Bank of Scotland v Hussain and another
Mr Justice Newey :
Introduction
at the relevant time and says that, even if she was, that would not allow her to escape from the Charge. It is, accordingly, the Bank’s case that it can rely on the Charge as against Mrs Qutb, including for its costs, but it has made it clear that, win or lose, it will not seek to recover any sums from Mrs Qutb personally. having long since been transferred back to Mrs Qutb pursuant to Warren J’s judgment. Mr Hussain nonetheless attended the trial in person and made some brief representations to me. in the early 1970s with a mortgage from Leeds Permanent Building Society (later, plc). By 2001, the amount outstanding on this mortgage was only about £1,000. to Mr Hussain. Simon & Co, a firm of solicitors in Southall, were instructed to act for Mrs Qutb in connection with the sale. . The relevant individual at Mortgage Marketing was a Mr Bahalim, a director. Mr Bahalim explained in a witness statement he gave to the police in 2001 that he first met Mr Hussain on about 30 October 2000, when Mr and Mrs Hussain came to see him with Mrs Qutb. as £300,000 but indicated that there would be a deed of gift for £155,000, with the result that the net sum which would be paid to Mrs Qutb would be £145,000. When a valuation obtained by the Bank put the property’s value at only £225,000, the purchase price was reduced to that figure, leaving the net sum payable to Mrs Qutb unchanged at £145,000. On 14 December 2000, Mrs Qutb entered into a deed of gift (“the Deed of Gift”) in Mr Hussain’s favour for the £80,000 difference between the £225,000 and the £145,000. . On, it seems, 3 January 2001 Waran & Co were appointed to act for the Bank as well. On the same day, the Bank issued a formal offer of mortgage in favour of Mr Hussain. to be sold with vacant possession and with full title guarantee. which it forwarded to the Bank. The certificate confirmed, among other things, that, on completion of the Bank’s advance, Mr Hussain would be in sole possession of the property and that no one else with any equitable interest in the property was in occupation. That same day, Simon & Co sent Waran & Co replies to requisitions on title. In response to a question as to whether every person in occupation agreed to vacate by completion, Waran & Co stated, “Yes if the contract provides for Vacant possession”. was transferred to Mr Hussain, who charged it in favour of the Bank. The Bank advanced £145,000 to Mr Hussain on the security of the Charge. Like the contract, the transfer provided for the property to be transferred with full title guarantee. . The Charge was also registered. . It was alleged that the sale had been procured by undue influence and was an unconscionable bargain. . As issued, Mr Hussain was the only Defendant. The relief sought was possession of and payment of sums said to be owed by Mr Hussain under the Charge. to Mr Hussain is void. We therefore request that your client agrees to remove its charge. should be set aside on grounds of undue influence, unconscionable bargain and non est factum, it was accepted on her behalf that only the last of these could affect the Charge. Mrs Qutb’s position was put in these terms in the skeleton argument which was prepared by her counsel for a trial which was due to take place in January 2003: because it could not “be said that [Mr Hussain] knew of [Mrs Qutb’s] lack of capacity”. ] (and the Transfer, subject to the Bank’s charge) set aside (as voidable rather than void) and to have the Register rectified”. Warren J went on to explain the implications as regards the Bank in the following terms (in paragraph 168): ] to [Mr Hussain] as a void (rather than voidable) deed. For reasons already given, the well-established rule in contract cases that incapacity renders the transaction voidable and not void, [Mrs Qutb] cannot succeed against the Bank by seeking to establish that the Agreement is void (and thus that the Transfer effected pursuant to it is also void). Quite apart from that, I have held that [Mr Hussain] did not know of [Mrs Qutb’s] incapacity so that the Agreement is not even voidable as against him by reason of that incapacity. Accordingly, in order to succeed on this plea, [Mrs Qutb] has to view the Transfer as a separate transaction to which the doctrine can apply. was set aside had they perceived the validity of the Charge still to be in dispute. Consideration could, for example, have been given to ordering the £17,000 mentioned in paragraph 9 of Warren J’s order (representing such of the £145,000 purchase price as Mrs Qutb retained) to be repaid direct to the Bank. There might also have been scope for argument as to whether Mrs Qutb should account to the Bank for the £64,000 which she had received back from Mrs Hussain in respect of the £128,000 withdrawn from Mrs Qutb’s account immediately after the sale of 30 Drayton Road was completed (see paragraph 29 above); the £128,000 had, of course, derived from the Bank’s advance to Mr Hussain. in accordance with Warren J’s order. The Charge continued to be registered. has long been unoccupied, except that Mr Qutb has stayed there occasionally. Mrs Qutb moved into a nursing home soon after returning to this country in April 2000. Since 2004, she has been living in the . and knew Mrs Qutb. at the relevant time? to be transferred to Mrs Qutb “subject to the first legal charge in favour of the [Bank] registered in the charges register”. should be transferred back to Mrs Qutb, subject to the Charge, on the basis of Mrs Qutb’s claims that the sale of the property should be set aside for undue influence and as an unconscionable bargain. Those claims were not advanced against the Bank. It follows, in my judgment, that no issue estoppel will have arisen as between Mrs Qutb and the Bank in relation to them. . Mrs Qutb was, moreover, both (a) alleging that the sale should be set aside for undue influence and as an unconscionable bargain and (b) challenging the Charge (albeit on a different ground). There was no obstacle to Mrs Qutb also challenging the Charge by reference to her allegations of undue influence and unconscionable bargain; when the property’s sale was completed. The question whether Mrs Qutb was in “actual occupation” could have been usefully explored with a number of people who gave oral evidence in the 2001 Action but not before me. Even had the relevant individuals been called to give evidence again, in these proceedings, their recollections could be expected to have dimmed. As it is, I have had to rely largely on witness statements which were prepared for the 2001 Action and not, therefore, directed at whether Mrs Qutb was in “actual occupation”. Further, I have little information as to what evidence the witnesses gave orally, before Warren J. Again, it would, as it seems to me, have been desirable for the section 70(1)(g) point to be considered when dealing more generally with the implications of setting aside the sale of 30 Drayton Road; . That being so, it was not (so Mr Grant said) now open to Mrs Qutb to dispute the validity of the Charge. Principles of affirmation, approbation and reprobation, election and counter-restitution applied. when the Charge was granted. . The issue is whether she was still in “actual occupation” when the Charge was granted on 29 January 2001. was in a poor state and that Mrs Qutb had been spending the bulk of her time either in the or staying with the Hussains at their house at in Greenford. Mr Grant accepted that Mrs Qutb returned to now and again, but said that she would have considered her home to be . when the Charge was granted. The condition of the property (as to which, the evidence does not entirely speak with one voice) had not prevented Mrs Qutb from staying there: for example, a Mrs Chesters, who said in a witness statement that the “place was in a terrible state of disrepair and not a very nice place to live at all”, nonetheless went on to refer to Mrs Qutb living “in one room at the top of the house”. Further, there is evidence indicating that Mrs Qutb was spending time at in the period immediately before its sale was completed and even just afterwards. Mr Grant accepted that Mrs Qutb had stayed at 30 Drayton Road on the night of 28/29 January 2001 and that she might have stayed there the next night: that, at any rate, is what a witness statement made by Mr Hussain would suggest (for what it is worth). In oral evidence, Mrs D’Souza, who lived close to 30 Drayton Road and knew Mrs Qutb well, said that she thought that Mrs Qutb had probably stayed with the Hussains for several weeks on returning from the United States in October 2000, but that she had then come back to 30 Drayton Road. Even if, so many years on, Mrs D’Souza’s recollection may not be wholly reliable, it seems very likely that Mrs Qutb spent at least some nights at between October 2000 and 28 January 2001: Mr Hussain referred in a witness statement to her having “occasionally” spent one or two nights there. Moreover, while “the mere presence of some of the claimant’s furniture will not usually count as actual occupation” (see paragraph 90 above), it is, I think, of some relevance that Mrs Qutb’s furniture and other belongings will have remained at 30 Drayton Road up to the point the sale of the property was completed (and afterwards). Further, it seems that Mrs Qutb was not intending to vacate 30 Drayton Road: Warren J concluded (in paragraph 160 of his judgment) that Mrs Qutb “did not appreciate that the real effect of the sale would be to deprive her of her home and that it would be unavailable for her to live in when she returned to England after her visit to the United States”. when the Charge was granted. . It is of course very common indeed for purchasers to borrow money on mortgage. A vendor who did not know otherwise might therefore expect the property to be mortgaged. In any case, the fact that Mrs Qutb attended a meeting with Mr Bahalim, the mortgage broker, indicates that she was aware that would be mortgaged. No objection was raised to this; . One of the matters to which he referred in this context was the fact that the amount Mrs Qutb was to give to Mr Hussain changed from £155,000 to £80,000 after 30 Drayton Road had been valued at £225,000 (down from £300,000); Mr Qutb observed in a witness statement that the Bank “appears not to have been given pause for thought by the fact that the size of the ‘gift’ simply fluctuated in accordance with Mr Hussain’s requirements”. Mr Qutb also asked, rhetorically, where the Bank thought his mother was going to go, and noted that there was no removal van. Further, Mr Qutb said that the Bank had “failed to spot a whole series of obvious warning signs that Mr Hussain was engaged in mortgage fraud”.
