First Mortgage Securities (No 9) Ltd v Smith & Ors [2005] EWHC 2455 (Ch)

Case No HC03C04245

[2005] EWHC 2455 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice

Date Wednesday, 29 June 2005

Strand

London WC2A 2LL

B e f o r e:

MR JUSTICE PARK

Between

FIRST MORTGAGE SECURITIES (NO 9) LIMITEDClaimant

- v -

Between

TREVOR ALAN SMITHClaimant

DEFENDANT ANDClaimant

PAUL ANTHONY BEDFORDDefendant

CAROLINE ANNE BEDFORDDefendant

Digital Transcript of Smith Bernal Wordwave Limited

183 Clarence Street Kingston-Upon-Thames Surrey KT1 1QT

Tel No: 020 8974 7300 Fax No: 020 8974 7301

(Official Shorthand Writers to the Court)

MR NIGEL CLAYTON instructed by BPE (Cheltenham) appeared for Paul Anthony Bedford and Caroline Anne Bedford

MR SMITH appeared in person for in person

for The claimant company did not appear

JUDGMENT

Overview

[1]MR JUSTICE PARK: In this judgment I propose to refer to the parties by their names and not by their designations in the heading to the action. Thus I shall not refer to "The Defendant" or "The Part 20 Claimant" I shall refer to Mr Smith. Similarly with the other parties, the party which is in fact the claimant is called First Mortgage Securities (No 9) Limited. I shall call it FMS. The other parties are Mr and Mrs Bedford. Mr Smith has represented himself. FMS, though a party to the case, has not been represented before me and has taken no part in this hearing. Mr and Mrs Bedford are represented by Mr Clayton of Counsel.

[2]The issues which I have to consider arise out of two mortgages: one created in 1987 and one in 1988, both having been granted by Mr and Mrs Smith to FMS. I believe that both of the mortgages related to the house which Mr and Mrs Smith then owned in Cheltenham. There is, I think, no relevant difference between the two mortgages and for all purposes of this judgment they can be taken together.

[3]FMS having brought proceedings against Mr and Mrs Smith concerning alleged arrears under the mortgage loans, there came a time in 1995 when Mr and Mrs Smith gave up possession to FMS pursuant to a court order. Since then the house has been sold twice. It was sold by FMS to a Mr Russell in 1995. It was sold by Mr Russell to Mr and Mrs Bedford in August of 2002. As I see the issues which have arisen today, although Mr Smith may see it slightly differently, the main point with which I am concerned derives from a contention which Mr Smith is advancing against Mr and Mrs Bedford that they must surrender possession of the house to him. They have applied for summary judgment dismissing Mr Smith's claim. I do not like the sort of judgments which keep the parties hanging in suspense until the stretch between the final fence and the winning post. In the circumstances I will say now that for the reasons which I will explain at some length in the course of this judgment, I am going to grant to Mr and Mrs Bedford the summary judgment which they request.

[4]There is also before me an application by Mr Smith for judgment in default against FMS on a counterclaim which he has brought against FMS in circumstances which I will describe in more detail later. I am not prepared to order judgment in default for reasons which I will explain. I stress that I am not dismissing Mr Smith's counterclaim against FMS. I am only, for reasons which will appear later, not at this hearing granting the particular kind of judgment in default which he requests.

History of the Matter

[5]The matter has a complicated history which I will try to summarise in the following paragraphs.(i) In 1987 and 1988 FMS made two loans to Mr and Mrs Smith. In total they were £139,500. The terms were rather complicated. I hope that it will not be necessary for me to analyse them in any detail. There were, as I said in the overview, two legal charges: one for each loan, but both of them related to the house at 34 Park Place, Cheltenham.

(ii) Over the next five years it is at least possible that arrears arose. I state the position in that cautious way because, in more detail, FMS certainly said that arrears arose and, as I will explain, Mr and Mrs Smith did not dispute that at the time. However, Mr Smith has more recently made further investigations which have led him to say that FMS was quite wrong and that on a proper interpretation of the complicated terms of the mortgages there were, or at least there may have been, no arrears. However, the matter was certainly not perceived that way in 1992.

