Wilton Student Developments (Egerton) Limited v Kin Fan Ip [2025] EWHC 2750 (Ch)

“1.The Claimant in this case is Kin Fan Ip, a resident of Hong Kong. 2. The Defendant is Wilton Student Development (Egerton) Limited, a property development company. 3. The case concerns Units 705 and 709 Nebula Apartments, Egerton Street, Sheffield (“the Apartments”). Nebula Apartments is a development of student flats. Chronology 4. In 2014, the Claimant paid 80% deposits on the Apartments to the then developer, Pinnacle Student Developments Ltd. The flats were about £55,000 each (the Land Registry entries say £55,995), so the Claimant paid approximately £88,000 - £90,000 at that time. 5. Pinnacle Student Developments Ltd had financial difficulties and were unable to complete the development of the apartments. 6. A company called Spectrum Buyers Limited was set up to protect the investors. It was granted a charge over the freehold. The Claimant was one of the directors of this company. 7. In November 2017, the Claimant paid the £22,000 balance of the purchase price (£11,000 per apartment) and was granted long leaseholds of the two flats, albeit without physical possession, as the development had not been completed. The Land Registry documents show that on 3rd November 2017, the Claimant became the owner of 999 year leases of the Apartments from 31st January 2015. 8. Spectrum Buyers Limited then took possession of the freehold of the block as mortgagees in possession. 9. On 25th October 2019, following negotiations with potential new developers, the Defendant purchased the freehold from Spectrum Buyers Limited for £1. It was a condition of the Defendant taking over the development that the leaseholders either sold their leases to the Defendant for £22,000 or invested a further £16,000 per apartment towards the cost of completing the development. 10. On 27th January 2020, the Claimant entered into: i) a loan agreement (“the Loan”) with Simon Roue, Naseema Roue, Adrian Todd, Tak Chai and Anthony Byrne (“the Lenders”) whereby he borrowed £33,087.80 over 5 years to be repaid 25% after 2 years from the drawdown date and 75% after 5 years from the drawdown date; and ii) a mortgage (“the Mortgage”) with Simon Roue, Naseema Roue and Adrian Todd (“the Mortgagees”) to secure the Loan. By this document, the Claimant granted a charge over the Apartments “by way of a legal mortgage” (Clause 3.1.1). 11. The Defendant’s case is that the loan was drawn down on the same day (27th January 2020) by payment of the amount loaned into an escrow account held with Harborough London. Mr Roue’s evidence was that Harborough London were managing the properties. 12. On 27th January 2022, on the Defendant’s case, the first instalment was due on the loan. The Claimant didn’t pay. 13. On 4th March 2022, the Lenders/Mortgagees assigned the loan and mortgage to Cirrus Property Group Limited (“Cirrus”). They had given notice to the Claimant of this assignment by email sent on 3rd March 2022. 14. On 14th March 2022, Cirrus’ solicitors Birmans wrote to the Claimant advising that, as he had defaulted on the Loan, the full amount of the loan, together with interest and other charges, totalling £43,281.81 was payable. The letter advised that if this sum was not paid by 5pm on 18th March 2022, Cirrus would take possession of the Apartments as mortgagees in possession. 15. On 18th March 2022, Cirrus took possession of the Apartments and changed the locks. 16. On 7th July 2022: i) Two Deeds of Surrender were purportedly entered into in respect of the lease relating to apartment 709: a) One signed by the Defendant as both the landlord and tenant; and b) One signed by Cirrus as the tenant and the Defendant as the landlord. Mr Monks signed both documents as a director of the Defendant and the latter document as a director of Cirrus. ii) The Defendant granted a long lease of apartment 709 to Kestutis Mazutavicius for £60,000. 17. On 11th July 2022: i) Two Deeds of Surrender were purportedly entered into in respect of the lease relating to apartment 705: a) One signed by the Defendant as both the landlord and tenant; and One signed by Cirrus as the tenant and the Defendant as the landlord. Again, Mr Monks signed both documents as a director of the Defendant and the latter document as a director of Cirrus. ii) 18. On 21st July 2022, the Defendant granted a long lease of apartment 705 to Gabriel Ijomor for £60,000. 19. On 30th August 2022, Unit 705 was rented to a Kudzai Chuma on an assured shorthold tenancy. 20. On 6th September 2022, Unit 709 was rented to Sophie Lowe on an assured shorthold tenancy. The Claim 21. When the Defendant applied to HM Land Registry to change the register to show that the leases had been surrendered and to withdraw the restriction in favour of the Claimant, the Claimant was given notice by HMLR. This prompted the Claimant to commence proceedings. 22. On 6th December 2022, the Claimant sought an injunction to prohibit any alteration to the Register in respect of the Apartments. 23. On 14th March 2023, HHJ Robinson granted this injunction against the Defendant and gave directions for the issue of a Part 7 claim. 24. The Claimant issued this claim on 25th April 2023 seeking (amongst other things): i) A declaration that the basis in which the Defendant sought to register the change of title was misconceived. ii) A declaration that the surrenders were invalid. iii) A declaration that the Defendant had no right in law to take possession in the manner it did. iv) A declaration that the Defendant has breached the Claimant’s property rights in seizing control of his properties. v) Damages for breach of those property rights and of his quiet enjoyment. vi) An account of rents. Vii) Possession of the Apartments.”

