Kumari and another v Bedia

  Introduction   1.      There are two actions before me.  In the first, the Claimants, Kanchan Kumari and Punam Khertola, who are sisters, seek possession of 240 Aldborough Road South, Ilford, Essex 1G3 8HG (“the Property”) which was purchased for them at auction by their father, Harbans Lal Khertola, in April 2009, from UK Property Trade Ltd. (in liquidation) (“UKPTL”). They are the registered proprietors. The Property is occupied by the Defendant, Jayshree Bedia, whose assured shorthold tenancy agreement was ostensibly determined on 16 August 2009.   2.      The Defendant defends these proceedings, asserting that she has a beneficial interest in the Property. She contends that the purported sale of the Property into which she entered with UKPTL in September 2008 was in substance an equitable mortgage; alternatively, she contends that this transaction was an unconscionable bargain. She counterclaims for a declaration that the Claimants took title to the Property, subject to her equity and beneficial interest, and thus overriding interest in the Property; she challenges the validity of the Section 21 Notice given to her to terminate her tenancy; and she seeks various consequential relief.   3.      The second action is one brought by Mrs Bedia against UKPTL, which is in insolvent liquidation. It has taken no steps to defend these proceedings and, following its failure to comply with an order for service of its Defence, is debarred from defending these proceedings. There was no appearance on the company’s behalf.   4.      On 10 September 2010, it was ordered that these two actions should be tried together. It is with the first action, however, that the hearings to date have been principally concerned; and although what follows deals specifically with the first action, my findings inevitably mean that the same essential findings are made consequentially in the second action.   5.      These matters, which have had chequered procedural history, have taken a great deal longer to deal with than the original time estimate. The actual hearings, of which there have been five in number, lasted some eight days in total. A number of difficult questions, both of law and fact, have been raised for my determination.   6.      As my review of facts show, this is a case where the consequences for the losing party (or parties) will be extremely hard, particularly so in the case of Mrs Bedia. In cases arising out of the fraud of a third party, it is often left to the victims to dispute between themselves who are the ultimate losers. This is such a case. As was wryly observed during the hearings, this is a dispute between victims.   Background   7.      The circumstances in which this whole matter arose are extraordinary ones. And, from Mrs Bedia’s point of view, they are potentially catastrophic. As it unfolded, without any real gainsay from the Claimants, the story is one of a vulnerable woman, who was cynically defrauded, although, as the evidence showed, it was her own naivety and folly which made all this possible. As a consequence of this, she faces financial destitution, for herself and her dependent family.   8.      Mrs Bedia, who was born in Bombay, came to England in 1984. She received a good education, attending school and college in India, obtaining a degree of Bachelor of Commerce, having completed studies in accounting, auditing and economics. She studied and did all her exams in English. She married in the year of her arrival in this country and has not worked since the birth of  the first of her two sons, in 1988. Her husband, who worked for the Ford Motor Company, died unexpectedly on 24 July 1998, at the young age of 41 years, leaving her widowed with two young sons, one of whom (Ajay) is disabled.   9.      The Property, which was the matrimonial home, was in joint names, as was the mortgage over it, although, no doubt by living prudently, she was able to save sufficient to clear this. The Property was then put into her sole name, with the assistance of her brother-in-law and a family friend, who is a social worker. She has no recollection of a solicitor being involved. Following her husband’s death, in addition to a small pension of £14 p.w. from Ford, she received a state pension, a disability allowance for Ajay and also small benefits (including tax credits). By about September 2007, she was in receipt of pension and benefits totaling about £270 p.w. and had savings of about £5,000. By this time, the Property was worth in excess of £200,000.   10.  Whilst Mrs Bedia was by nature careful and prudent, I have no doubt that money was tight and that, like anyone in such a situation, she would have welcomed more money to spend for herself and her family, and to secure their futures. It was in this state of things that fraudsters came into her life. Vulnerable to the attraction of receiving a very substantial sum of money, she was easy prey for these fraudsters. She altogether abandoned her good sense and, in the course of the ensuing months, she took a path which threatens her and her small family’s financial ruin. If, however, she is able to escape from the consequences of what she has done, great loss will be caused to the Claimants and their father.   The fraud   11.  That this fraud was successful almost beggars belief; but, succeed it did. The manner in which this was practised was clearly explained in the course of these proceedings and the payments she was induced to make to the fraudsters are supported by financial and other records produced by Mrs Bedia.   12.  The story is this. In about October 2007, Mrs Bedia received a letter, addressed to her, from an organization calling itself ‘Euro Millions International S.A.’, purporting to confirm that she had won a share in a lottery prize of Euros 1 million. This came a considerable surprise to her, as she had never played the lottery.  When she contacted Euro Millions International S.A., she spoke to a man calling himself ‘Don Ivan’ and he explained to her that the purchase of a lottery ticket was irrelevant, because winners were randomly selected from data they held and that her name had come up in the winners’ list. Even though the country code she dialled was that of Spain, she thought that because Don Ivan’s voice was ‘African’ and the suffix ‘S.A.’ appeared after the name of the company shown in the letter, the lottery in question was South African, although she said also that she “did not understand them too clearly”. She was told not to discuss the matter with anybody, as she might be robbed or heavily taxed; and she was told to telephone Euro Millions’ agent, Infinity Security Company.   13.  The story thereafter is one of both extraordinary naivety and of utter folly on her part. She was asked to pay £1,000 in respect of their ‘administration charges’ and, preying on her obsession that she was entitled to share in substantial lottery winnings, over the ensuing months she was induced to make as series of further payments, exhausting her own resources and putting herself heavily into debt. I will not dwell on the details or the extent of Mrs Bedia’s gullibility; suffice it to say that by about August 2008, she had paid sums paid totaling £121,190 to these fraudsters, by means of a series of payments to accounts designated by them, induced by a series of assurances that the scheme was legitimate and that these payments were required to secure the release to her of the entire prize, as the other ‘winners’ had not paid the requisite administration charges and had been disqualified as participants. The money came from a variety of sources: she exhausted her savings; she took out unsecured loans (which she is still repaying and she borrowed from friends, one of whom, on being told by her the actual purpose for which the sum of £6000 she was borrowing was to be put, told her (as she admits) that she was “crazy”.   14.  By the end of August 2008, Mrs Bedia had lost all reason, at least where these fraudsters were concerned. Incredible to relate, despite all these payments and the financial problems she was making for herself, she remained convinced that this lottery prize would be released to her. She was eventually told that she had to make a yet further payment, just short of £70,000, with the assurance that if this final payment was made the lottery money would be paid into her account within 3 days. And despite having made a series of payments totaling £121,190 during the preceding 9 months, in reliance upon a series of broken promises, Mrs Bedia was convinced that winnings from a lottery in which she had even not participated would at long last be released to her.   15.  As I have indicated, Mrs Bedia’s account of how she became a victim of this fraud has not been gainsaid by the Claimants, on whose behalf this was very thoroughly probed; nor realistically could this have been challenged, especially in the light of what was to follow.   The obtaining by Mrs Bedia of £70,000 from UKPTL   16.  The actual sum requested by the fraudsters, as the final payment required to secure the release of the lottery winnings was £66,000, but, to give herself a small cushion, Mrs Bedia resolved to raise £70,000. She had exhausted her savings; she was unable to borrow from reputable financial institutions – she tried and failed to get a mortgage from Abbey National; and by now, she was too embarrassed again to approach her friends, especially those who had already lent money to her. Her only remaining asset was her unencumbered house, which, by this time, was worth not far short of £250,000. I conjecture that, saddled with debts and having exhausted her savings, Mrs Bedia was almost at her wits’ end. It was in these circumstances, that she came into contact with UKPTL, in consequence of which the two actions now before me have been brought.   17.  Mrs Bedia’s own evidence, about the limitations on her ability to raise money is critical to an understanding of her case. When questioned about her situation in August 2008, she said this: “I recognised having regard to my circumstances I would not be able to borrow money on mortgage on my house.”   18.  