Fraenkl -Rietti v Cheltenham & Gloucester Plc [2011] EWCA Civ 524

[2011] EWCA Civ 524Case No B2/2010/2753
IN THE COURT OF APPEAL (CIVIL DIVISION)
Venue ON APPEAL FROM THE MANCHESTER COUNTY COURTCase No M10X0007 (MA113524)
His Honour Judge Holman
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 12/05/2011
Before
LORD JUSTICE RIMER
Between
IRENE FRAENKL-RIETTIAppellantCHELTENHAM & GLOUCESTER PLCRespondent
Mr Nicholas Davis (of Albinson Napier & Co) for Applicant for The Respondent was not representedHearing Hearing date: 14 April 2011
Judgment
[1]This is a renewed application for permission to pursue a second appeal. The applicant is Irene Fraenkl-Rietti, who was represented before me, as at both hearings below, by Nicholas Davis, a Solicitor Advocate. The respondent is Cheltenham & Gloucester Plc (‘C&G’), which was not represented before me.[2]The facts are simple. On 12 November 2001 C&G obtained a judgment against the applicant for possession of a mortgaged property and a money judgment for £24,000 odd, not to be enforced so long as she paid various defined payments, which she did not. The property was compulsorily purchased in 2004 but the compensation money paid to C&G was insufficient to discharge the money judgment. In May 2009 C&G applied to the Manchester County Court for a charging order over a house held in the sole name of the applicant. The purpose was to secure the unpaid balance of the judgment debt, some £18,000 odd. C&G obtained an interim charging order on 3 August 2009.[3]The applicant opposed the making of a final charging order, to which end she made a witness statement on 22 September 2009. She there explained that she had bought the house in 2004 for £102,000 and estimated that by September 2009 it was worth about £115,000. It was subject to two prior charges registered in 2006. The first secured just over £115,000, the second just under £23,000. The house thus had a negative equity. The applicant also had unsecured liabilities totalling just under £13,000.[4]The application for a final charging order came before District Judge Smith on 14 December 2009. Paragraph 3 of his judgment explained that the main grounds of objection advanced by Mr Davis were(i) that the court had no jurisdiction to make the order, because the judgment debt was more than six years old at the date of the application for the charging order;(ii) alternatively, if the court did have jurisdiction, it could only exercise it if it was first prepared to give permission for such application, by analogy with the condition applying to like belated applications for the issue of writs of execution prescribed by RSC Ord 46, r.2(1)(a) (which still applies under the Civil Procedure Rules 1998).[5]Judge Smith rejected both submissions. There remained the question of how he should exercise his discretion on the application, it being agreed that the court had a discretion as to whether or not to make the order and that it was for the applicant to satisfy the court why the order should not be made. Judge Smith considered the various factors advanced by the applicant, including that the house was in negative equity. He regarded it as a difficult case but exercised his discretion by making a final charging order.[6]With the permission of His Honour Judge Holman, the applicant appealed against Judge Smith’s decision. Judge Holman dismissed the appeal for the reasons given in his judgment of 27 October 2010. Mr Davis no longer argued that there was no jurisdiction to make a final charging order more than six years after the obtaining of the judgment debt, but repeated his argument that in such a case the applicant for such an order required the court’s permission to apply for it. Judge Holman rejected that argument and held that, in exercising his discretion Judge Smith had taken all the relevant matters into account, including the negative equity point, as to which Judge Holman said that:
‘… I struggle to see why, per se, the fact that there is negative equity should be a bar to the grant of a charging order, particularly when one bears in mind that under the [Charging Orders Act 1979] there is power for the debtor to apply to vary or discharge the charging order.’
[7]Undeterred by that failure, the applicant sought permission from this court for a second appeal. Permission for a second appeal is only given if the appeal will surmount one or other of the two CPR Part 52.13 hurdles. The grounds of appeal are that Judge Holman was wrong not to hold(i) that after six years there is a discretionary bar to the enforcement of a judgment debt by way of a charging order;(ii) that (in effect) the RSC Ord 46, r.2 hurdle to the issuing of writs of execution after six years applies equally to an application for a charging order; and (ii) that a charging order should not be made final over a property already in negative equity.[8]Patten LJ, on the papers on 7 February 2011, refused permission, expressing the view that whilst the making of a charging order involves an exercise of discretion, there is no legal basis for the suggestion that an application made more than six years after judgment required the proof of exceptional circumstances. Any such condition would require to be governed by specific rules to that effect. The same applied to the negative equity point.[9]On the renewed oral application, Mr Davis disavowed the suggestion that a judgment creditor asking for a charging order more than six years after the obtaining of judgment debt must show exceptional circumstances. After some clarification in discussion, he confirmed that his case was as

Judge Holman had identified it, namely that there is under the charging order procedure:

‘… a requirement for the creditor to obtain permission and explain why permission should be granted, where more than six years have elapsed since the obtaining of the judgment.’