“Charged Assets all properties, assets and rights of the Borrower charged by this deed;” “Disposal includes any charge, sale (whether subject to this deed or otherwise), lease, sub-lease, assignment or transfer, or any agreement to enter into any of the foregoing, the grant of an option or similar right, the creation of a trust or other equitable interest in favour of a third party and a sharing or parting with possession or occupation whether by way of licence or otherwise and Dispose and Disposition shall be construed accordingly;” “Properties means each of the properties described in the Part I of the Schedule together with all buildings thereon and all Fixtures subject to and with the benefit of all rights, easements, covenants, restrictions, stipulations, agreements, declarations and other matters affecting and/or benefiting the same, each a Property;” “Secured Liabilities all monies, obligations and liabilities, whether actual contingent, now or hereafter due, owing or incurred by the Borrower, in whatever currency denominated, under clause 2 of this deed or under any other provision of this deed and references to the Secured Liabilities include references to any of them;”

“7. Powers of the Security Trustees 7.1 The statutory powers of sale and of appointing a Receiver (as extended by this deed) shall arise at any time after the execution of this deed. 7.2 At any time after the Borrower has failed to pay the Secured Liabilities when due, or if requested by the Borrower，the Security Trustees may exercise without further notice on and without the restrictions contained in section 103 of the Act all the powers conferred mortgagees by the Act as varied by this deed and all the powers and discretions conferred by this Charge either by themselves or by a Receiver appointed by them, without first appointing a Receiver or notwithstanding any such appointment. 7.3 The Security Trustees shall have the power to lease, make agreements for and accept surrenders of leases and to grant options on such terms as it may consider expedient and without the need to observe any of the provisions of sections 99 and 100 of the Act. 7.4 The Security Trustees may in their absolute discretion release from this Charge any part of the Charged Assets. 7.5 The Security Trustees may at any time obtain, at the Borrower's expense, an up to date professional valuation of any of the Properties and/or the Business and the Borrower and any Surety shall give the valuer all reasonable assistance to enable it to carry out the valuation and permit it such access to any of the Charged Assets, the assets used in any Surety as it the Business and the records and accounts of the Borrower reasonably requires to conduct the valuation. 8. Receiver 8.1 At any time after the Security Trustees have demanded repayment of all or any of the Secured Liabilities or if the Borrower requests that a Receiver be appointed then the Security Trustees may by writing under the hand of any director or manager or other authorised signatory for the time being of the Security Trustees appoint any person or persons to be a Receiver of the whole or any part or parts of the Charged Assets and of all the rights of the Security Trustees contained in or conferred by this deed. 8.2 Where two or more persons are appointed to be a Receiver the Security Trustees may in the appointment declare whether any act required or authorised to be done by a Receiver is to be done by all or any one or more of them for the time being holding office and subject thereto any such persons may act jointly and/or severally. 8.3 Any Receiver shall (subject to any limitations or restrictions expressed in the deed or other instrument appointing him but notwithstanding the winding up or dissolution or bankruptcy at any time of the Borrower) have: 8.3.1 all the powers conferred from time to time on receivers by law and/or statute (including the Act); 8.3.2 power (without limitation) to: (a) take possession of, collect, get in and give receipts binding on the Borrower for all or any of the Charged Assets and all rents and other income in connection with the Charged Assets whether accrued before or after the date of his appointment in such manner as he thinks fit; (b) bring, defend or discontinue any proceedings (including arbitration proceedings) in the name of the Borrower or otherwise as may seem expedient to him; (c) carry on, manage and develop the whole or any part of the Business and/or the Charged Assets, and for this purpose to make use of any of the Borrower’s assets which may be on any of the Properties without being liable to compensate the Borrower for such use; (d) redeem any security, raise or borrow any money from or incur any liability to the Security Trustees or others on such terms and secure the payment of any money as he may think fit and so that any such security may be or include a charge on all or any of the Charged Assets; (e) without the restrictions imposed by section 103 of the Act or the need to observe any of the provisions of sections 99 and 100 of the Act sell, let, surrender or accept surrenders, grant licences or otherwise Dispose of or deal with all or any of the Charged Assets on such terms and conditions as he may think fit in the name and on behalf of the Borrower or otherwise. Any such sale, lease or Disposition may be for any form of valuable consideration and by payable immediately or by instalments spread over such period as he shall think fit and so that any consideration received becomes charged with the payment of all moneys, obligations and liabilities secured by this Deed. Plant, machinery, fixtures, fittings and equipment may be severed and sold separately from the premises containing them and the Receiver may apportion any rent relating to the premises sold without the consent of the Borrower; (f) carry out on any of the Properties any unfinished works of building reconstruction, maintenance, furnishing or equipment; (g) on behalf of the Borrower remove, store, sell or otherwise deal with any chattels not subject to this Charge without being responsible to the Borrower for any loss; (h) promote the formation and trading of companies and arrange for such companies to acquire all or any of the Charged Assets on such terms and conditions as he may think fit; (i) make any arrangement or compromise, allow time for payment or enter into, abandon, cancel or disregard any contracts in relation to the Charged Assets as he shall think fit; (j) purchase or acquire any land or other property and purchase, acquire, grant or release any interest in or right over land or the benefit of any covenants (positive or restrictive) affecting land; (k) make and effect such repairs and improvements to the Charged Assets as he may think fit and maintain or vary insurance cover; (l) make any arrangements or compromise which he thinks fit in relation to any lease of all or part of any of the Properties or to any covenants or restrictions relating to any of the Properties; (m) insure the Charged Assets and any works and effect indemnity insurance or other similar insurance and obtain bonds and give indemnities and security to any bondsmen; (n) appoint managers, agents, officers and employees; (o) without any further consent by or notice to the Borrower exercise on behalf of the Borrower all the power and provisions conferred on a landlord or a tenant by any legislation from time to time in force in respect of any of the Properties but without any liability in respect of powers so exercised or omitted to be exercised; (p) acquire, renew, extend, grant, vary easements, rights, privileges and licences over or for the benefit of the Charged Assets as he considers expedient; and (q) power to do all such other acts and things as may be considered by the Receiver to be incidental or conducive to any of the above matters or powers or to the preservation or realisation of the Charged Assets. 8.4 Any Receiver shall so far as the law allows be deemed to be the agent of the Borrower for all purposes and the Borrower shall be solely responsible for his acts, defaults contracts, engagements, omissions, losses, liabilities, misconduct and remuneration and the Security Trustees shall not be under any liability whatsoever in such regard… 8.8 Neither the Security Trustees nor any Receiver shall be liable to account: 8.8.1 as mortgagee in possession in respect of all or any of the Charged Assets nor be liable for any loss upon realisation whatsoever for which a mortgagee in possession may be liable as such; or 8.8.2 for any money or assets not actually received by it or him whether or not a better price might have been obtained by deferring or advancing any Disposal of the Charged Assets. 9. Effectiveness of Security This Charge: 9.9.1 shall remain in full force and effect as a continuing security unless and until the Security Trustees discharge it and shall extend to cover the ultimate balance due from the Borrower to the Lenders notwithstanding there may have been at any time a balance to the credit of the Borrower on any account between the Borrower and the Security Trustees or any other matter or thing whatsoever; 9.1.2 in addition to and shall be independent of every other security which the Security Trustees may at any time hold for any of the Secured Liabilities and may be enforced without the Security Trustees first having recourse to any such security and without taking steps or proceedings against any person; and 9.3 shall not merge with any prior security held by the Security Trustees over the whole or any part of the Charged Assets.”