It was with this understanding that she looked at other ways in which she could use her house to raise the sum of £70,000 she was so desperate to lay her hands on. She found an advertisement in a local newspaper, of 30 July 2008, placed by UKPTL, which offered: “CASH NOW for your property! Immediate help with: …Sell & Rent back….all Fees paid. Instant Decision. Call us now  FREE for a fast and friendly service.” A telephone number was given.  And this she duly did. The only direct oral evidence about her dealings with UKPTL came from Mrs Bedia herself.   19.  Mrs Bedia first called UKPTL  in about early August 2008 – the precise date is not known and is immaterial – and told the person (unknown) to whom she spoke that she urgently needed to borrow £70,000, and asked whether this could be made available immediately. She told him that she believed the Property to be worth more than £200,000, but was told that “they would only to agree to make £70,000 available to her quickly if I agree to sell the Property to them and buy it back and that I would not be able to raise the money through a mortgage so quickly”. This cannot have been clearer and it is likewise clear, as Mrs Bedia acknowledged throughout her evidence, that whilst her wish was for a short term loan pending receipt of enormous lottery winnings, the only basis which UKPTL was prepared to make money available was on the basis of a sale and buy-back arrangement.   20.  After an initial show of indifference, UKPTL telephoned Mrs Bedia to express an interest; and on 24 August 2008, Nadeem Wahid visited the Property, where he met Mrs Bedia and one of her sons, inspected the Property and made some enquiries of her neighbour. It was agreed that she would sell her home to this company for £ 70,000 with a right to repurchase it for £92,000 in 8 weeks’ time. Mrs Bedia was convinced that, by that time she would have received her ‘winnings’. She also said, and I accept this, that she made it clear that the money would have to be made available within 3 days.   21.  Mrs Bedia did not then, and did not at any relevant time thereafter tell Mr Wahid or anyone else at UKPTL the true reason why she needed to borrow this money so urgently. When she was asked by Mr Wahid, she told him that the money was required in connection with family matters, which she enlarged upon when the arrangements for the actual sale of the Property were concluded, a few days later.   22.  Mrs Bedia stated in her evidence that she did not have a family solicitor and that she had not previously used the services of any solicitor, having relied upon family and friends when help had been required. She likewise told Mr Wahid that she did not have one and he offered to help her find a solicitor to act on her behalf on the sale of the Property to his company. Mrs Bedia said in evidence that she accepted this offer, because “it was not possible for me to find a solicitor as I needed the money within three days. I knew that if I got a solicitor there would be a long procedure and I wanted to avoid that”. I conclude from this evidence that Mrs Bedia was obsessed only with getting the money and that the intervention of getting a solicitor, whilst necessary, was nevertheless at that time regarded by her as an irritant and irrelevant to the decision she had made, from which she would not be deflected.   23.  Mrs Bedia’s evidence became a little unclear with regard to the sequence of events thereafter, although the essence of what occurred is clear enough.    24.  As I have understood it, Mr Wahid and a solicitor,  Inderjeet Deu, attended the Property on 3 September 2008, although from what appears to be Mr Deu’s conveyancing file, which was obtained for the purposes of these proceedings, it would seem that there may have been telephone contact between him and Mrs Bedia the previous day. There is a manuscript attendance note dated 2 September 2008, with the contents of which she very largely agrees, confirming such a conversation. It is in these terms:   (1)   Spoke to client to take instructions.   (2)   Said she was selling the house for £70K and wanted to buy it back in 8 weeks for £92K.   (3)   Said that the money was required by uncle in Spain for a wedding & for a property client was buying there. The balance would come back from family to purchase the property (4)   Explain to client that they were selling at a significantly reduced price but she was adamant she wanted to proceed and that she would be able to buy back the property.   (5)   Said she tried to get a loan but couldn’t.   (6)   Said I require a waiver letter to be signed. Client said that was ok.   (7)   Client aware of significant risks involved if she couldn’t raise money to buy back the property.   (8)   Client also asked me to speak to her son, who confirmed above, Ravi.   25.  Mr Deu is, apparently, a sole practitioner, practising as Ashley James, from the same address then given for UKPTL, although I do not believe this fact was revealed to Mrs Bedia, when he and Mr Wahid visited her on 3 September 2008. It is to be inferred, from the fact that Ashley James subsequently acted for UKPTL on the sale of the Property, that Mr Deu was closely associated with that company and those behind it. Although concerns have been legitimately expressed with regard to his perceived lack of independence, I nevertheless conclude that, even if this close relationship had been disclosed to Mrs Bedia, she would not have been deflected from her obsessive determination to obtain the money on virtually any terms.   26.  The disclosed Ashley James paperwork relating to this transaction, to which Mrs Bedia was taken in evidence and with which she largely agreed, confirms that she was both extremely anxious and very willing for the transaction to proceed, although she also stated that she was adamant that the money would have to be paid over within 3 days. In fact, this did not happen, but, in the event, even though Mrs Bedia originally asserted her belief that it was the failure to make these monies available which resulted in her not getting her ‘winnings’, this became immaterial; on Mrs Bedia’s own account, when the money did materialise, she contacted Euro Millions International S.A. and, having been assured that late payment would result in the release of these moneys, she made this last payment of £66,000, with the inevitable result that this, too, was lost. The overall sum paid by Mrs Bedia to these fraudsters therefore amounts to about £187,000 and she faces also the loss of her home and continuing liabilities to repay substantial debts.   27.  Mrs Bedia stated that when Mr Deu came to the house, he told her that he could act for her, but “that he didn’t have to. He gave me a free choice.” This is confirmed in Mr Deu’s client care letter to Mrs Bedia dated 2 September 2008, which she signed on the occasion of his visit, the next day. She said, as confirmed also in the attendance note of 2 September 2008, that Mr Deu discussed the proposed transaction with her – “he asked why I needed the money” – and very significantly, she added this: “If I had told him that I wanted the money for the lottery, I wouldn’t have got the money.” She was clear that she told Mr Deu this on 3 September 2008 and that both Mr Wahid and her son Ravi were present when this was said.  As it was, she falsely told both men that the money was required for a family wedding and to assist with the purchase of a property in Spain, confirming the accuracy of what is set out in Mr Deu’s attendance note of 2 September 2008. It is thus clear that she repeated to Mr Deu what she had said to him over the telephone the previous day, in Mr Wahid’s presence.   28.  The matter does not rest there. She explained that Mr Deu brought with him various completed documents for her sign, and that having examined the deeds to the Property he prepared a contract for her to sign. (I infer that this was by the manuscript insertion of basic particulars into a pre-typed form of contract.) She also signed an Assured shorthold tenancy agreement. The documents he produced included a typed letter from him on Ashley James letter heading dated 2 September 2008, which is in these terms:   “I write further to your sale of the above named property at a sale price of £70,000.00 and you have agreed to buy the property back within 8 weeks at £92,000.  You should be aware that you are selling the property for significantly less than the market value and that if you are unable to raise the sum of £92,000.00 within 8 weeks you will not be able to purchase the property back.             You should therefore consider carefully whether you are happy to proceed on this basis.             You should therefore carefully consider whether selling through an estate agent to obtain a higher price or other route would be a better option for you. If you do wish to proceed on this basis please sign this letter below.”   29.  Mrs Bedia confirmed that she read this letter through carefully and understood it, before she signed it. Although a little unclear, her signature is dated ‘3/9/08’.  She confirmed that this accurately described the transaction she was entering into. She told Mr Deu that the Property was worth more than £200,000 and that she was selling for much less; that she understood the difference between borrowing on mortgage and selling the Property, even though her intention was just to ‘borrow’ £70,000, believing that the Euro Millions money would be paid to her immediately, and thus in time for her to repurchase the Property for £92,000.  When I asked her again carefully to read this letter, which she did, she confirmed that she understood it, now as she did when she had signed it.  She clearly explained that because she could not get the money on mortgage, she would have to sell the Property. She stated that Mr Deu also told her on 3 September 2008, when he met her at the Property, that she should carefully consider going ahead with the transaction and that he discussed another option, which was to sell through an estate agent, confirming what he had recorded in writing, although she says that she told him that she just wanted to ‘borrow’ £70,000 and did not want to sell her house at all. She said that the only reason for going ahead was that she was sure that Euro Millions International ‘would come through’, clearly understanding that if she got the £70,000, this would be on the basis of her selling the Property for that sum and having to buy it back for £92,000. And most critically, she clearly understood that: “I would lose the house if I didn’t repay on time.”   30.  