercise involved his rejection of all but three of her points of objection, which resulted in three amendments. He set a deadline of noon on Friday 21 September for the delivery by the defendants of Form UN 2 that was necessary to procure the withdrawal of the restrictions on the title to the property that had been entered by AS and to remove any pending applications for entries on it. He made it clear that if there were any further arguments about the documents, the matter should be restored to him by no later than 3pm on 21 September.

[12]The defendants complied with the obligation to deliver Form UN2. Following the hearing before Briggs J, the claimants overnight amended and engrossed the second legal charge in the form he had settled it in readiness for the completion of the refinancing arrangements between Red River and the BoI. They also sought and obtained the BoI’s agreement to the form of the deed of priority as amended following Briggs J’s rulings. At midday on 21 September they sent the engrossment of the legal charge to the defendants for execution and the defendants executed it on the same day.

[13]On 24 September AS raised further objections to the deed of priority, asserting that it was not compliant with the settlement agreement or consent order. She declined to execute it. The claimants restored the matter to the court seeking an order requiring her to do so. That application was heard by Mann J on 27 September, when both sides were represented by counsel.

[14]Mann J’s judgment summarised the history. He said that AS’s obligation was merely to sign a deed that was compliant with the requirements of paragraph 4 of the Schedule to the consent order. The question was whether it was still open to her to argue, as she did, that the document she was being asked to sign was not so compliant. The claimants’ point was that AS had had her chance to argue her corner on the deed before Briggs J. She was not entitled to a second bite of the cherry because the ordinary principle is that a litigant has to advance all arguments in relation to a particular issue at the same time.

[15]Mann J considered, by reference to the transcript, what AS had argued before Briggs J in relation to the deed of priority. His conclusion, at paragraph 53 of his judgment, was that all that Briggs J regarded himself as doing in relation to that deed was to rule on the particular disputes about it that the parties had raised. He was not settling the deed, no doubt because he could not bind the BoI, and he expected that, once he had ruled on the points in dispute, the parties would go away and draft it. The only remaining dispute he had in mind as being permissible at that stage about the document was whether the drafting adequately incorporated the matters on which he had ruled, in which case it could be referred back to him, ideally no later than 3pm on 21 September. He was not inviting a return visit on new points.

[16]Mann J was satisfied that AS was seeking to raise new points as to why the deed was non-compliant. He explained at paragraphs 55 to 58 that those points could and should have been raised before Briggs J. AS’s own counsel admitted as much. Mann J’s decision was that there must be finality to litigation, in particular conveyancing litigation of this sort, and that it would be unfair to decide those new points and then, depending on their outcome, require the claimants to go back to the BoI and obtain a new consent. The judge’s view was that AS was not entitled to raise the new points.

[17]The outcome of the hearing was that(1) upon the defendants’ undertaking to execute a deed of priority in an identified form and to send it to the claimants’ solicitors on 28 September, there was no order on the application save that

(2) the defendants pay costs of £4,000 to the claimants, to be set off against the £300,000 due to the defendants under clause 1.1 of the settlement agreement. The order included a liberty to apply. The defendants were not, therefore, ordered to execute the deed: they undertook to do so. The order of 27 September is the subject of one of the applications for permission before me. The reference to that application is A3/2007/2795.

[18]RS executed the deed of priority on 28 September and delivered it to the claimants’ solicitors. The undertaking given to Mann J was thereby honoured. Those solicitors forwarded the deed to the BoI’s solicitors in readiness for completion, and by 4 October the BoI had executed it as well. The deed did not thereby come into effect. That depended upon the execution of documents requiring simultaneous completion.

[19]At the end of September 2007 the claimants’ solicitors, at the BoI’s request, carried out a further search against title. That revealed that on 21 September the defendants had applied to HM Land Registry to register a second charge, in support of which they had forwarded to the Land Registry a charge in the form settled on 20 September and dated 21 September, although one that was still unexecuted by Red River. The BoI regarded its priority under the pending composite transaction as prejudiced by that application. The original agreement was that, upon completion of the composite transaction, the BoI would register both its first charge and the defendants’ second charge. It was not prepared to complete unless the defendants’ application was withdrawn. The result was that the claimants applied to Briggs J on 2 October for orders(i) that the defendants’ application to the Land Registry be cancelled forthwith,

(ii) restraining them from making any other application to the Land Registry in relation to the property until after registration of the first legal charge upon completion of the composite transaction, and

(iii) restraining them from entering in the meantime into any communications with the BoI. The latter two orders were based on the assertion that AS had embarked on a campaign to sabotage the composite transaction. At the same hearing AS applied informally for delivery to her of the second legal charge on the basis that, as Red River had executed it on 28 September, there was no reason why she should not have it.