“No third party dealing with the Security Trustees or any Receiver or its agents shall whether before, on or after any contract, Disposition or assurance in relation to any Charged Assets in such third party's favour be concerned to enquire whether the Secured Liabilities have become payable or whether the Receiver has been validly appointed or whether any power which the Security Trustees or Receiver purports to exercise has become exercisable or whether any of the Secured Liabilities remain undischarged or to see to the application of any money paid to the Security Trustees or any Receiver nor shall any such third party lending any money to a Receiver be concerned to enquire as to the propriety or purpose of the exercise of such power or as to the application of any money so borrowed.”

“The Borrower by way of security and in order more fully to secure the performance of the Borrower's obligations under this deed irrevocably appoints the Security Trustees and the persons deriving title under it and separately with any Receiver jointly and severally to be its attorney for and in its name and on its behalf and as the act and deed otherwise of the Borrower, at any time after the Security Trustees has demanded payment or discharge by the Borrower of the Secured Liabilities, to execute as a deed or under hand (as applicable) and deliver and do all such which the Borrower is required to execute and do under the covenants and provisions contained in this deed and to make any demand upon or to give any notice receipt or discharge to any person owing monies to the Borrower comprised in the Charged Assets and to execute as a deed or under hand (as applicable) and deliver any charges, legal mortgages, assignments or other security and any transfers of securities required to be executed hereunder and generally in its name and on its behalf to exercise all or any of the powers authorities and discretion conferred by or pursuant to this deed or by which may be required or which the Security or statute on the Security Trustees or which may be required or which the Security Trustees or any Receiver shall deem fit for carrying any sale, lease, charge, disposal other dealing by the Security Trustees or any Receiver into effect or for giving the Security Trustees or any Receiver the full benefit of this deed and generally to use the name of the Borrower and to do anything (without prejudice to the generality of the foregoing) which it or he may reasonably deem proper in or for the purpose of exercising any of such powers authorities and discretion.”

“2.4 The Assignee shall pay any Realisations to the Assignor within 3 Business Days of receiving the same in payment of the Consideration in accordance with Clause 2.5 below until the Consideration is paid in full. “2.6 The Assignee shall provide the Assignor within 5 Business Days of the end of each 3 month period following completion with a written summary of all Facilities collected in the preceding 3 months. 2.7 If the Assignee receives any payment in respect of any Facility or any other sum due to the Assignor by way of Consideration or otherwise, it shall hold the payment on trust for the benefit of the Assignor and remit it to the Assignor forthwith on receipt in accordance with clause 2.4 above.”

“The Tenant with full title guarantee hereby surrenders unto the Landlord the residue of the term of years created by the Lease to the intent that the same shall forthwith merge and be extinguished in the reversion immediately expectant on the term.”