(iii) On 4 February 1992 FMS applied to the County Court for a possession order under the mortgages, and the court made the order in principle. The court was presented with statements of the mortgage account by FMS and the statements undoubtedly showed arrears. Mr Smith says now that they were wrongly calculated. I do not think that I need give a definitive decision myself at this stage about whether they were wrongly calculated or not. I am content to proceed on the basis that they were, or at least might have been. Mr Smith tells me that he opposed the application for a possession order but he was not able, at that stage, to dispute FMS's figures. I interpolate that I cannot possibly blame him for that. I very much doubt that I would have felt myself in any better position to dispute the figures if I had been in his place at the time. In the circumstances the district judge made a possession order, but he suspended it on conditions of a fairly routine nature as to payment of arrears, payment of current instalments and the like.

(iv) Mr and Mrs Smith did not appeal against the possession order.

(v) Although I do not have any detailed information about the passage of events over the next two or three years it seems fairly clear that by 1995 the arrears were not being cleared. Certainly on 18 September 1995 a warrant for possession of the property was issued by the Court in favour of FMS. A detail which I mention now, having noticed it in the papers, is that in a statement of claim of 1998, to which I have not yet come in this account of the facts, there is an averment that a possession order was made on 30 March 1995. I do not think that the papers which I have include a copy of that possession order. The detail probably does not greatly matter. There certainly was the suspended possession order of 1992 to which I have referred. There certainly was the warrant for possession of 18 September 1995, to which I have referred. There may or may not have also been a second possession order made on 30 March 1995.

(vi) Pursuant to the warrant for possession, bailiffs attended at the premises. They took possession of the property and they delivered possession of it to FMS. Mr and Mrs Smith were no doubt unhappy about the position but, as Mr Smith said to me, being law-abiding citizens they had no choice in the circumstances. They handed over the keys of the property and moved out. They have not occupied the property since. There was no appeal by Mr and Mrs Smith against anything which the Court ordered in 1995.

(vii) FMS, having taken possession of the property in those circumstances and thus being a mortgagee in possession, advertised the house for sale at £149,500. In 1995 a Mr Russell purchased the house at that price. He had himself raised a borrowing from a bank. The bank caused the property to be valued. The bank's valuer valued it at £145,000. I mention those details because the papers which I have read include assertions by Mr Smith that the sale by FMS to Mr Russell was in some way colourable and at a demonstrable undervalue. Given the figure at which the house was valued by Mr Russell's lending bank, I do not think that I can accept those assertions. That is not to say that Mr Smith does not sincerely believe them.

(viii) After the sale to Mr Russell there were still arrears owing on the mortgage of just under £60,000, or at least those arrears were still owing on FMS's own figures. By now Mr Smith says that FMS's figures were wrong and, as I have said earlier, I am prepared to assume for the purposes of this judgment that indeed that was or may have been so. Nevertheless FMS was proceeding at the time that there were still arrears owed to it. In March 1998 it commenced a High Court action against Mr and Mrs Smith claiming its alleged arrears. The present case is in fact that High Court action, but it has gone through a considerable number of changes and modifications since March 1998.

(ix) In 2000 or thereabouts Mr Smith, no doubt motivated by the money claim which FMS was still pursuing against him and his wife, commissioned two expert reports, each of which considered and reviewed FMS's calculations of the interest and other liabilities which arose under the mortgages and which therefore constituted the alleged arrears. Both reports said that there were numerous errors in FMS's calculations. I infer that when Mr Smith had had the opportunity to consider those reports he began to explore the possibility of re-opening the possession order or orders which had been made against him several years before, and seeking to claim back possession of the house.

(x) In July of 2002 Mr Russell put the house on the market. In August of 2002 Mr and Mrs Bedford contracted to purchase it from Mr Russell for £474,000. Before the exchange of contracts Mr Smith had contacted the Bedfords' solicitors and warned them that he was proposing to claim that the house still in truth belonged to himself, or to himself and his wife. (I interpolate here that at a date which I do not know exactly Mr Smith suffered the tragedy of the death of his wife. Henceforth I shall refer simply to him.) Reverting to the point that Mr and Mrs Bedford's solicitors had been warned of Mr Smith's claim, I record that the contract of sale between Mr Russell of the one part and Mr and Mrs Bedford of the other contained an indemnity from Mr Russell to Mr and Mrs Bedford should Mr Smith succeed in overturning the title to the property which Mr and Mrs Bedford were acquiring. Mr Smith fairly points out to me that in the circumstances Mr and Mrs Bedford went into the purchase with their eyes open to the risk. However, I think that Mr Smith would accept that his claim to recover possession of the property does not acquire any added strength in law from the existence of the indemnity.

