Hardy & Ors v Fowle & Anor [2007] EWHC 2423 (Ch)

Case No 4PZ00737[2007] EWHC 2423 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue BRISTOL DISTRICT REGISTRY
(Transferred from the Penzance County Court)
The Guildhall
Venue Small Street, Bristol BS1 1DADate Friday 26 th October 2007
Before
Mr JOHN RANDALL QC
B E T W E E N :
Between
MICHAEL DANIEL WORSLEY HARDYClaimantKENNETH HARRAPClaimantNATIONAL WESTMINSTER BANK PLCClaimantMICHAEL FOWLEDefendantGAIL FOWLEDefendant
Mr Mark Cawson QC instructed by Cobbetts LLP, Solicitors of Leeds, appeared for ClaimantsThe First Defendant appeared in person for in personMr John R Macdonald QC and Mr Philip Coppel instructed by Messrs Follett Stock, Solicitors of Truro, appeared for Second DefendantHearing Hearing dates: 3 rd– 5 th September 2007, at Truro Combined Court, Edward Street, Truro
JUDGMENTThe Deputy Judge, John Randall QC :INTRODUCTION
[27]Mr O’Connor did indeed sign and return the enclosed undertaking the day after he received it, that is on 11th May 1988. The form of undertaking as completed was from his firm to the Bank’s Penzance branch, with the relevant words reading as follows:
“If you provide facilities to our client, Bramridge Developments Limited, for the purchase of freehold properties situated in the County of Cornwall (see Schedule attached) I/We undertake a) that any sums received from you or your customer for the purpose of this transaction will be applied solely for acquiring a good marketable title to such property...” (48). A few days later, on 13th May 1988, contracts were exchanged between the executors and Bramridge. The contract was in substantially the terms of the draft I have mentioned with the following alterations: first the addition of a new clause 14 in accordance with the rider which I have already quoted; and second, the deletion of the second schedule (thus there were no leases to which Trelan or indeed any of the properties conveyed were expressed to be subject under the related provision in the main agreement, clause 4). Exchange was by telephone in accordance with Law Society formula B. (49). In due course, Crosse & Crosse were put in funds to enable them to complete on 9th June 1988. One can see by reference to the completion statement prepared that, the deposit having been received on 10th May 1988, the balance of the completion monies, £450,000, is noted as having been received from Bramridge on 7th June 1988, two days before the completion. By reference to that and then his original file, Mr O’Connor in his oral evidence was able to explain that what his firm received was a cheque drawn on the account of Bramridge with National Westminster Bank, Penzance branch. He explained that that is how matters were normally dealt with in the 1980s, with the making of the advance by the Bank taking the form of it honouring such a client’s cheque upon presentation. His file shows that that is indeed what happened, and that having received such a cheque, he himself had made a note on the file to arrange for its special clearance. The fact that the completion took place indicates that Bramridge’s cheque was indeed honoured on such special presentation on 7th June. (iv). COMPLETION (9th JUNE 1988) (50) Counsel for the second defendant invited me to make certain findings as to the knowledge of the Bank, in the person of Mr Riley, its then manager, at the time of completion. The findings which I am prepared to make in this regard are as follows: first, that Mr Riley knew that the grandparents were then occupying Trelan and knew or suspected that they had done so for some time; second, that the defendants did not wish the grandparents to have to vacate the house at Trelan; third, that Mr Riley knew that one objective or expectation of the defendants was that the grandparents would remain in the house at Trelan for as long as they wished, and that that was a matter of importance to the second defendant; fourth, that Mr Riley was content that the grandparents’ assumed rights of occupation should subsist for the remainder of their lives notwithstanding the sale from the executors to Bramridge and was not concerned with the detailed legal arrangements to that end; and fifth, that Mr Riley knew that the value attributed to Trelan in the 9th October 1987 valuation of Mr Manasseh took into account an assumed right of occupancy in the grandparents, and believed that, on the basis of that same valuation, the charged properties in total more than sufficiently secured the amounts to be loaned. (51) That said, it is also right that I make certain further findings as to what the Bank, as opposed to Mr O’Connor whose role I shall examine later, did not know. The Bank did not know: first, that the executors had received advice to the effect that it was at best questionable whether the grandparents already enjoyed any legal rights of occupation over Trelan; second, that the creation of some new right of occupation was proposed or intended by vendor and purchaser; third, that the executors had proposed the grant of a new lease by them to the grandparents prior to the sale and purchase between the executors and Bramridge, let alone that its proposed terms including a primary term of 30 years; fourth, that the ultimate proposal between vendor and purchaser was the immediate grant by Bramridge of a new lease to the grandparents upon completion, let alone its (very similar) proposed terms; and a fortiori fifth, that there was any proposal that such a lease should take priority over the Bank’s legal charge. (52). As follows from those findings, but perhaps should be spelt out, if Mr O’Connor had reported to the Bank prior to the contract or completion, as was not the fact, that a conveyance of Trelan to Bramridge was to be taken subject to some pre-existing right of life occupancy in the grandparents, it is unlikely that the Bank would have objected. However, had Mr O’Connor reported, as was the fact, that a grant of a new 30 year lease on the terms in fact granted - with priority over the Bank’s legal charge - was proposed, it is very likely that the Bank would have objected, especially with regard to the inclusion within the lease of the whole of the land of Trelan, some of which was identified as readily saleable building plots, but also more generally, given that the proposal involved encumbering for a potential 30 years the Bank’s security over Trelan, which, even subject to the grandparents’ assumed rights of life occupancy, was - according to the 9th October 1987 valuation, on which the Bank was relying - the most valuable of the properties in the portfolio by some margin. (53) Three deeds were executed to complete the transaction on 9th June 1988. First, the Conveyance between Pauley and Snell as vendors and Bramridge as purchaser (“the Conveyance”), which recited the death of Max, his being seized of the properties to be conveyed, that no prior assent had been made, and the agreement for the sale at £500,000. The first operative clause provided that in consideration for that sum, “the Vendors as personal representatives of [Max] … convey unto the Purchaser all those the several properties more particularly described in the Schedule hereto to hold the same unto the Purchaser in fee simple subject as mentioned in the said Schedule”
. There were consequential covenants and acknowledgments, and the schedule then listed the various items of property comprising the portfolio. Trelan was dealt with in the third paragraph of the schedule, which included limited exceptions and reservations, but nothing whatever concerning a lease or other like interest in favour of the grandparents. (54) Second, a Legal Mortgage (“the Mortgage”) was executed, which was subsequently duly registered at Companies House. It was in a National Westminster Bank standard form (NWB 1015, May 1985 revision), unmodified save for completion of blanks where necessary. The mortgagor was Bramridge; the mortgagee was the Bank. It provided amongst other things:
“2(a) The Mortgagor as beneficial owner charges by way of legal mortgage all and every interest in or over the property referred to in the Schedule hereto which the Mortgagor has power at law or in equity so to charge...and/or the proceeds of sale thereof as a continuing security to the Bank for the discharge on demand of:- (i) all present and/or future indebtedness of the Mortgagor to the Bank on any current and/or other account... 4 Section 103 of the Law of Property Act 1925 shall not apply to this Mortgage and the statutory power of sale and other powers shall be exercisable at any time after demand... 6 The statutory powers of leasing or of accepting surrenders of leases conferred on mortgagors shall not be exercised by the Mortgagor nor shall the Mortgagor part with possession of the Mortgaged Property or any part thereof nor confer on any person, firm, company or body whatsoever any licence, right or interest to occupy the Mortgaged Property or any part thereof without the consent in writing of the Bank, but the Bank may grant or accept surrenders of leases without restriction. 7 At any time after the power of sale has been exercisable the Bank or any Receiver appointed hereunder may enter and manage the mortgaged property or any part thereof...”