Also, contained in the Ashley James conveyancing file is a typed attendance note dated 3 September 2009 (a mistype for 2008) to which Mrs Bedia was carefully taken and which she also agreed is an accurate record of her conversation with Mr Deu on 3 December 2008. I set this out in full:   “Spoke to Mrs Bedia to confirm instructions before proceeding with the matter.     Client told me that she had agreed to sell the property 240 Aldborough Road South, Ilford, IT3 8HG to UK PropertyTrade for £70,000.00 but had agreed to buy the property back after 8 weeks for £92,000. She said she would be allowed to stay in the property rent free for the 8 weeks until she bought back the property.   I asked the client why she was selling. She advised that she was selling the property to fund a family wedding and to help her uncle in Spain purchase a property. Client confirmed that she was selling the property of her free will and was not being influenced by anyone. Client said she would sign the declaration confirming this.   Asked the client how she was going to obtain the monies required to re-purchase the property. She advised that the monies were to come from uncle in Spain. That they were guaranteed.  I asked what if her uncle did not have the monies. Client advised that she had other family members who would send her the monies.   Told the client that if this money was not forthcoming within 8 weeks she would lose the right to purchase the property. Client fully understood this. Told the client that she would have to sign a disclaimer to this effect and she agreed.   I also asked client if she had considered getting a loan. Client said that she had approached many loan companies but they had refused her a loan. Saw copies of letter confirming this.   Also asked client if she had considered selling through an estate agent. Client said she did not wish to go down that route as she could not buy the property back in that case. Explained to client the risks associated with not having the money to buy back the property. Ie that she would lose the property and have to move out. Client understood and wanted to proceed.   It also transpired that during the course of conversation that the client has approached UK PropertyTrade on a number of occasions and told to ensure that she could meet her obligations in respect of buying back the property. Client had initially approached UK PropertyTrade around one month before they agreed to purchase the property after client was adamant that she wished to proceed and had investigated her other options.”   With the exception of the final paragraph, as to which Mrs Bedia says that the telephone conversation in about early August 2008 was her first contact with UKPTL, she agreed with the contents of this attendance note.   31.  For completeness, I mention that it is recorded in a manuscript attendance note dated 4 September 2008 that Mr Deu telephoned Mrs Bedia to tell her that completion was “set for 1st October 2008.” And that, having gone through the conditions of the Contract, “Client was happy for me to exchange on above basis.”   32.  Whilst, on the face of it, Mr Deu appears to have covered the essential ground, and Mrs Bedia fully understood the nature and implications of the transaction into which she was entering, the fact remains that this transaction was, on its face, one which must have caused any competent solicitor the gravest anxiety. Whether Mr Deu sufficiently discharged his duties to Mrs Bedia is something I must consider with care, in the context of determining, as Mrs Bedia now contends, whether the transaction should be set aside as an unconscionable bargain.   33.  An added, and significant, concern is that, according to Mrs Bedia’s uncontested evidence, Mr Wahid was present throughout the whole of the time that Mr Deu was with her. I am told, and I must accept, that at no time did Mr Deu attempt to speak to his client on her own.   34.  To complete this part of the narrative, Mrs Bedia was taken to the offices of a local solicitor, probably (although the date is unclear) on 5 September 2008, where she signed a statutory declaration of solvency, containing this confirmation:   “I hereby confirm that I transfer the above property exercising my free will and have not been forced in any way by any person group or organization and further this transfer is not an attempt on my part to take this asset away from my creditors as I do not contemplate bankruptcy proceedings being issued against me.”   Mrs Bedia explained that she was taken to that solicitor’s office for this purpose by Mr Wahid, and was accompanied by Mr Deu.   35.  Although the money materialised later than the 3 days Mrs Bedia had required, it was accepted by her and sent off to the fraudsters, as I have previously explained. Contracts were exchanged with UKPTL on 4 September 2008 and the sale was completed on 18 September 2008. She did not, of course, hear anything further from the fraudsters and was unable to exercise her option to repurchase the Property within the 8 option week period, which expired on 13 November 2008, of which date she was reminded by Mr Deu in a letter dated 7 November 2008. On 14 November 2008, Mr Deu again wrote to confirm that, having heard nothing further from her, he was closing his file.   36.  Mrs Bedia was granted an assured shorthold tenancy for a fixed term of 6 months from 17 November 2008 to 16 April 2009, at a fixed rental of £1,000 payable monthly in advance.  (The original arrangement was that she would be granted a tenancy rent free for the first two months and thereafter at this rate.) Mrs Bedia acknowledges that she has not paid any rent and that she remains in occupation with her sons, to this day.   Sale of the Property by UKPTL   37.  Following Mrs Bedia’s inevitable failure to exercise the option to repurchase, she received letters from UKPTL pressing for the rent payable under the tenancy agreement she had signed, which she could not pay. Her attempts to obtain a quote from UKPTL for the repurchase of the Property were unproductive, she being told that her right to repurchase had been lost after 8 weeks.   38.  On 28 February 2009, Mrs Bedia wrote to UKPTL, stating (apparently for the first time) that she was able to finance the re-purchase of her home, reminding the company that the agreed price was to be £92,000 odd, but the company declined to discuss this, presumably interpreting (correctly in the event) that she could not longer buy the Property back for its true market value.   39.  In the early part of 2009, UKPTL put the Property in the hands of agents (Barnard Marcus & Co.) and Mrs Bedia was told that it would be sold by auction. She said that she was forced to allow viewings to take place, under threat of legal action if she refused.  The viewings apparently took place on 21 and 22 April 2009. Mrs Bedia states that she was present throughout on both these occasions, as was a representative of UKPTL, Qusain Khan. She says that she told every viewer that she was in dispute with the company and that, despite Mr Khan’s attempts to silence her, she warned each that it was her property and that UKPTL was not entitled to sell it.   40.  Mr Khertola says in his evidence that he personally viewed the Property to see if it was suitable for his daughters, where he saw a young smartly dressed Asian man (presumably Mr Khan), who said that he was there ‘from the agency’; that Mrs Bedia was not present; and that no-one told him not to buy the Property or that there was any dispute involving it.  In contrast, Mrs Bedia says that Mr Khertola was not one of the viewers on either of these occasions, as she would have recognized him; and she asserts further that if he had attended, she would have given him the same warning as she gave to all other viewers. I have no hesitation in accepting Mr Khertola’s evidence about this in preference to that of Mrs Bedia. These were distressing times for her and I am confident that she could be mistaken about this. Mr Khertola’s evidence about this (and other matters) was impressive. I observe also that Mr Khertola’s evidence was that “there were quite a few people bidding for the property”, which suggests that not over-much attention was paid to anything Mrs Bedia may have said to potential purchasers. Mr Khertola contacted his solicitor, Paresh Gandhi, before the auction and gave him some preliminary details. He was advised that the assured shorthold tenancy to which it was subject could be terminated and Mr Khertola accordingly determined to bid for the Property. This was the first time he had purchased a property at auction.   41.  Mrs Bedia contacted solicitors, Avery Emerson, who, on 24 April 2009, wrote to UKPTL, asserting “that her present circumstances have been taken advantage of by yourselves and the original sale of the property is now in dispute”. They asked for the property to be withdrawn from the auction list for the following Monday. They likewise wrote to the auctioneers and to Mr Deu, who had by then been identified as the solicitor acting for UKPTL on the sale. Mr Deu must before then, therefore, have known that Mrs Bedia was disputing UKPTL’s right to sell the Property, yet he continued to act, no doubt believing that his duties to Mrs Bedia were at an end. In the event, the sale went ahead; the injunctive proceedings threatened by Avery Emerson were not pursued, probably because funds were not available – I do not know if legal aid was applied for – and, somewhat surprisingly, these solicitors did not enter, or seek to enter, a caution or restriction on the title, to prevent a sale. As the reasons for this failure have not been disclosed,  and as the matter was not explored in any real detail at trial, I refrain from criticism. A restriction was entered on the register of title, nevertheless, on 6 January 2010, presumably by Mrs Bedia’s current solicitors.   42.  The sale of the property duly went ahead and Mr Khertola was the successfully bidder, at £236,000. Contracts were exchanged in his name, but completion, some months later, was in the joint names of his daughters.   43.  