[20]Briggs J, on 2 October, acceded to the first and second of the claimants’ applications on terms but refused the third. The basis of his decision was that under the settlement agreement and consent order, the transaction to which the defendants were committed was one under which there was to be a first charge in favour of the BoI, a second charge in favour of the defendants and a deed of priority between the BoI and defendants; and that it was an implied term of that transaction that the defendants would not make applications to the Land Registry that would hinder its due completion. He did not accept AS’s arguments that the settlement and agreement said nothing about requiring the defendants to be party to a composite transaction with the BoI. Whilst that might be true as far as it went, the consent order had moved things on. The defendants intended to appeal against Mann J’s order of 27 September and AS made clear to the judge that she opposed the making of any order that might prejudice that appeal. Precisely what she meant by that is not clear to me.

[21]Briggs J’s order of 2 October contained undertakings by the claimants in damages and “to obtain registration of the Second Legal Charge at Companies House.” Paragraph 1 required the defendants to withdraw their application to the Land Registry upon delivery to them of a letter from the BoI’s solicitors(a) stating that the deed of priority had been executed by the BoI, and

(b) undertaking, on any registration of the first charge, that the BoI’s solicitors would simultaneously register the deed of priority, lodge with the Registry a certified copy of the second charge and apply for its registration. Paragraph 1 also restrained the defendants from making any further applications to the Land Registry pending registration of all three elements of the composite transaction. The purpose behind those orders was to ensure that the application of 21 September did not give the defendants a priority over the BoI they were not intended to have. Consistent with that intention, paragraph 1 of the order restrained the defendants from making any further application to the Land Registry in relation to the property pending the registration by the BoI of their first charge, the deed of priority and the second charge.

[22]Paragraph 2 of the order required the claimants to make available to the defendants a certified copy of the second legal charge upon receipt of confirmation from the defendants that they had withdrawn their application to the Land Registry, and also required the delivery to the defendants of the original of the second legal charge once no longer required by the Land Registry for registration purposes. Paragraph 4 refused the defendants a stay of paragraph 1 pending appeal, and paragraphs 5 and 6 refused permission to appeal against paragraphs 1 and 2 (the order stating that neither of paragraphs 1 and 2 had made a final order). Paragraph 7 (which was a final order) ordered the defendants to pay costs of £8,081.45. Permission to appeal against that order was also refused. The order of 2 October is the subject of another application for permission by the applicants. The reference is A3/2007/2794.

[23]On 4 October the BoI’s solicitors wrote to AS saying that the BoI had executed the deed of priority and undertaking that, on any application for registration of the first legal charge at the Land Registry, they would simultaneously apply for registration of the deed of priority and lodge with the Land Registry a certified copy of the second legal charge. That was the letter contemplated by paragraph 1 of the order. The consequence was that the defendants became obliged to, and did, withdraw their registration application made on 21 September. Matters were apparently proceeding to a completion of the composite transaction on 5 October.

[24]On 3 October AS presented a petition for the winding-up of Red River. It was based on the non-payment of the £300,000. Briggs J had told her at the hearing the day before that the order he was about to make did not prevent her from presenting a petition but would prevent her from applying to the Land Registry to register it pending completion of the transaction.

[25]On 5 October – as yet unaware of the petition -- the claimants made a further application to the court. That raised a question as to the appropriate means for securing registration of the second charge at the Land Registry. The defendants’ position was that they wanted the original charge to be used for immediate registration at the Registry rather than a certified copy such as was referred to in the undertaking just mentioned. In short, they had become dissatisfied with the terms of the BoI’s solicitors’ undertaking. By 5 October both sides were, however, expressing themselves as wishing to complete the composite transaction, if possible that day. Briggs J was committed to other cases on 5 October and, having identified the nature of the problem to him, the parties left the court to resolve the matter of the undertaking themselves. By about 12.10 pm they returned to court to tell Briggs J that they had done so and in a way with which the BoI was also content. Mr Meares, counsel for the defendants, told him that the composite transaction had probably by then been completed, although in fact it had not, and the parties left court at 12.15 pm after a short argument about costs. The minute of order for that day, sealed on 13 November, reflected that the resolution of the difference over the form of undertaking was by way of an oral confirmation from the BoI’s solicitors to Mr Meares that the undertaking in the letter of 4 October should take effect as if it had been to lodge the original of the charge together with a certified copy of it rather than merely a certified copy. That was achieved -- on the face of the order and from what one infers from the transcript of the proceedings -- by the agreement of the parties.