The schedule thereto was completed simply with reference to “The several freehold properties situated in the county of Cornwall comprised in the following documents...” and the Conveyance identified. Companies House subsequently asked for a more detailed schedule of those properties to be provided, to enable it to identify the individual properties which were thereby charged. This was duly provided, faithfully following the first schedule of the Conveyance. The provision of this schedule to Companies House in no way altered or purported to alter the subject matter or any other terms of the Mortgage; it was a matter of clerical mechanics to meet the requirements of Companies House, which had no impact on the operation or effect of the Mortgage. (55) Third, the Lease was executed between Bramridge as landlords (a term which “shall where the context so admits include the person for the time being entitled to the reversion immediately expectant on the determination of the term hereby created”) and the grandparents as tenants. It provided that, “(1) The Landlords hereby demise unto the Tenants [the entirety of the property Trelan] to hold the same unto the Tenants from the 9th day of June 1988 for the term of 30 years subject to the provision for determination hereafter contained paying therefor the yearly rent of £1.00 on the 9th day of June in each year. (2) The Tenants hereby jointly and severally covenant with the Landlords as follows:-... (iii) To keep the demised premises and fixtures and additions thereto in tenantable repair throughout and in such repair to yield up the same at the determination of the term... (vi) Not to assign, underlet or part with the possession of the demised premises or any part thereof... (3) The term hereby granted may be determined by the Landlords at any time after the death of the survivor of the Tenants by giving one month’s notice in writing terminating on one of the usual quarter days to the person then entitled to the leasehold interest hereby created and may be determined by the Tenants at any time by giving three months notice in writing...” There followed a covenant for quiet enjoyment and a right of re-entry. (56) It will be observed that there was nothing in the contract of 13th May or any of the three deeds executed on 9th June which was in any way inconsistent with the Bank’s primary case in these proceedings. I should mention that title to Trelan (freehold or leasehold) is not registered at HM Land Registry, that the district of Penwith in Cornwall did not become an area of compulsory first registration under the Land Registration Acts until some six months later, namely on 31st December 1988, and that the matter was treated by the parties throughout, and now has to be legally analysed by me, in accordance with the law of unregistered conveyancing. (v). 1988 - 1999 (57) A couple of weeks after completion took place, on or about 22nd June 1988, the Bank received the first cheque from Stephens and Scown on account of Mrs Fowle’s share in the residue of Max’s estate. It was in the sum of £54,000. Notwithstanding what I have earlier recited as the originally intended use of these monies, namely to reduce the extent of Bramridge’s borrowing by introducing the same as a postponed director’s loan, in the event over £37,000 was owing on Mrs Fowle’s personal overdraft account and the funds were, in due course, used firstly to discharge that indebtedness – see the Bank’s file-note in relation to her own current account of that date – and secondly to provide a credit balance on that same account of just under £15,000 to be available for the defendants’ living expenses, rather than introduced into Bramridge – see the Bank’s file-note in relation to Bramridge’s account dated 5th July 1988. There were reviews of the borrowing conducted later that year. (58) At some stage in the second half of 1988, the Bank, through its relevant records office, received copies of the various conveyancing documents which had resulted from the completion on 9th June. The documents now available do not show exactly when that occurred, but a credible possibility identified by Mr Cawson was on or about 10th October 1988. Crosse & Crosse’s letter of that date (at Bundle CB3, page 4) recorded that title deeds relating to the various properties were being sent under separate cover, each one with a separate schedule. The Bank was asked to acknowledge safe receipt by signing and returning a copy of the enclosed schedule. However, a post-script on the letter reads, “In view of the proposed sale of part of the land at Trelan, we are retaining the title deeds relating to that property against our undertaking sent to you under separate cover. In due course, we shall require the Conveyance dated 9th June 1988 which is enclosed herewith, to be returned to us so that we may endorse a memorandum of the sale thereon.” So it may be, it can be put no higher, that a schedule in respect of Trelan without any of the accompanying backing deeds (other than the Conveyance itself, which the post-script suggests was sent with the above-mentioned letter), listing amongst other things a lease dated 9th June 1988, was sent to the Bank’s Penzance branch either with, or under separate cover from, that letter. There is no issue that the deeds in relation to Trelan eventually reached the Bank and were held in its regional safe storage facilities, not least because in due course a copy of the Lease turned up, filed inappropriately with other documents, as described in the witness statement of Mr Rose. However, neither the detail nor even the fact of the Lease was specifically drawn to the Bank’s attention in any way, and it seems clear that it was only at some time much later that the Bank came actively to appreciate that some new lease had been created. (59) In February 1989, Mr Riley took early retirement from the Bank and his successor was Mr Rockey. It seems that Mr Rockey was introduced to the defendants by Mr Riley in that month, perhaps at a lunch on 22nd February. Be that as it may, the following month, on 13th March, Mr Rockey, as the new manager, was summoned urgently to visit the defendants to discuss an increase in borrowing for a property acquisition pending sale of one of the lots of development land. Mr Rockey was taken around, as he recorded it, “the empire” and referred to the Fox and Sons valuation “dated 9th October 1987.” This provoked him as new manager to assemble a really quite lengthy and detailed note (he was unkind to himself in describing this as verbose), reviewing the whole position generally. Certain passages under the heading Security I should perhaps quote. “I would be rather hesitant to place customer to the [expense] of a ReValuation of all his properties, but it is perhaps, in the circumstances, not unreasonable that we obtain a Professional View of the various Plots of Land. On a general basis, having seen all the tenanted properties, I feel that Fox’s Valuation is extremely low given movements in property prices over the last 18 months. Indeed even a 40% across the board increase, which is far and away below the actual for this part of the world, the domestic properties would increase to £786,800, say £750,000 realistically. This, for instance, would place Trelan at £210,000 - a laughably low figure even including the Tenancy - 4 upmarket Building Sites would easily produce that much... Total Security Value, therefore, on this very basic and conservative outlook £1,625,000 or 120% cover on a very conservative basis.” (60) In the course of cross-examination, Mr Coppel put to Mr Rockey that the words “the tenancy” in the passage from his file-note which I have just quoted, were a reference to the Lease and Mr Rockey, as he often did while being questioned, agreed. Mr Cawson did not re-examine on the point. Notwithstanding Mr Coppel’s apparent forensic success, I am quite satisfied that Mr Rockey inadvertently went too far in giving that affirmative answer. There is absolutely no indication whatever that Mr Rockey, or indeed his predecessor, had in any way become aware of the existence of a 30 year lease, and Mr Macdonald realistically conceded that it was extra-ordinarily unlikely that Mr Rockey had ever seen the Lease, which was somewhere in the Bank’s vaults. I find (notwithstanding the answer to which I have referred) that he had neither seen it nor become aware of it. I am satisfied that a correct understanding of the evidence which Mr Rockey was intending to give is simply an acceptance on his part that the words “the tenancy” at this point in his file-note were a cross-reference to the assumed life tenancy, on apparently ill-defined but perhaps rent-free terms, which the parties had assumed existed in favour of the grandparents at the time of the dealings between Mr Riley and the defendants in 1987, and which was referred to in Mr Manasseh’s valuation of 9th October 1987 (to which we know, from the start of Mr Rockey’s file-note, he was making reference at the time). (61) Later that year, on or about 22nd September 1989, the Bank received a further cheque for £21,000 from Stephens and Scown being a second payment on account of Mrs Fowle’s interest in residue in Max’s estate. Once again, this sum, indeed this time in its entirety, was needed to reduce overdraft borrowing on her personal current account which stood at £21,119: see the Bank’s file-note of the same day. A file-note of 20th October 1989 records the fact that this current account continued to be used for personal expenditure including, amongst other things, private school fees for the defendants’ children. There is no need for me to set about casting judgment on the question of whether or not the expenditure at a jeweller’s referred to in this file-note was of an extravagant or unreasonable nature in order to decide this case, and I therefore do not propose to go into that question. The Bank continued to review the borrowing from time to time, and suffice it to say that valuations were obtained which, for the time being, seemed to indicate the Bank had adequate security cover for the ever-growing lending in respect of the portfolio of properties, notwithstanding that contrary to the terms of the proposal, contrary to the terms of the cash-flow document, and contrary to the terms of noted discussions between the defendants and the Bank, not a single property, nor a single lot forming part of a property, had been sold, nor had any money from the second defendant’s residuary interest in her father’s estate in fact been applied to reduce the company’s borrowing. The first indication which we have, on the documents at least, that the Bank was becoming concerned about the position on Bramridge’s account is to be found in its letter to Mr and Mrs Fowle from Mr Rockey dated 5th August 1991. It is not necessary for me to quote at any length from this letter, but it records the Bank’s disappointment with the position, concern at the reduction in its security (which I take to be a reference to the adverse state of the property market at that time), and the company’s inability to meet even the interest accruing on the borrowings. The key phrase used is “The position gives cause for serious concern.” (62) On 4th December 1991, the second defendant was involved in a serious car accident. It has undoubtedly had serious physical and psychological consequences for her. Without going into all the detail which she volunteered from the witness box at various stages, it seems that another motorist involved in the same collision was burnt to death, and the second defendant herself suffered extensive physical injuries including a head injury, the consequences of which I have mentioned earlier in my judgment. As if that was not bad enough, one month later, on 1st January 1992, her grandfather Hulbert died. As Mr Rockey records, Hulbert’s widow, Millicent, was by then 82 years of age and not in good health. I accept the second defendant’s evidence that she, or occasionally her husband, stayed overnight at Trelan from time to time (I am not satisfied that she “moved in”) to look after Millicent over this first period of her widowhood, i.e. up until when she moved out of Trelan to the property, Beaver Lodge, in order to provide support and reassurance to her. I note that this is something which Mr Rockey was told at the time. However it started some months after Hulbert’s death. The second defendant suggested 6 months’ later in her witness statement, and in the first part of 1992 she herself was recovering from the serious injuries she had sustained in the car accident. (63) During 1992 Mr Rockey had a number of relevant discussions with the defendants about Trelan and its availability for realisation as security on this, by now, very unsatisfactory account. They are referred to in particular from paragraphs 25 to 29 of his witness statement, each of which is in fact supported, albeit that no express reference to them has been included in the text of the witness statement, by one of Mr Rockey’s contemporaneous file-notes. In particular, on 13th March 1992 the directors of Bramridge, i.e. the defendants, were proposing piecemeal sales to reduce reliance on the Bank and to enable them to capitalise on potential. Mr Rockey’s note of that date includes this passage:
“Furthermore, Granny, who resides at Trelan, wants to move and is seeking a smaller property with her daughter, Mrs Fowle’s mother. As soon as she vacates, Trelan will be available to sell and Mike Fowle tells me that Harding Laity’s, St Ives know of a potential purchaser by the name of “Hypbein–Rothschild” who possibly would pay £550,000 for the lot. Alternatively, they would sell the House at £300,000, retain the South and South-West corners of the garden for potential future Planning Enhancement...” (64) On 20th May 1992, Mr Rockey had another discussion with the defendants. At that time, to quote his note, “Trelan remains occupied by Mrs Fowle’s Grandmother, although she is actively looking for an alternative property... Ultimately when vacant Trelan will be Marketed at £350,000 and if [the planning permissions discussed above are] granted, the Two Plots at £125,000 Each...”