Judgment Mr Justice Newey : Introduction 1. The case raises a familiar question: which of two innocent parties is to bear loss caused by the wrongdoing of a third person? 2. The basic facts, in a nutshell, are as follows. The Second Defendant, Mrs Mona Qutb, sold her home at 30 Drayton Road, Ealing to the First Defendant, Mr Afzaal Hussain (“Mr Hussain”), at an undervalue in 2001. Warren J held in 2005 that the sale should be set aside as having been procured by Mr Hussain’s undue influence and as an unconscionable bargain. Is Mrs Qutb nevertheless bound by a charge (“the Charge”) which Mr Hussain executed in favour of the Claimant, the Bank of Scotland (“the Bank”), as security for a loan he took out to fund his acquisition of the property? Or can Mrs Qutb disavow the Charge? 3. Mrs Qutb’s case depends on section 70(1)(g) of the Land Registration Act 1925. It is said on Mrs Qutb’s behalf that she was in “actual occupation” (within the meaning of section 70(1)(g)) of 30 Drayton Road when the Charge was granted and, hence, that the Bank’s rights under the Charge are subject to her own rights in the property. On the other hand, the Bank contends that it is not now open to Mrs Qutb to advance this argument, having regard to Warren J’s judgment and to other matters relating to the proceedings in which that judgment was given. The Bank also disputes that Mrs Qutb was in “actual occupation” of 30 Drayton Road at the relevant time and says that, even if she was, that would not allow her to escape from the Charge. It is, accordingly, the Bank’s case that it can rely on the Charge as against Mrs Qutb, including for its costs, but it has made it clear that, win or lose, it will not seek to recover any sums from Mrs Qutb personally. 4. Mrs Qutb has been suffering for a number of years from Alzheimer’s disease. Although she had solicitors and counsel acting for her in the past, she is now represented in these proceedings by her son, Mr Azam Qutb, as her litigation friend. As Mr Qutb has stressed, he has no legal qualification or training. Mrs Qutb has not, therefore, had the benefit of legal representation at this trial. 5. Mr Hussain does not have any obvious stake in the matters aired during the trial, a money judgment having been entered against him in 2004 and 30 Drayton Road having long since been transferred back to Mrs Qutb pursuant to Warren J’s judgment. Mr Hussain nonetheless attended the trial in person and made some brief representations to me. Factual history 6. Mrs Qutb was born in 1924 and so is now in her mid-80s. As well as her son, Mr Qutb, Mrs Qutb has a daughter, Ms Azra Qutb. Mr Qutb and Ms Qutb have both lived in the United States of America for many years. 7. Mrs Qutb bought 30 Drayton Road in the early 1970s with a mortgage from Leeds Permanent Building Society (later, Halifax plc). By 2001, the amount outstanding on this mortgage was only about £1,000. 8. Mrs Qutb seems to have met Mr Hussain or his wife in 1998 and to have spent increasing amounts of time with the family. By October 2000, Mrs Qutb had agreed to sell 30 Drayton Road to Mr Hussain. Simon & Co, a firm of solicitors in Southall, were instructed to act for Mrs Qutb in connection with the sale. 9. Mortgage Marketing Limited (“Mortgage Marketing”), a mortgage broker, was approached about arranging a loan to facilitate Mr Hussain’s acquisition of 30 Drayton Road. The relevant individual at Mortgage Marketing was a Mr Bahalim, a director. Mr Bahalim explained in a witness statement he gave to the police in 2001 that he first met Mr Hussain on about 30 October 2000, when Mr and Mrs Hussain came to see him with Mrs Qutb. 10. On 21 November 2000, Mortgage Marketing submitted a mortgage application form to the Bank on Mr Hussain’s behalf. This gave the value of 30 Drayton Road as £300,000 but indicated that there would be a deed of gift for £155,000, with the result that the net sum which would be paid to Mrs Qutb would be £145,000. When a valuation obtained by the Bank put the property’s value at only £225,000, the purchase price was reduced to that figure, leaving the net sum payable to Mrs Qutb unchanged at £145,000. On 14 December 2000, Mrs Qutb entered into a deed of gift (“the Deed of Gift”) in Mr Hussain’s favour for the £80,000 difference between the £225,000 and the £145,000. 11. By the end of December 2000, Waran & Co, a firm of solicitors in Clapham, had been appointed to act for Mr Hussain in connection with his acquisition of 30 Drayton Road. On, it seems, 3 January 2001 Waran & Co were appointed to act for the Bank as well. On the same day, the Bank issued a formal offer of mortgage in favour of Mr Hussain. 12. On 9 January 2001, Simon & Co sent Waran & Co, among other things, draft contracts and a completed property information questionnaire. A week afterwards, Simon & Co forwarded to Waran & Co replies to additional enquiries. 13. Contracts were exchanged on 19 January 2001. The contract provided for 30 Drayton Road to be sold with vacant possession and with full title guarantee. 14. Three days later, Waran & Co completed a certificate of title in respect of 30 Drayton Road which it forwarded to the Bank. The certificate confirmed, among other things, that, on completion of the Bank’s advance, Mr Hussain would be in sole possession of the property and that no one else with any equitable interest in the property was in occupation. That same day, Simon & Co sent Waran & Co replies to requisitions on title. In response to a question as to whether every person in occupation agreed to vacate by completion, Waran & Co stated, “Yes if the contract provides for Vacant possession”. 15. On 26 January 2001, Mrs Qutb entered into a statutory declaration in which she referred to her £80,000 gift to Mr Hussain and said that she was prepared to allow that sum to be treated as a gift. Simon & Co faxed the statutory declaration to Waran & Co on 29 January. 16. Completion took place on 29 January 2001. 30 Drayton Road was transferred to Mr Hussain, who charged it in favour of the Bank. The Bank advanced £145,000 to Mr Hussain on the security of the Charge. Like the contract, the transfer provided for the property to be transferred with full title guarantee. 17. The net proceeds of sale, after deduction of the sum required to redeem the Halifax charge and incidental costs, amounted to £143,288.14. This sum was transferred electronically into an account Mrs Qutb held with National Westminster Bank. The money was entirely, or almost entirely, derived from the Bank’s advance to Mr Hussain. 18. Almost immediately, sums totalling £128,000 were withdrawn from Mrs Qutb’s account in cash. £8,000 was withdrawn on 29 January 2001, £60,000 on 30 January and another £60,000 on 31 January. 19. On 1 February 2001, Mrs Qutb flew to the United States of America, where she was to stay with her daughter. 20. On 16 February 2001, Mr Hussain was registered at HM Land Registry as the proprietor of 30 Drayton Road. The Charge was also registered. 21. Mrs Qutb returned to the United Kingdom in early April 2001 with her daughter, and the matter was soon reported to the police. On 3 May, Mrs Qutb (by Mr Qutb as her litigation friend) issued proceedings (“the 2001 Action”) against Mr Hussain challenging, among other things, the sale of 30 Drayton Road. It was alleged that the sale had been procured by undue influence and was an unconscionable bargain. 22. Mr Hussain was also prosecuted for conspiracy to defraud, as were his wife (Mrs Yasmeen Hussain) and a step-son (Mr Zameer Hussain). The indictment gave the following particulars of offence: “ZAMEER HUSSAIN, AFZAAL HUSSAIN AND YASMEEN HUSSAIN between the 30th day of August 1999 and the 3rd of May 2001 conspired together and with others to defraud Mona Qutb, Azra Qutb and Azam Qutb of their real and personal property by dishonestly- i) Withdrawing cash from the Halifax account of Azra Qutb without her authority; ii) Obtaining third party authorisation to sign on the bank accounts of Mona Qutb; iii) Withdrawing monies from the bank accounts of Mona Qutb; iv) Inducing Mona Qutb to grant Afzaal Hussain an Enduring Power of Attorney with a general authority to act on her behalf in relation to all her property and affairs; v) Selling and/or attempting to sell stocks and shares belonging to Mona Qutb or held by her on behalf of Azra Qutb and Azam Qutb; vi) Inducing Mona Qutb to sell her home, 30 Drayton Road, West Ealing, London W5 to Afzaal Hussain at an undervalue of its market price and granting Afzaal Hussain a Deed of Gift in the sum of £80,000 towards the purchase price; vii) Inducing Mona Qutb to withdraw £128,000 in cash which formed part of the proceeds from the sale of her home and using the said sum for their own purposes.” 23. Mr Zameer Hussain failed to attend the trial, but Mr Hussain and his wife were both convicted in March 2002. Mr and Mrs Hussain each appealed, but Mr Hussain’s conviction was upheld. As regards Mrs Hussain, the Court of Appeal quashed her conviction but ordered a re-trial. In the event, the matter was disposed of in September 2003 by Mrs Hussain pleading guilty to charges of theft of, I gather, the total sum of £2,200. 24. The Bank instituted the proceedings which are now before me (“the 2002 Action”) on 26 March 2002 in Brentford County Court. As issued, Mr Hussain was the only Defendant. The relief sought was possession of 30 Drayton Road and payment of sums said to be owed by Mr Hussain under the Charge. 25. On 2 April 2002, Mrs Qutb’s solicitors, Prince Evans, wrote to Underwood & Co, the Bank’s solicitors, referring to the Hussains’ convictions. The letter continued: “It is clear therefore that the transfer of 30 Drayton Road to Mr Hussain is void. We therefore request that your client agrees to remove its charge. In view of the decision of the Criminal Court, the appropriate application is being made to the High Court, which will include an application to join your client to the proceedings and to set aside your client’s charge if you do not agree to the same.” Underwood & Co having replied that it was not accepted that the Charge should be set aside, Mrs Qutb issued an application seeking, among other things, the joinder of the Bank as the Second Defendant to her proceedings, and an order to that effect was made on 24 April 2002. The application notice had stated that it was “necessary to add the [Bank] as a party and to apply for the [Bank’s] charge to be set aside”, and the witness statement in support of the application had said: “[Mrs Qutb] now seeks a declaration that the charge is invalid and an order that it is set aside and removed from the charges register.” 26. Amended Particulars of Claim were served in the 2001 Action in May 2002. The amendments introduced, among other things, a plea of non est factum. Various paragraphs were added to the prayer, including these: “(3) A declaration that the deed dated 29th January 2001 effecting the sale of 30 Drayton Road … is void and of no effect on the ground of non est factum; … (14) A declaration that the charge in favour of the [Bank] over 30 Drayton Road … is invalid and of no effect (15) An order that the charge in favour of the [Bank] over 30 Drayton Road … be vacated from the land register pursuant to section 82 of the Land Registration Act 1925; (16) In the event that the said charge remains on the land register and remains a valid charge [Mrs Qutb] is entitled to damages against [Mr Hussain] equal to the sum of the outstanding monies owing to the [Bank] from [Mr Hussain] under its charge.” 