[26]AS has asserted that Briggs J’s order of 2 October was amended on 5 October. There is no evidence in the papers that it was and AS told me at the hearing on 28 August 2008 that the only alleged change was to substitute for the reference to a “certified copy” of the charge a reference to the “original” charge. She is, with respect, wrong about that. The change I have just described was the subject of the separate sealed order of 5 October. It may be that the substance of that was to change the requirements of the order of 2 October. It did not, however, strictly amend it. Moreover, as the claimed amendment was one to which the defendants appear to have agreed, they can hardly, as it appears they do, complain about it.

[27]Shortly after the parties left court on 5 October, AS presented Mr Dogan with an envelope which, when he opened it following her departure, revealed a copy of the winding-up petition. The claimants’ attempts to make contact with her later that day failed. On the same day she faxed a letter to the BoI’s solicitors, the essence of which was that the defendants would seek to enforce their legal charge in priority to any subsequent charge the bank may require.

[28]The claimants having been served with the winding-up petition, they informed the BoI of it. The BoI assumed that the execution of the composite transaction, at least by Red River, would be potentially void: section 127 of the Insolvency Act 1986. In the afternoon of 5 October Briggs J heard an application by Red River, on short notice to the defendants but in their absence, to have the petition struck out as an abuse of the process. He made that order, taking the view that its presentation had been a deliberate attempt to sabotage the composite transaction carried out in an underhand and surreptitious manner. It may be that in making that observation, as I think he himself later accepted, he had forgotten that AS had raised the possibility of the presentation of a winding-up petition at the hearing on 2 October.

[29]The judge also considered that Red River had a bona fide cross-claim against the defendants for amounts corresponding to those claimed in the petition because of alleged breaches by the defendants of the settlement agreement, namely the obligations under clause 2.1. Red River’s point was that those failures had caused its inability to complete the composite transaction with the BoI and comply with the obligation to pay the £300,000. They had included a claim for damages in the proceedings issued on 22 August. In paragraph 13 of his judgment, the judge observed that the effect of the settlement agreement and consent order was to subject the defendants to an implied contractual obligation to act in good faith to bring about the completion of the composite transaction, whereas he held the petition was directed at sabotaging it.

[30]By 8 October the BoI knew that the petition had by then been struck out but also that AS had leave to apply to reinstate it. They had received AS’s challenges to their claim for priority over any charge in favour of the defendants. They were not prepared to proceed with the funding and withdrew the offer of facilities. The composite transaction with the BoI was at an end.

[31]On 9 October AS applied to Kitchin J for an order that HM Land Registry be required to enter a new restriction on the title to the property. Kitchin J dismissed that application with costs reserved. On 11 October issues as to the costs of the hearings of 5 and 9 October were restored before Briggs J. He gave directions and those matters came back before him on 7 November.

[32]The matters before Briggs J on that date included applications by the defendants for orders requiring the claimants to register the second legal charge with the Registrar of Companies; to deliver up the second legal charge together with an appropriate form of resolution authorising the giving of it by Red River; and the deletion of that part of the order of 2 October restraining the defendants from making applications to the Land Registry pending the particular events it referred to. The argument was that Red River had undertaken in the order of 2 October to obtain registration of the charge at Companies House. They had executed it and the settlement agreement provided for £900,000 of the debt due to the defendants to be secured by such a charge. Thus, the defendants asserted, there was no reason why it should not be registered and delivered up. The settlement agreement had not been discharged by either side. The claimants could have no answer to its partial specific performance, the effect of which would be that the defendants would have a second charge ranking after the BoS debenture. That, however, as I have mentioned, prevented the creation of further charges without the consent of the BoS, which had not been sought or obtained.