“27. The deeds of surrender filed by the 1st Claimant were both signed by the Defendant as the Landlord and also by the Defendant as the tenant. 28. At no point did the Claimant consent to surrendering units 705 or 709. In any event as a matter of well-established law, an entity cannot be both the landlord and the tenant – there is no landlord tenant relationship if both parties are the same. 29. The deeds of surrender are a sham, in that they purport to surrender the claimant’s properties when he has never consented and the party attempting to surrender them has no right in law to do so. 30. In subsequent correspondence before and during proceedings it’s been averred that the Claimant has no interest in unit 705 or 709, which as a matter of fact is simply incorrect – he is the current leasehold owner and even when deducting the loan amount, he has a sizeable cash stake invested within the properties. 31. Leaving aside the validity of the Defendant seizing the units, the Defendant has treated the properties and the revenue that flows from them as his. There has been no account for profits nor has the Defendant in any way attempted to market or sell the properties. 32. It is averred that the Defendant: a) Unlawfully seized control of the Claimants Units. b) Prevented the Claimant or his agents’ from accessing, marketing, and letting the property. c) Unlawfully granted long leases to the Claimants units. d) Failed to account for any profits. e) Has treated the units as legally and beneficially his in an attempt to unlawfully steal the property from the claimant, perhaps taking advantage of the fact that the claimant is an expat, not residing within jurisdiction and perhaps not fully understanding his proprietary rights. f) Attempted to change the register using with documents that provided no basis to do so. g) Unreasonably failed to provide copies of documents that it attempted to use to change the title register which necessitated the need for the Claimant to issue a Pre -action Disclosure application. a) [sic] Unreasonably refused to undertake not to attempt to change the register until the matter had been resolved. 33. In the circumstances described the Claimant seeks the following: i) A declaration that the basis in which the defendants sought to register the change of title were misconceived. ii) A declaration that the failure of the Defendant to provide details of the documents it attempted to register was unreasonable. iii) A declaration that the deeds of surrenders were invalid. iv) A declaration that the Defendant had no right in law to take possession in the manner it did. v) A declaration that the Defendant has breached the Claimants proprietary rights in seizing control of his properties. vi) Damages for breach of those proprietary rights. vii) Damages for breach of quiet enjoyment of property. viii) An account of rents. ix) Possession of the property. x) Interest on damages pursuant to section 69 of the County Courts Act 1984 at such a rate and for such a period as the court thinks fit. xi) Costs.”

“In relation to paragraphs 26 and 27, it is admitted that Knights were seeking to alter the register by virtue of deeds of surrender over the Units (by virtue of the matters detailed in paragraphs 4-14 and 44 herein). It is, however, denied that the relevant deeds of surrender referred to the Defendant as both Landlord and Tenant. The relevant deeds dated 11 July 2022 (in respect of Unit 705) and 7 July 2022 (in respect of Unit 709), refer to the Defendant as the landlord and Cirrus as the tenant. Copies of the same are appended to the Defence. It is admitted that there were erroneous deeds which referred to the Defendant as both counter-parties thereto, but this issue was rectified with the relevant deeds referred to in this paragraph and appended to this Defence – those deeds being the operative ones which surrendered the leases of the Units.”

“The defendant’s position is that the claimant has no interest now in those units or funds flowing from those units as they have been surrendered.”

“1. Was the loan agreement a regulated agreement for the purposes of the financial Services and Markets Act 2000 (Regulated Activities) Order (SI 2001/544) 2. Was the Loan agreement properly assigned to the Defendant? 3. Did the Defendant have the power to surrender the Claimants leases? 4. If the Claimant did have the power to surrender the Claimants leases, was the surrender conducted lawfully? 5. Does the Claimant have any interest in the units or the funds that flow from them? 6. Does the Claimant have to account for profits?”

“1) Was the Loan Agreement a regulated agreement for the purposes of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)?; and 2) Was the Loan Agreement properly assigned to the Defendant?”

“Registration of the assignment and surrender with HMLR 27. As above, the Lenders and Security Trustees assigned the Loan Agreement and the Mortgage to Cirrus on 4 March 2022. As matters stand, the Security Trustees remain the registered holders of the Mortgage on the title registers of both of Mr Ip’s former units (see office copy entries at pages 99-106). Cirrus is currently unable to apply registration of the assignment at HM Land Registry, due to the terms of the interim injunction which Mr Ip obtained against Knights in these proceedings on 14 March 2023 (which was before the Company was added as a party to the Proceedings), which essentially prevents alterations being made to those titles whilst these proceedings are determined. 28. Cirrus applied, via its solicitors (Knights) for registration of the deeds of surrender at HMLR on 11 July 2022. That application has been delayed (and as such has not been processed by HMLR) because HMLR raised requisitions which Knights have been unable to respond to, due to the terms of the interim injunction referred to above.”

“30. After the evidence and before submissions, Miss Coyle asked me to give a preliminary judgment on whether I was going to consider and therefore needed to hear submissions on three issues. The Defendant’s case was that the Claimant was raising issues at trial that had not been pleaded. 31. I gave an ex-tempore judgment in which I decided that I did not need to hear submissions on two issues that had not been pleaded, as it would be unfair to the Defendant for me to consider them, namely: i) whether the Loan had been drawn down on 27th January 2020; and ii) whether the Claimant had a claim in misrepresentation. 32. In my ex-tempore judgment, I concluded that I would hear submissions and would consider the Claimant’s case against the Defendant that he has an “equity of redemption.”

“The Defendant was deprived of the opportunity to address “collateral purpose”, it not being raised by any party at trial. The nearest reference was when the director of the Defendant stated: “had we sold the leasehold and accounted to the Claimant for his equity, we could have ended up in litigation.”