(xi) I return at this point to the High Court claim which FMS had brought against Mr Smith. There have clearly been a number of amendments to the pleadings. Since I only have before me the pleadings in their presently amended form I cannot be certain of the exact details of the amendments: how many there were, when exactly they were made, and matters of that sort. However, I think it is sufficient for me at this stage to record two matters. The first is that Mr Smith filed a defence contesting FMS's claim for further arrears of just under £50,000. The second is that Mr Smith counterclaimed against FMS for a substantial sum of damages. He also counterclaimed for an order setting aside the order or orders for possession, which had been made against him and his wife in 1992 and possibly also in 1995.

(xii) On a date which may appear exactly in the papers but which at present I do not have at my fingertips, FMS was struck off the Companies Register. In consequence of that step a district judge made a consequential order to strike out the counterclaim which Mr Smith had put forward against FMS.

(xiii) Mr Smith appealed against the district judge's order. The matter came before Mr Justice Neuberger. If I have followed correctly there were at least two hearings before Mr Justice Neuberger. At one of them the judge ordered FMS to be restored to the register in order that Mr Smith should be able to pursue his counterclaim against it. A corollary of FMS being restored to the register was that the district judge's order, which had struck out the counterclaim against FMS, must have been set aside. There is no doubt that there is before me today a live counterclaim by Mr Smith against FMS. FMS, having been restored to the register, therefore existed again as a legal person. It still does so exist but it has taken no active part in any of the legal proceedings which have followed down to the stage of the hearing before me today.

(xiv) The second of the hearings before Mr Justice Neuberger of which I know was on 18 December 2003. He was not prepared to proceed solely against FMS on Mr Smith's counterclaim for the possession order, or orders, to be set aside. The judge made the point that third party rights had arisen and he thought it appropriate that the third parties who might otherwise be affected should be joined as parties to the action. It turned out that those third parties were Mr and Mrs Bedford. Mr Smith therefore joined Mr and Mrs Bedford as Part 20 defendants.

(xv) What I have said so far more or less brings matters up to date, but I should add two further points; (a) Mr Smith has applied for summary judgement against FMS for a large sum of damages which he says is owed to him and for an order setting aside the possession orders of 1992 and 1995. Previously I believe he had simply sought those reliefs in his counterclaim. This step was an application for summary judgment on the counterclaim. FMS has not responded to the application for summary judgment. In those circumstances Mr Smith applies for judgment in default against FMS. That is one of the matters which I have to consider today. (b) Mr and Mrs Bedford have applied for summary judgment against Mr Smith. They seek summary judgment dismissing his claim for possession against them.

Applicants for Mr Smith's Summary Judgment and Judgment in Default Against FMS

[6]I will consider separately the application for damages and the application to set aside the possession orders. As regards the application for damages Mr Smith fairly confirms to me that he has no prospect of obtaining from FMS damages of any amount, let alone the £300,000 or more which he claims. He explains that there may be a possibility of recovering damages against persons, possibly former directors, who were involved in FMS in earlier years. In those circumstances I do not think that it would be right for me to give summary judgment now against FMS.

[7]If Mr Smith has a possible claim against former directors I believe that he ought to identify them and bring proceedings against them. They should be given the opportunity to defend the claim if they wish. I believe that it would be unjust to them for Mr Smith to be able to confront them with a judgment for some £300,000 or more against FMS and to say that they are liable for whatever FMS would have been liable for. Mr Smith may well succeed in a claim for damages against former directors. I say nothing about it. However he should, I believe, pursue that avenue of recovery in a claim against them, and I do not think that it would be right for me to give "a leg up" to that claim by making a large order now against FMS in circumstances where FMS has taken no part in the proceedings.

[8]I move now to Mr Smith's application for summary judgment against FMS to set aside the possession order, or orders, which were made against him in 1992 or 1995. Mr Clayton submits to me that even if those orders are set aside that would not enable Mr Smith to obtain a possession order against Mr and Mrs Bedford. I am inclined to agree with that, but I do wish to consider first Mr Smith's assertion that, because FMS has not responded to his application for summary judgment, he should obtain judgment in default.