It was in about June 1992 that Mr Rogers of Waycotts Surveyors, a witness in this case, was first retained by the Bank. On 13th August 1992, Mr Rockey met again with the defendants, their accountant and their estate agent/valuer. Again, Mr Rockey’s note is quite detailed, but the essential passages for immediate purposes read as follows:
“Essentially the Company accepts the Waycott’s [valuation] Report. They have already reduced the price of various properties in line with Waycott’s valuation and whilst they delay marketing some of the individual properties awaiting vacant possession (with which Waycott’s concur at least in the short-term) they have instructed their agents with regard to the remainder. They accept also the need for them to appoint Waycotts as agents for sale of all the properties, acknowledging that Waycotts themselves will “sub-contract” this to local agents where appropriate... Trelan:... it seems that Mrs Saunders has bought another property in Lelant allowing Trelan House itself to be placed on the market when it becomes vacant.” (65) The next reference to Millicent’s occupation or vacation of Trelan comes in a later file-note of Mr Rockey’s dated 21st December 1992. On this occasion, he saw both defendants and Mr Rogers at the branch and they, on behalf of Bramridge, confirmed to Mr Rockey its ongoing cooperation. His note outlines their discussions on a property by property basis. I shall quote only passages under the heading Trelan: “Property now vacant and because of its exposed position and traditional construction, probably with little insulation, is deteriorating rapidly... Martin [Rogers] agrees that is it not right to Market until the Spring, at which time the matter of the garden will need to be reviewed. In the meantime, however, Mike Fowle has it available for sale and has some interest in the £250,000 area subject to the remedial works, which in any case are necessary, being completed. Turning more to these works the place needs to be tended to prevent it deteriorating into a state which will only attract minimal offers...”
So, as ultimately the parties before me agreed, the evidence indicates that Millicent vacated Trelan, moving to the bungalow, Beaver Lodge, at some time which cannot be more specifically identified between 13th August and 21st December 1992, and I so find. It may be that Mrs Fowle, the second defendant, continued to occupy Trelan for a short period after her grandmother moved out, but, notwithstanding suggestions to the contrary at some points in the evidence, I am quite satisfied that any such period of continued occupation was very short. After all, given the descriptions of the very poor state into which Trelan had fallen and the availability of the defendants’ own longstanding family home at Carbis Bay, not far away, it would have made little sense for Mrs Fowle to have remained alone at Trelan, notwithstanding its relative proximity to her mother’s new place of residence, Beaver Lodge. Certainly, by December 1992, Trelan is noted as having been vacant. I shall deal with the suggested oral gift of the Lease at about this time when resolving issue (ii) later in this judgment. (66) A note in the intervening period of 28th October 1992 shows Mr Rockey even then in discussion with Mr Fowle as to the relative merits of marketing Trelan effectively immediately or in the spring (i.e. the spring of 1993), with a need for some works of repair and renovation being done prior to the sale. Ultimately, on the basis, as much as anything, of Mr Roger’s recommendation in favour of such works being done, the Bank agreed that marketing should be postponed until the following spring and that the Bank would extend limited further funds sufficient to finance those works being undertaken. (67) By May of 1993, works on Trelan were underway but not complete. Some short extracts from Mr Rockey’s note of 10th May gives a sufficient flavour of the position. “Visit ‘Trelan’ in company with Martin Rogers and with customers to see progress. Whilst Martin [Rogers], and obviously the Fowles, seem very pleased with progress, I remain horrified as to the state of the property must have been in at the outset.... All the money has been spent and much work has been done. Having looked over it fully today, I confirm it still to be an impressive, old (probably between the wars) property, but I am not entirely convinced that the improvements will achieve the sort of price Mike Fowle has in mind...in order to finish, Mike Fowle needs another £2,000, to be drawn under the existing managed basis and both he and Martin Rogers are convinced that the Property can be fully completed within that... The need to market is accepted, but in discussions on price, there would seem, I read, to be some difference. Mike Fowle seems to think it should be marketed at £330,000 perhaps to sell at £300,000 and I cannot see any market at that price in this area. We have, therefore, agreed that once the alterations have been completed by the end of the month, two National Firms should be introduced to draw-up a Marketing Strategy and advise on price...” (68) The following month a meeting took place at Trelan at which there were discussions between Mr Rogers, Mr Derek Elliott, the architect and the defendants as directors of Bramridge. The customary detailed note made by Mr Rockey includes a lengthy section with regard to Trelan from which I will quote only extracts. “This led into some long and hard discussions concerning Marketability with my becoming somewhat forthright in pointing out that if they effectively don’t comply with our request, then our patience will not continue. I have, therefore, persuaded that the House at Trelan plus one plot be marketed at an Asking Price of £250,000 inclusive, with the acquisition of the Plot remaining optional and price adjustment (perhaps to £200,000) in the event that the plot is not required. This seems to find favour with Martin Rogers, although quite evidently not with the Fowles. I make the point that we have yet seen no sales completed, and that if we are to remain with this continually pumping in additional funds, then something must be sold. The Fowles may well regard Trelan as the Family property and the jewel in the crown but it is the only sellable asset and therefore must be marketed effectively. Towards the end of our discussions, it seemed that the agreement was watered down to the effect that it would be marketed as Open to Offers, but with our negotiated price as a guideline. I regret to say that I fear the worst, in that the Fowles have a grossly inflated aspiration of the value and that they will stick out for this unrealistically. It is therefore in my opinion, imperative that an element of control regarding the marketing remains with the Bank and that all offers, however low, are communicated direct to us by the agents...” (69) In the latter part of 1993, Mr and Mrs Fowle incorporated a new company for the purposes of applying for planning permission on some undeveloped land. The purpose, in general terms, appears to have been to try and achieve a situation whereby the applicant company was not associated with Mr Fowle, apparently for some reputational reasons which have not been explored before me and as to which I say no more. (70) In March 1994, steps were taken to have a plot from within Trelan released from the Bank’s charge to facilitate what ultimately became the only sale-off of any land or buildings within the entire portfolio that took place prior to the appointment of Law of Property Act Receivers on 11th November 2003. A letter from Mr Rockey to Crosse & Crosse on 10th March 1994 deals with this topic; the sale itself took place on 10th June 1994 as indeed is referred to in the second defendant’s witness