“10. At the time of surrender of the Claimant’s former leases, the Claimant was in arrears of ground rent and service charge in the sum of £8,641.01 per lease (so, £17,282.02 in aggregate), which Cirrus settled with Wilton in order that the ‘slate be wiped clean’ ahead of the grant of new leases of those units. Accordingly, any assessment of ‘equity’ allegedly belonging to the Claimant in these units must take account of those sums. It is also worth mentioning that the Claimant’s leases could legitimately have been forfeited for his failure to pay those sums. 11. Although the Defendant sold new long leases of these units to third parties for the sum of £60,000 each, the Defendant incurred sale costs of £7,000 plus VAT per unit (commission payable to the sales agent). The Defendant also incurred legal costs on those sales in the sum of around £3,000 plus VAT per unit. 12. It is worth adding that units in the Nebula development are not, in reality, worth close to what the Claimant appears to believe. Attached is a schedule of purchases which Wilton completed of other units in the development in 2022, together with completion statements for each. 13. The list is a true reflection of the value of the leaseholds for units within Nebula. The average price paid by Wilton for those units was just over £29,000. 14. The Claimant’s former units were sold at an increased rate (i.e. Wilton achieved a higher-than-usual sum for those units) because they were sold with a sub-lease in place and with an assured yield guaranteed to the purchaser. Those sub-leases place all obligations for payment of service charge costs (including any extraordinary costs) back on the Defendant. The Defendant has, accordingly, assumed liabilities as a result of having sold long leases of those units at those prices, and I submit that a proper assessment of those liabilities would be required in order to properly determine any question of alleged equity in the units.” “17. Any sums that remained following sale of the new leaseholds and the aforementioned deductions, were reinvested in their entirety into completing the build of Nebula. Therefore the Defendant has not benefitted from any alleged equity in unit 705 and/or unit 709. The development as a whole has been a loss making development for the Defendant due to the extensive works and costs that were required to finish the build in addition to the untimely decline in demand for student accommodation.”

“94. Cirrus had taken possession of the Claimant’s two apartments, for which he had paid £110,000 or so to the initial developer together with a further £32,000 to the Defendant using the Loan. Long leases of the Apartments were sold by the Defendant shortly after possession was taken for £120,000. 95. The amount due under the charge was £43,281.81, together with a few days further interest. 96. So, what happened to the Claimant’s equity? 97. Rather than sell the apartments as mortgagees in possession, Cirrus surrendered the 999-year leases to the Defendant. The Claimant’s pleaded case is that these surrenders were a “sham”. 98. As I indicated during the hearing, this looked like a “kamikaze” move on Cirrus’ part. I said that I could see why the Claimant felt that he had been “ripped off.” 99. As the Claimant put it in his skeleton: “D somehow thinks that as a result of the alleged “breach” he can just pocket the difference and walk away with the £85k extra. D has exploited the fact that most of the investors are foreign and would be unsure of their rights and the law and has unlawfully “extinguished” dozens of investors’ interests and retained illegally significant sums… Even if D had a right as mortgage (sic) in possession, that right does not extend to D retaining all assets and income over and above what was owed…” 100. The Claimant’s barrister put it even more strongly in the skeleton argument that he filed prior to the hearing on 4th – 5th March 2024 – “As mortgage (sic) in possession D has a duty to realise the assets and discharge the debts with the (significant) remainder being returned to C. This has not happened in C’s case nor dozens of other cases and the manner in which D has dealt with the assets is tantamount to a wholesale criminal enterprise.” 101. A Companies House search reveals that Mr Monks is the sole director and majority (more than 75%) shareholder in Cirrus. I asked Mr Monks why Cirrus had surrendered the leases on the apartments, rather than selling them, as the Defendant had effectively done shortly afterwards by granting new leases. His answer was that he had signed the documents that were presented to him by his lawyer and that “had we sold the leasehold and accounted to the Claimant for his equity, we could have ended up in litigation.” 102. At this point, Miss Coyle, representing the Defendant interjected to advise that Mr Monks was giving evidence as a director of the Defendant and not Cirrus and that it would be unfair to Cirrus, who are not a party to this litigation and have not been able to take legal advice to pursue the line of enquiry further. Miss Coyle specifically advised that she has no instructions from Cirrus. 103. Miss Coyle’s submission was that there is no fetter on a mortgagee in possession’s powers. 104. She referred me to clause 7.3 of the Charge, which read: “The Security Trustees shall have the power to lease, make agreements for and accept surrender of leases and to grant options on such terms as it may consider expedient and without the need to observe the provisions of sections 99 and 100 of the [Law of Property Act 1925].” 105. Her submission was that this provision gave Cirrus the power to surrender the lease and that, whilst it might seem harsh, the Claimant had signed up to the terms of the lease and must face the consequences of that following his default on the Loan. 106. She agreed with me when I summarised her submission as saying that the Defendant’s case was “Tough. It is a windfall for us, but you signed up for it and you lose.” 107. Miss Coyle also submitted that, as Cirrus is a separate corporate entity, the Defendant cannot be liable for any rights that the Claimant may have as against Cirrus. She submitted that I could not fairly adjudicate upon matters relating to Cirrus’ actions, as they are not a party to the litigation and have not had the chance to defend their actions or protect their interests.”