[9]Mr Smith is entirely right that in most cases where a party claims some form of relief against a defendant and the defendant simply ignores the proceedings, an order for judgment in default is likely to follow. However, in this case Mr Smith wants this particular order for judgment in default against FMS, not in reality for the purposes of his counterclaim against FMS, but as a step in his claim for possession against Mr and Mrs Bedford. For reasons which are quite similar to the reasons which I explained in the context of a possible future claim by Mr Smith for damages against former directors of FMS, I do not think that it would be right for me to give judgment in default against FMS on the question of whether the possession orders should be set aside or not.

[10]If, as indeed is the case, a step in Mr Smith's claim against the Bedfords has to be that the possession orders need somehow to be eliminated from the history of the matter, and if Mr Smith wishes to establish that proposition, not for any advantage which will accrue to him in his claim against FMS, but rather for an advantage which will accrue to him in his claim against Mr and Mrs Bedford, I believe that the matter should be considered on its merits in the context of what is now the third party claim between Mr Smith and Mr and Mrs Bedford.

[11]For those reasons, departing from what more usually happens in applications for judgment in default, I do not order the judgments in default sought in this case. At the risk of repeating myself, by doing that I do not in any way close off any argument that Mr Smith may have to claim damages from former directors of FMS, nor do I close off any arguments which he may have as between himself and Mr and Mrs Bedford. The difference however between those two circumstances is this. The possibility of claims by Mr Smith against former directors of FMS is only a possibility. If it arises it will have to be considered, not in this case but in some future case which has not been commenced yet. In contrast, issues between Mr Smith and Mr and Mrs Bedford are, in my view, fairly and squarely raised on the application which Mr and Mrs Bedford have brought before me today, and I am now going to proceed and determine those issues.

The Third Party Claim Between Mr Smith and Mr and Mrs Bedford

[12]I summarise what I am about to expand on in more detail in two ways. First, I do not think that there is a realistic prospect of Mr Smith setting aside the possession orders which were made by the County Court, in so far as an order setting aside those orders is an essential step in his claim against Mr and Mrs Bedford. That would be fatal to the claim against them in any event. Second, even if I thought that there was some possibility of the possession orders being set aside, I still cannot see how, as a matter of law, the claim for possession of the house against Mr and Mrs Bedford can succeed. I will now enlarge on those two different strands in my reasoning.

[13]As regards the possession orders the starting point is that, if a party to proceedings wishes to challenge a decision made against him, or her, he or she ought to appeal. Mr Smith did not appeal against any orders of the County Court in 1992 or 1995. He explains to me now, and I entirely accept, that it did not appear to him at the time that there was any basis on which he could appeal. At that time he did not have the experts’ reports which he obtained in 2000. If he had had those reports then, even if the County Court had decided against him in the first instance he probably would have appealed. I accept all of that, but it remains the case that appeals were not filed in 1992 or 1995, and in my judgment it would be a remarkable thing if Mr Smith could re-open those issues now, ten years after the event.

[14]The general principle in litigation is that, when the time for appealing against a decision has expired, particularly where as in this case it has long since expired, the losing party ought not to be able to re-open the matter years later. It is unfashionable to say things in Latin in the present day usage of the courts, but there is a well-known Latin maxim which translates as, "It is in the interest of the state and the public that there should come an end to legal proceedings".