On 3 June 2009, Mr Khertola personally served a Section 21 Notice on Mrs Bedia at the Property on his daughters’ behalf, with the intention of terminating the tenancy. Mrs Bedia and her sons have remained in occupation and, as I have said, have paid no rent or other sum in respect of their occupation.   44.  On 2 September 2009, the first action, that in which possession is claimed by the Claimants, was commenced. On 3 November 2009, Mrs Bedia commenced the second action against UKPTL, seeking to avoid the transaction, on the grounds that it was in substance an invalid mortgage, alternatively that it was unconscionable bargain, and seeking consequential relief.   Issues for determination   45.  It has been agreed by the Parties that the following are the issues that need first to be determined:   1.      Did the contract dated 4 September 2008 between Mrs Bedia and UKPTL (‘the Contract’) constitute: (i)                  an outright sale of all the estate and interest of Mrs Bedia in the Property? or (ii)                a mortgage enforceable in equity?     2.      If the Contract was a mortgage in equity, to what extent were its terms and conditions – (i)                  valid and enforceable? or (ii)                void?   3.      If the Contract was an outright sale of the Property, was it an unconscionable bargain?   4.      If the Contract was either (a) a mortgage enforceable in equity or (b) an unconscionable bargain: (i)                  did Mrs Bedia retain an interest in the Property that was capable of binding UK PTL? and (ii)                are the Claimants bound by any such interest.   5.         If the Contract was neither a mortgage enforceable in equity or an unconscionable bargain, was the Section 21(2) Notice dated 2 June 2009 validly served and effective to terminate the Assured Shorthold Tenancy?   Issue 1.   46.                                         Mr David Parry, Mrs Bedia’s Counsel, to whom I am much indebted for his assistance throughout this trial, contends that it is the substance of the transaction between Mrs Bedia and UKPTL with which the Court is concerned, notwithstanding it has the form of an outright sale, on completion of which Mrs Bedia ceased to have any right or interest in the Property. He contends that the Contract was a sham, because it did not represent the true parties’ agreement, which, he contends further, was that Mrs Bedia wished to borrow £70,000 and did not intend to sell the Property outright for that sum. Having regard to Mrs Bedia’s evidence, that she understood what the transaction involved, this was a courageous submission.   47.                                         The concept of a ‘sham’ document was discussed in Welsh Development Agency v. Export Finance [1992] BCC 270, in which Snook v. London West Riding Investments Ltd [1967] 2 QB 650 was cited. The following passage from the judgment of Diplock LJ (as he then was) at p. 683 was drawn to my attention:   “…for acts or documents to be a ‘sham’ with whatever legal consequences followed from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. No unexpressed intentions of a ‘shammer’ affect the rights of a party whom he deceived.”   48.                                         The argument advanced on behalf of Mrs Bedia is that, because of what she told Mr Wahid and Mr Deu at the meeting on 3 September 2008, Mr Wahid knew that Mrs Bedia was not willing to sell the Property outright. He contends  that, by requiring her to sign the Contract in the form in which it was drawn, he intended that she should be precluded from re-purchasing it, and that this cannot be allowed to affect her right to repay what she owed and thus to release the legal restriction on the Property. (What she ‘owed’ was made not altogether clear.)   49.                                         This submission is, in my view, factually unsustainable. From my lengthy review of the events surrounding the signing of the Contract by Mrs Bedia, it is clear to me that Mrs Bedia knew precisely what the transaction legally entailed, even though her intention and expectation was that she would be able to pay the sum required (£92,000) within 8 weeks. The explanations and warnings she received, from both Mr Deu and Mr Wahid, both orally and in writing cannot have been clearer. Mr Parry’s submission to my mind, elides the distinction between Mrs Bedia’s purpose in entering into the transaction and the actual legal form it took. There can be no basis, in my view, for contending that the common intention was other than to effect an outright sale, with the right to re-purchase within a strictly limited period.  There is no basis for contending that UKPTL had any covert or unexplained intention in that regard, or that Mrs Bedia, who was determined to get her hands on the money at almost any cost any terms, and who was herself the deceiver, can in any way be regarded as a deceived party. It is thus not possible to conclude that the Contract did not represent these parties’ true agreement.   50.                                         Mr Edward Hewitt, the Claimant’s Counsel, to whom I am likewise indebted for the considerable assistance he gave me throughout this trial, took the matter a good deal further.  He referred me to the comparatively recent case of Dutton v. Davis [2006] EWCA civ 694 and to the more recent case of Brighton and Hove City Council v. Audus [2010] 1 All ER (Comm) 343.  These are examples of recent approaches to the determination of whether a transaction that bears all the characteristics of a sale is in fact a sale, or something different. In these cases, as in Welsh Development Agency, the court determined the substance of the particular transaction before it by examining the detailed terms of the documents themselves and then by identifying its legal substance, in which context the following passage from the judgment of Morgan J was drawn to my attention:   “[51] The modern approach to an issue as to whether a transaction is in substance a security transaction or has some other character is stated by the Court of Appeal in Welsh Development Agency v. Export Finance Co. Ltd [1992] BC LC 148. One of the issues in that case was whether the transactions were by way of absolute sale or by way of secured loan. The court (Dillon, Ralph Gibson and Staughton LJJ) held that the transaction was by way of sale.  The documents in that case took the form of a sale transaction. It was not suggested that the documents were a sham or a pretence. The court examined the detailed terms of the documents and identified the legal substance of the matter, as set out in those terms, as being in accordance with the form,  that is as a sale and not a secured loan. Staughton LJ pointed out (at 185) that one was seeking to ascertain the legal nature of a transaction and not its economic effect. There were many ways of raising money besides borrowing. If the transaction is not in the form of a loan it is not to the point to say that its object was to raise money or that the parties could have produced the same result more conveniently by borrowing and lending money. He identified two ways of examining the question. The first was the external route and the second was the internal route. The external route involved the allegation that the written document did not truly represent the agreement of the parties in that it was a sham or pretence. The internal route involved an examination of the written agreement in order to ascertain its legal nature from the terms contained in the document.”   51.  Mr Hewitt also drew attention to the following striking similarities between  Dutton v. Davis and the instant case:   (i)                  the property was transferred in return for an option to re-purchase and an assured shorthold tenancy agreement; (ii)                the consideration for the transfer was significantly below the market  value of the property; (iii)               the consideration for the transfer was determined by reference to the sum required by the vendor, and not to the market value of the property; (iv)              the price payable to exercise the option to re-purchase was calculated so as to include a fee to be received and retained by the purchaser; (v)                prior to the transfer, the vendor made a declaration of solvency confirming his ability to pay his debts as they fall due without recourse to the interest in the property to be transferred; (vi)              the vendor was warned that if he failed to exercise the option to re-purchase within the option period he would not longer be able to re-purchase the property; (vii)             the vendor failed to exercise his option to re-purchase; (viii)           all the contemporaneous documentation referred unambiguously to a “sale” and an “option to re-purchase”.   52.  Mr Hewitt also drew attention to the fact that the Court of Appeal deemed the following factors to be irrelevant in determining whether the transaction was in substance a sale:   (i)                  the economic pressure to which  the vendor was subject [37]; (ii)                the true nature of the role played by the purchaser’s solicitor [38] ; and (iii)               the provenance of the drafting of the document [39].     53.  I conclude, therefore, that in relation to Issue 1 Mr Parry’s submissions are premised on a factual situation which is unsustainable and that the Contract, properly construed, constituted an outright sale of all the estate and interest of Mrs Bedia in the Property.   Issue 2   54.  As the contract, in my view, was so clearly not a mortgage enforceable in equity, this issue does not call for determination, and I will not decide this on a hypothetical basis. I simply observe, that the question of how the £70,000 which Mrs Bedia received from UKPTL is to be dealt with was rather left ‘hanging’ and has not been satisfactorily explained – at least to my mind. This aspect was not dealt with in Mr Parry’s written submissions and the conclusion, rather late in the day, that this would ‘somehow have to be taken  into account’ was rather too imprecise to be of real assistance. Had I resolved Issue 1 in Mrs Bedia’s favour, I would have required further assistance – as I shall, in the light of my findings on Issue 3.   Issue 3   55.  