“111. I am not satisfied that clause 7.3 of the charge gave Cirrus the right to surrender the lease. My reading of that provision is that it gave the mortgagee the power to i) Lease; ii) Make agreements for leases; and iii) Accept the surrender of leases. 112. I do not read the provision as entitling Cirrus to surrender its own lease. 113. After I circulated a draft of this judgment, Miss Coyle sent a “Table of Suggested Typographical Corrections and Obvious Errors” referring me to Clause 8.3.2(e) of the charge, which gives any receiver the power to surrender as well as accept surrenders of leases and goes on to provide that any consideration received then becomes charged with the payment of monies etc secured by the deed. There was no evidence as to the consideration paid by the Defendant for the surrenders, although Miss Coyle did tell me (after having confirmed this with Mr Monks) that consideration was paid. 114. Even if Cirrus had the power to surrender the leases, by the circuitous route suggested by Miss Coyle, namely by Clause 7.2 giving Cirrus the receiver’s powers under clause 8 even if it did not appoint a receiver, the same principle applies – enforcement must be to secure satisfaction of the debt and no other purpose. 115. I need to tread carefully here, given that Cirrus has not been joined as a party to this litigation, but it is blindingly obvious that Mr Monks had a collateral purpose when signing the surrender of the lease, that purpose being to eliminate the Claimant’s equitable rights following the taking of possession of the Apartments. 116. From Cirrus’ point of view, the surrender of the leases was madness. It can only have been to benefit the Defendant – a linked company – or its owners. As well as being the sole director and 75%+ shareholder in Cirrus, Mr Monks was one of two directors and an owner of between 25% and 50% of the shares in the Defendant. 117. I find that the deeds of surrender were ineffective to extinguish the Claimant’s equity. 118. The Defendant clearly had actual knowledge of the Claimant’s equity in the apartments. The Defendant’s initial attempt to get rid of the leases by signing deeds of surrender itself shows that Mr Monks thought that the actions of the two companies were interchangeable. 119. It would be completely unjust and contrary to any principles of equity for the Defendant to take the surrenders of the leases free from the Claimant’s equity when its director was fully aware of the transactions. 120. The Defendant, having full knowledge, could not take any greater interest in the apartments than Cirrus had to convey. 121. I find that the Defendant is bound by the Claimant’s equity, notwithstanding the deeds of surrender. The fact that the Defendant took subject to the Claimant’s equitable interest is the reason why, in my judgment, the Claimant succeeds, notwithstanding that he has not brought proceedings against Cirrus. The Claimant does not seek any remedy from Cirrus. 122. In the circumstances, it would be unjust for HMLR to register the surrender of the leases until such time as the Claimant’s equity has been satisfied. 123. We know that long leases of the apartments were sold for £120,000 within days of the surrender of the lease. I can understand therefore why the Claimant values his equity at £85,000 (£120,000 minus £43,281.81 or so). For the avoidance of doubt, I am not making any findings about this. 124. I will hear further submissions as to how to conclude matters at the hearing when I formally hand down this judgment.”

“Ground 1 The learned judge erred in law and procedure when concluding that the Appellant, a Freeholder, does not take the surrenders of the leases free from the Respondent’s equity, and that notwithstanding the deeds of surrender, the Freeholder Appellant is bound by the Respondent’s equity because of an alleged collateral purpose: a. The learned judge relies on the fact that the Freeholder happens to have a director that is the same as the mortgagee in possession. This, and that the said director was fully aware of the transactions, is the alleged collateral purpose relied upon. Not only is this ill-defined, this position is not supported in law. There does not need to be purity of purpose. The right to enforce a security interest was a legitimate exercise undertaken by Cirrus, the mortgagee in possession, as was the subsequent surrender – there was no “wholly collateral purpose” to render the enforcement and surrender void, see Quennell v Maltby [1979] 1 WLR 318, 322h, per Lord Denning MR; Downsview Nominees Ltd v First City Corporation Ltd [1993] AC 295, 312g, per Lord Templeman; Çukurova No 2 [2013] UKPC 2; [2016] AC 923, para 73, Meretz Investments NV v ACP Ltd [2007] Ch 197, paras 300–314, Çukurova No 2 [2013] UKPC 2; [2016] AC 923, paras 77–78 and ABT Auto Investments Ltd v Aapico Investment Pte Ltd and Others [2022] EWHC 2839 (Comm); b. Without prejudice to the foregoing, there is nothing in law (nor in the Mortgage Deeds itself) that supports the contention that the equity of a defaulting leaseholder travels from his/her mortgagee that has gone into possession, to a freeholder on a valid surrender by the mortgagee in possession, see Clause 11 of the Mortgage Deeds and the protection to third parties; c. The learned judge did not hear evidence about nor was it put to the Appellant’s director in evidence as to whether and what was the collateral purpose of the Appellant and/or Cirrus.”

“(1) A mortgagee, where the mortgage is made by deed, shall, by virtue of this Act, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed, but not further (namely): (i) A power, when the mortgage money has become due, to sell, or to concur with any other person in selling, the mortgaged property, or any part thereof, either subject to prior charges or not, and either together or in lots, by public auction or by private contract, subject to such conditions respecting title, or evidence of title, or other matter, as the mortgagee thinks fit, with power to vary any contract for sale, and to buy in at an auction, or to rescind any contract for sale, and to re-sell, without being answerable for any loss occasioned thereby; and (ii) A power, at any time after the date of the mortgage deed, to insure and keep insured against loss or damage by fire any building, or any effects or property of an insurable nature, whether affixed to the freehold or not, being or forming part of the property which or an estate or interest wherein is mortgaged, and the premiums paid for any such insurance shall be a charge on the mortgaged property or estate or interest, in addition to the mortgage money, and with the same priority, and with interest at the same rate, as the mortgage money; and (iii) A power, when the mortgage money has become due, to appoint a receiver of the income of the mortgaged property, or any part thereof; or, if the mortgaged property consists of an interest in income, or of a rentcharge or an annual or other periodical sum, a receiver of that property or any part thereof; and (iv) A power, while the mortgagee is in possession, to cut and sell timber and other trees ripe for cutting, and not planted or left standing for shelter or ornament, or to contract for any such cutting and sale, to be completed within any time not exceeding twelve months from the making of the contract. (2) Where the mortgage deed is executed after the thirty-first day of December, nineteen hundred and eleven, the power of sale aforesaid includes the following powers as incident thereto (namely):— (i) A power to impose or reserve or make binding, as far as the law permits, by covenant, condition, or otherwise, on the unsold part of the mortgaged property or any part thereof, or on the purchaser and any property sold, any restriction or reservation with respect to building on or other user of land, or with respect to mines and minerals, or for the purpose of the more beneficial working thereof, or with respect to any other thing: (ii) A power to sell the mortgaged property, or any part thereof, or all or any mines and minerals apart from the surface:— (a) With or without a grant or reservation of rights of way, rights of water, easements, rights, and privileges for or connected with building or other purposes in relation to the property remaining in mortgage or any part thereof, or to any property sold: and (b) With or without an exception or reservation of all or any of the mines and minerals in or under the mortgaged property, and with or without a grant or reservation of powers of working, wayleaves, or rights of way, rights of water and drainage and other powers, easements, rights, and privileges for or connected with mining purposes in relation to the property remaining unsold or any part thereof, or to any property sold: and (c) With or without covenants by the purchaser to expend money on the land sold.”