statement. However, in the meantime, an extremely important development occurred in March 1994. As Mr Rogers says in his evidence, which I have accepted, “On or around 15th March 1994, the first defendant telephoned me and said that he and his family had decided to move into Trelan whilst it was being sold. He said that he thought it would look better if it was furnished than unfurnished. I telephoned Mr Rockey to tell him this.” Although Mr Rogers was unable to confirm the precise date, by virtue of his confirmation that such a thing only occurred on one occasion and the availability of Mr Rockey’s notes, I can say with confidence that this telephone conversation took place in mid-March 1994 (but no later than 15th). For the avoidance of any doubt, in accepting Mr Rogers’ evidence I note that I am accepting something which the first defendant did not recall happening, and that I am, in effect, rejecting what Mr Fowle said in evidence was a reconstruction in his mind of what he would have said in such a phone-call if it had taken place, which he could not recall. I have no difficulty in accepting Mr Rogers’ evidence in this regard in full. (71) By reference to a file-note of Mr Rockey’s made on 15th March 1994, but quite possibly referring to events a few days earlier than that, he records receipt of information from Mr Rogers, advising him “that there is a rumour that the Fowles have taken possession of Trelan.” Mr Rockey took the trouble to visit the property over the ensuing weekend and observed that it did indeed appear to be occupied. He prepared a letter, which in the event was not sent, to Bramridge, seeking, to summarise, an explanation. However, on or about 16th March (which is the date of the relevant entry in his file-notes), Mr Rockey happened to meet Mr Fowle face to face. Picking the matter up from his file-note, “I gave him yet another opportunity to advise me that they had occupied “Trelan” an opportunity which he did not take. I was, therefore, able to look him in the eye and ask him directly “who was occupying “Trelan”, which after the briefest of moments to collect his thoughts, he confirmed that he and his Family had. Comparisons of his front and Southend’s came to mind!... Further enquiry of Mike Fowle discloses that they are occupying the property as “caretakers” in view of a number of break-ins. A further suspicion of mine is also confirmed in that their matrimonial home at Polmennor Drive, which I know to be held in a Family Trust, is now admittedly required by Granny who previously had occupied “Trelan”. The transaction whereby Granny vacated “Trelan” now seems much clearer!” I would interpolate here that I make no finding one way or the other as to whether those remarks about the property in fact required by Granny are correct and note, without resolving the matter, the contrary evidence of the second defendant. Mr Rockey’s note continues:
“I have, therefore, made it quite clear to Mike Fowle that the Company has no authority by the Bank to grant any Lease or Tenancy and also suggest that we may well require them to sign an acknowledgment that they are occupying the property as “caretakers” and that they do not seek to gain any occupation, reservations or rights. Perhaps Region will consider and instruct….”. (72). I accept the oral evidence of Mr Rockey that something in the nature of “verbal tennis” took place between him and Mr Fowle in the course of this conversation. That accords entirely with the passages from the note which I have read out, and the bottom line seems to be that Mr Fowle, for as long as he thought he could get away with it, avoided owning up, if I can put it that way, to the fact that he and his family had taken up occupation of Trelan, which had been repaired and renovated at the Bank’s expense for the repeatedly expressed purpose of then being sold with vacant possession. This is one example of what Mr Fowle described in the course of his evidence as ‘not wishing to cause ripples with the Bank’. “Ripples,” he elaborated, when questioned further, “would be ripples from the Bank if they knew that we were asserting some right to occupy the property which might have impacted on the funding by the Bank which we were hoping would ultimately, if successful, take out the loan” [that is, I interpolate, funding of further planning applications]. “We were trying to keep as many balls in the air as we could.”
I am satisfied that the first defendant (a) deliberately avoided acknowledging his family’s occupancy of Trelan until ‘put on the spot’ by Mr Rockey, and (b) when put on the spot, attributed their occupation to being “caretakers” in order to avoid such ‘ripples’ as he described in evidence resulting. I unhesitatingly reject the first defendant’s evidence, at one point during his testimony, to the effect that his reference to “caretakers” was in the nature of a joke. Its purpose was much more deliberate than that, and was to avoid the Bank becoming concerned as to its security being jeopardised. If he and Mrs Fowle were already planning to assert a right of occupation in themselves derived from the Lease, he deliberately avoided mentioning that too to Mr Rockey, for like reasons. However I think it more likely that the idea of so asserting had not yet occurred to either of them, particularly given the terms of Mr Fowle’s conversations with Mr Hardy on 17th and 20th November 2003, to which I shall come. (73). The matter was indeed referred within the Bank to “Region”, i.e. the Bank’s regional office, and they prepared the letters which were sent to Mr and Mrs Fowle dated 11th April 1994. Those letters are headed “without prejudice” but, as I shall rule later in this judgment, I have no hesitation in admitting them in evidence and looking at them. There are two effectively matching letters, one addressed to the directors of Bramridge and the other addressed to Mr and Mrs Fowle personally, they of course in practice being the same individuals. I shall read the latter letter, because it was the enclosure with that which they signed and returned two days later. “Dear Mr and Mrs Fowle, We understand that Bramridge Developments Limited have created a tenancy of “Trelan House” in Lelant in favour of Mr and Mrs Fowle and Family without formal tenancy agreement. This property was mortgaged to National Westminster Bank PLC by the Company as security for its borrowings under the legal charge agreement dated 9 June, 1988 and the consent of the Bank is required to the creation of such a tenancy. The Bank does not in any way consent to this tenancy nor the creation of any lease by the Company to any third party. In recognition of the current situation, the Bank is however prepared to permit Mr and Mrs Fowle and their Family to remain in occupation subject to their formal written acknowledgment now that the Bank may at any future time seek to enforce the charge over the property whereupon they will immediately vacate the property thereby providing the Bank with full vacant possession. The immediate confirmation as sought, of Bramridge Developments Ltd. and Mr and Mrs Fowle is required. A suitably worded response is attached for signature by return.” The letter, though prepared at Regional Office, was signed and sent out by Mr Rockey. (74). The document attached which was duly signed and returned reads as follows:
“We Michael Anthony Fowle and Suzanne Gail Fowle, acknowledge that we have occupied “Trelan House” in Lelant without the consent of National Westminster Bank to which the property is legally mortgaged under a charge agreement dated 9th June 1988. We hereby irrevocably confirm that if at any future time the Bank seeks to enforce the charge over the property, we will immediately vacate the property on receipt of formal written notice from the Bank.”