Because I have found that the Contract took effect as an outright sale of all the estate or interest of Mrs Bedia in the Property, the question arises whether it was nevertheless an unconscionable bargain. This has been a very difficult issue to resolve.   56.  The general principles of the doctrine of unconscionable bargain are described in Halsbury’s Laws of England 4th Edn, vol  31, as follows:   “854. Jurisdiction to grant relief   As part of the jurisdiction to grant relief against constructive fraud, courts of equity have acted to protect persons in cases in which it was apparent from the intrinsic nature and subject of the bargain itself, that it was one which no person in his senses and not under delusion would make on the one hand, and no honest and fair person would accept on the other; in fact, an inequitable and unconscionable bargain.   The principle, which originally mainly protected expectant heirs, has now been extended to other persons under pressure without adequate protection. The usual requirements for showing a prima facie unconscionable bargain are that it was a purchase from a poor and ignorant or weak-minded person, that it was a purchase at a considerable undervalue and that the vendor had no independent advice. Where those requirements are satisfied the onus is on the purchaser to show that the purchase was, fair, just and reasonable.”   57.  When the issue arose before Park J. in Singla v. Bashir [2002] EWAC 883 (Ch), he described the doctrine, in these terms:         “28. Unconscionable bargain.   There is a somewhat narrow doctrine of equity under which the court may set aside a transaction on the ground that it was an unconscionable bargain. The cases show that it requires a very strong case before the courts will intervene on this ground. The bargain has to be more than hard, unreasonable or foolish: it must be proved to be unconscionable in the sense that one of the parties has imposed the bargain in a morally reprehensible manner. His behaviour must be characterised by some moral capability or impropriety. There needs to be unconscientious or extortionate abuse of power. See Lord Templeman in Boustany v. Pigott (1993) 69 P&R 298 at 303.     58.  Mr Parry’s submission justifiably portrays Mrs Bedia’s then situation, and the plight in which she now finds herself, in harrowing terms.  It is impossible not to have sympathy for her and for her sons; but, it is likewise impossible to be unsympathetic towards the Claimants and their father, who, through no fault of theirs, moral or otherwise, face the prospect of losing the Property, which was paid for in full (£236,000 plus costs and stamp duty) if Mrs Bedia succeeds in upsetting their purchase. They have also incurred substantial costs in bringing these proceedings and there remains the spectre of an adverse costs order if they are unsuccessful.   59.  I have no difficult in accepting, as Mr Parry has contended that Mrs Bedia  was gullible, despite her qualifications and short period of practical experience, and that she was naïve in the extreme. This is self evident from the way in which she was so easily duped by the fraudsters. There can be no doubting either that, by August 2008, she considered herself to be in desperate need of money and that, as a result of her obsession, she determined to enter into a transaction, which, by any reasonable standards, must be regarded as an irrational one. Against the background of her and her family’s personal circumstances, being almost entirely dependent on State Benefits, to have jeopardized her home and sole remaining assets is ample testimony to her desperation and utter folly.   60.  Putting aside, for the moment, the role of Mr Deu, whilst I would have concluded that Mrs Bedia fell into the category of persons who are ‘poor and ignorant’ and thus in need of protection, I would not have found it possible, in the particular circumstances, to conclude that the transaction was one which should be set aside. On the face of things, there was no coercion or pressure on the part of UKPTL and Mrs Bedia was fully cognisant of the risks she was running, but convinced that the lottery moneys would materialise, leaving her comfortably off. Whilst the terms of the Contract were extremely harsh, at first blush there was no “unconscionable or extortionate abuse of power” on the part of UKPTL.   61.  It is with the role of Mr Deu that I have substantial concerns. Whilst it is clear that he explained the risks involved to Mrs Bedia, his independence of UKPTL, in the true and professional sense, is brought into question. I am mindful Mr Deu is a solicitor and an officer of the court; but, whilst I must be cautious about making criticism of a professional nature, especially as he has not been called to give evidence and thus personally to give his own account of matters, I must nevertheless deal with the situation, on the basis of evidence which was before me.   62.  Whilst Mrs Bedia would have been content to deal with the matter without legal representation, and very readily agreed to Mr Wahid’s introduction of Mr Deu – she was in no way coerced into a choice of solicitor – the only inference I can draw is that Mr Deu was UKPTL’s usual solicitor, both at the times complained of and subsequently, and that he was accordingly familiar with the fact that desperate and vulnerable persons resorted to this type of high risk transaction, as a last resort, being unable to raise  finance from conventional sources. The vulnerability of such persons to transactions of this kind, which were (I am told) at that time outside any regulatory regime, is something of which he cannot have been unaware.   63.  During the course of her evidence, Mrs Bedia suggested that Mr Wahid had actually told her, on 3 September 2008, that “Mr Deu was his solicitor as well”. This was not in either of her witness statements and I concluded that, acting under stress, this embellishment was ‘a case of the thought becoming father to the deed’. (In fact, such evidence does not advance her case; probably the contrary.) Be that as it may, when the money was not forthcoming within 3 days, she telephoned Mr Deu, because (as she put it) “I thought he was acting for me”; yet he told her, as had Mr Wahid previously, that they were dealing with the documents and when she said she wanted to cancel, he told her that “as I had signed I couldn’t get out of it”. In the circumstances, and  given the assurances she had received about the release of moneys to her within 3 days, these responses, especially the latter, were not ones which Mrs Bedia can have expected to hear from her own solicitor.   64.  Other details trouble me. Thus, whilst Mr Deu’s ‘Ashley James’ business address (1301 Stratford Road, Hall Green, Birmingham BH28 9HH) was the same as that of UKPTL, the latter’s address does not appear in the Contract. Moreover, although Mrs Bedia signed on 3 September 2008, the Contract is dated 14 September 2008, which leads me to think that this was done because of doubts as to the availability of money within the 3 days stipulated by Mrs Bedia, of which fact Mr Deu must have been fully aware. The address beneath UKPTL’s name as the buyer was left blank. I am driven to conclude therefore, despite Mrs Bedia’s surprising assertion in the witness box  (that she was told by Mr Wahid that Mr Deu was also his solicitor) that neither Mr Wahid nor Mr Deu made any or any sufficient disclosure to Mrs Bedia of Mr Deu’s connection with UKPTL. And, in the circumstances as I have inferred them to been, it was, at the very least, most unwise for Mr Deu to have acted in this matter, irrespective of what is set out in his paperwork and of the acknowledgement that Mrs Bedia was require to sign. In my judgment, like Mr Wahid, Mr Deu must have realised that, in her desperation for money, Mrs Bedia would have agreed to almost any terms and signed almost anything that was put before her.   65.  On the basis of the evidence I have heard, I am forced to conclude that Mr Deu faced a serious conflict of interests between UKPTL and Mr Wahid on the one hand and Mrs Bedia on the other. Moreover, I am forced to conclude that this conflict was not one, which in the particular circumstances, could have been accommodated by disclosing this relationship to Mrs Bedia; Mr Deu was in an impossible position, the more so as he never saw, or even sought to see, Mrs Bedia alone. Throughout, his dealings with Mrs  Bedia were conducted under the gaze of Mr Wahid and, on the facts as I know them, Mr Deu should have declined to act altogether. There was, in my judgment no half-way house. Mr Wahid, moreover, allowed Mr Deu to act in this way, when he too, must have realised the impropriety of his doing so.   66.  Mr Parry drew my attention to the solicitors’ Code of Conduct 2001, promulgated by the Solicitors’ Regulation Authority, and to the following rules in particular (which were in force at the relevant times):   (i)                  Rule 1: Core duties: 1.03 “You must not allow your independence to be compromised”. 1.04 “You must act in the best interests of each client.” (ii)                Rule 3: Conflicts of Interests, of which the most significant is 3.01  Duty not to act: “(1) You must not act if there is a conflict of interests…..(2) There is a conflict of interests if: (a) you, or your firm owes, separate duties to act in the best interests of two or more clients in relation to the same or related matters, and those duties conflict, or there is a significant risk that those duties may conflict….”  (3) “For the purposes of 3.01(2) a related matter will always include any other matter which involves the same asset or liability.   67.  Although Mr Deu (I infer) had a previous, perhaps even long-standing relationship with UKPTL and the persons involved with it, and must have assumed (as occurred) that he would be instructed to act on the sale of the Property if, as was likely to eventuate, Mrs Bedia defaulted, it is not possible to conclude, on the present state of the evidence, that Mr Deu actually  breached Rule 3.01(2)(a) – at least, on a literal reading.   68.  The guidance notes, however, explain that the core duties define a solicitor’s professional values and “can help you to navigate your way through those situations not covered in the detailed rules as no code can foresee or address every ethical dilemma which may arise in legal practice”; and these core duties are described as “fundamental ….