[33]Briggs J refused to make the orders sought by the defendants. He held that the purpose of his order of 2 October was to facilitate completion of the composite transaction provided for by the settlement agreement, nothing more and nothing less. Although the second legal charge had been completed, it was only intended to come into force as part of a simultaneous composite transaction including the redemption of the BoS charge, the grant of the BoI charge, the grant of the second charge and the completion of the deed of priority. He said that, although it was not so expressed in terms, the claimants’ undertaking to register the second charge at Companies House was, just like the BoI’s solicitors’ undertaking in relation to lodging it at the Land Registry, by necessary implication only to come into effect on completion of the composite transaction. That would now never be completed.

[34]There was likewise no reason why the second charge should be delivered up. Although it had been executed by Red River, it was not dated and had not come into force. Moreover the sabotaging of the composite transaction was the deliberate work of AS and in breach of her implied contractual obligation under the settlement and consent order to co-operate in good faith. The judge rejected the proposition that he could only make such a finding at a trial. He also rejected the proposition that he could not at that stage, without cross-examination, disbelieve AS’s assertion that she had behaved in good faith. He concluded that this was a paradigm case in which a party’s deliberate flouting of her contractual obligations raised an equitable bar to her claim for specific performance. RS was in no better position, having entrusted the conduct of the matter to AS. He said that if, on which he expressed no view, the defendants had any surviving remedies, they were merely for damages.

[35]The other head of relief sought by the defendants at that hearing was the variation of the order made on 2 October restraining them from making further applications to the Land Registry in relation to the property pending registration by the BoI of the second charge, a deed of priority and the first charge. Briggs J accepted that this order had been intended to be of limited duration and that its objective was to facilitate the completion of the composite transaction. The argument in support of the order applied for was that the order of 2 October was now spent and the judge saw the force of that. To the question what interest the defendants sought to protect by registration, the reply was an immediate equitable charge of the property arising from the terms of the settlement agreement, in particular from the clause 3 agreement to confer the second legal charge. The judge, however, regarded it as fanciful that the defendants had an equitable charge over the property. They could only have had such a charge if the contract to grant it was specifically enforceable, whereas in the events that had happened, provision for the grant of the second legal charge was no longer capable of specific performance. That was both because performance had become impossible and because of the defendants’ sabotaging of the composite transaction. The grant of the second legal charge was an integral part of that transaction. The judge concluded that the order sought was for the purpose of making an unjustified application and therefore refused to make the order.

[36]As for the various costs applications, Briggs J ordered either AS or the defendants to pay the costs of the application to strike out the petition. He ordered the defendants to pay the costs of the application to Kitchin J on 9 October 2007. He ordered the costs of 11 October 2007 to be costs in the defendants’ application.

The permission applications

[1]The application in relation to the order of 27 September 2007: A3/2007/2795

[37]The order of 27 September 2007 was made by Mann J. The appellants’ notice was issued on 10 December 2007. It should have been issued by 18 October 2007 and so was nearly two months late. Section 5 of the notice appears to indicate that the only paragraph of the order that the defendants seek to appeal is paragraph 2, the costs order. Paragraph 5 adds, however, that the remainder of the order is in dispute. That makes little sense. Apart from a liberty to apply, the remainder of the order is “no order” and that is because the defendants gave the undertaking to which I have referred.

[38]Before saying more about this application, I record that AS’s apparent understanding is that on 28 August I refused to adjourn it. Had I in fact done so, I would also then have ruled one way or the other on the application on its merits. I certainly did not do that and my recollection, about which I had no doubt, is that I adjourned this application in the same way as I adjourned that relating to the order of 2 October. Last week, in order to clarify what happened at the August hearing I listened to a recording of the proceedings on that day. My recollection is correct and that of AS is, with respect, wrong. I unambiguously adjourned this application together with that relating to the order of 2 October, and if AS had misunderstood that, I am baffled as how she could have done. In the event she has not sought to renew the argument in relation to this application and I propose now to rule on it.

[39]Five pages of appeal grounds have been generated. They assert, first, that there were “serious procedural irregularities” about the application before Mann J. But the points in support of that do not make out an arguable case to that effect. There was nothing procedurally irregular about the application. The substance was that the claimants were legitimately doing all they could properly do to procure the completion of a transaction which they perceived the defendants to be intent on frustrating. Briggs J had on 20 September settled the form of the second legal charge – I reject AS’s point that he had not -- and had ruled on the points of difference between the parties as to the form of the deed of priority. AS then executed the form of charge which put that issue to bed. The deed of priority was amended and approved by the BoI. AS then, as Mann J found, raised new points about it and refused to agree it. She could and should have raised those points before Briggs J but did not. Mann J’s decision was that it was not open to her to raise them before him. That was dictated by the principles relating to the interests of finality in litigation.