[15]I accept that there is an exception to the general proposition that the way to seek to have an earlier decision set aside is to appeal against it. The exception is if the earlier decision was obtained by the fraud of the party who obtained it. In this connection Mr Smith has relevantly and helpfully referred me to fairly recent Court of Appeal decisions. The one which is really in point and which establishes the legal proposition on which he relies, although he cannot bring this case within the factual circumstances which are needed, is Odyssey Re (London) Ltd v OIC Run Off Ltd. 16. I mention in passing that a second case to which Mr Smith refers, and as to which I am impressed by the researches which he has been able to undertake, is Prentice v Hereward Housing Association [2001] All ER Com 900. That case is, however, slightly different because, if it is considered carefully, it will be seen that the case, as it came before the Court of Appeal, was in fact itself an appeal from the earlier decision which was said to have been obtained by fraud. However, the Odyssey case certainly does carry the proposition that, if an earlier Court decision has been obtained by the fraud of the party who obtained it, it is vulnerable to being set aside on an application as opposed to on an appeal.17. However, in my judgment Mr Smith does not have a seriously maintainable case that the orders of the district judges in the County Court in 1992 and 1995 could be set aside in the manner in which the earlier decision in the Odyssey Re (London) Ltd case was. In Odyssey Re (London) Ltd the managing director of the party which had succeeded in proceedings around 1990 had given perjured evidence; that is to say, he deliberately and consciously lied to the Court. I appreciate that Mr Smith has asserted, for example in his skeleton argument, that, when in 1992 FMS presented its statements of arrears to the district judge in Cheltenham County Court, FMS also was committing perjury. The basis for what Mr Smith says is that the two experts to whom I have referred have written reports to the effect that the statements of arrears were wrong. Let me assume that the statements of arrears were indeed wrong. It simply does not follow that they were wrong in a perjured way. That is to say, it does not mean that FMS presented the statements of Mr and Mrs Smith's mortgage accounts and arrears to the Court well knowing that they were false. Witnesses can get things wrong, particularly in areas where detailed calculations are required.

18. In this case I have looked at the reports on which Mr Smith relies. They certainly suggest that the calculations which FMS had prepared, and most of which seem to have come out of its computerised system, rather as one would expect, were incorrect in a number of respects. They may well have been incompetently prepared. However, the most that the reports could be said to imply is that FMS operated and used inadequate systems, and had staff who were prone to error. They do not suggest that FMS set out to give fraudulent and false evidence to the Court. In the interest of time I will refer specifically only to a handful of passages in the first of the reports which appears in Mr Smith's very well presented bundle of materials. This is a report by Mr Brown, a chartered accountant. Many of Mr Brown's comments identify detailed respects in which he observes that the calculations which have been carried out differ in some respect or other from the calculations required by the mortgage deeds. For example:

"My first comment is that the monthly calculation is made on a daily basis whereas it should be calculated as 1/12th of a year." 19. I am sure that Mr Brown is right in that respect, but manifestly a difference of that nature between what the mortgage deeds provided for and what emerged from the operation of FMS's computerised systems cannot be any form of indication that FMS was perjuring itself when it gave evidence to the Court. There are other detailed propositions of a similar nature.

(h) of the report reads: "

The computation appears to have been made by an individual not familiar with the terms of the loan." Again, that is plainly indicating that something had not been handled properly in FMS, but it is in no sense consistent with perjury. Mr Brown had checked a number of calculations at random and there is a section of his report in which he sets out differences between what he considers to be the correct calculation and the calculations in the materials which FMS put before the Court. Again, I am quite prepared to accept the possibility that Mr Brown's calculations are correct, whereas FMS’s were not, but the interesting point is that in several respects it appears that the correct figures, as calculated by Mr Brown, were in fact less favourable to Mr Smith than the incorrect figures which appeared in the calculations which FMS put before the Court. 20. In one paragraph Mr Brown says the balance figure at a particular date should be calculated by the addition of four figures which produce a total of £185,038.16. However, he says, it is shown as £185,036.16. There is a £2 error. Mr Brown says that that throws doubt on the integrity of the spreadsheet compilation. That strikes me as a perfectly good point, but is not remotely the sort of thing which leads one to suppose that FMS was giving perjured evidence to the district judge. 21. There is a summary at the end of Mr Brown's report which begins as follows:

"11.1 The Schedule of Mortgage Account attached differs extensively from the Lender's Statement of Account. Identifiable differences are listed in paragraph 7, and all seem to arise from insufficient knowledge of the terms of the loans and incorrect arithmetical application within the spreadsheet."