And each of them signed, dated 13th April 1994. As the first defendant ultimately accepted under cross-examination, the second paragraph, being also the second sentence, of that document really is in absolutely clear and unambiguous terms, and the defendants chose to sign it. (75). Suitably reassured, albeit realising, as a letter of 6th April 1994 illustrates, that the legal efficacy of such a letter was something of which the Bank could not be certain, the Bank continued to make facilities available to Bramridge for some time more. The latest facility letter which is in evidence before me is that of 3rd March 1995, in the course of which an overdraft facility of £1.781 million plus charges was granted to, or confirmed and continued for, Bramridge. The section under the side-heading ‘Security’ reads, “The Bank continues to rely upon its existing security for the discharge on demand of all present and future liabilities (both actual and contingent) of the Borrower to the Bank.” The facility letter is countersigned by the first defendant on behalf of Bramridge, confirming that a Board Resolution to that effect had been passed on either 24th or 29th (the manuscript is hard to decipher) March 1995. (76). Millicent died on 21st December 1997. She left a will dated 31st May 1996. The will did not contain any specific devise of the Lease or indeed of any interest in Trelan, and therefore if and so far as any such lease or interest existed, it fell into residue which was dealt with by Clause 6 where, under a trust for sale, it was granted to her granddaughters, the second defendant and Jackie, in equal shares. A Grant of Probate was taken out on 21st April 1999 by two of her three-named executors (her daughter-in-law being the third name in the will, but who did not join in taking out the Grant), one Jordan Bell and one Robert Spouse, both of Cornwall. One might note in passing that the Grant of Probate declared an estate in the gross value of £477,000, net value of £446,000. (v). MORE RECENT EVENTS (77). In January 2002 Bramridge was struck off the Register of Companies, and then dissolved. (78). Nevertheless, at the end of that year a solicitor in sole practice, Mr Rose, was instructed by Mr Fowle, purportedly on behalf of Bramridge, to act in connection with the proposed sale of the land at Nancledra which formed part of the said portfolio of properties. In the course of doing so Mr Rose obtained, against the usual undertaking, various title deeds from the Bank, apparently being wallets of documents relating not only to Nancledra but at least three other properties too, including Trelan. In the course of going through them with Mr Fowle on 29th January 2003, they came across the Lease. It, and indeed all of the deeds relating to properties other than Nancledra, were returned to the Bank at its direction the following month. (79). On 11th November 2003 the first and second claimants were duly appointed Law of Property Act receivers by the Bank over, relevantly, Trelan. (80). On 17th November, Mr Hardy spoke to Mr Fowle about the various properties over which he had been appointed. He made a separate note about each property, because he wished to place each on a separate file. He recorded that Mr Fowle told him that he and his wife occupied Trelan, that there was “no tenancy agreement”, and “no rent paid” (see A5/209). On 20th November, Mr Hardy had an hour and a half’s further conversation with Mr Fowle, by telephone. Each of them had in front of him copies of some typed up notes which Mr Hardy had produced following the earlier conversation. Mr Hardy made some manuscript notes on his during the conversation. On the note about Trelan (A5/211) he corrected the postal address, and put ticks against the various entries the accuracy of which Mr Fowle confirmed to him during that second conversation. The ticked entries included “Tenancy Details: no formal agreement”, “Rental: Nil” and “Rent due: Not applicable”. I further accept Mr Hardy’s evidence that if Mr Fowle had said anything to him which asserted any form of legal right to occupy Trelan, he would have written it down. The whole point of the conversations was for the Receivers to ascertain what they could about the properties over which they had been appointed, and it would have been perverse for Mr Hardy not to record such an assertion. Mr Fowle did not say any such thing, and I conclude that this was because in November 2003 neither of the defendants considered in their own minds that they and their family had any such right. If either had thought of such, s/he would have shared it with the other. That thought must have come to them, or one of them, later. Absent some deliberate decision to keep the Receivers in the dark (which Mr Fowle himself did not assert), Mr Fowle had every reason to inform the Receivers of any legal rights over Trelan which he believed that he or his wife had (as he accepted at one point in his cross-examination), and was the sort of person who would not be backward in putting forward his own view of matters. For the avoidance of any confusion, Mr Cawson did not rely on this conversation as raising an estoppel against either of the defendants. (81). On 3rd March 2004 the defendants were given formal written notice to vacate Trelan, but did not comply. These proceedings were commenced out of Penzance County Court on 12th August 2004. Save perhaps to refer back to the transfer of these proceedings to this Court by Order dated 8th March 2005, there is no need for me to set out the procedural history of this case, which adequately appears from the pleadings and Orders on the court file. (82). After Mrs Fowle had, in her original defence, relied inter alia on the assertion that she was entitled to possession of Trelan by virtue of the Lease, the Bank – no doubt on a ‘belt and braces’ basis - took steps to determine the same in accordance with the express provisions of clause 3. Leaving aside the claimants’ first attempt to serve valid notices, which the Bank accepted may have resulted in those notices (which were apparently posted on 22nd May 2006) not being received until less than a month before the specified date of termination (presumably 24th June 2006), the claimants have proved with documentary exhibits that their notices dated 18th August 2006 were duly received by Messrs Bell and Spouse on 19th August 2006. RESOLUTION OF THE ISSUES (83). The main questions which arise may conveniently be considered in the following sequence: (i) Does the Lease subsist? (ii) If so, is it vested in either Mrs Fowle or Mr and Mrs Fowle? (iii) If so, did it take priority over the Bank’s Legal Charge? (iv) If so, is/are Mrs Fowle, or as the case may be Mr and Mrs Fowle, estopped from relying on the same in answer to the claim for possession? (84). If any one of the first 3 questions so posed is answered in the negative, i.e. in the claimants’ favour, that would strictly be sufficient for the resolution of the claim without proceeding to the remainder. However out of deference to the submissions which I have received, and in case it should be of use to another Court, I will deal with each of them in any event. (i). DOES THE LEASE SUBSIST? (85) Mr Cawson submits not, on 2 grounds: (i) First, the Lease has in law been surrendered, and (ii) Second, the Lease has been lawfully determined pursuant to its own express provisions. (86). As to Mr Cawson’s first submission, he asserts that an agreed surrender is to be inferred from Millicent’s conduct in moving out of Trelan, and the subsequent work done on Trelan, at the Bank’s expense, to get it ready for sale. He reminds me that such an agreement may be evidenced by unequivocal acts of the parties, and that those are to be assessed objectively (citing Hill & Redman, para [7987]). He also relies on surrender by operation of law, citing Zionmor v Islington LBC (1997) 30 HLR 822 CA, which supports the need for an unequivocal act by the tenant inconsistent with the continuance of the tenancy, and an unequivocal acceptance thereof by the landlord, again both being assessed objectively. I note that on the facts of Zionmor it appears that the tenancy conditions permitted leaving the flat for up to 3 months without giving the landlord Council notice (report p827, Chadwick LJ citing the judgment below of HHJ Simpson, and also at p828) and therefore when the tenant moved out in that case he was not in breach by doing so. I further note that Chadwick LJ did not regard the question of possible breach as critical – at p828 he said “Whether or not the act of leaving [another] in possession or occupation while [the tenant] went away was in breach of a term of the tenancy agreement, it was not an act which indicated that the tenancy was being surrendered”. (87). In Zionmor an earlier judgment of Peter Gibson LJ (in Tarjomani v Panther Securities Ltd (1983) 46 P&CR 32 at 41) was approved and applied, in which the relevant test was stated thus:
“The doctrine operates when the tenant is a party to a transaction that is inconsistent with the continuation of his tenancy but in my judgment the conduct of the tenant must unequivocally amount to an acceptance that the tenancy has been terminated. There must be either relinquishment of possession and its acceptance by the landlord or other conduct consistent only with the cesser of the tenancy, and the circumstances must be such as to render it inequitable for the tenant to dispute that the tenancy has ceased”. (88). I must therefore apply that test, bearing in mind that in 1992 Millicent was the (surviving) tenant and Bramridge the landlord. Given that the directors of Bramridge were the defendants, and that they seem to have been acting in concert with Millicent throughout, there is a certain air of artificiality about this. Any breach of Millicent’s covenant not to part with possession (cl. 2(vi)) was one in which the directors of Bramridge (the defendants) clearly acquiesced, and in any event whether or not there was any such breach is not the critical question. Whilst I can see the force of Mr Cawson’s argument, I am not persuaded that Millicent’s actions in moving out of Trelan, with the concurrence, indeed assistance, of the defendants, are objectively to be assessed as an unequivocal act on her part necessarily inconsistent with the continuance of the Lease. Nor am I persuaded that the actions of Bramridge, in then setting about (at a somewhat leisurely pace) ‘doing up’ Trelan, with yet more money being borrowed from the Bank to that end, are objectively to be assessed as an unequivocal acceptance that Millicent had surrendered her Lease. Bramridge appears to have had the future sale of Trelan with vacant possession in mind (and Bramridge certainly so indicated to the Bank from time to time). That said, it took a year or more to complete the requisite works (they were still in progress in May 2003), which does not suggest that at the time Millicent moved out Bramridge (as distinct from the Bank) was firmly focussed on progressing to an early sale. There is limited evidence as to Millicent’s reasons for moving out of Trelan, but I note that it was plainly in poor condition by 1992, that Millicent was living alone there for that part of the time when the Second Defendant