27. On 20 May 2002, an order was made in Brentford County Court transferring the 2002 Action to the High Court. On the following day, there was a case management conference before Master Bowman. It is apparent from an attendance note prepared by Mr Paul Twomey of Underwood & Co, the Bank’s solicitors, that he asked for a possession order to be made there and then (albeit with a proviso that the order should not be enforced without the Court’s permission) but Mrs Qutb’s counsel objected to this. In this respect, the attendance note records as follows: “[Counsel for Mrs Qutb] said that there is no reason why the bank should have an order now. The possession proceedings could be dealt with at a later date. He also believed that it would give the bank an unfair advantage. His claim was that the charge may be set aside. Therefore he could not see how the court had jurisdiction to make an order if the charge was liable to be set aside at some stage in the future.” The Master concluded that the appropriate course was to stay the Bank’s proceedings. 28. On 28 October 2002 confiscation and compensation orders were made against Mr and Mrs Hussain on the basis of their convictions. The amounts ordered, which had been agreed between the parties, were £152,000 in the case of Mr Hussain and £64,000 in his wife’s case. Mr Thomas Grant (“Mr Grant”) (who appears with Mr Laurie Scher for the Bank) submitted, and I accept, that the £64,000 figure represented half of the £128,000 withdrawn from Mrs Qutb’s account at the end of January 2001: Mrs Hussain referred in a witness statement dated 20 May 2005 to the Court having “confiscated £64,000 being one half of the sum of £128,000 withdrawn in cash by [Mrs Qutb]”, and Detective Sergeant MacRae, who was the investigating officer with regard to the criminal proceedings brought against the Hussains, gave evidence to similar effect during this trial. It is less obvious how the £152,000 figure was arrived at, but Detective Sergeant MacRae said that it was his understanding that it included £64,000 in respect of the £128,000 withdrawals. 29. Mr Hussain has not to date paid any of the £152,000 due from him. In contrast, Mrs Qutb has received the £64,000 which Mrs Hussain was ordered to pay. It is to be noted that, when Mrs Hussain pleaded guilty to the theft offences in September 2003 (see paragraph 23 above), she was required to agree to the imposition of a fresh confiscation and compensation order of £64,000. 30. Although it was Mrs Qutb’s case in the 2001 Action that the sale of 30 Drayton Road should be set aside on grounds of undue influence, unconscionable bargain and non est factum, it was accepted on her behalf that only the last of these could affect the Charge. Mrs Qutb’s position was put in these terms in the skeleton argument which was prepared by her counsel for a trial which was due to take place in January 2003: “It is accepted that [the Bank] had no knowledge of the undue influence or the unconscionable bargain. In the event of the court finding that the sale was voidable any transfer back to [Mrs Qutb] would result in [Mrs Qutb’s] property being subject to the [Bank’s] charge. A claim of non est factum was pleaded on the basis that [Mrs Qutb] had no capacity to understand the contents of deed of sale to [Mr Hussain]. In the event that the court should find that a plea of non est factum is made out then the transaction would be ‘void’. Any transfer of the property would not be subject to the [Bank’s] charge.” On this basis, there was an attempt to hive off the issues between Mrs Qutb and the Bank. Mrs Qutb’s counsel explained as follows in his skeleton argument: “On 23rd January 2003 Mr Justice Hart order that the matters set out in paragraphs 3, 14 and 15 of the prayer for relief are to be adjourned. This means that the court does not need to concern itself with the question of non est factum. This should prove to be a wholly academic issue.” 31. In the event, the trial was adjourned, and Re-Amended Particulars of Claim were later served. The re-amendments included the addition of the following sentence: “For the sake of clarity it is averred that should the sale be set aside on the grounds of non est factum the charge in favour of [the Bank] would be of no effect.” 32. By now, the Bank had obtained a money judgment against Mr Hussain. On 19 July 2004, Master Moncaster lifted the stay on the 2002 Action to allow judgment to be entered against Mr Hussain for the sum of £196,781.64. 33. The 2001 Action eventually came on for trial before Warren J (then Mr Nicholas Warren QC sitting as a Deputy High Court Judge) in December 2004. Mrs Qutb, Mr Hussain and the Bank were all represented by counsel. (At this stage the Bank was represented by different counsel from those currently appearing.) In his skeleton argument for the trial, Mrs Qutb’s counsel once again said that it was accepted that the Bank had had no knowledge of any undue influence or unconscionable bargain but that, if the plea of non est factum was made out, “Any transfer of the property would not be subject to the [Bank’s] charge”. The skeleton argument further explained that, in the event of the Charge not being set aside, Mrs Qutb would seek “damages in the sum equal to the amount required to redeem the bank’s mortgage”. 34. Warren J handed down a draft judgment in February 2005 and the final version of the judgment on 26 April 2005. He dealt with the issues as follows: i) Lack of capacity Warren J concluded that, if the Deed of Gift and the sale of 30 Drayton Road were to be held valid, Mrs Qutb must have understood not only that she was making a gift and selling the property at an undervalue, but the claims of her children to her estate and the extent of her property. Warren J proceeded on the basis that a gift would be rendered void by the donor’s lack of capacity, but said that the position in relation to contracts was different. A contract entered into by a person lacking capacity was, Warren J said, “not void but, at most, voidable”, and it would “only be voidable if the other contracting party was aware of the incapacity”. On the evidence, Warren J was not satisfied that Mrs Qutb had the necessary capacity to enter into the Deed of Gift and the connected sale of 30 Drayton Road at an undervalue, with the result that the Deed of Gift was void. Mrs Qutb’s lack of capacity did not, however, invalidate the agreement for the sale of 30 Drayton Road because it could not “be said that [Mr Hussain] knew of [Mrs Qutb’s] lack of capacity”. ii) Undue influence and unconscionable bargain Warren J decided that a case of undue influence or unconscionable bargain had been made out. That meant that Mrs Qutb was “entitled to have the [contract for the sale of 30 Drayton Road] (and the Transfer, subject to the Bank’s charge) set aside (as voidable rather than void) and to have the Register rectified”. Warren J went on to explain the implications as regards the Bank in the following terms (in paragraph 168): “Those conclusions do not avail [Mrs Qutb] against the Bank. Neither [Mrs Qutb’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 [Mrs Qutb’s] incapacity or of undue influence or unconscionable bargain. It has, rightly so far as I can see, not been asserted on behalf of [Mrs Qutb] 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 [Mrs Qutb’s] interests so that, if the Register is rectified, the Bank’s charge should nonetheless be preserved”; iii) Non est factum Warren J proceeded as follows (in paragraphs 169 to 171): “To meet this problem, [Mrs Qutb] relies on non est factum to set aside the transfer of [30 Drayton Road] to [Mr Hussain] as a void (rather than voidable) deed. For reasons already given, the well-established rule in contract cases that incapacity renders the transaction voidable and not void, [Mrs Qutb] cannot succeed against the Bank by seeking to establish that the Agreement is void (and thus that the Transfer effected pursuant to it is also void). Quite apart from that, I have held that [Mr Hussain] did not know of [Mrs Qutb’s] incapacity so that the Agreement is not even voidable as against him by reason of that incapacity. Accordingly, in order to succeed on this plea, [Mrs Qutb] has to view the Transfer as a separate transaction to which the non est factum doctrine can apply. In my judgment, she has not been able to do that. It seems to me that the reasoning which, through the long line of authorities leading to the conclusion that contracts of persons lacking mental capacity are, at most, voidable and not void, and even then can only be avoided when the incapacity is known to the other party, applies equally to a transfer which is executed for the very purpose of completing the contract which ex hypothesi is not void but at most only voidable. Accordingly, the Transfer remains valid as against the Bank, with the result that there should be no rectification of the Register as against it.” 35. The order which Warren J made to give effect to his judgment included the following provisions: “THE COURT DECLARES that: … 2 [Mrs Qutb] shall be entitled to an indemnity from [Mr Hussain] in respect of the sums remaining payable under the first legal charge in favour of the [Bank] over the property as at the date of transfer of the property to [Mrs Qutb] but excluding the [Bank’s] costs incurred in defending the claim made by [Mrs Qutb] against the [Bank]. AND IT IS ORDERED that: 3 The register of the above mentioned title shall be rectified by cancelling in the proprietorship register the registration of [Mr Hussain] as proprietor of the property and registering [Mrs Qutb] as proprietor of the property. 4 The property shall be transferred to [Mrs Qutb], subject to the first legal charge in favour of the [Bank] registered in the charges register. … 9 [Mrs Qutb] shall pay to [Mr Hussain] the sum of £17,000 (being the purchase price of £145,000 less £128,000), such sum to be credited against the amount otherwise due from [Mr Hussain] to [Mrs Qutb] pursuant to the indemnity in paragraph 11 below. 10 In the event that [Mr Hussain] undertakes to indemnify [Mrs Qutb] in respect of any claim (and associated costs) brought by [Mrs] Hussain or the CPS to recover all or any part of the £64,000 received by [Mrs Qutb] under the confiscation or compensation orders, the figures as set out in paragraph 9 above will be replaced as follows: 11 [Mr Hussain] shall indemnify [Mrs Qutb] in respect of the full sum being due to the [Bank] under its charge over the property as at the date of transfer of the property to [Mrs Qutb], but excluding the [Bank’s] costs of defending [Mrs Qutb’s] claim against the [Bank]. … 15 The costs of the [Bank] shall be added to the security. For the avoidance of doubt such costs are not to form part of the indemnity referred to in paragraph 10 above. 16 [Mrs Qutb] shall be entitled to a public funding assessment of her costs. … 18 Permission for [Mrs Qutb] to appeal the costs order as between [Mrs Qutb] and the [Bank] is refused ….” 