“Now it has been held that, when the bank holds a charge and there is a clause in it whereby there are to be no tenancies granted or surrendered except with the consent of the bank in writing, then in those circumstances, if the mortgagor does thereafter grant tenancies without the consent of the bank, then those tenancies are not binding on the bank, and the tenants are not entitled to the protection of the Rent Acts. That was decided in Dudley and District Benefit Building Society v. Emerson [1949] Ch. 707. Mrs. Quennell relies on that case. She says that, as transferee of the legal charge, she stands in the shoes of the bank and can obtain possession. The judge accepted that submission. His decision, if right, opens the way to widespread evasion of the Rent Acts. If the owner of a house wishes to obtain vacant possession, all he has to do is charge it to the bank for a small sum. Then grant a new tenancy without telling the bank. Then get his wife to pay off the bank and take a transfer. Then get the wife to sue for possession. That indeed was what happened here. In October 1977, when Mr. Quennell went to the bank, he told them about the tenancies. They said that they did not intend to take proceedings. So he got Mrs. Quennell to do it. In evidence, she said: “I paid £2,500. This was for my husband. I took the charge to make the debt to his bank less onerous. I was aware he wanted to obtain possession of the house to sell it. I merely paid off the charge. These proceedings have been brought to get possession to sell.”

“The courts of equity left the legal effect of the transaction unaltered but declared it to be unreasonable and against conscience that the mortgagee should retain as owner for his own benefit what was intended as a mere security.”

“The next submission on behalf of the first and second defendants is that, even if a mortgagee owes certain duties to subsequent encumbrancers, a receiver and manager appointed by a mortgagee is not under any such duty where, as in the present case, the receiver and manager is deemed to act as agent for the mortgagor. The fallacy in the argument is the failure to appreciate that, when a receiver and manager exercises the powers of sale and management conferred on him by the mortgage, he is dealing with the security; he is not merely selling or dealing with the interests of the mortgagor. He is exercising the power of selling and dealing with the mortgaged property for the purpose of securing repayment of the debt owing to his mortgagee and must exercise his powers in good faith and for the purpose of obtaining repayment of the debt owing to his mortgagee. The receiver and manager owes these duties to the mortgagor and to all subsequent encumbrancers in whose favour the mortgaged property has been charged. The next question is the nature and extent of the duties owed by a mortgagee and a receiver and manager respectively to subsequent encumbrancers and the mortgagor. Several centuries ago equity evolved principles for the enforcement of mortgages and the protection of borrowers. The most basic principles were, first, that a mortgage is security for the repayment of a debt and, secondly, that a security for repayment of a debt is only a mortgage. From these principles flowed two rules, first, that powers conferred on a mortgagee must be exercised in good faith for the purpose of obtaining repayment and secondly that, subject to the first rule, powers conferred on a mortgagee may be exercised although the consequences may be disadvantageous to the borrower. These principles and rules apply also to a receiver and manager appointed by the mortgagee. It does not follow that a receiver and manager must immediately upon appointment seize all the cash in the coffers of the company and sell all the company's assets or so much of the assets as he chooses and considers sufficient to complete the redemption of the mortgage. He is entitled, but not bound, to allow the company's business to be continued by himself or by the existing or other executives. The decisions of the receiver and manager whether to continue the business or close down the business and sell assets chosen by him cannot be impeached if those decisions are taken in good faith while protecting the interests of the debenture holder in recovering the moneys due under the debenture, even though the decisions of the receiver and manager may be disadvantageous for the company.”