was not staying to give her company and support, that although it had the advantage of familiarity (Millicent having lived there for almost 30 years), it was far from ideal accommodation for an elderly widow, and more specifically that (on Mrs Fowle’s evidence) Millicent had decided that she needed to live somewhere without flights of stairs (Trelan had several). In these circumstances I find there to be a certain equivocality about Bramridge’s and Millicent’s actions surrounding her move away from Trelan so far as concerns the continuation or extinction of the Lease, and I am therefore unable to accept Mr Cawson’s first submission. (89). I should just add this. The closing written submissions on behalf of Mrs Fowle (at paras 21-24) placed heavy reliance on the fact that in June 2004 (so some 18 months or more after Millicent had moved out of Trelan) she and Bramridge joined in a Deed of Surrender in respect of the Lease limited to one plot taken out of the land comprised in the lease. Given the warning against reliance on subsequent events as a means of (objectively) determining the parties’ intentions contained in the judgment of Chadwick LJ in Zionmor at p827, I have not attributed any weight to that matter in reaching my view. (90). As to Mr Cawson’s second submission, Mr Macdonald QC takes what amounts to a procedural point, namely that any such determination occurred after the issue of proceedings, and therefore cannot be relied on by the claimants. The time for taking that point was when the claimants sought permission to amend their Reply so as to rely on the same, before Judge Pelling QC on2nd March 2007. No such point was taken, and Judge Pelling QC gave permission so to amend (I am told without objection, if not formally by consent). No appeal has been brought against that order, nor any application to set it aside. That being so, the claimants are entitled to rely upon the terms of their pleading as it now stands, and that affords the claimants a complete answer to Mr Macdonald’s procedural point. (91). However lest what I have just said give the false impression that there is some sort of shadow over the validity or propriety of Judge Pelling QC’s order, or that there were clear grounds for objecting to such permission to amend which, had only they been raised, would have preserved a defence to this claim, I would draw attention to the following points: (i) The first indication available to the claimants that these defendants were relying on the Lease as entitling them to occupy Trelan was (I am told) when such a plea (among many others) was included in the defence originally served on Mrs Fowle’s behalf. It was in response to that plea that the Bank took steps to determine the Lease in accordance with its express provisions; (ii) The determination of the Lease is not, as Mr Cawson rightly submitted, an element of the claimant’s cause of action, but rather is a response raised to negate a defence raised. Thus its addition to the claimants’ pleadings by amendment does not bring about the addition of a cause of action which only accrued after the commencement of the proceedings; (iii) Further, such an addition is not objectionable per se in any event. The editors of the 2007 White Book summarise the position thus (at 17.3.5, final paragraph): “Although amendments take effect from the date of the original document which it amended (see para.17.3.4 above) there is no absolute rule of law or practice which precludes an amendment to rely on a cause of action which accrued only after the date of the original claim in circumstances where (but for the amendment) the claim could fail (Maridive & Oil Services SAE v CNA Insurance Co (Europe) Ltd [2002] EWCA Civ 369). In British Credit Trust Holdings v UK Insurance Ltd [2003] EWHC 2404 (Comm) , C was permitted to amend the particulars of claim in an insurance dispute in order to seek declaratory relief in respect of insurance claims arising after the proceedings had started.” (92). Next, Mr Macdonald QC submits that the notices served were not effective under clause 3 of the Lease because they should have been served on at least Mrs Fowle (or possibly both defendants) as being “the person(s) then entitled to the benefit of the leasehold interest created [by the Lease]”, either in addition to or rather than Millicent’s Personal Representatives. I reject both limbs of that submission as put to me: (i) Insofar as it was put on the basis that such leasehold interest had become vested in the Defendants or either of them, or that the Defendants or either of them had become immediately entitled to have that interest vested in them, it fails for the reasons given in my determination of the next question, below; (ii) Insofar as it was put on the basis that as a matter of construction of clause 3 the words “the person then entitled to the leasehold interest hereby created” should be construed broadly so as to include any person in actual occupation of Trelan at the time of the giving of notice, those words do not in my judgment bear such a meaning. In his oral submissions Mr Macdonald QC drew my attention to the provisions of CPR 55.10. Those provisions become relevant at a later stage, and are directed to ensuring that the Court does not make a possession order in favour of a mortgagee without the persons in actual occupation of the subject property (who may or may not be the mortgagors) first having had formal notice of the possession proceedings, and thus the opportunity to appear. They do not assist me in construing the words of clause 3. The clear and natural meaning of those words in the context of formal conveyancing documents dealing with matters of (leasehold) interests and title is the person in whom the leasehold interest is vested for the time being, and that was the persons on whom the Bank served its notices of determination, namely the two Personal Representatives of Millicent; (iii) On my construction of clause 3, the words “the person then entitled to the leasehold interest hereby created” do not, as Mr Macdonald submitted, extend to a person beneficially (but not legally) entitled to the leasehold interest, whether in addition to or instead of the person legally entitled to the same. In any event, in my judgment neither of the defendants was beneficially entitled to the same in any event, for the reasons given in my determination of the next question, below. (93). No other answer to Mr Cawson’s second submission has been raised by or on behalf of either Defendant, and I therefore accept it. Bramridge created a legal charge over its interest in Trelan to the Bank, and was very substantially indebted to the Bank prior to being struck off the Register of Companies and dissolved in January 2002. If relevant, there is no realistic prospect whatever of Bramridge’s equity of redemption being redeemed by the Duchy of Cornwall (in whom it has been vested as bona vacantia since the dissolution of Bramridge in January 2002). The claimants as unpaid legal chargees are the “person(s) for the time being entitled to the reversion immediately expectant on the determination of the term created [by the Lease]” within the meaning of the Lease, and were therefore entitled to give notice of determination under clause 3 thereof. (94). No defect in the wording of the claimants’ notices dated 18th August 2006 is suggested, they were received by Messrs Bell and Spouse more than a month before the specified date of termination, it being one of “the usual quarter days”, and they were therefore effective duly to determine the Lease with effect from that date, namely 29th September 2006. (95). For completeness, I should perhaps mention that I have been told that both the Duchy of Cornwall and Messrs Bell and Spouse have been given formal written notice of these proceedings. Neither have chosen to intervene. (ii). IF IT SUBSISTS, IS THE LEASE VESTED IN EITHER MRS FOWLE OR MR AND MRS FOWLE? (96). Mrs Fowle’s pleaded case relied on the death of Millicent as giving rise to her entitlement to the Lease (see her ReAmended Defence at para 26). As I have explained, the Lease (assuming it then subsisted) fell into residue under her will. There is no evidence that Millicent’s Personal Representatives, Messrs Bell and Spouse, have taken any steps to appropriate the Lease to her portion of residue, nor to assign the same to her whether by vesting assent or otherwise howsoever. In these circumstances I accept Mr Cawson’s submission that (on the said assumption) Mrs Fowle’s only relevant legal right is a right qua beneficiary against the Personal Representatives to the due administration of Millicent’s estate. Mrs Fowle’s pleaded case therefore fails. (97). As I mentioned earlier in my judgment, what amounts to an alternative case of an oral gift of the Lease by Millicent to herself and, it appears, her husband, was sought to be raised in her witness statement signed as recently as 8th August 2007 (see at paras 93 and 97). No such case appeared in her pleadings, the most recent of which was her Re-Amended Defence of 2nd March 2007, nor in her earlier witness statements. Though she verified her witness statement of 8th August 2007, when first questioned orally about the matter (by Mr Cawson in cross-examination) she did not ‘come up to proof’ and instead spoke of a series of conversations with both Hulbert and Millicent, shortly after Bramridge had purchased Trelan from Max’s estate, to the effect that “this is your family home”
. She stated that Millicent would not have understood that Trelan had been bought by a limited company which she and her husband controlled, and that Hulbert would not have understood about the existence of a 30 year lease. She said nothing to suggest that either of the grandparents had said anything about the Lease, let alone made (or purported to make) an oral gift of it to her or her and her husband. Her evidence in re-examination on the same topic was to like effect until Mr Macdonald, with nothing to lose, asked specifically whether anything had been said to her about the Lease. She then answered that Millicent had said ‘It’s all yours, I want you to live there. There’s that funny piece of paper, I’m not quite sure about, but I want you to live there’. Suffice it to say that I reject such evidence as Mrs Fowle gave, in her last witness statement and at the end of her re-examination, that Millicent said anything to her about giving her (or her and her husband) the Lease, or the benefit of the Lease, or the remainder of its term, or indeed anything (in the suggested context) about a ‘funny piece of paper’. Mrs Fowle’s alternative case therefore fails on the facts. (98). In those circumstances it is unnecessary for me to go on to the formidable legal difficulties which would have faced her alternative case by reason of the provisions of s.53(1)(a) Law of Property Act 1925, and Mr Macdonald’s suggestion that such oral gift was “perfected” by Millicent’s actions in moving out of Trelan, and subsequently allowing the defendants into exclusive occupation thereof. (iii). IF IT SUBSISTS, AND IS SO VESTED, DID THE LEASE TAKE PRIORITY OVER THE BANK’S LEGAL CHARGE? (99). Mr Cawson submitted that the Lease must be treated as having been granted after the Mortgage, because Bramridge only acquired Trelan and the other properties by the Conveyance with the benefit of funds provided by the Bank secured by the legal charge created by the Mortgage. He submitted that, given that the Bank advanced the purchase monies to enable the purchase to take place, Bramridge only acquired an equity of redemption, and did so when and at that time as the legal charge bit. Only thereafter, Mr Cawson submitted, was Bramridge in a position to grant any lease, and thus the Lease must have been granted subject to the (prior) legal charge. Further, he pointed out, the Conveyance made no reference to the Lease, or to Trelan being purchased subject thereto, as was consistent with the earlier part of his submission. Consequently, the Bank’s legal charge imposed by the Mortgage was free of the Lease even if, which it “emphatically denied”, the Bank was aware thereof at the time that the legal charge was taken. (100). Mr Cawson relied on a passage from the speech of Lord Oliver in Abbey National Building Society v. Cann [1991] 1 AC 56. Having referred to the “attractive legal logic” of the well-known ‘scintilla temporis’ decision of the Court of Appeal in Church of England BS v Piskor [1954] Ch 553, which the House went over-ruled in Cann), Lord Oliver continued (at 92F-93B):