There is Mr Brown's analysis of what has gone wrong. FMS's staff who prepared the calculations did not understand the terms of the loans well enough. Further, they made arithmetical errors. In the last paragraph of the summary Mr Brown says this:

"11.9 The terms of the loans are sufficiently complex that the lender, a professional mortgagee, could not interpret them. It is unlikely that the borrowers could have calculated the position of their account, but if they relied on the figures from the Lender's Statement of Account they would have been misled from the first month onward." 22. I accept that the word "misled" is capable in some contexts of meaning deliberately deceived. However in the context of the whole of that paragraph it is perfectly clear that what Mr Brown is saying is that FMS incorrectly interpreted the terms of its loans. It therefore gave evidence of arrears which were owing in circumstances where the evidence was wrong. I cannot see any basis at all in the report for Mr Smith's preferred analysis, which is that FMS gave perjured evidence to the district judge. It seems to me that these are clear examples of the normal sort of situation where an order made by a Court might well have been varied on appeal. They are not circumstances analogous to those in the Odyssey Re (London) Ltd case where earlier orders had been obtained by fraud. 23. I apologise for having taken some time on that part of the case. It is however of some importance because it appears to me that the first step in Mr Smith's case against Mr and Mrs Bedford, namely that the possession orders made by the district judge in 1992 and 1995 are liable to be set aside, is incorrect. For that reason alone I consider that Mr Smith's claim against Mr and Mrs Bedford cannot succeed, and that Mr and Mrs Bedford should be entitled to the summary judgment order which they seek. However, I will assume that I might be wrong in what I have said so far, and that it is at least arguable that a Court in 2005 might think that the orders which the district judges made for possession in 1992 and 1995 could be set aside. Even if that was so it would not help Mr Smith against Mr and Mrs Bedford. I am sure that it would help him considerably in a claim for damages against FMS. However, that will be no comfort to him because of course FMS has no funds to meet a claim for damages. 24. The matter which I have before me at present is the claim between Mr and Mrs Bedford and Mr Smith, not the claim between FMS and Mr Smith. In relation to Mr and Mrs Bedford's application for summary judgment I make a number of points. This takes me into somewhat technical areas of property law where Mr Smith, I fear, has misunderstood the position. In general I have been very impressed by the diligence with which Mr Smith has researched these matters and by the careful, clear and moderate way in which he has expressed his points. Unfortunately there are aspects of property law which are irretrievably against him and I will try to explain what they are. (i) The starting position is that FMS undoubtedly had valid mortgages over the house. Even if FMS had miscalculated the arrears and even if it had miscalculated them dishonestly, which is not something which I am prepared to infer, that could not change the position that the mortgages themselves were validly created. (ii) The mortgage deeds undoubtedly contained powers of sale exercisable by the mortgagee. Thus the sale to Mr Russell was made under powers of sale in the deeds. (iii) That attracted the operation of section 104 of the Law of Property Act 1925. It is convenient to take two subsections in reverse order. Section 104(3) provides: "

A conveyance on sale by a mortgagee, made after the commencement of this Act, shall be deemed to have been made in exercise of the power of sale conferred by this Act unless a contrary intention appears." No contrary intention appeared, I assume, in the case of the sale to Mr Russell. Therefore Section 104 operates on the basis that the conveyance of the house by FMS to Mr Russell was a conveyance in exercise of the power of sale conferred by the 1925 Act. That takes me to Section 104(2):