[a] breach [of which] may result in the imposition of sanctions”.  Their importance is obvious and it behoves any solicitor in a situation in which Mr Deu found himself to conduct himself with very great caution and circumspection.   69.  Mr Hewitt’s submission, that Mr Deu’s role is irrelevant to a determination of whether the transaction can be regarded as an unconscionable bargain, is, in my view, misconceived.   70.  It is inconceivable, to my mind, that the transaction would have been allowed to stand if, to UKPTL’s knowledge, Mrs Bedia had not received the benefit of independent legal advice; see the passage from Halsbury’s Laws cited         above. Mr Parry’s point, moreover, that it is nothing to the point to say that Mrs Bedia would have signed the Contract, whatever independent advice might have been given to her, is well made. Despite her obsession with her obtaining the money, I agree that it would be impossible to say how Mrs Bedia would have acted if a properly instructed independent solicitor had correctly carried his (or her) duties to her. His enquiries of Mrs Bedia would have been made in private consultation with her; he would not have had any professional connection, or possibility of a professional connection, with UKPTL in relation to the subject matter of the transaction; he would have been sensible and searching with regard to questions about her circumstances, with regard to the purposes for which the money was required and as to whether the source(s) of repayment were viable; and, of course, he would have discussed with Mrs Bedia at length the possible catastrophic consequences to her and her family, having established that she had one disabled child, in terms far more explicit than the bald warning she received from Mr Deu. I have to surmise that it was apparent to Mr Deu (as well as to Mr Wahid) that Mrs Bedia was not really interested in hearing what she was told and that, despite the warnings which Mr Deu recorded, in realistic terms they were doing little more than going through the motions.   71.  On the basis of the evidence I have heard, again emphasizing that this was without the benefit of hearing from Mr Deu, I am forced to conclude that his failure to act in the ways I have described was because he felt constrained to do little more than the bare minimum of what was required of him, in which activity Mr Wahid appears clearly to have been privy. I must, therefore, conclude that Mr Deu was not acting with sufficient detachment from UKPTL and that he cannot be regarded as having acted independently in his role as Mrs Bedia’s solicitor.     72.  I further conclude that, given Mr Wahid’s very close involvement in the whole process of Mr Deu’s dealings with Mrs Bedia, the reality is that UKPTL deprived her of the exercise of the right and opportunity demanded by the circumstances to have fully independent advice from a competent solicitor. It was known that she was vulnerable and I am forced to conclude that advantage was taken of her in a way which can only be regarded as reprehensible.   73.  I accept, as Mr Parry has contended, that it should be assumed that a solicitor acting independently of UKPTL would have taken steps to ensure that his professional duties of care towards Mrs Bedia were complied with and that he would have acted in the way described by Millet LJ (as he then was) in Portman Building Society v. Dusangh [2000] All ER Comm, at 227:   “No competent solicitor could possibly have advised [Miss Burch] to enter into [the transaction]. He would have been bound to warn her against it in the strongest possible terms and to have refrained from acting for her further if she had persisted in it against his advice…..”   In fact, he held that the suspicions of the bank in that case should have been confirmed by Miss Burch’s refusal to take independent legal advice, which, in principle at least, is not far removed from Mrs Bedia insouciance when told by Mr Wahid to get a solicitor and Mr Wahid’s actual knowledge of Mr Deu’s lack of independence.   74.  And Millet LJ further observed:   “That is sufficient to dispose of this appeal, but I should not be taken to accept that it would necessarily have made any difference even if Miss Burch had entered into the transaction after taking independent legal advice…..The cases show that it is not sufficient that she should have received independent advice unless she acted on that advice. If that were not so, the same influence that produced her desire to enter into the transaction would cause her to disregard any advice not to do so. They all show that the solicitor must not be content to satisfy himself that his client understands the transaction and wishes to carry it out. His duty is to satisfy himself that the transaction is one which his client could sensibly enter into…..and if not so satisfied to advise her not to enter into it and to refuse further if she persists.”   To my mind, Mr Deu, with his knowledge of matters generally, could not properly have continued to act for Mrs Bedia, even if he had acted correctly when first accepting instructions to act for her.   75.  I therefore conclude that the transaction entered into between Mrs Bedia and UKPTL was an unconscionable bargain and, as between these parties, could be set aside. It does not, however, follow that it is a right which can be exercised by Mrs Bedia as against the Claimants. This situation is very different.   Issue 4   76.  On the basis of this finding, I now turn first to the question of whether Mrs Bedia retained an interest in the property that was capable of binding UKPTL. On the basis of my finding, that the Contract constituted an unconscionable bargain, it must follow that this transaction is not one, which, if challenged before the Property was re-sold, could have been permitted to stand. The salient facts were known to UKPTL and (although legally irrelevant) it must be taken as having had actual knowledge of Mrs Bedia’s equity, that is, of her right to have the register rectified to show her as the sole proprietor, consequent upon her right to have the transaction set aside. On this basis, although contrary to their primary case that the transaction did not constitute an unconscionable bargain, the Claimants do not dispute that this right was a mere equity within the meaning s. 116 (b) of the Land Registration Act 2002, at the time when the Property was purchased by them.   77.  S. 116 (Proprietary estoppel and mere equities) is, so far as material, in these terms:   “It is hereby declared for the avoidance of doubt that, in relation to registered land, each of the following – (a)    an equity by estoppel, and (b)   a mere equity, has effect from the time the equity arises as an interest capable of binding successors in title (subject to the rules about the effect of dispositions on priority).   78.  Also relevant is Schedule 3 of this Act (UNREGISTERED INTERESTS WHICH OVERRIDE REGISTERED DISPOSITIONS), para 2 of which reads: “An interest belonging at the time of the disposition to a person in actual occupation, so far as relating to land of which he is in actual occupation, except for – (a)    an interest under a settlement under the Settled Land Act 1925 (c.18); (b)   an interest of a person of whom inquiry was made before the disposition and who failed to disclose the right when he could reasonably have been expected to do so; (c)    an interest (i)      which belongs to a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition, and (ii)    of which the person to whom the disposition is made does not have actual knowledge at that time; …..”   79.  The critical and altogether distinct question, however, is whether any such rights as Mrs Bedia has in the Property are ones which can be exercised by her against the Claimants. In other words, the issue is whether her interest constitutes an interest which, applying s. 116, overrides the registered disposition to the Claimants.   80.  It is common ground between the parties that Mrs Bedia, by virtue of her continuing occupation of the Property at the time when this was acquired for them by their father, is to be treated as a person in actual occupation for the purposes of Schedule 3, para 2 of the 2002 Act. At that time, she did so by virtue of her tenancy, which had not yet been determined, and not, arguably, by reason of an asserted right to remain in the Property in pursuance of any right to avoid the earlier transaction between her and UKPTL.  It is common ground, as I understand it, that for the purposes of s. 116, the rights of a person in occupation of registered land is distinct from the capacity in which  a person occupies it, and this occupation does not need to be indicative of the right claimed; see Wallcite v. Ferrishurst, cited below. I therefore accept that Mrs Bedia is a person in actual occupation for the purposes of Schedule 3, para 2 of s. 116.   81.  As I have earlier stated, I have rejected Mrs Bedia’s evidence that Mr Khertola did not inspect the Property on one or other of the two visiting days; the suggestion that he bought a valuable house for his daughters unseen stretches credibility too far, aside from the fact that I found Mr Khertola to be a wholly credible witness, preferring his evidence to that of Mrs Bedia on this aspect of matters. In the same vein, I repeat that I am satisfied that he was not given any such warning as Mrs Bedia asserts that she gave to all visitors; indeed, it is clear that he made no enquiries of any party, but simply enquired as to the nature of the known tenancy and whether this could be terminated, so that his daughters would have vacant possession. Moreover, I emphasize that whatever Mrs Bedia was telling people who inspected the property, it would appear that her warnings were ineffective to deter bidders at the auction. It is not contended by Mr Hewitt that paras 2(b) and (c) of Schedule 3 can be relied upon by the Claimants and I am therefore concerned only with whether s. 116 avails Mrs Bedia and enables her to defeat the Claimants’ claims.   82.  