36. Mr Grant submitted that it was difficult to see how Warren J could have made the order he did had he known that Mrs Qutb would be challenging the Charge in other proceedings. I agree. It is also fair to infer that the Bank would have conducted matters differently had it appreciated that there was a possibility of the Charge being ineffective as against Mrs Qutb. 37. The position is clearest as regards the Bank’s costs. Warren J ordered the Bank’s costs to be added to its security (paragraph 15 of his order) and directed that the indemnity which Mr Hussain was to give Mrs Qutb was not to extend to the Bank’s costs (paragraphs 2, 11 and 15 of the order). He plainly envisaged that the burden of the Bank’s costs would fall on Mrs Qutb. Further, that was evidently how those representing Mrs Qutb saw matters: hence the application which must have been made on Mrs Qutb’s behalf for permission to appeal the costs order, resulting in paragraph 18 of the order. (Mr Qutb suggested that Warren J had refused his mother permission to appeal on his own initiative, without any application for permission having been made, but I was told by Mr Grant that that was not Mr Twomey’s recollection, and I do not think Mr Qutb can be right about this.) 38. Both Warren J and the Bank will have been proceeding on the assumption that the Charge was binding on Mrs Qutb. As matters have turned out, the Bank’s ability to recover costs incurred in the 2001 Action would appear to depend on the outcome of the present proceedings. I cannot believe that that was Warren J’s intention. Further, the Bank would surely have wanted to argue for different costs provisions had there been thought to be any issue as to the effectiveness of the Charge. It might, for example, have wished to press for an order for costs being made against Mrs Qutb personally, albeit that the fact that Mrs Qutb was legally aided could have affected its prospects of obtaining such an order. 39. It seems to me that Warren J and the Bank might also have approached differently the terms on which the sale of 30 Drayton Road was set aside had they perceived the validity of the Charge still to be in dispute. Consideration could, for example, have been given to ordering the £17,000 mentioned in paragraph 9 of Warren J’s order (representing such of the £145,000 purchase price as Mrs Qutb retained) to be repaid direct to the Bank. There might also have been scope for argument as to whether Mrs Qutb should account to the Bank for the £64,000 which she had received back from Mrs Hussain in respect of the £128,000 withdrawn from Mrs Qutb’s account immediately after the sale of 30 Drayton Road was completed (see paragraph 29 above); the £128,000 had, of course, derived from the Bank’s advance to Mr Hussain. 40. At all events, Mrs Qutb was re-registered at HM Land Registry as the proprietor of 30 Drayton Road in accordance with Warren J’s order. The Charge continued to be registered. 41. Following Warren J’s decision, the 2002 Action was revived. On 25 August 2005, Master Moncaster lifted the stay which Master Bowman had imposed in 2002. He also added Mrs Qutb as an additional Defendant. (Hitherto, Mr Hussain had been the only Defendant.) Thereafter, Mrs Qutb served a Defence and Counterclaim in which she, among other things, invoked section 70(1)(g) of the Land Registration Act 1925. In summary, she claimed as follows: “The Second Defendant [i.e. Mrs Qutb] has an overriding interest in the Property and the Claimant’s [i.e. the Bank’s] rights as mortgagee under the Mortgage are subject to the right of the Second Defendant to be the registered freehold proprietor of the Property free of the Mortgage, alternatively and in any event subject to the right of the Second Defendant to occupy and/or possess the Property.” The Defence went on to plead that, on the day the sale of 30 Drayton Road was completed, Mrs Qutb was in actual occupation of the property and “had a right as against [Mr Hussain] to set aside the agreement of sale and the transfer and have the Property re-conveyed to her together with a right to have the register rectified to record her as the true registered proprietor of the Property”. 42. The Bank (which was still at this stage represented by counsel different from those appearing before me) applied to have the section 70(1)(g) defence struck out as an abuse of process, on the ground that the point should have been raised in the 2001 Action, and sought summary judgment on the footing that Mrs Qutb could have no overriding interest. Master Moncaster dismissed the application to strike out but granted summary judgment. On appeal, Vos J (then Mr Geoffrey Vos QC sitting as a Deputy High Court Judge) upheld Master Moncaster’s refusal to strike out but overturned the Master’s decision on the application for summary judgment. 43. It is Vos J’s decision on the strike out application which is of particular relevance for present purposes. Vos J concluded that Mrs Qutb’s conduct could not be regarded as an abuse. In the course of his judgment, Vos J said that it had always been known that, once the 2001 Action had been determined, the 2002 Action would have to proceed and that Mrs Qutb’s position could not be seen as a collateral attack on Warren J’s judgment. He also said this: “It seems to me that there is a simple answer to the Bank’s claim. The proceedings before Mr Warren QC concentrated on the relationship between [Mr Hussain] and [Mrs Qutb], and consequentially between [Mr Hussain] and the Bank. They were not directed at the logically secondary question of what might happen if the transaction between [Mr Hussain] and [Mrs Qutb] were set aside on one or more of the grounds alleged, so that the Property was re-registered in [Mrs Qutb’s name].” 44. There was no appeal from Vos J’s decision. 45. 30 Drayton Road has long been unoccupied, except that Mr Qutb has stayed there occasionally. Mrs Qutb moved into a nursing home soon after returning to this country in April 2000. Since 2004, she has been living in the United States. 46. On 26 November 2009, a receiver was appointed over Mr Hussain’s property to enforce the confiscation order made against him in 2002. The limited information available to me suggests that this could result in Mrs Qutb receiving some of the £152,000 due to her under the compensation order made in her favour (in particular, following the sale of a property of which Mr Hussain was the beneficial owner). 47. The Bank now seeks a possession order. Evidence 48. The evidence on which the parties relied during the trial was largely documentary. The materials to which I was taken included not only contemporary documents but statements which a variety of witnesses had made either to the police or in the 2001 Action. 49. Only five witnesses were called. The Bank’s witnesses were Mr David Grant, a business assessor of the Bank, and Mr Twomey, the solicitor with conduct of this matter on behalf of the Bank. Mr Qutb gave evidence himself and also called Detective Sergeant MacRae, who had been concerned with the criminal proceedings against the Hussains, and Mrs Rose D’Souza, who has long lived near Drayton Road and knew Mrs Qutb. 50. Extensive reference was made to Warren J’s judgment. The Bank’s position was essentially that it did not take issue with Warren J’s findings. For his part, Mr Qutb queried Warren J’s conclusion that it could not “be said that [Mr Hussain] knew of [Mrs Qutb’s] lack of capacity” (see paragraph 34(i) above). Mr Qutb argued that, contrary to Warren J’s view, the Hussains were well aware of Mrs Qutb’s lack of capacity and, indeed, that that was implicit in the Hussains’ convictions. However, I do not think that these points matter for present purposes. The question whether Mr Hussain knew that Mrs Qutb lacked capacity arose in relation to issues on which Mrs Qutb failed before Warren J, which were not (so far as I know) the subject of any appeal and which are not before me. Issues 51. The principal issues to which the parties’ contentions give rise can be summarised as follows: i) Does Warren J’s decision in the 2001 Action mean that Mrs Qutb is not entitled to challenge the Charge in the present proceedings? Do res judicata principles apply? ii) Did Mrs Qutb seek and obtain remedies in the 2001 Action which are contrary to the case she now wishes to advance? If so, does that preclude her from advancing that case? iii) Assuming that Mrs Qutb is free to put forward the case outlined in her Defence and Counterclaim, is that case well-founded? In particular: a) Was Mrs Qutb in “actual occupation” (within the meaning of section 70(1)(g) of the Land Registration Act 1925) of 30 Drayton Road at the relevant time? b) Is Mrs Qutb bound by the Charge by reason of consent or estoppel? c) Are Mrs Qutb’s rights in any event limited to those she was granted by Warren J’s order? Res judicata 52. Mr Grant argued that the case “should begin and end with an application of the principles of res judicata”. He relied not only on res judicata in the strict sense (encompassing cause of action estoppel and issue estoppel), but on merger (or former recovery) and on the extended doctrine of res judicata based on abuse of process. I shall take these possibilities in turn. Cause of action estoppel 53. The term “cause of action estoppel” was explained by Diplock LJ in Thoday v Thoday [1964] P 181. He said (at 197-198): “The particular type of estoppel relied upon by the husband is estoppel per rem judicatam. This is a generic term which in modern law includes two species. The first species, which I will call ‘cause of action estoppel,’ is that which prevents a party to an action from asserting or denying, as against the other party, the existence of a particular cause of action, the non-existence or existence of which has been determined by a court of competent jurisdiction in previous litigation between the same parties. If the cause of action was determined to exist, i.e., judgment was given upon it, it is said to be merged in the judgment, or, for those who prefer Latin, transit in rem judicatam. If it was determined not to exist, the unsuccessful plaintiff can no longer assert that it does; he is estopped per rem judicatam. This is simply an application of the rule of public policy expressed in the Latin maxim ‘Nemo debet bis vexari pro una et eadem causa.’ In this application of the maxim ‘causa’ bears its literal Latin meaning.” 54. Mr Grant argued that Mrs Qutb was advancing in the present proceedings a cause of action which she had also advanced, and on which the Court had ruled, in the 2001 Action. Mrs Qutb had challenged the validity of the Charge in the 2001 Action, and (said Mr Grant) she was doing so again. In this connection, Mr Grant pointed out that the relief sought in the 2001 Action included claims for a declaration that the Charge was invalid and for the register to be rectified by the vacation of the Charge. Mr Grant said that cause of action estoppel can apply even if the cause of action advanced in the second proceedings is not identical to that advanced in the earlier litigation; it is enough, he submitted, that the causes of action are substantially the same. Further, cause of action estoppel extends, Mr Grant submitted, beyond the matters expressly in issue in the previous proceedings to points which were accepted and to legal arguments within the same factual matrix. 55. In this regard, Mr Grant referred to Henderson v Henderson (1843) 3 Hare 100, where Wigram V-C said the following in a very well-known passage (at 114-115): “ … where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.” Mr Grant also relied, in particular, on Ezekiel v Royal Bank of Scotland [2000] All ER (D) 2265 and Hoystead v Commissioner of Taxation [1926] AC 155. 56. In my judgment, however, cause of action estoppel does not preclude Mrs Qutb from disputing that she is bound by the Charge. 