Application to lift automatic stay — Effect on land — Appellant’s action for possession of land automatically stayed — Judge refusing to lift stay — Whether refusal sterilising land — Whether effect on appellant disproportionate — Appeal allowed
The appellant was the registered proprietor of a plot on an industrial estate, having taken a transfer of the legal title from the owner, L, in 2000. In 1991, L had agreed, subject to contract, to sell the plot to the first respondent, C. C went into possession and paid £40,000, as part of the purchase price, pursuant to that agreement. However, no contracts were exchanged. The second respondent, D, took possession in 1993 as the transferee of C’s business assets, and paid for improvements to the property.
In 1994, L and the appellant brought proceedings against the respondents for possession and mesne profits. The respondents claimed that they held an interest in the land, based upon estoppel. D counterclaimed for rectification of the Land Register. The appellant’s action was not actively pursued. D subsequently went into liquidation, and C regained possession of the plot after taking an assignment of D’s interest in the proceedings.
In 2001, the appellant made a procedural application to revive the action. A district judge found that the proceedings had been automatically stayed under CPR 51 PD 19, and, after applying the considerations set out in CPR 3.9(1), declined to exercise his discretion to lift the stay. The appellant’s appeal against that decision was refused by a judge. On a further appeal, the appellant contended that unless the action was allowed to proceed, the question of title to the plot would never be resolved, and the land would effectively become “sterilised”.
C submitted that such a problem would not arise because, as the person in possession of the land, he had a right to possession that was good against all the world. He further contended that since the sterilisation point had been raised for the first time on the appeal, the court should not overturn the district judge’s decision unless it was satisfied that he would inevitably have lifted the stay had he heard that point, and unless C could be adequately compensated in costs.
Held: The appeal was allowed.
The effect of a refusal to lift the stay would be to sterilise the land. So long as the proceedings were subject to the stay, the appellant’s title would be subject to the unresolved claim for rectification and to C’s possession. A sale of the land would be virtually impossible, since there would be no way to remove C. The matter might be resolved in C’s favour if he were successfully to apply for registration of a possessory title, pursuant to section 75 of the Land Registration Act 1925. However, C might choose not to make such an application, and the land would, in any event, be sterilised for several years until then. The sterilisation point was an important one, and had not been considered by the district judge.
The only way for the appellant to avoid the very serious consequences of a refusal to lift the stay would be to bring a new action. Hence, the district judge should have considered the chances of a second action being permitted. A second action would be impossible unless the appellant served a notice to discontinue the first, or C succeeded in an application to strike it out. Even then, there was a high risk that the second action would be struck out as an abuse of process. There was an analogy with cases where a first action was struck out for inordinate delay. In such cases, following the advent of the CPR, a second claim would usually be struck out, even where the limitation period for such claims had not yet expired: Securum Finance Ltd v Ashton [2001] 1 Ch 291 applied.
The district judge’s decision was flawed. He had failed to consider the sterilisation point or to assess the risk of a second action being struck out. That being so, the Court of Appeal was entitled to exercise the discretion afresh. It did not need to be satisfied, before differing from the district judge, that the sterilisation point, had it been raised before him, would inevitably have led him to lift the stay. Leaving the stay in place was a draconian and disproportionate measure in view of its serious consequences for the appellant.
Marilyn Kennedy-McGregor (instructed by Max Bitel, Greene) appeared for the appellant; Vivian Chapman (instructed by John Collins & Partners with Edward Harris & Sons, of Swansea) appeared for the respondents.
Sally Dobson, barrister