Mr Parry contends that, because Mrs Bedia was in actual occupation of the Property, when it was sold to Mr Khertola and thence to his daughters, this entitles her to have the register of title rectified accordingly and that this right constitutes a “mere equity” for the purposes of s. 116 (b) and is thus capable of being exercised by her against the Claimants as successors in title to UKPTL. He points out also that no exceptional circumstances are alleged by the Claimants which would warrant the Court not making an order that the register be rectified to show Mrs Bedia as the sole registered proprietor of the Property. This asserted right is at the heart of what remains to be determined in connection with Issue 4; indeed, it is at the heart of this case.   83.  The nature and effect of s. 116 is of fundamental importance in determining this issue. Mr Parry has explained this as a provision which is rigorous in its application; it has the potential for upsetting transactions, even ones for valuable consideration, by reason of the existence of third party interests, which do not appear on the register of title. It is therefore essential, he contends, that any prudent conveyancer acting for a purchaser should make sufficient enquiries of both the vendor and of any other person in occupation, to eliminate the possibility of any such overriding interest as is envisaged by s. 116.   84.  In support of this contention, Mr Parry draws attention to the following passage from the judgment of Robert Walker LJ in  Wallcite Ltd v. Ferrishurst Ltd  [1999] 1 All ER 997, at 990 (dealing with the corresponding earlier section to s. 116):   “Having already discussed the authorities at length I will set out quite shortly the principles which can in my view be extracted from them. (1) The function of overriding interests in registered conveyancing is comparable to that of notice (actual, constructive or imputed) in unregistered conveyancing, but there are significant differences and the burden on a purchaser to make enquiries is now heavier than before. (2) The rights of an occupier of registered land are to be distinguished from the fact of his occupation. The capacity in which a person occupies (for instance, as a tenant) need not be indicative of the right which he claims (for instance an option to purchase the freehold reversion or an unpaid vendor’s lien). (3) The occupier need not (in order to rely on s. 70(1)1(g) be in actual occupation of the whole of the land comprised in a registered disposition (whether that disposition is from the registered proprietor’s point of view a transfer of the whole, or a transfer of part, or  a demise or other disposition taking effect in relation to the whole or part).”   85.  It is now necessary to consider the nature of Mrs Bedia’s existing rights in respect of the Property, as these affect the Claimants. As I have rejected Mrs Bedia’s evidence in favour of Mr Khertola’s, finding as a fact that the Claimants had no actual notice of Mrs Bedia’s interest prior to completion of the sale to them by UKPTL, the remaining question in connection with Issue 4 is whether, as Mr Parry submits, actual notice at the time of their purchase was irrelevant or whether, as Mr Hewitt contends, such notice was necessary to perfect her rights against them.   86.  I preface my examination of this particular issue by emphasising that, if the doctrine as such were applicable to the present situation, which I believe it is not, I would unhesitatingly have held that the Claimants (and their father) were to be regarded as bona fide purchasers for value without notice of any defect in the title of UKPTL. Any other finding would be impossible, on the facts as I know them.   87.  It follows from this preliminary observation that I accept what Mr Parry says, that, in the ordinary way, notice is not required to establish an overriding interest. Whilst his primary contention is that, Mrs Bedia did in fact give sufficient notice on the occasion that Mr Khertola’s inspection of the Property, which I have rejected, there are further strings to his bow. Thus, he contends that, given the nature and effects of s. 116, even if the doctrine of notice were in fact to apply, Mr Khertola (and thus the Claimants) were fixed with constructive notice of her claim to an overriding interest in the Property. He contends that it was incumbent on Mr Khertola, and thus his solicitor, Mr Gandhi, to make “all usual searches and enquiries” before he agreed to purchase the Property or run the risk that he would buy the Property subject to an overriding interest. He criticises Mr Khertola and his solicitor for failing to make any enquiries of Mrs Bedia, when it was known that she was in actual occupation, even though this was by virtue of an assured shorthold tenancy, contending that this would have revealed the problems she had with UKPTL.  I think this goes too far.   88.  It was Mrs Bedia’s, or her former solicitors’, surprising failure to enter a restriction or caution on the register (as her present solicitors have done) before the actual sale, which enabled the sale of the Property to proceed without challenge. As Mr Hewitt has contended, it is difficult (but without deciding the point) to see how Mr Gandhi or Mr Khertola can be criticised and that there was, in the circumstances, a departure from the “careful enquiries” envisaged by Lord Wilberforce in the following passage from his speech in  Williams & Glyn’s Bank Ltd v. Boland [1980] 2 All ER 408, at 412:   “The exception just mentioned to consists of ‘overriding interests’ listed in s. 70. As to these, all registered land is stated to be deemed to be subject to such of them as may be subsisting in reference to the land, unless the contrary is expressed on the register. The land is so subject regardless of notice actual or constructive. In my opinion, therefore, the law as to notice as it may affect purchasers of unregistered land, whether contained in decided cases or in a statute…. has no application even by analogy to registered land. Whether a particular right is an overriding interest and whether it affects a purchaser, is to be decided on the terms of s. 70, and other relevant provisions of the Land Registration Act 1925, and on nothing else….I do not accept the argument which counsel for the appellant sought to draw …. that, in applying section 70(1)(g), we should have regard to  and limit the application of the paragraph in the light of the doctrine of notice. But this would run counter to the whole purpose of the Act. The purpose, in each system, is the same, namely, to safeguard the rights of persons in occupation, but the method used differs. In the case of unregistered land, the purchaser’s obligation depends on what he has notice of, notice actual or constructive. In the case of registered land, it is the fact of occupation that matters. If there is actual occupation, and the occupier has rights, the purchaser takes subject to them. If not, he does not. No further element is material.”   And at 415 he added these words: What is involved is a departure from an easy-going practice of dispensing with inquiries as to occupation beyond that of the vendor and accepting the risks of not doing so. To substitute for this a practice of more careful inquiry as to the fact of occupation, and, if necessary, as to the rights of occupiers, cannot, in view of the matter, be considered as unacceptable…..”   89.  Whether Mr Gandhi should have made the broader enquiries alleged by Mr Parry is something I cannot decide on the limited evidence before me. To the extent that such enquiries would have been relevant, I would have needed to know a good deal more about reasonable and prudent conveyancing practice and whether any failures on his part were culpable. This may have to be taken up on another occasion, although I must emphasise that I do not give any encouragement.   90.  Mr Hewitt contends, which is his central point, that notice was required to perfect Mrs Bedia’s overriding interest and that her interests in the Property were dependent on principles governing the avoidance of voidable transactions. He contends that notice is relevant, in spite of the abolition of the doctrine of notice in relation to registered land by the Land Registration Acts of 1925 and 2002. His point, simply put, is that the notice in question is of an altogether different nature.   91.  Mr Hewitt’s contention is that notice still plays a part, that is, when notice is an essential ingredient of the right to assert a claim to enforce an interest against a third party purchaser. In the present case, therefore, his submission is that Mrs Bedia’s interest in relation to the Property cannot be made good against the Claimants because they had no notice of this, actual or constructive, at any time before the property was purchased by them. This, he says, is to be distinguished from the ordinary situation envisaged by Lord Wilberforce in Boland.   92.  Mr Hewitt relies on two authorities. First, he refers to a decision of Lewison J in Thompson v. Foy  [2009] EWHC 1076 (Ch),  in which a claim was made to set aside a mortgage in favour of a mortgage company, over a property in the name of a daughter, which her mother contended had been obtained from her by her daughter’s undue influence. In that case, the judge observed [at 135] that : “Even in the world of registered conveyancing notice plays a part where the grantor of a mortgage wishes to set aside the grant against the grantee on the ground of the undue influence of a third party.”  He observed further that “In the Etridge situation notice is an ingredient of the right itself which the claimant has to establish”.   93.  The second case relied upon by Mr Hewitt is Qutb v. Hussain  [2005] EWHC 157 (Ch), as illustrating that this type of doctrine of notice likewise applies in relation to the jurisdiction to set aside the transaction on the grounds of undue influence and unconscionable bargain. Nicolas Warren QC (as he then was) held that both had been made out (162 – 164), but this did not avail the claimant vis a vis the third party bank which lent in good faith on the security of the relevant property, with no notice of the undue influence or of the unconscionable bargain. He said this:   “167. However, my conclusions on undue influence and unconscionable bargain mean that Mona is entitled to have the Agreement (and the Transfer subject to preserving the Bank’s charge) set aside (as voidable rather than void) and to have the Register rectified. The effect, as between Mona and Afzaal for her incapacity discussed…..above, should not, therefore, need to be resolved.   