[40]The errors of law that the grounds of appeal attribute to Mann J are set out in paragraphs 2(1) and (2) of the grounds. I do not understand them and they appear to bear little relation to what Mann J actually decided. They read:

“(1) The decision by the Learned Judge was wrong as a matter of law because he has implicitly constructed the Settlement Agreement and the Consent Order by his judgment. (2) The decision by the Learned Judge was wrong as a matter of law because he has wrongly premised his judgment on his assumption, which is wrong, which is that the Deed of Priority as entered into, complies with the Deed of Priority, as settled on point of principle by Briggs J, which it manifestly does not.”

[41]Three points in support of that are then given, which appear to be to the effect that the deed the defendants were being asked to execute did not comply with what Briggs J had determined. That appears to be inconsistent with the way in which the matter was put before Mann J, namely that the points that AS was taking were new points. They were not directed at resolving disputes arising out of what Briggs J had decided. Other imprecise grounds of appeal are that Mann J did not sufficiently understand the background of the case and exercised his discretion without fully taking account of all the facts and matters he should have done.

[42]The applicants’ challenge to Mann J’s order is, with respect, hopeless. His judgment shows that he well understood the background and what had happened in front of Briggs J; and his assessment, conceded by AS’s counsel, that AS was seeking to raise new points before him that should have been raised, if at all, before Briggs J, appears to me to be incapable of serious challenge. In any event the outcome was that the defendants gave an undertaking to the judge to execute the deed of priority. They were not ordered to do so, and I cannot see how they can now complain about that aspect of the outcome. It is not ordinarily open to a litigant to appeal against the giving of an undertaking, which is always voluntary. Moreover, the undertaking having been given, RS executed the deed and so the undertaking has been complied with. Yet further the document has now proved to be of no utility because the BoI has withdrawn from the transaction.

[43]Thus the only element of Mann J’s order that AS might hope to challenge is his costs order. Since the outcome of the hearing was the defendants’ undertaking to do what the claimants’ had sought, it is difficult to see how that order can be challenged. The undertaking reflects that the claimants had succeeded and so did the costs order; and the judge’s judgment anyway demonstrates that the defendants’ opposition to the application was misplaced and that his costs order was properly within his discretion. I have no hesitation in concluding that on the merits the defendants have no prospect of a successful challenge of that costs order, and I would therefore refuse permission to appeal on the merits. But there is also the prior point that the appellants’ notice was filed nearly two months late. There is no explanation, let alone excuse, for such a delay. I have mentioned that on 2 October AS advanced, as one ground of opposition to the application then before Briggs J, that the defendants wanted to appeal against the order of 27 September. AS therefore had the prospect of an appeal in mind and there is no excuse for a failure to do anything about it until December. I refuse to extend the defendants’ time for appealing against the order of 27 September 2007.

[2]The application in relation to the order of 2 October 2007: A3/2007/2794

[44]The order of 2 October 2007 was made by Briggs J. The appellants’ notice was filed on 10 December 2007. It should have been filed by 24 October 2007 and so was some six weeks late. The appellants’ notice challenges the whole of the order. The substance of the order was to require the defendants to withdraw their application to register their charge at the Land Registry. The basis of the order was that under the composite transaction the defendants were only to get a second charge ranking after the BoI’s first charge, whereas the effect of the defendants’ application was to prevent the composite transaction proceeding at all. As it seems to me, the judge’s exercise of judgment in relation to that application was unimpeachable; and, but for the defendants’ further steps taken immediately afterwards that had the effect of derailing the transaction, it might well have been completed.

[45]In my judgment there are no properly arguable grounds for challenging the correctness of Briggs J’s judgment in this respect, one which has anyway, in the events that have happened, become academic. The grounds of appeal do not reflect any rational basis of complaint about a judgment which was obviously a correct one. Indeed, they are now implicitly abandoned, since a skeleton argument has been produced for the purpose of this hearing which advances a detailed critique of the proceedings and order of 2 October, being a critique bearing no relation to the original grounds.