“Nevertheless, I cannot help feeling that it flies in the face of reality. The reality is that, in the vast majority of cases, the acquisition of the legal estate and the charge are not only precisely simultaneous but indissolubly bound together. The acquisition of the legal estate is entirely dependent upon the provision of funds which will have been provided before the conveyance can take effect and which are provided only against an agreement that the estate will be charged to secure them. Indeed, in many, if not most, cases of building society mortgages, there will have been, as there was in this case, a formal offer and acceptance of an advance which will ripen into a specifically enforceable agreement immediately the funds are advanced which will normally be a day or more before completion. In many, if not most, cases, the charge itself will have been executed before the execution, let alone the exchange, of the conveyance or transfer of the property... The reality is that the purchaser of land who relies upon a building society or bank loan for the completion of his purchase never in fact acquires anything but an equity of redemption, for the land is, from the very inception, charged with the amount of the loan without which it could never have been transferred at all and it was never intended that it should be otherwise.” (101). Mr Cawson correctly points out that the evidence here establishes that this is one of the “great majority of cases” which was the subject of Lord Oliver’s analysis, because Bramridge’s purchase from Max’s estate was entirely dependent on the provision of the Bank’s advance, the Bank’s advance was received to that end by Crosse & Crosse (by then acting for both it and Bramridge) shortly before the completion date, and the Bank’s advance was conditional on the portfolio, including Trelan, being charged to secure the advance. (102). Mr Macdonald submitted that, far from being against him, Lord Oliver’s speech should be developed and applied in his favour in respect of this four-party situation (vendor, purchaser/mortgagor/lessor, mortgagee bank, and lessees). He submitted that here there were three, not two, precisely simultaneous transactions indissolubly bound together. The difficulty to which that submission, without something more, gives rise is that once there is such a third transaction introduced, i.e. once two different dispositions (or grants) by the purchaser are introduced into the picture, the question necessarily arises as to the priority between the interests thereby created/the grantees. There cannot in law be a ‘dead heat’ between two mutually inconsistent and competing interests over a legal estate in land. There must be a priority as between them. It is, in my judgment, significant that the whole transaction was not ‘entirely dependent’ on the grant of the Lease, as it was on the Bank advancing the purchase monies. As for the second part of Mr O’Connor’s recollection expressed in the first sentence of paragraph 8 of his witness statement, I do not accept it – the question of whether the purchase of the portfolio from Max’s estate by Bramridge would have gone ahead if the bank had been told of the proposed grant of a 30 year lease with priority over its charge and refused to proceed simply never arose. The acquisition of the legal estate, on which the whole transaction was founded, was necessarily dependent on the latter (the conditional advance) but not the former (the Lease). Therefore, without ‘something more’, Mr Macdonald’s submission would fail. (103). The ‘something more’ on which Mr Macdonald relies is the assertion that it was the actual, subjective intention of all three parties to these simultaneous transactions that the Lease have priority over the Bank’s legal charge, rather than vice versa. Mr Cawson responds first, that this is incorrect as a matter of fact, and second, that in any event the priority of legal interests in land cannot properly depend on ascertaining the actual, subjective intention of the parties to a conveyancing transaction which may have taken place years earlier, insofar as they are not recorded in the documentation which gave effect to the transaction. (104). In my judgment Mr Cawson’s first response is well-founded. Since the Bank knew nothing of the proposal for a 30 year lease, and hence a fortiori formed no intention and made no agreement as to whether any such lease should have priority over the its legal charge, until well after the Lease had been granted, the answer turns on the role and authority of the solicitor Mr O’Connor. Mrs Fowle’s case depends on the submission that Mr O’Connor’s knowledge and intention with regard to the Lease was that of and/or to be imputed to and/or bound the Bank. I reject that submission. As all concerned well knew, Mr O’Connor was not an officer of the Bank (of whatever seniority), but a solicitor in private practice who was acting on instructions from the Bank. The nature of Mr O’Connor’s (relevant) actual authority to act on behalf of the Bank was limited and clearly documented. He was instructed “to act on [the Bank’s] behalf in taking the mortgage over the properties and protecting [its] interest at all times”
. He gave the required undertaking to the bank “that any sums received from [the Bank or Bramridge] for the purpose of this transaction will be applied solely for acquiring a good marketable title to the property”. The Bank did not do anything to clothe Mr O’Connor with ostensible authority to agree on its behalf to any other or different transaction, and in particular to the creation of a 30 year lease over Trelan, let alone with priority over the bank’s legal charge. It is not suggested that the Bank said anything expressly which had that effect, so the only basis for it would be implied authority inherent in Mr O’Connor being instructed to act as he was. It is perfectly clear that a solicitor so instructed is not impliedly authorised to agree any such thing on behalf of his/her client bank. The solicitor’s role on behalf of the bank is, ordinarily, essentially ministerial. It would be wholly out of the ordinary for a bank to authorise a solicitor so acting him/herself to agree to such a substantive change in the nature of the transaction – the normal implication would be that s/he did not have such authority, and would therefore have to revert to the bank for its instructions before any agreement could be given. So applying ordinary principles Mr O’Connor had neither actual nor ostensible authority from the Bank to agree to the grant of a 30 year lease, let along to one with priority over the Bank’s charge. Nor can I find any basis for Mr Macdonald’s alternative formulation that “the bank had constructive knowledge of the lease that was to come into being immediately upon the conveyance and that it was to have priority to any charge.” (105). Mr Macdonald further relied on the provisions of section 199(1)(ii)(b), Law of Property Act 1925, to the effect that the Bank was “prejudicially affected by notice of” the proposal for a 30 year lease given that “in the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of … his solicitor .. as such …” Even if this is a case where, on a strict analysis, the question of the Bank being adversely affected by “notice” arises, which I doubt given that the subject matter is a proposal for a lease, rather than the existence of some prior interest, Mr O’Connor did not learn about the proposal for a 30 year lease from the Bank, and was fully apprised of it before 10th May 1988, when he received the Bank’s initial letter of instructions. That being the case, the position is equivalent to that considered by the Court of Appeal in Halifax Mortgage Services v Stepsky [1996] Ch 207. Giving what was in effect the judgment of the court, Morritt LJ said (at 215F-216C:
“ … section 199 of the Law of Property Act 1925 … so far as relevant … provides: ‘(1) A purchaser shall not be prejudicially affected by notice of - . . . (ii) any other instrument or matter or any fact or thing unless - . . . (b ) in the same transaction with respect to which a question of notice to the purchaser arises, it has come to the knowledge of his counsel, as such, or of his solicitor or other agent, as such, or would have come to the knowledge of his solicitor or other agent, as such, if such inquiries and inspections had been made as ought reasonably to have been made by the solicitor or other agent’ Counsel for the wife submitted that it did not apply as the knowledge came to the knowledge of the solicitors for the lender as such when they were instructed to act on behalf of the lender on 19 June 1990. In the case of the wife it was submitted that the solicitors were not instructed by her as "agents to know." I do not accept either of these submissions. In my view the section has to be applied in accordance with its terms to the facts of this case. There is no doubt that the information as to the true purpose of the remortgage loan imparted by the husband came to the knowledge of the solicitors on 12 June 1990 as the solicitors for the husband and wife alone for they were not instructed to act for the lenders until 19 June at the earliest. That knowledge once acquired remained with the solicitors and cannot be treated as coming to them again when they were instructed on behalf of the lenders. As counsel for the wife accepted, their knowledge cannot be treated as divided or disposed of and reacquired in that way. The conclusion seems to me to be inescapable, namely that knowledge of the relevant matters facts or things did not come to the solicitors as the solicitors for the lenders. Accordingly it did not come to them "as such." It was not disputed that the lender is a purchaser within the definition contained in section 205(1)(xxi) of the Law of Property Act 1925. Consequently section 199(1)(ii)(b) precludes the solicitors' knowledge of the relevant matters or facts being imputed to the lender.”