168. Those conclusions do not avail Mona against the Bank. Neither Mona’s incapacity nor undue influence and unconscionable bargain make the agreement void rather than voidable. There is nothing in the evidence which would justify treating the Bank as having notice of Mona’s incapacity or of undue influence or unconscionable bargain. It has, rightly so far as I can see, not been asserted on behalf of Mona that the bank has constructive notice of undue influence or unconscionable bargain or that it should have made further enquiries which it did not make. In those circumstances, the Bank’s charge should prevail against Mona’s interests so that, if the Register is rectified, the Bank’s charge should none the less be preserved. “   94.  Mr Parry boldly submits that these authorities which are to be distinguished on their facts, are not analogous to the cases of Boland and Etridge, referred to by Lewison J. He contends that Mr Hewitt’s arguments are not well-founded in law. He advances a number of distinctions between the cases Mr Hewitt cites and those of the present case, including (1) the fact that Mrs Bedia’s Contract with UKPTL was entered into more than 6 months before the Property was sold to the Claimants; (2) that these cases involved consideration and decisions of the effect on mortgagees where undue influence was exerted by one co-mortgagor on another or upon the donor on the donee of land; (3) that in none of the cases was the tribunal concerned with an overriding interest which had arisen as between 2 parties, where no mortgagee or other party was privy or party to the transaction out of which the overriding interest arose; and (4) that it is fallacious to treat Mr Khertola and the Claimants as being in the position of a third party purchaser and analogous to that of mortgagees as in Thompson v. Foy and Qutb v. Hussain.  These (and other) arguments of Mr Parry are powerful ones.   95.  It is common ground that the concept of a “mere equity” for the purposes of s. 116, includes the right of a party to set aside a transaction relating to land, on the grounds that it constitutes an unconscionable bargain. This is a right which was personal to Mrs Bedia and which, before the Claimants’ purchase of the Property, she was free to exercise against UKPTL. It was not, as Mr Parry says, a transaction which arose contemporaneously with the sale to the Claimants and there was no third party interest in the Property at the time that Mrs Bedia had the right to apply to have the Contract declared an unconscionable bargain.   96.  Whilst I have much sympathy with Mr Hewitt’s submissions, that notice ought to play a part, I am unable to follow, as he contends, how it is that notice is “an ingredient of the right itself which [Mrs Bedia] has to establish”; in particular, I do not follow how “notice of the impropriety surrounding the previous transaction and rendering it voidable” can affect Mrs Bedia’s equity or her right to assert this, at least against UKPTL.  The gloss Mr Hewitt is forced effectively to place on the words “mere equity”, by asserting that the notice requirement is unnecessary only “in the case of an adverse right or interest in land and [that] the existence or otherwise of the notice determines whether it is equitable to set aside the transaction against a third party purchaser”, is one which I cannot accept in the context of the present case. It seems to me that this is to graft onto the concept of “mere equities” in s. 116 a notice requirement which is irrelevant to the claim which Mrs Bedia has at all material times been able to assert against UKPTL and she thus brings herself within s. 116. The cases relied upon by Mr Hewitt do not, to my mind, support the distinction he seeks to draw with Mrs Bedia’s case, which (at the risk of undue repetition) is that the equity was one which she was entitled to assert before the Claimants purchased the Property, in contrast to claims against banks, which could only be established by the parties affected showing that the banks had notice of the undue influence or unconscionable bargain alleged, prior to taking their security (as explained in Royal Bank of Scotland v Etridge [2001] UKHL 44,  eg per Lord Nichols, at paras 145 -147). Mr Parry points out also that the cases relied upon by Mr Hewitt do not address the situation where, as in the present case, an overriding interest has arisen when one of the parties was not a mortgagee or was party or privy to the original transaction out of which the overriding interests arose.   97.  I therefore conclude that the combined effect of Mrs Bedia being in actual occupation of the Property and of her rights (i.e. her then existing beneficial interest and right to call for the alteration of the register accordingly) in relation to UKPTL, and thus in relation to the Property, constituted an overriding interest in her favour within the meaning of s. 116 and that this affects the Claimants accordingly. I have found the resolution of this particular issue a difficult one and I am left with a sense of unease with the result. Issue 5   98.  This issue relates to the validity of service of the Section 21 Notice dated 2 June 2009 and whether, on the hypothesis that Mrs Bedia failed to establish an overriding interest, this was effective to terminate her assured shorthold tenancy. I will deal with this, even though this does not strictly arise for determination, as there is a realistic prospect that another court may come to a conclusion in relation to Issue 4, which is at variance with the conclusion I have reached.   99.  The Section 21 Notice was personally served at 9.25 pm on 3 June 2009 by Mr Khertola on Mrs Bedia, at the Property. It required possession to be given up “after 16th August 2009 or after the day being the last of the period of the tenancy expiring next after two months from the date this Notice is given.” It describes the Claimant by name as “the landlord” with the address for each being given as 21 Sisley Road, Barking, Essex 1G11 9SR. The Notice was signed by Landlord’s agent, namely, PGA solicitors LLP (Mr Gandhi).   100.                      Mr Parry’s points are these:   (a)    Section 21 (4) of the Housing Act 1998 requires the court to be satisfied that the landlord has served a notice to terminate the tenancy in accordance with that section.   (b)   The term ‘landlord’ is defined by s. 45, in these terms: “…landlord includes any person from time to time deriving title under the original landlord…”     (c)    The conveyance was originally to Mr Khertola, who was registered as the proprietor with title absolute in the property, and was thus at that time entitled to the freehold reversion. (d)   The Section 21 Notice was given by or on behalf of the Claimants, who were not registered as co-proprietors until 6 January 2010.   (e)    Accordingly, as they were not successors in title to UKPTL when the notice was served (3 June 2009) they were not entitled to serve it, so that it was ineffective to terminate Mrs Bedia’s assured shorthold tenancy.   101.                      Whilst contracts were exchanged between UKPTL and Mr Khertola, the copy Form TR1 indentified the Claimants as the transferees for entry in the register and their address was given. It was always Mr Khertola’s intention that his daughters should become the owners of the Property, which he had bought on their behalf; as the Section 21 Notice itself showed, he and Mr Gandhi clearly regarded them as the owners; and the fact that they were not registered as co-proprietors until 6 January 2010 was the result of technical conveyancing problems only.   102.                      I am unable to accept Mr Parry’s very technical argument, which is based on what is, in my view, a misdescription of the Claimants’ true interest in the Property. There were plainly entitled to receive the rent; and to restrict this right, as Mr Parry seeks to do, to Mr Khertola as the person technically (that is, legally) entitled to the freehold reversion at the end of the tenancy is too artificial.   103.                      I therefore conclude that the Section 21 Notice was validly given and was effective to terminate Mrs Bedia’s tenancy. In view of my finding in relation to Issue 4, however, this is academic.           Conclusions     104.                      My conclusions are these:   (1)   The contract was an outright sale of the Property and did not constitute a mortgage enforceable in equity.   (2)   The Contract was an unconscionable bargain.   (3)   Mrs Bedia was accordingly entitled to have the transaction set aside as between herself and UKPTL, thus retaining an interest in the Property, which constitutes “a mere equity’ within the meaning of s. 116 of the Land Registration Act 2002.   (4)   This equity took effect from the date when this arose (3 September 2008) as an interest capable of binding the Claimants, notice of such interest being irrelevant to Mrs Bedia’s right to enforce that interest.   (5)   The Section 21 Notice served by Mr Khertola on 3 June 2009 was validly and effectively served and given.   105.                      There will be a further hearing to determine the orders  which must be made, consequent upon my findings, in relation to both actions. These will need to address also what needs to be done in relation to the £70,000 Mrs Bedia received from UKPTL. I will also deal with any application(s) for permission to appeal.   106.                      I cannot conclude this judgment without expressing my concern that Mrs Bedia has emerged as the successful party, when it was very largely her own folly which has resulted in the present situation. Mr Khertola, and thus his daughters also, are entirely blameless, it affronts my notions of justice that they should suffer the loss of the Property (subject to payment of any moneys for which Mrs Bedia must account.) The application s. 116 has had harsh consequences, but I must apply the law as I have understood it to be. It must be for a superior tribunal to take different views of the conclusion I have reached.   Antonio Bueno QC Recorder              6 July 2011