[46]Those grounds persist in wrongly insisting that the order of 5 October amended that of 2 October. It did not. What it did do was to reflect a consensual variation to the terms of the BoI’s solicitors’ undertaking, being a variation to which the defendants agreed. To the extent that the complaint about the order of 2 October is that it required an undertaking in unacceptable form, the point evaporated on 5 October. I have a detailed argument before me as to why the form of the letter that Briggs J required of the BoI’s solicitors in his order of 2 October did not meet ordinary conveyancing requirements. It is said that it was based on a misstatement to him by counsel at the hearing -- at which AS was present -- of the conveyancing procedures. Whether that is a correct statement of the position I do not know, but for present purpose it does not matter because on 5 October the defendants agreed to a variation of the terms of the letter required of the BoI’s solicitors; and if the letter as then required was still in an inadequate form, that is as much the defendants’ fault as anybody else’s. I am therefore unpersuaded that in the events that have happened there can have been any continuing complaint about the essence of the judge’s order of 2 October, which was in principle rightly made. It was an order directed at enabling the composite transaction to proceed to completion.

[47]Even if, contrary to my view, there is any aspect of the judge’s order of 2 October that the defendants might have a real prospect of successfully challenging in this court, there has again been an unacceptable delay in filing the appellants’ notice, which was weeks out of time. The original explanation for that delay was that, just as Briggs J’s order was directed at bringing about the prompt completion of the composite agreement, the defendants delayed in filing an appellants’ notice because, acting in good faith, they were proceeding on the same assumption. But, they say, Briggs J’s judgment of 15 November proved that the claimants were acting in bad faith and that completion of the composite transaction was never possible. Thus, say the defendants, there has “therefore been no material delay in issuing this application [the appellants’ notice] promptly upon discovery of facts and matters which provides the grounds for it, and give rise to it”.

[48]I regard that explanation as insufficient. The defendants’ almost immediate response to the order of 2 October was to present the winding-up petition, which it might be thought was foreseeably likely at least to delay, and perhaps derail, the composite transaction, although whether the defendants did foresee that I do not know. But even if one takes the defendants’ submission at face value and accepts that it was only on 15 November that the full extent of the claimants’ alleged villainy became apparent to them, there remains the question why it still took until 10 December to file the appellants’ notice.

[49]The original explanation as to why the notice was filed as late as it was has now been replaced by further explanations. First, AS says that she did not wish to trouble the Court of Appeal with the matter until she was able to assess the significance of the order of 2 October. There is nothing in that. The time limits for appealing apply to everyone alike and AS’s claimed thoughtfulness about not troubling the court is no excuse. She was in a position to assess the significance of the order when it was made and should have done so. Secondly, AS says she wanted to see a transcript of the proceedings of 2 October, which she says she only saw on 2 November. That too is no explanation. She knew what order had been made and did not need to see the transcript in order to file the appellants’ notice. Awaiting transcripts is never an excuse for not filing an appellant’s notice in time. In any event she provides no explanation of the delay from 2 November up to 10 December when the notice was filed. AS says next that she was awaiting completion of the transaction and says that had it completed she would not have had to appeal against the order of 2 October. No doubt, but she knew by 8 October that it was not going to complete. Several further explanations for the delay are given, but they appear to me to be of a like quality of inadequacy as those I have summarised.

[50]The plain fact is there was no good reason why AS did not file the appellants’ notice in time and no explanation has been advanced as to why it would be just to extend time. Since I take the view that the merits of the appeal are nil, that does not assist an application for an extension of time. But even if I had been of the view that there was some merit in the proposed appeal, I anyway see no reason to extend time in a case such as this where there is simply no acceptable explanation for the unusually long delay. I refuse to extend the applicant’s time for appealing against the order of 2 October 2007.

[3]The application in relation to the order of 15 November 2007: A3/2007/2793

[51]The order of 15 November 2007 was made by Briggs J following argument on 7 November 2007. The appellants’ notice was filed on 10 December 2007. It should have been filed by 6 December 2007 and so was about four days late. The notice asserts that it was not filed late because the judge extended time accordingly. There is no evidence that he did. The degree of lateness is, however, in this instance modest and, on 28 August 2008, Mr Page advanced explanations of attempts to file it by 6 December. In the circumstances, having regard to the relative modesty of the delay in this case, I will extend time for filing the appellants’ notice in relation to the order of 15 November 2007.

[52]Mr Page sought permission to appeal against this order on three grounds. First, he said that the judge was wrong to regard the defendants’ right to their legal charge as arising under a composite transaction with the BoI. The settlement agreement did not so provide. Upon its correct construction, it simply entitled the defendants to a charge. Such a charge had been executed and the defendants were entitled to have it delivered to them.

