A man has failed in a claim to an overriding interest in respect of his former home in Kent, in which he sought to recover more than £1m from its sale in 2012.
The Court of Appeal rejected Kevin Wishart’s claim, and found in favour of lender Credit & Mercantile (“C&M”). The ruling means C&M is entitled to keep almost £700,000 to realise its security, and recover its legal costs from a further £300,000-plus sum paid into court. Wishart is only entitled to recover what is left of the money in court.
Sales LJ upheld a decision last year in which deputy judge Tim Kerr QC dismissed Wishart’s claim to have an overriding interest based on an entitlement in equity to ownership of the house named “Dalhanna” and be entitled to the proceeds of sale of the property.
Dalhanna was purchased in May 2010 by Kaymuu Ltd, a company controlled and wholly owned by Sami Muduroglu.
Sales LJ said: “Sami was at the time of the purchase a close friend of Mr Wishart. It has now emerged that Sami is a fraudster who acted contrary to Mr Wishart’s interests, which Mr Wishart believed he was acting to promote. On 22 June 2010, Sami caused Kaymuu to borrow £500,000 from C&M in return for a charge given by Kaymuu over Dalhanna by way of mortgage. C&M’s charge was registered. Mr Wishart was in occupation of Dalhanna at this time.
“Sami took the money borrowed from C&M for himself and then lost it all gambling. He has since disappeared and has been declared bankrupt. Kaymuu defaulted on the loan.
“C&M exercised its rights under the mortgage, issued proceedings to obtain possession of Dalhanna and then arranged for Dalhanna to be sold in October 2012 for £1.1m. C&M seeks to retain £694,072.75 from the net proceeds of sale (“the main sum”), to realise its security. Mr Wishart claims this sum as against C&M, contending that his beneficial ownership of Dalhanna was an overriding interest at the time of the registration of C&M’s charge, when he was in occupation of Dalhanna, and so has effect in priority to that charge.
“The balance of £328,158 (“the surplus”) has been paid into court, to await the outcome of these proceedings. Mr Wishart claims this sum, on the basis of his beneficial ownership of Dalhanna, as part of the proceeds of sale of Dalhanna. C&M claims that it is entitled to recoup its legal costs of these proceedings out of the surplus, as part of the monies covered by its charge on the proper construction of the mortgage deed, as registered.”
He ruled that the High Court judge was fully entitled to find that Wishart’s “abstinence from any involvement at all in the mechanics of the purchase” meant that he had given Sami the means of representing himself as the beneficial owner of Dalhanna, with full authority to deal with third parties as owner. As a result, he said that Wishart was precluded by operation of the Brocklesby principle (Brocklesby v Temperance Permanent BS [1895] AC 173) from maintaining that he had a beneficial interest in relation to Dalhanna with potential to have priority over the security interest of C&M.
He allowed C&M’s cross-appeal in respect of the money paid into court.
He said: “The effect of this is that, out of the proceeds of sale of Dalhanna, C&M is entitled to keep the main sum and is entitled to recoup out of the surplus the costs of defending itself against the claims of Mr Wishart and the trustee made in the course of these proceedings.”
Wishart v Credit & Mercantile Plc Court of Appeal (Longmore, Tomlinson and Sales LJJ) 6 July 2015
P Rainey QC & Mr T Polli (instructed by Glovers Solicitors LLP) for the respondent