In his oral argument, that was the only point that Mr Davis sought to show was properly arguable. If, he said, it was so arguable, it would merit permission for a second appeal because it would raise an important point of principle. He devoted no separate energy towards showing that the ‘negative equity’ point also merited permission for a second appeal.[10]I agree with Mr Davis that, if properly arguable, the ‘six year’ point would raise an important point of principle that this court ought to consider. That is because nowhere – in the Charging Orders Act 1979, in CPR Part 73 and its related Practice Direction (which concern, inter alia, applications for a charging order) or anywhere else – is there any support for the existence of any such point. Thus, if Mr Davis is right about it, it is important that the Court of Appeal should make publicly known an important principle that is otherwise unknown and undiscoverable.[11]Mr Davis recognises that, whereas RSC Ord 46, r 2 provides expressly for the need for permission for the issue of a writ of execution more than six years on, CPR Part 73 does not provide likewise in relation to the application for a charging order. He says that is because the issue of a writ of execution is ordinarily a purely administrative act. But for Ord 46, r 2, there would therefore be no bar on the issue of such writs after six years; and the purpose of Ord 46, r. 2 is to subject such belated applications to the check of a judicial filter. There is, however, he said, no need for any express like six year reference in Part 73, because the making of a charging order always requires the exercise of judicial discretion; and a preliminary to the exercise of such discretion will thus automatically require the prior obtaining of judicial permission for applications made more than six years after the date of the judgment debt.[12]Put like that, the argument is a non sequitur because it still leaves unidentified the source of the claimed six year condition in relation to charging order applications. It obviously does not derive from Ord 46, r. 2. It may perhaps be odd for there to be an express condition in Ord 46, r. 2 in relation to writs of possession but no like express condition in Part 73 in relation to charging orders. But, if so, there is, without more, still no basis for reading Part 73 as implicitly containing a like condition.[13]Mr Davis’s submission is that the existence of the claimed condition is supported by the decision of the House of Lords in Lowsley and Another v. Forbes (trading as L.E. Design Services) [1999] 1 AC 329. That was what he argued before both judges below. His argument there fell on stony ground. His suggestion to Judge Smith that it supported the view that ‘there was indeed a bar on all forms of execution after six years’ was rejected by Judge Smith, who observed that ‘[i]n fact, I do not accept, on reading the authority, that it says anything of the kind.’ The like submission was rejected by Judge Holman, who said:
‘If one reads the judgment in totality, the central issue in Lowsley was whether the Limitation Act applied to an application for a charging order to which the House of Lords gave a resounding answer in the negative, and I see no reason to go beyond that narrow issue in applying Lowsley v. Forbes to this situation.’
[14]Both judges were, I consider, right to reject Mr Davis’s submission that Lowsley supports the proposition that six years on from the obtaining of a judgment debt, there is a need to obtain the permission of the court for the making of a charging order application. With respect to Mr Davis’s tenacious submission otherwise, his attempt to derive support for the applicant’s case from Lowsley was a hopeless bid to conjure something out of nothing. As Judge Smith rightly said, it does nothing of the kind.[15]The plaintiffs in Lowsley obtained in 1981 a judgment against the defendant for £70,000, which remained unpaid. By 1992, when the judgment debt and interest had grown to £184,000 odd, the plaintiffs obtained ex parte from the Master leaveunder Ord 46, r. 2 to enforce the judgment debt (Lord Lloyd of Berwick explaining, at 334E, that such leave was necessary as over six years had elapsed since the judgment). They also obtained charging and garnishee orders nisi. Tuckey J reduced the interest covered by the orders to six years’ worth and made the orders absolute. The Court of Appeal upheld the orders save that it restored the Master’s order that they should cover interest down to their date.[16]On the defendant’s appeal to the House, the defendant argued that all methods of enforcement were barred after six years by section 24(1) of the Limitation Act 1980. If that was right, none of the 1992 orders was valid and no question would have arisen as to the period for which interest was recoverable. Lord Lloyd’s speech provided an illuminating account of the history of the law of limitation and the enforcement of judgments, which there is no need for me to repeat. The unanimous decision of the House was that section 24(1) has no application to proceedings by way of execution of a judgment but only to the time within which a fresh action on the judgment may be brought. Therefore the 1992 orders by way of execution were validly made. Tuckey J had also correctly held that section 24(2) precluded the recovery by any enforcement proceedings of more than six years’ interest. The Court of Appeal’s decision was reversed in that latter respect but otherwise upheld.