[53]In my view there is no real prospect of that argument succeeding on appeal. It is implicit in the settlement agreement that the charge to which the defendants were to be entitled was a second charge to be given as part of a composite transaction involving the refinancing of the company’s indebtedness. It might be arguable that such refinancing did not have to be with the BoI if for any reason the BoI decided not to proceed. But that argument does not arise since, in the event, the matter was moved on by, in particular, the terms of the Schedule to the consent order, which show that by then the defendants were accepting that the transaction was a composite one involving the BoI, with the claimants’ assertion being that it was that composite transaction that the defendants had frustrated. It was against that background that the second legal charge came into being, such charge being intended only to come into effect as a charge subsequent to the BoI’s first legal charge. The argument that the effect of the settlement agreement was to entitle the defendants unconditionally to the grant of a charge over the property, being a charge which, on their case, would rank after the BoS charge – and, furthermore, a charge to which the BoS had not consented -- appears to me to have no real prospect of success on appeal. I can see no answer to the judge’s reasoning in paragraph 35 of his judgment as to why the defendants were not entitled to delivery up of the claimed charge.

[54]Mr Page’s third point, which I will deal with next, was based on the balance of convenience, his submission being that the balance of convenience favoured the making of the order that his clients sought rather than refusing it. In my judgment if, as I consider, the judge was right on the point to which I have just referred, that argument can have no prospect of success either, and I would refuse permission to appeal on that ground.

[55]Mr Page’s second point, which was really his main point, was that although the application before Briggs J was merely an interim application and was openly agreed by counsel as being such, the judge nevertheless made what purported to be final findings as to the defendants’ conduct, namely that they had acted in breach of the implied obligation of good faith to which he found they had become subject. The claimants themselves so regard Briggs J’s finding and Mr Page relied on their amended Particulars of Claim which plead Briggs J’s findings to this effect. The claimants’ assertion is that these findings are res judicata between the parties: paragraph 54 of the pleading. Mr Page’s point was that whilst it would have been legitimate for Briggs J to have refused the interim application on the basis that there was a good arguable case on the facts that the defendants had breached the implied obligation of good faith to which they had become subject, it was wrong for him to make that finding, purportedly by way of a final finding, without giving the defendants the opportunity to explain in oral evidence why, as they claimed, they had always acted in good faith. They wished to make that good at the trial. But if the judge’s findings are in that respect res judicata, they will be precluded from doing so.

[56]This point alone of the endless grounds of appeal against Briggs J’s order has caused me concern. I have no doubt that Briggs J was right to refuse what was in effect the grant of final relief on the interim application before him. But ought he on such an application to have made what appear to have been final findings as to the defendants’ lack of good faith? Of course, appeals lie only against orders, not findings. That in principle poses a difficulty to the giving of permission to the defendants to appeal on this point since, if the order was a correct disposal of the interim application, on what basis might the Court of Appeal review the judge’s findings?

[57]I see no immediate clear answer to that, but it can perhaps be said that the way in which the judge dealt with this matter was in this respect procedurally unfair; and if that is right it would seem wrong in principle that the defendants should have this finding held permanently against them, it having been made on an interim application without oral evidence or any relevant discovery. Whilst I have indicated the procedural difficulties which might face the defendants in pursuing an appeal against this element of Briggs J’s decision, I am not satisfied that they should stand in the way of permission to appeal on this ground.

[58]I would therefore refuse permission to appeal against Briggs J’s order of 15 November on all grounds apart only from this single ground that I will reformulate as follows: “That the learned judge was wrong (if he did so) to decide finally that the defendants acted in breach of the implied obligation to act in good faith in relation to the completion of the Composite Transaction. That question turned on matters of fact such that the judge should not (if he in fact did so) have purported to decide it finally in advance of the trial, at which the defendants could adduce oral evidence on the matter. The judge should have done no more than to find that the respondents had a good arguable case that the appellants had breached the implied term.

[59]I will therefore give permission to appeal on that limited basis alone. Orders: (i). Application in relation to order of 27 September 2007 (A3/2007/2795). Extension of time for appealing refused. (ii). Application in relation to order of 2 October 2007 (A3/2007/2794). Extension of time for appealing refused. (iii). Application in relation to order of 15 November 2007 (A3/2007/2793) Time for appealing extended and application granted in part

Red River UK Ltd v Sheikh & Anor [2008] EWCA Civ 1592

The permission applications

Cited in 2 later judgments