"(2) Where a conveyance is made in exercise of the power of sale conferred by this Act, or any enactment replaced by this Act, the title of the purchaser shall not be impeachable on the ground - (a) that no case had arisen to authorise the sale; or (b) that due notice was not given; or (c) where the mortgage is made after the commencement of this Act, that leave of the court, when so required, was not obtained; or (d) whether the mortgage was made before or after such commencement, that the power was otherwise improperly or irregularly exercised. and the purchaser is not, either before or on conveyance, concerned to see or enquire whether a case has arisen to authorise the sale, or due notice has been given, or the power is otherwise properly and regularly exercised, but any person indemnified by an unauthorised, or improper, or irregular exercise of the power shall have his remedy and damages against the person exercising the power." (iv) What that subsection means in this case is that the sale of the house by FMS to Mr Russell is not "impeachable" by anyone, including Mr Smith, on the ground that the circumstances which would have authorised FMS to exercise the power of sale had not arisen. It is also saying that, if Mr Smith has been harmed by the exercise of the power, his remedy is not to try to set the sale to Mr Russell aside his remedy is to claim damages against FMS. Unfortunately for him FMS is not good for the damages, but that cannot somehow revive for him the possibility of making a claim against Mr Russell, still less against the purchasers from Mr Russell, namely Mr and Mrs Bedford. (v) Staying at the stage of the sale by FMS to Mr Russell it follows that Mr Russell obtained a good title and became the registered proprietor under the Land Registration Act. I will come later to certain detailed aspects of that Act. (vi) It is important to note that when FMS sold to Mr Russell the Court order for possession was in force. It may or may not be the case that that Court order was vulnerable to being challenged and, if a challenge succeeded, being set aside either on appeal or in other proceedings. However, the fact of the matter is that, when the sale to Mr Russell was made, the Court order (of the Cheltenham County Court) had not been set aside. Indeed, at that stage it had not even been challenged. (vii) Mr Smith says that the present case is similar to the decision of the Court of Appeal in Malory Enterprises Ltd v Cheshire Holmes (UK) Ltd [2002] 3 WLR 1. However, in my view the present case is different. In the Malory Enterprises case the company referred to as Malory (UK), which was the company which had behaved dishonestly in the matter, never acquired any title to the property at all and therefore could not confer a good title on Cheshire Homes. In this case I do not accept Mr Smith's contention that FMS was in a position comparable to that of Malory (UK). FMS had a mortgage and it had the benefit of a Court order which, among other things, permitted it to exercise the power of sale. Unless the Court order was set aside before FMS sold the property to Mr Russell FMS clearly had the ability to confer a good title on Mr Russell. The Malory case, unfortunately for Mr Smith, does not help him. (viii) Further, yet more difficulties arise in Mr Smith's way when I move on to consider the sale from Mr Russell to Mr and Mrs Bedford. At that point Mr Russell was the registered proprietor with title shown on the Land Register. There was no application by Mr Smith to rectify the register by removing the registration of Mr Russell. (ix) Against that background I turn to Section 20 of the Land Registration Act. So far as relevant, it reads as follows: "21. In the case of a freehold estate registered with an absolute title a disposition of the registered land … for valuable consideration shall, when registered, confer on the transferee … an estate in fee simple … together with all rights, privileges and pertinences belonging or are pertinent thereto … subject (a) to the encumbrances and other entries, if any, appearing on the register … and (b) … to the overriding interests, if any, affecting the estate transferred or created, but free from all other estates and interests whatsoever."

What the subsection means in this case is that the disposition to Mr and Mrs Bedford of the house, when registered at the Land Registry, conferred on them a freehold title which would be free from all other estates and interests except any encumbrances or other entries appearing on the register and any "overriding interests". (ix) Mr and Mrs Bedford did become the registered proprietors of the freehold. It is not suggested to me that there are any encumbrances or other entries which are of any relevance appearing on the register. Certainly there are no encumbrances or other entries expressed to be in favour of Mr Smith which appear on the register. Mr Smith has said from time to time that he is entitled to an overriding interest. However, what I think he has overlooked is that the term "overriding interests" is explained in Section 70. There is a long list of interests in Section 70(1) which fall to be regarded as overriding interests.

(g) :

"The rights of every person in actual occupation of the land …"

That, however, cannot assist Mr Smith because, although he and his wife had once been persons in actual occupation of the house, they had ceased to be in actual occupation in 1995. Therefore any claim in relation to the house which they might have had in 2002, which is when the freehold was transferred to Mr and Mrs Bedford, cannot have been an overriding interest. It follows that Mr and Mrs Bedford did not acquire the freehold subject to any claim which Mr and Mrs Smith might have. On the contrary they acquired the freehold "free from all other estates and interests whatsoever", and that means that they acquired it free from the claim which Mr Smith is asserting now. (x) I record that there is no application by Mr Smith for the Land Register to be rectified. I suppose he could seek to make such an application but I would, in his own interests, discourage him from doing that for reasons which I will not enlarge on at length but which are very fully and clearly explained in Mr Clayton's skeleton of which Mr Smith has a copy. An application to rectify the Land Register by some form of removal of Mr and Mrs Bedford as the registered proprietors would not succeed.

Conclusion

[25]For the foregoing reasons, which I have explained at some length, I make no order on Mr Smith's application for summary judgment against FMS, but I will make, in favour of Mr and Mrs Bedford, the summary judgment order for which they have applied. [After hearing further submissions the judge ordered the defendant and Part 20 claimant to pay to the Part 20 defendants costs in the amount of £20,000.]