Similarly here, the relevant knowledge was not gained by Mr O’Connor in his capacity as solicitor to the Bank, and the statutory words “as such” are therefore not satisfied. (106). Summarising his case, Mr Macdonald invited me to take “the broad view”, to look at what the parties intended, and what the Bank did not object to and was content with, and to construe the deeds so as to give effect to their intention. I have already dealt with the question of what, on a proper analysis, the Bank (as opposed to Mr O’Connor) did and did not intend, and can detect no proper basis for construing deeds which say nothing as to the priority between the Bank’s legal charge on the one hand and the Lease on the other as if they contained some words rendering the former subject to the latter. (107). Mr Coppel, following Mr Macdonald, advanced an argument directed to dealing with a question I had raised, namely what the legal position would be if I accepted that all three parties had shared an actual subjective intention as to the legal effect of the documents executed on 9th June 1988, but it transpired that in law they did not have that effect. He helpfully directed me to a passage in Fisher & Lightwood’s Law of Mortgage, 12th ed para 42.33 as to how estoppel can bring about a loss of priority. However this approach takes Mrs Fowle’s case no further, because any relevant representation or intention for present purposes would have to be with regard to a 30 year lease, rather than some right of occupation for the grandparents during their lifetime, and as to the former Mrs Fowle can only rely on what Mr O’Connor knew about the proposed mechanism of a 30 year lease etc. As no claim for possession of Trelan was brought by the Bank until well after both grandparents had died, the more difficult question (given what Mr Riley did know and intend) as to whether they or the survivor of them might have had the benefit of an estoppel against the Bank need not be addressed. (108). I should perhaps briefly explain how it came about that Mr O’Connor acted as he did, with no such authority. Mr O’Connor readily accepted that in ordinary circumstances title to land subject to a 30 year lease at a nominal rent would not constitute “good marketable title” for the purposes of a mortgagee bank. However he reached the conclusion, in good faith but in my judgment quite wrongly, that here the Bank would have no objection to the proposed course of action. He was shown the proposal document by Mr Fowle. As appears from what I have already said about it, the proposal document did include references to the present and future occupation of Trelan by the grandparents. Beyond that (even as to the extent to which the Bank had agreed to the proposal document, let alone as to the subsequent development of the proposal) Mr O’Connor can only have acted on the additional explanations or say so of the directors of Bramridge, which in practice will have meant at least mainly Mr Fowle, plus the making of assumptions on his own part. As to the former, there was the self-evident potential for conflict between the interests of the Bank and the wishes of the defendants. As to the latter, any such assumptions which Mr O’Connor made were not justified or safe ones for a solicitor in his position to make; one illustration of that is afforded by that fact that it is (now) Mr Fowle’s own evidence that he “did not have any discussions with the Bank as to the mechanism to ensure the continued occupation of Trelan by [the] grandparents” (witness statement, para 40). There was in my judgment quite insufficient material to entitle Mr O’Connor to act on the basis that his client bank had agreed to, or would if asked not object to, the creation of a 30 year lease over Trelan, let alone one taking priority over the Bank’s legal charge, and/or one extending to the entirety of the land comprised in Trelan (i.e. including the proposed building plots as well as the existing house and its immediate curtilage). I have already made my findings (at paragraphs 50-52 above) as to what the Bank (in the person of Mr Riley) did and did not know at the time of completion, and what the likely outcome would have been had the proposal for a 30 year lease with priority over its legal charge been put to the Bank. (109). Having accepted Mr Cawson’s first response, it is unnecessary for me to explore in any detail his second (with regard to the manner of determining the priority of legal interests in land). However I would simply observe that as a matter of general principle one would expect it to be correct. This is not a case of competing equities where, bearing in mind that this is a case to which un-registered conveyancing principles apply, the position might not always be so straightforward. Even there Mr Cawson might well (depending on the nature of the equity in question) have been able to rely on the absence of prior registration under the Land Charges Act 1972, and in opening, by way of something of a ‘pre-emptive strike’, he cited section 4(6) of that Act. However in the event Mr Macdonald did not put his case on the basis of any alleged equitable interest of his client’s, and I need not, therefore, go further into that area either. (iv). IF THE LEASE SUBSISTS, IS SO VESTED, AND TOOK PRIORITY, ARE THE DEFENDANTS NEVERTHELESS ESTOPPED FROM RELYING ON IT IN ANSWER TO THE CLAIM FOR POSSESSION? (110). The Bank has relied on the letter signed by both defendants on 13th April 1994 and returned to it, the terms of which I have set out at paragraph 74 above, as giving rise to an estoppel in its favour. It relies on its continued lending thereafter to Bramridge, including the further facility granted under its facility letter of 3rd March 1995, as detrimental reliance on its part to the representations contained in the former letter. If (as I have held) the Lease had not by then been surrendered, the Bank seeks to estop the defendants from denying that it had been or, which is another way of putting essentially the same case, to estop the defendants from thereafter relying on the Lease as giving them any right to occupation or possession of Trelan. (111). Mrs Fowle first takes the point, which it was ultimately agreed that I should deal with in this judgment rather than as a preliminary point on the first day of the trial, that the letter relied on is inadmissible, because the letters dated 11th April 1994 under cover of which its draft was sent both to Bramridge and the defendants were marked ‘without prejudice’. This is a hopeless submission. If one assumes in Mrs Fowle’s favour that the letters of 11th April 1994 marked the commencement of an attempt to conclude a compromise of a dispute, such a compromise was concluded 2 days’ later when the Bank’s “offer” was accepted by the defendants signing the letter which the Bank required to reach such a compromise without any alteration of its terms as proposed by the Bank. Further or alternatively, the letter sent back amounted to a clear statement by the defendants on which the Bank was intended to act and did in fact by not taking any immediate steps to obtain vacant possession of Trelan and by continuing to afford Bramridge substantial loan (overdraft) facilities. On either basis the signed letter of 13 April 1994 is clearly admissible: see Phipson on Evidence at para 24-29 at (a) and (c), citing Robert Walker LJ in Unilever v Procter & Gamble [2000] 1 WLR 2436 CA at 2444D-F. (112). Mr Macdonald then submits that the Bank’s letter of 11th April 1994 is directed to the possibility that the defendants were occupying Trelan pursuant to a tenancy granted to them by Bramridge, and that because they in fact rely only on the Lease, which was first granted by Bramridge to the grandparents, “neither the notice nor the covering letter was directed to the proper basis on which the Defendants were occupying Trelan … the bank cannot invoke the second paragraph of the notice to prejudice the basis on which they were actually occupying Trelan …”. This is a bold submission, given that Mr Fowle, when directly confronted by Mr Rockey a few weeks earlier, not only did not tell him that they were occupying Trelan on the basis of the Lease (an example of ‘not creating ripples’), but expressly stated that they were doing so as “caretakers”. It would be absurd if the efficacy of the Bank’s letter were defeated by the defendants’ own misleading statement. There is nothing in the Bank’s letters of 11th April 1994 which, when read in the context of what Mr Fowle had recently told Mr Rockey, in any way misled, or misrepresented the position to, the defendants. Further, the entirety of the letter of 13th April 1994 was well capable of covering the position as the defendants now argue it was. As to the first paragraph, whatever the basis on which they ultimately sought to justify their occupation of Trelan, it remained true that they had not (thitherto) done so with the consent of the Bank. As to the second paragraph, as Mr Fowle ultimately accepted in cross-examination, it could not be clearer. He further agreed that the reason why the Bank had wanted the signed letter was to protect its position if it wanted to enforce its security, and that the Bank had extended further facilities after receipt of the letter. (113). In my judgment, the Bank’s case on estoppel was made out. The representation or promise in the second paragraph of the letter which both defendants signed was really quite clear. The Bank was intended to rely on it, and did rely on it, in the respects I have indicated. It was and is unconscionable for the defendants, who enjoyed further lending facilities for some time, and no less than 10 years’ further occupation of Trelan prior to being given formal written notice to vacate, now to seek to depart from it, the bank having sought to enforce its charge. CONCLUSION AND RELIEF TO BE GRANTED (114). I shall therefore make declarations (1) that the Lease was determined no later than on 29 September 2006 pursuant to the notices to that effect dated 18th August 2006 which were duly served on the Personal Representatives of the late Millicent Saunders, and (2) that in the events which have happened the Claimants are entitled to possession of Trelan. I shall dismiss Mr Fowle’s counterclaim, which as I have indicated was not in the event pursued before me. I shall make such orders for costs as appear appropriate having received any further submissions made to me in that regard. (115). Finally, for the reasons indicated above, I shall transfer proceedings back to the Penzance County Court where, sitting as a Recorder, I shall make an Order for Possession. [END]

Cited in 2 later judgments