57. The key point, as I see it, is that the cause of action which Mrs Qutb is now asserting against the Bank is not the same as any cause of action she asserted as against the Bank in the 2001 Action. Mrs Qutb’s case in the present proceedings is based on allegations of undue influence and unconscionable bargain (see paragraph 3 of her Defence and Counterclaim). The 2001 Action also included such allegations, but they were then being advanced against only Mr Hussain and not against the Bank. Mrs Qutb did claim in the 2001 Action that the Charge was invalid, but that was on the basis of non est factum rather than undue influence or unconscionable bargain. Further, while the facts underlying the non est factum claim may have overlapped those underlying the undue influence and unconscionable bargain claims, they were by no means identical. The basis of Mrs Qutb’s claim against the Bank in the 2001 Action was thus different from that of her claim in the present proceedings. That the remedies sought by Mrs Qutb in her counterclaim may resemble relief which Mrs Qutb asked for as against the Bank in the 2001 Action is not, in my view, important. The cause of action in respect of which Mrs Qutb was seeking those remedies in the 2001 Action is not one on which she now relies. 58. Further, I do not consider that the authorities mentioned in paragraph 55 above assist Mr Grant in this context. With whatever degree of historical justification (as to which, see Handley, “A closer look at Henderson v Henderson”, [2002] LQR 397), Henderson v Henderson has been important to the development of the abuse of process doctrine discussed below (see paragraphs 74-79). The case may also be taken to indicate that cause of action estoppel can bar a person from putting forward new arguments in relation to a cause of action which has already been litigated: Spencer Bower and Handley, “Res Judicata”, 4th edition, (in paragraph 7.03) cites Henderson in support of the proposition that a cause of action estoppel “bars relitigation of the cause of action by either party on grounds, other than fraud or collusion, that were not raised in the earlier proceedings” (emphasis added). However, the question in the present case is not whether Mrs Qutb can re-litigate on new grounds a cause of action she advanced against the Bank in earlier proceedings, but whether she can advance a new cause of action against the Bank. As I see it, there is nothing in Henderson v Henderson to indicate that cause of action estoppel can extend to such a case. It will sometimes be an abuse of process for a person to put forward even a new cause of action, but cause of action estoppel will not apply. 59. In Ezekiel v Royal Bank of Scotland, a bank had brought possession proceedings in reliance on two charges and succeeded in obtaining a possession order. When Mr Ezekiel later sought to challenge the validity of the charges in new proceedings, Judge Weeks QC, sitting as a High Court Judge, held that the res judicata principle applied. No more than a summary of the decision is available; Mr Grant and Mr Scher attempted to track down either a better report or a transcript, but without success. In the circumstances, it is impossible to know exactly what Judge Weeks’ reasoning was. The case appears, however, to be readily distinguishable from the present one. The points which Mr Ezekiel was seeking to raise went to the heart of the claim which the bank had advanced in the earlier proceedings: they would have provided, if well-founded, a defence to the bank’s claim. In contrast, the issue in the present case is whether Mrs Qutb is barred from putting forward a claim which she has not previously advanced (as against the Bank). 60. As regards Hoystead v Commissioner of Taxation (to which I return in paragraph 64 below), that case is more concerned with issue estoppel than cause of action estoppel; Spencer Bower and Handley describes Hoystead as having “extended the Henderson principle to issue estoppels” (paragraph 8.11). At all events, I do not think that Hoystead lends any support to the idea that there can be a cause of action estoppel, as such, in relation to a cause of action which has not previously been the subject of litigation. 61. I should perhaps add that my conclusions as regards cause of action estoppel do not depend on the fact that Mrs Qutb is now, for the first time, invoking section 70(1)(g) of the Land Registration Act 1925. It is evident from Paddington Building Society v Mendelsohn (1985) 50 P&CR 244 (the judgment of Browne-Wilkinson LJ in which is quoted in paragraph 97 below) that section 70(1)(g) merely protects rights and does not create them. It follows, as I see it, that Mrs Qutb must be relying on section 70(1)(g) in respect of some other cause of action. Reference to section 70(1)(g) cannot of itself mean that she is advancing a new cause of action. Issue estoppel 62. “Issue estoppel” was explained by Diplock LJ in the following terms in the Thoday case (at 198): “There are many causes of action which can only be established by proving that two or more different conditions are fulfilled. Such causes of action involve as many separate issues between the parties as there are conditions to be fulfilled by the plaintiff in order to establish his cause of action; and there may be cases where the fulfilment of an identical condition is a requirement common to two or more different causes of action. If in litigation upon one such cause of action any of such separate issues as to whether a particular condition has been fulfilled is determined by a court of competent jurisdiction, either upon evidence or upon admission by a party to the litigation, neither party can, in subsequent litigation between one another upon any cause of action which depends upon the fulfilment of the identical condition, assert that the condition was fulfilled if the court has in the first litigation determined that it was not, or deny that it was fulfilled if the court in the first litigation determined that it was.” 63. Only a determination which is necessary for a decision, and fundamental to it, will create an issue estoppel (Spencer Bower and Handley, at paragraph 8.23). Moreover, reasons for costs orders do not, it seems, give rise to issue estoppels (see Spencer Bower and Handley, at paragraph 8.11, and Clancy v Santoro [1999] 3 VR 783). 64. On the other hand, issue estoppel can extend to points which were not taken in earlier litigation. In Hoystead v Commissioner of Taxation [1926] AC 155, Lord Shaw (delivering the judgment of the Privy Council) said (at 165-166): “In the opinion of their Lordships it is settled, first, that the admission of a fact fundamental to the decision arrived at cannot be withdrawn and a fresh litigation started, with a view of obtaining another judgment upon a different assumption of fact; secondly, the same principle applies not only to an erroneous admission of a fundamental fact, but to an erroneous assumption as to the legal quality of that fact. Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the Court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted, and there is abundant authority reiterating that principle. Thirdly, the same principle – namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken. The same principle of setting parties’ rights to rest applies and estoppel occurs.” 65. In the present case, Mr Grant argued that it was fundamental to Warren J’s decision in the 2001 Action that the Charge was effective. As Mr Grant pointed out, Warren J stated in terms that his conclusions on undue influence and unconscionable bargain did not avail Mrs Qutb against the Bank, explaining that “the Bank’s charge should prevail against [Mrs Qutb’s] interests so that, if the Register is rectified, the Bank’s charge should nonetheless be preserved” and going on to say that “the Transfer remains valid as against the Bank, with the result that there should be no rectification of the Register as against it”. In keeping with these comments, Warren J’s order provided for 30 Drayton Road to be transferred to Mrs Qutb “subject to the first legal charge in favour of the [Bank] registered in the charges register”. 66. It had not, of course, been contended by Mrs Qutb in the 2001 Action that the Bank’s position would be affected by findings in Mrs Qutb’s favour on her undue influence and unconscionable bargain allegations. To the contrary, it was accepted on Mrs Qutb’s behalf in the 2001 Action that the Bank had no knowledge of any undue influence or unconscionable bargain and that, if Mrs Qutb established them, this would “result in [Mrs Qutb’s] property being subject to the [Bank’s] charge”. Furthermore, no reference was made to section 70(1)(g) in the 2001 Action. According to Mr Grant, none of this is significant: Hoystead, he says, shows that issue estoppel applies to points which were admitted or otherwise not taken. 67. However, issue estoppel will not necessarily apply whenever a point has been determined (or not taken) in previous proceedings in which the same persons were involved. It is not enough that a person alleged to be estopped was a party to earlier proceedings in which the relevant issue was determined (or not taken). For an issue estoppel to have arisen, the issue must, as I see it, have related to a cause of action advanced in the previous proceedings as between the same persons or otherwise to a matter which was in “controversy” between them in those proceedings. As Fisher J explained in Taylor v Ansett Transport Ltd (1987) 18 FCR 342 in the Federal Court of Australia in a passage quoted in Spencer Bower and Handley (at paragraph 9.08): “… issue estoppel can only be raised by or applied against parties who were in ‘controversy’ at the time when the issue was first determined, either in their favour or adversely to them. If a party was not involved in the litigation of that issue, either because it was not an issue between him and another party to the proceedings, or because he was not a party at all to the proceedings at the time of resolution, then he is not affected by nor can he raise an estoppel.” 68. The point can be illustrated by reference to the present case. Warren J concluded in his judgment that Mrs Qutb’s undue influence and unconscionable bargain allegations had been made out. Those allegations had not, however, been advanced against, or said to affect, the Bank, and it would not seem to have been open to the Bank to appeal Warren J’s findings. In the circumstances, it would be unfair for the Bank to be bound by Warren J’s findings. This may be of no practical significance since the Bank does not in fact take issue with the findings. In principle, however, it appears to me that, the findings having been made in relation to allegations which were advanced only against Mr Hussain, there can be no issue estoppel as between Mrs Qutb and the Bank. 69. By the same token, Mrs Qutb cannot be barred by issue estoppel from challenging the validity of the Charge on grounds of undue influence and unconscionable bargain. Warren J decided that 30 Drayton Road should be transferred back to Mrs Qutb, subject to the Charge, on the basis of Mrs Qutb’s claims that the sale of the property should be set aside for undue influence and as an unconscionable bargain. Those claims were not advanced against the Bank. It follows, in my judgment, that no issue estoppel will have arisen as between Mrs Qutb and the Bank in relation to them. Merger 70. Diplock LJ referred in Thoday v Thoday to the fact that, when judgment is given on a cause of action, the cause of action merges in the judgment (see paragraph 53 above). The principle is summarised in Spencer Bower and Handley in these terms (in paragraph 19.01): “Any person in whose favour an English judicial tribunal of competent jurisdiction has pronounced a final judgment, is precluded from recovering before any English tribunal a second judgment on the same cause of action.” 