[17]That is all that Lowsley decided. There was no issue before the House that the charging order could only have been lawfully obtained if the plaintiffs had first obtained permission to apply for a charging order, a point about which the House said and decided nothing. Even so, Mr Davis said that one can still get from Lowsley enough to make good his argument. I must refer to what he had in mind.[18]In his speech, Lord Lloyd cited, at 340A, from the final report of the Law Reform Committee on Limitation ofActions (1977) (Cmnd 6023), including paragraph 4.14. He continued, at 340E:
‘The authorities referred to in the footnote to paragraph 4.14 include W.T. Lamb & Sons v. Rider [1948] 2 K.B. 331. The importance of the paragraph is not just that it draws attention to the reasoning in the Lamb case. What it also does is to propose a statutory compromise. All forms of execution were to be removed from the sphere of limitation and instead made subject to a discretionary bar after six years. There would then be no need for the special limitation period of 12 years for bringing suit on a judgment. It was in the light of that proposal that Parliament passed the Limitation Amendment Act 1980, which was in turn consolidated in the consolidation Act of that year.’
[19]Lord Lloyd referred, at 341, to part of the speech of Lord Hailsham of St. Marylebone L.C. when introducing the second reading of the Bill that became the Limitation Amendment Act 1980, in which Lord Hailsham said that ‘[t]he Bill brings into effect almost all the recommendations of [the Law Reform Committee].’ The argument of the defendant’s leading counsel, as recorded at 341, was that Lord Hailsham had not referred to all the Report’s recommendations but only to almost all of them. There followed this passage in Lord Lloyd’s speech, at 341F:
‘For myself I have, like Lord Griffiths in Stubbings v. Webb [1993] A.C. 498, no doubt that in reducing the limitation period from 12 years to six, Parliament was intending to give effect to the package of recommendations in paras. 4.12-4.16 of the Law Reform Committee’s Final Report. ‘Mr Hockman [leading counsel for the defendant] … argues that, even so, the recommendations of the committee are far from clear. What the committee seems to have contemplated was some future change in the rules of court so as to put garnishee orders and charging orders on the same footing as fi. fa. Since that has not yet been done, those means of execution are still covered by section 24(1) of the Limitation Act 1980. I do not accept this argument. …’
Lord Lloyd then proceeded to explain why, as was the decision of the House, the word ‘action’ in section 24(1) did not include those other methods of execution but meant, and meant only, a fresh action on the judgment.[20]As it seems to me, the most that Mr Davis can get from Lowsley is the expression of opinion by Lord Lloyd in the first of the three paragraphs just quoted to the effect that in enacting the Limitation Amendment Act 1980 Parliament ‘was intending to give effect to the package of recommendations in paras 4.12-4.16 of the Law Reform Committee’s Final Report’, recommendations which, as he had earlier explained, included the subjection of all forms of execution to a discretionary bar after six years. But that still takes Mr Davis’s argument nowhere because it is plain from the decision in Lowsley that that particular part of the package was notin fact implemented by Parliament: Lowsley decided that section 24(1) does not cover methods of execution; and it was not suggested in Lowsley, nor does Mr Davis suggest now, that any other provision of the Limitation Act 1980 does so either. Mr Davis also accepts that there is nothing in the rules of court relating to charging orders that does so. Thus Mr Davis can point to no primary or secondary legislation supporting his argument; and the only authority that he relies upon for support does not, upon a proper consideration, provide any at all.[21]In my judgment, there is no arguable basis for the applicant’s case that permission is required to make a charging order application once six years from the date of judgment has elapsed. The passage of time may be a factor to be taken into account by the court when exercising its discretion as to whether or not to make the order. But that is its only significance.[22]The applicant’s ‘six year’ point is, I consider, therefore unarguable and an appeal on it would have no prospect of success. I refuse permission for a second appeal on that point. I also refuse permission for a second appeal on the negative equity point. That was at most a matter going to the exercise of the court’s discretion in its disposition of the charging order application. It raises no separate point of principle, let alone one meriting a second appeal.[23]I refuse the applicant’s application for permission to appeal.