“The facts 69. ÇH and ÇFI contend that ATT's decision to appropriate the charged shares was void, even if there was an event of default, because it was vitiated by its improper and collateral reasons. The factual basis of this submission is as follows. 70. The judge found that ATT had originally entered into the facility agreement and its associated instruments in the expectation that ÇH and ÇFI would default, and with the aim of obtaining de facto shareholder control of Turkcell by enforcing the security. 71. As mentioned above, he also found that, in the autumn of 2006, ATT deliberately obstructed the declaration of dividends with a view to starving ÇFI of funds, in an attempt to prevent it from servicing the loan and thereby to provoke a default. He also found that after accelerating and calling in the loan, Mr Reznikovich painted an extremely unattractive picture of the Çukurova Group's financial situation at the press conference in Istanbul on 17 April, in order to hamper the Çukurova Group's attempts to refinance. ATT also issued unflattering and defamatory press releases on 30 April and 10 May at least partly with a view to making it difficult for the Çukurova Group to refinance. 72. The judge characterised the press conference and press releases as acts of bad faith on ATT's part, but found that they were irrelevant because the Çukurova Group succeeded in refinancing anyway. In every other respect, the judge considered that ATT could not be said to have acted in bad faith, because it was acting within its legal rights. He therefore rejected the defence raised by ÇH and ÇFI founded on the allegation of bad faith. The Court of Appeal agreed. Discussion 73. In the Board's opinion the judge's findings afford no basis for treating the appropriation of the charged shares as ineffective, for essentially the reasons which he gave. In equity, a mortgagee has a limited title which is available only to secure satisfaction of the debt. The security is enforceable for that purpose and no other: Quennell v Maltby [1979] 1 WLR 318, 322H (Lord Denning MR); Downsview Nominees Ltd v First City Corpn Ltd [1993] AC 295, 312G (Lord Templeman). It follows that any act by way of enforcement of the security (at least if it is purely) for a collateral purpose will be ineffective, at any rate as between mortgagor and mortgagee. The reason is that such conduct frustrates the equity of redemption which, as Stuart V-C observed in Jenkins v Jones (1860) 2 Giff 99, 107, a court of equity “is bound to regard with great jealousy”. 74. In principle, this is straightforward enough, but the facts are rarely simple. The acceleration of the loan on 16 April 2007 in this case was not part of the process of realising the security. It merely brought forward the date of repayment of the loan and ascertained the amount. Given that there was an event of default, there was a contractual right to do this. It follows that the debt of $1·352 billion (plus interest) was repayable in full at the time when ATT satisfied it by appropriating the charged shares. 75. Under clause 9.3 of the charges, ATT was entitled to “appropriate any charged asset … in or towards satisfaction of the liabilities in accordance with the Regulations”, at its “fair price” (as defined). This means that, by virtue of regulation 18 of the Financial Collateral Arrangements (No 2) Regulations 2003 (“the Regulations”), the lender was entitled to appropriate the security at that price, any difference between the valuation and the liabilities being settled separately. 76. It necessarily follows from an arrangement on these terms that the lender may satisfy the debt by crediting the borrower with the Fair Value of the security and retaining the charged assets as their own property: see the advice of the Privy Council delivered by Lord Walker of Gestingthorpe: see Çukurova Finance International Ltd v Alfa Telecom Turkey Ltd [2009] Bus LR 1613, paras 12–13. As Lord Walker also observed at para 27, this is a remedy new to English law which allowed what was “in effect a sale by the collateral-taker to himself, at a price determined by an agreed valuation process”. 77. ÇH and ÇFI do not dispute that ATT appropriated the charged shares in order to satisfy the debt. They hardly could do so, since appropriation is a mode of satisfying the debt. Their real complaint is that ATT only wanted to do so because that would enable it to obtain control over ÇFI and ÇTH and indirectly of Turkcell, instead of (say) selling the shares onto the market. Since this was the very thing that the contract and the Regulations permitted, it is impossible for them to contend that ATT was exercising its power of enforcement for a collateral purpose. The acquisition of control was a necessary incident of a permitted mode of satisfying the debt. The fact that it was an incident which was highly attractive to ATT does not mean that the right of appropriation was exercised in bad faith. 78. That is enough to decide this particular issue in the present case. More generally, however, the Board considers that if a chargee enforces his security for the proper purpose of satisfying the debt, the mere fact that he may have additional purposes, however significant, which are collateral to that object, cannot vitiate his enforcement of the security. If the law were otherwise, the result would be that the exercise of the right to enforce the charge for its proper purpose would be indefinitely impeded because of other aspects of the chargee's state of mind which were by definition irrelevant.”

“Drawing the threads together, it seems to me that none of the authorities to which I was referred gives unequivocal support to Mr Morgan's submission that the mortgagee must have “purity of purpose”

“The important point for present purposes is that the proper purpose rule is not concerned with excess of power by doing an act which is beyond the scope of the instrument creating it as a matter of construction or implication. It is concerned with abuse of power, by doing acts which are within its scope but done for an improper reason. It follows that the test is necessarily subjective. “Where the question is one of abuse of powers,” said Viscount Finlay in Hindle v John Cotton Ltd (1919) 56 Sc LR 625 , 630, “the state of mind of those who acted, and the motive on which they acted, are all important”.”

“(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 a purchaser is not, either before or on conveyance, concerned to see or inquire 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 damnified by an unauthorised, or improper, or irregular exercise of the power shall have his remedy in damages against the person exercising the power.”

“Mr Tamimi had actual or imputed knowledge of the various contractual documents. However, the allegation of improper exercise of the power of sale depends on the allegation that it was no part of FP's purpose in exercising the power to recover its debt. Mr Tamimi had no knowledge of the internal discussions by the boards of ACP and FP and only limited access to the privileged communications between Mr Olsson and Mr Hawkins. Mr Hawkins had told Mr Ware in terms on 29 April 2002 that FP was taking action “in order to protect its own position as first chargeholder”

“…[A] the Security Trustees may exercise without further notice on and without the restrictions contained in section 103 of the Act all the powers conferred mortgagees by the Act as varied by this deed and [B] all the powers and discretions conferred by this Charge [C] either by themselves or by a Receiver appointed by them…” (6) Sections A and B set out the powers which the Security Trustees may exercise dividing them up into two categories, namely, the statutory powers and the express powers conferred by the Mortgage. Section C sets out how the Security Trustees may exercise those powers, namely, by doing so themselves or by appointing a receiver to do so. Ms Coyle’s construction involves running sections B and C together. But this requires section C to be read as “either on themselves or on a Receiver appointed by them”