71. There can be circumstances in which recovery against one person will also bar recovery against another. The position is explained in Spencer Bower and Handley as follows (in paragraph 22.05): “Where one of two persons is liable at the election of a claimant, judgment against one extinguishes the liability of the other: transit in rem judicatam …. The principles were stated by the High Court of Australia in Petersen v Maloney: ‘It is a well-settled general principle that, while the commencement of an action against one of two persons alternatively liable does not, the entry of judgment against one of them does constitute a final and irrevocable election.’” 72. Mr Grant argued that the principle applied in the present case on the basis that the relief now sought against the Bank was necessarily alternative to relief which Mrs Qutb had already obtained as against Mr Hussain. Mr Grant relied in particular on paragraph 11 of Warren J’s order, which provided for Mr Hussain to indemnify Mrs Qutb in respect of the sum due to the Bank under the Charge. This provision was premised, Mr Grant said, on the Charge being effective as against Mrs Qutb, and it was not now open to Mrs Qutb to seek a remedy inconsistent with that premise. 73. I have not been persuaded, however, that the judgment which Mrs Qutb obtained against Mr Hussain operated to extinguish the claim she is now seeking to advance against the Bank. Neither Mrs Qutb’s claims against Mr Hussain in the 2001 Action nor the remedies which Warren J granted in respect of those claims necessarily represented, in my judgment, an alternative to Mrs Qutb’s current challenge to the Charge. As regards, in particular, paragraph 11 of Warren J’s order, this merely provided for Mr Hussain to indemnify Mrs Qutb against the Charge. Were I, therefore, to conclude that Mrs Qutb was not bound by the Charge, paragraph 11 would, in effect, fall away. There is no danger of the provision producing double recovery. Abuse of process 74. Guidance as to the extended doctrine of abuse of process based on abuse of process is to be found in Lord Bingham’s speech in Johnson v Gore Wood & Co [2002] 2 AC 1. He said (at 31): “The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not …. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party’s conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.” 75. Mr Grant argued that Mrs Qutb’s Defence and Counterclaim represented an abuse of process. Mrs Qutb had challenged the Charge in the 2001 Action, without success. She should not (Mr Grant submitted) be allowed a second bite at the cherry. The section 70(1)(g) point ought to have been taken in the 2001 Action if it was to be taken at all. 76. But for the Bank’s previous (and unsuccessful) application to strike out, I might have been inclined to agree. The reasons include these: i) The section 70(1)(g) point could have been raised conveniently in the 2001 Action. The relevant parties were before the Court, and the proceedings were concerned with the sale of 30 Drayton Road. Mrs Qutb was, moreover, both (a) alleging that the sale should be set aside for undue influence and as an unconscionable bargain and (b) challenging the Charge (albeit on a different ground). There was no obstacle to Mrs Qutb also challenging the Charge by reference to her allegations of undue influence and unconscionable bargain; ii) In fact, it would have been far preferable for the section 70(1)(g) point to be addressed in the 2001 Action rather than the present proceedings. Had it been raised in the 2001 Action, it could have been dealt with much sooner and much more cheaply; it would not, I am sure, have added greatly to the length or expense of the trial before Warren J. More specifically, for section 70(1)(g) to apply, Mrs Qutb must have been in “actual occupation” of 30 Drayton Road when the property’s sale was completed. The question whether Mrs Qutb was in “actual occupation” could have been usefully explored with a number of people who gave oral evidence in the 2001 Action but not before me. Even had the relevant individuals been called to give evidence again, in these proceedings, their recollections could be expected to have dimmed. As it is, I have had to rely largely on witness statements which were prepared for the 2001 Action and not, therefore, directed at whether Mrs Qutb was in “actual occupation”. Further, I have little information as to what evidence the witnesses gave orally, before Warren J. Again, it would, as it seems to me, have been desirable for the section 70(1)(g) point to be considered when dealing more generally with the implications of setting aside the sale of 30 Drayton Road; iii) So far as I am aware, Mr Qutb has never given any real explanation of why the section 70(1)(g) point was not raised in the 2001 Action. It is to be noted, moreover, that Mrs Qutb had the benefit of legal representation in the 2001 Action; iv) It was evidently Vos J’s understanding, on the basis of the submissions and materials before him, that the 2001 Action was “not directed at … what might happen if the transaction between [Mr Hussain] and [Mrs Qutb] were set aside on one or more of the grounds alleged, so that the Property was re-registered in [Mrs Qutb’s name]”. However, it is clear from the matters to which Mr Grant has taken me that consideration was given in the 2001 Action to the implications of the sale to Mr Hussain being successfully impugned. In fact, Mrs Qutb challenged the Charge in the 2001 Action and sought to have it removed from the register. Her case was in this respect based on non est factum rather than undue influence or unconscionable bargain, but that was because she accepted that she could not succeed against the Bank on those grounds. In substance, Mrs Qutb is seeking to resile from concessions she made in the 2001 Action; v) As mentioned above (paragraphs 36-39), both Warren J and the Bank could have been expected to approach the 2001 Action differently had they thought that there could be an outstanding issue as to the validity of the Charge. While all concerned must have known that the present (possession) proceedings would remain outstanding, there is no reason to suppose that anyone was envisaging any further challenge to the Charge by Mrs Qutb (who was not then even a party to these proceedings); vi) There has been no suggestion from Mrs Qutb that she should account to the Bank for the £17,000 she appears to have retained from the sale of 30 Drayton Road (see paragraph 39 above), the £64,000 she has recovered from Mrs Hussain (see paragraph 29 above) or any sums she might receive from the current receivership (see paragraph 46), nor that Mrs Qutb should undertake any responsibility for the costs of the Bank which Warren J ordered to be added to its security on the assumption that the Charge was binding on Mrs Qutb (see paragraphs 37-38 above); vii) In short, on the basis of the arguments put before me (which the Bank says are far more developed than and quite different from those before Vos J), I should have thought that there was a good deal to be said for the view that the section 70(1)(g) point not only could, but should, have been raised (if at all) in the 2001 Action. 77. Is it, though, open to the Bank now to allege that Mrs Qutb’s Defence and Counterclaim represents an abuse of process when it has already failed in an application to strike out on that basis? 78. The Bank argues that it is. It contends that the dismissal of its strike out application represents no more than an exercise of judicial discretion not to grant a procedural remedy, based on the circumstances and arguments then before the Court, with the result (it is said) that there is no relevant res judicata. The Bank refers in this regard to Mullen v Conoco Ltd [1998] QB 382, where a Court’s refusal to set aside a default judgment was held not to have given rise to a relevant res judicata. As for abuse of process, the Bank relies on Woodhouse v Consignia plc [2002] 1 WLR 2558, where the Court of Appeal said the following (in paragraph 56): “In our view, although the policy that underpins the rule in Henderson v Henderson has relevance as regards successive pre-trial applications for the same relief, it should be applied less strictly than in relation to a final decision of the court, at any rate where the earlier pre-trial application has been dismissed.” The Bank further submits (as I have already mentioned) that the arguments and material deployed before me differ substantially from those before Vos J. In the circumstances, the Bank says that it should be allowed to contend once again that the Defence and Counterclaim itself represents an abuse of process. 79. I do not agree. In my judgment, Vos J’s affirmation of Master Moncaster’s refusal to strike out the Defence and Counterclaim does bar the Bank from now contending that the Defence and Counterclaim represents an abuse of process. My reasons include these: i) The question in Mullen v Conoco Ltd was whether a Court’s refusal to set aside a default judgment which Conoco Ltd had obtained against Mr Mullen precluded the latter from bringing a claim in respect of a matter which he had advanced as a reason for setting aside the judgment. The Court of Appeal decided, essentially, that the earlier decision had not involved a determination on the merits of the relevant matters. Evans LJ did “not exclude the theoretical possibility that there might be a case where the court’s ruling on an Ord. 13, r. 9 application to set aside a default judgment was so clear and so specific as regards a particular defence or potential defence, and where no special factors were present which might prevent an issue of estoppel from arising …, which might give rise to legal or discretionary grounds for barring any further action ” (see 391), but he did not consider that Mullen was such a case. Hobhouse LJ said (at 396) that “what occurs on an application under R.S.C., Ord. 13, r. 9 is not a determination of issues but merely an exercise of a discretion and the decision whether or not to grant a discretionary procedural remedy” and that such an application does not give rise to a res judicata in respect of the exercise of discretion. For his part, Hutchison LJ said (at 397-398): “While it might … be possible successfully to raise a plea of res judicata or, more generally, of abuse of process to defeat a subsequent fresh action based on the cause of action which founded the proposed set-off and counterclaim, this would only be so in cases where the court was satisfied that the matters relied on in the new action were the subject of such consideration in the previous interlocutory proceedings as to justify the conclusion that there had really been a determination on the merits in relation to those matters. In the present case the suggested set-off and counterclaim were sketched out only in the briefest and most general terms in Mr. Mullen’s affidavit, prepared without the benefit of legal advice. There is nothing in the note of the deputy master’s short judgment or elsewhere to satisfy me that there was here anything that ought to be regarded as a determination of the relevant matters on the merits”; ii) The present case is very different. The question is whether the Bank is free to argue that the Defence and Counterclaim represents an abuse of process. That is precisely the same issue as was raised by the strike out application. Moreover, Vos J expressed his conclusions on the point in unqualified terms, concluding that “the test laid down by Lord Bingham in Johnson v Gore Wood is not satisfied in this case”. There is, furthermore, nothing in Vos J’s judgment to indicate that he was expressing only a provisional view. It seems to me, in the circumstances, that Vos J’s decision represents a final determination on the question of abuse of process, with the result that the res judicata principle is applicable; iii) Even if I had taken a different view on res judicata, I should not have thought it appropriate for the Bank to re-litigate the abuse of process point. This is not a case in which important new evidence has become available since the hearings before Master Moncaster and Vos J. Nor, so far as I can see, has there otherwise been a significant change of circumstances. Notwithstanding, therefore, that Woodhouse v Consignia plc indicates that abuse of process principles are to be applied less strictly in relation to pre-trial applications, the Bank should not, in my view, be allowed a second bite at the cherry here. That different arguments may have been advanced before me is not a sufficient reason; iv) The views expressed above are consistent with the conclusions of Cullity J, in the Ontario Superior Court of Justice, in Renaissance Leisure Group Inc. v Frazer (2001) 197 DLR (4th) 336, to which Mr Grant and Mr Scher very properly drew my attention. Conclusion 80. In my judgment, res judicata principles do not preclude Mrs Qutb from challenging the Charge. Remedies sought and obtained in the 2001 Action 81. Mr Grant argued that Mrs Qutb had sought and obtained remedies in the 2001 Action on the basis that the Charge was valid and bound her and 30 Drayton Road. That being so, it was not (so Mr Grant said) now open to Mrs Qutb to dispute the validity of the Charge. Principles of affirmation, approbation and reprobation, election and counter-restitution applied. 82. Mr Grant pointed out that the 2001 Action had included a claim for Mr Hussain to be ordered to pay damages “[i]n the event that the [Charge] remains on the land register and remains a valid charge”, and he said that the indemnity which Warren J ultimately ordered fulfilled a similar function. Mrs Qutb had moreover, Mr Grant submitted, expressly accepted that findings of undue influence and unconscionable bargain would not entitle her to avoid the Charge, and Warren J’s order was premised on the Charge’s validity. 83. Mr Grant attached particular importance to the decision of the Court of Appeal in First National Bank plc v Walker [2001] 1 FLR 505. In that case, a wife had pursued matrimonial proceedings on the footing that the family home was encumbered by a particular charge, and a property adjustment order had been made on that basis. Further, a conveyance executed in pursuance of the property adjustment order had contained an acknowledgment by the wife that the charge was a continuing security for liabilities of both spouses. The wife nevertheless alleged in possession proceedings brought by the chargee that the charge should be set aside as having been executed under the husband’s undue influence. The Court of Appeal unanimously concluded that the wife was not entitled to pursue that defence. 84. One member of the Court, Chadwick LJ, said (in paragraph 76) that “it would be an abuse of the process of the court to allow [the wife] … to pursue the inconsistent case which she asserts in the possession proceedings”. This conclusion can be of no help to Mr Grant. I have already considered abuse of process and decided that Vos J’s judgment precludes the Bank from relying on it. 85. Morritt V-C and Rix LJ, the other members of the Court, approached the case on the basis that the wife could only rely on undue influence as against the chargee if she could also do so as against her husband and that she had lost any right to allege undue influence as against her husband. Rix LJ, for example, explained (at paragraph 81): “[the wife] had … finally elected … to go down the route of absolving her husband of any wrong of undue influence. In those circumstances, she had abandoned, or must be treated as abandoning, the claim of vitiating wrong which was a necessary pre-condition of her assertion of a right as against the bank to have the charge avoided. That right was parasitic on her claim of undue influence on the part of her husband, and could no longer exist when once that claim had been abandoned.” Similarly, Morritt V-C said (in paragraphs 53-54): “if and to the extent that the charge had previously been unenforceable, the husband and the wife agreed that it should now be treated as enforceable. At the time she executed the conveyance, if not before, the wife precluded herself from asserting the contrary. In summary, therefore, I conclude that by [the date of the conveyance], at the latest, the wife had precluded herself from asserting as against her husband that the charge was voidable because of his undue influence. I do not think that the label to be attached, whether estoppel, approbation and reprobation, abuse of the process, affirmation or release is of any importance, though on the facts of this case I am inclined to think that all of them apply.” 86. To my mind, however, First National Bank plc v Walker is distinguishable from the present case, and the remedies which Mrs Qutb sought and obtained in the 2001 Action have not served to preclude her from challenging the Charge. In the first place, whereas in the First National Bank case the wife had abandoned her claim of undue influence as against her husband, there is no question of Mrs Qutb having abandoned her claims of undue influence and unconscionable bargain as against Mr Hussain; to the contrary, she has obtained an order setting aside the sale of 30 Drayton Road on those grounds. Further, while all concerned may have assumed that the Charge was effective when Warren J’s order was being framed, I do not think the relief it grants is necessarily inconsistent with a challenge to the Charge. As I noted above, paragraph 11 of the order, in particular, merely provided for Mr Hussain to indemnify Mrs Qutb against the Charge and so would simply become a dead letter were I to conclude that Mrs Qutb was not bound by the Charge; it should not produce double recovery. Some of the points which Mr Grant made in this context would have been relevant to abuse of process, but, as I have said, it is not open to the Bank to pursue that. 87. I turn, accordingly, to section 70(1)(g) of the Land Registration Act 1925. Section 70(1)(g) 88. Section 70 of the Land Registration Act 1925, which was in force when the relevant events took place (it has since been repealed), provided as follows: “(1) All registered land shall, unless under the provisions of this Act the contrary is expressed on the register, be deemed to be subject to such of the following overriding interests as may be for the time being subsisting in reference thereto, and such interests shall not be treated as incumbrances within the meaning of this Act, (that is to say): – … (g) The rights of every person in actual occupation of the land or in receipt of the rents and profits thereof, save where enquiry is made of such person and the rights are not disclosed …. ” “Actual occupation” 89. The first question which arises in relation to this provision is whether Mrs Qutb was in “actual occupation” of 30 Drayton Road when the Charge was granted. 90. In Link Lending Ltd v Bustard [2010] EWCA Civ 424, the Court of Appeal endorsed a passage from the judgment of Lewison J in Thompson v Foy [2009] EWHC 1076 (Ch), [2010] 1 P&CR 16 summarising the law in relation to “actual occupation”. The passage in question (at paragraph 127) reads as follows: “Before addressing the question of Mrs Thompson’s actual occupation directly, it is necessary to say a little more about ‘actual occupation’: (i) The words ‘actual occupation’ are ordinary words of plain English and should be interpreted as such. The word ‘actual’ emphasises that physical presence is required: Williams & Glyn’s Bank v Boland [1981] A.C. 487 per Lord Wilberforce at 504; (ii) It does not necessarily involve the personal presence of the person claiming to occupy. A caretaker or the representative of a company can occupy on behalf of his employer: Abbey National BS v Cann [1991] 1 A.C. 56 per Lord Oliver at 93; (iii) However, actual occupation by a licensee (who is not a representative occupier) does not count as actual occupation by the licensor: Strand Securities Ltd v Caswell [1965] Ch. 958 per Lord Denning M.R. at 981; (iv) The mere presence of some of the claimant’s furniture will not usually count as actual occupation: Strand Securities Ltd v Caswell [1965] Ch. 958 per Russell L.J. at 984; (v) If the person said to be in actual occupation at any particular time is not physically present on the land at that time, it will usually be necessary to show that his occupation was manifested and accompanied by a continuing intention to occupy: compare Hoggett v Hoggett (1980) 39 P. & C.R. 121 , per Sir David Cairns at 127.” 91. In the present case, there can be no doubt but that Mrs Qutb had in the past been in “actual occupation” of 30 Drayton Road. The issue is whether she was still in “actual occupation” when the Charge was granted on 29 January 2001. 92. Mr Grant argued that she was not. His case was to the effect that 30 Drayton Road was in a poor state and that Mrs Qutb had been spending the bulk of her time either in the United States of America or staying with the Hussains at their house at 140 Birkbeck Avenue in Greenford. Mr Grant accepted that Mrs Qutb returned to 30 Drayton Road now and again, but said that she would have considered her home to be 140 Birkbeck Avenue. 93. On balance, however, I accept Mr Qutb’s submission that his mother was still in “actual occupation” of 30 Drayton Road when the Charge was granted. The condition of the property (as to which, the evidence does not entirely speak with one voice) had not prevented Mrs Qutb from staying there: for example, a Mrs Chesters, who said in a witness statement that the “place was in a terrible state of disrepair and not a very nice place to live at all”, nonetheless went on to refer to Mrs Qutb living “in one room at the top of the house”. Further, there is evidence indicating that Mrs Qutb was spending time at 30 Drayton Road in the period immediately before its sale was completed and even just afterwards. Mr Grant accepted that Mrs Qutb had stayed at 30 Drayton Road on the night of 28/29 January 2001 and that she might have stayed there the next night: that, at any rate, is what a witness statement made by Mr Hussain would suggest (for what it is worth). In oral evidence, Mrs D’Souza, who lived close to 30 Drayton Road and knew Mrs Qutb well, said that she thought that Mrs Qutb had probably stayed with the Hussains for several weeks on returning from the United States in October 2000, but that she had then come back to 30 Drayton Road. Even if, so many years on, Mrs D’Souza’s recollection may not be wholly reliable, it seems very likely that Mrs Qutb spent at least some nights at 30 Drayton Road between October 2000 and 28 January 2001: Mr Hussain referred in a witness statement to her having “occasionally” spent one or two nights there. Moreover, while “the mere presence of some of the claimant’s furniture will not usually count as actual occupation” (see paragraph 90 above), it is, I think, of some relevance that Mrs Qutb’s furniture and other belongings will have remained at 30 Drayton Road up to the point the sale of the property was completed (and afterwards). Further, it seems that Mrs Qutb was not intending to vacate 30 Drayton Road: Warren J concluded (in paragraph 160 of his judgment) that Mrs Qutb “did not appreciate that the real effect of the sale would be to deprive her of her home and that it would be unavailable for her to live in when she returned to England after her visit to the United States”. 94. It is noteworthy that Mr Grant accepted (to my mind, correctly) that a person can be in “actual occupation” of more than one property. Were, therefore, it to be the case that Mrs Qutb would have considered her home to be at 140 Birkbeck Avenue, and so to have been in “actual occupation” there, that would not necessarily be inconsistent with her having been in “actual occupation” of 30 Drayton Road too. 95. I find, in all the circumstances, that Mrs Qutb was in “actual occupation” of 30 Drayton Road when the Charge was granted. Consent and estoppel 96. There is a line of cases in which persons with overriding interests have been taken to have authorised mortgages and so to be bound by them. 97. The earliest of the cases to which I was taken was Paddington Building Society v Mendelsohn (1985) 50 P&CR 244. There, a mother and son agreed to buy a flat together, but the acquisition was effected in the son’s sole name. Some of the purchase price was provided by the mother and the balance by Paddington Building Society, the plaintiff. When mortgage possession proceedings were brought, the mother resisted them on the basis that she had an overriding interest. The Court of Appeal, however, concluded that the mortgage had priority over the mother’s rights. Browne-Wilkinson LJ, with whom Donaldson MR agreed, said this (at 247): “Since the mother knew and intended that the mortgage was to be granted to the society and that without the mortgage the flat in which she claims a beneficial interest could not have been acquired, the only possible intention to impute to the parties is an intention that the mother’s rights were to be subject to the rights of the society. Therefore, if the land were unregistered land, in my judgment the mother’s equitable interest in the flat would have been subject to the society’s rights and would provide no defence to the society’s claim to possession.” Browne-Wilkinson LJ went on to explain that it made no difference that the land was registered. He said (at 248): “Section 70(1) [of the Land Registration Act 1925] deems the registered land to be subject to certain rights which ‘override’ the rights appearing on the register. The rights referred to in paragraph (g) are ‘the rights of every person in occupation.’ There is no doubt therefore that the registered land is subject to the rights of such person. But the essential question remains to be answered, ‘What are the rights of the person in actual occupation?’ If the rights of the person in actual occupation are not under the general law such as to give any priority over the holder of the registered estate, there is nothing in section 70 which changes such rights into different and bigger rights. Say, in the present case, before the acquisition of the flat a trust deed had been executed declaring that the flat was held in trust for the mother but expressly subject to all the rights of the society under the proposed legal charge. The effect of section 70(1)(g) could not in my judgment have been to enlarge the mother’s rights so as to give her rights in priority to the society when, under the trust deed, her rights were expressly subject to those of the society. Her rights would be ‘overriding interests’ in that the society would have to give effect to them, but the inherent quality of the mother’s rights would not have been such as to give them priority over the society’s rights. So in the present case, once it is established that the imputed intention must be that the mother’s rights were to be subject to the mortgage, there is nothing in section 70 of the Registration Act 1925 which enlarges those rights into any greater rights.” 98. The next case is Abbey National Building Society v Cann [1991] 1 AC 56, where the Court of Appeal had concluded that Mrs Cann had left it to her son to raise money on mortgage to complete the purchase of the property at issue. Lord Oliver (obiter) said that the Court had been entitled to take this view and continued (at 94): “If that is right, it follows that George Cann was permitted by her to raise money on the security of the property without any limitation on his authority being communicated to the society. She is not, therefore, in a position to complain, as against the lender, that too much was raised and even if, contrary to the view which I have formed, she had been able to establish an interest in the property which would otherwise prevail against the society, the circumstances to which I have alluded would preclude her from relying upon it as prevailing over the society’s interest for the reasons given in the judgment of Dillon L.J. in the Court of Appeal.” 99. In Skipton Building Society v Clayton (1993) 66 P&CR 223, Slade LJ took the cases as demonstrating the following principle (at 228-229): “in a case where A, the holder of the legal estate in land, has executed a mortgage of the land in favour of B, and C, who claims an interest in the land, has so conducted himself as to give B reasonable grounds for believing that C is consenting to the creation by A of a charge over the land in favour of B which will have priority to C’s interest, then C will be estopped from asserting that his interest has priority to B’s charge.” 100. The most recent of the authorities is Thompson v Foy. In that case, Lewison J rejected a submission that in Paddington Building Society v Mendelsohn the Court of Appeal had been concerned only with determining the nature of the relevant party’s beneficial interest in the property. Having referred to Lord Oliver’s observations in the Cann case, Lewison J said (in paragraph 142): “This, as it seems to me is a much broader principle, akin to an estoppel. In the course of his reasoning in the Court of Appeal (which Lord Oliver approved) Dillon L.J. applied the principle in Brocklesby v Temperance Permanent BS [1895] A.C. 173 which was referred to and applied by Farwell J. in Rimmer v Webster [1902] 2 Ch. 163 …. Shortly stated the principle is that when: ‘the owner is found to have given the vendor or borrower the means of representing himself as the beneficial owner, the case forms one of actual authority apparently equivalent to absolute ownership, and involving the right to deal with the property as owner, and any limitations on this generality must be proved to have been brought to the knowledge of the purchaser or mortgagee.’” 101. There is room for argument about the basis for the principle which emerges from these authorities. In the Paddington case, Browne-Wilkinson LJ spoke of the “intention to impute” to the parties, but there has been debate as to how far intentions can be imputed: compare in this respect the views of Lord Neuberger (at paragraphs 125-127) with those of Lord Walker and Baroness Hale (at paragraphs 33 and 60) in Stack v Dowden [2007] 2 AC 432. Further, the authorities may be thought to go beyond established agency principles, which are “to the effect that where an agent acts outside his actual authority, his principal is only bound where there is apparent authority, or where the contract is ratified” (Bowstead and Reynolds on Agency, 19th edition, at paragraph 8-135). Nor is the justification for the principle obviously to be found in estoppel by representation. The estoppel propounded by Slade LJ in Skipton would appear to do more than preclude “C” from denying a representation of existing fact, as an estoppel by representation would conventionally do. 102. In some cases, the person claiming not to be bound by a mortgage can fairly be taken to have given the legal owner actual authority to enter into it or to have ratified it. Where that is so, the mortgage may be binding on ordinary agency principles. In other cases, the principle may perhaps best be explained as a species of, or akin to, proprietary estoppel. 103. At all events, it seems to me that, leaving aside for the moment any issue as to Mrs Qutb’s mental capacity, the principle applies in the present case. The reasons include these: i) Mrs Qutb will have (or ought reasonably to have) appreciated that Mr Hussain was going to mortgage 30 Drayton Road. It is of course very common indeed for purchasers to borrow money on mortgage. A vendor who did not know otherwise might therefore expect the property to be mortgaged. In any case, the fact that Mrs Qutb attended a meeting with Mr Bahalim, the mortgage broker, indicates that she was aware that 30 Drayton Road would be mortgaged. No objection was raised to this; ii) Mrs Qutb represented to Waran & Co, who were the Bank’s solicitors as well as Mr Hussain’s, that the property would be sold with vacant possession and that she would not retain any rights in it. So much is, as it seems to me, apparent from, in particular, the provision to Waran & Co of the contract (which provided for the property to be sold with vacant possession and with full title guarantee), the replies to requisitions on title (which confirmed that vacant possession would be given on completion) and the transfer (which stated that the property was being transferred with full title guarantee); iii) The Bank relied on those representations by proceeding with the loan to Mr Hussain. It was reasonable for it to do so since (as Warren J found) there is nothing to indicate that the Bank had notice of Mrs Qutb’s incapacity or undue influence or unconscionable bargain; iv) Almost all of the money advanced by the Bank found its way (via the solicitors) into Mrs Qutb’s bank account. It thus accrued to her benefit, regardless of whether it was then misappropriated by Mr Hussain. 104. Mr Qutb argued there could be no estoppel because his mother had had no direct relationship with the Bank. He also submitted that an estoppel could do no more than preclude his mother from denying an existing fact. Even, therefore, if Mrs Qutb were to be taken to have represented to the Bank that she intended to give vacant possession, an estoppel could, at most, debar her from denying that that was her intention at the time. An estoppel would not, Mr Qutb said, prevent his mother (through him) from asserting her rights now. 105. In my judgment, however, the principle established by the authorities is capable of applying even where there was no direct relationship between the person asserting rights and the mortgagee. In any case, there was, here, direct contact between Mrs Qutb’s solicitors and the solicitors acting for the Bank (as well as for Mr Hussain). Further, while an estoppel by representation might do no more than preclude a representor from denying a statement of existing fact (which might be as to his intention at a particular time), the principle flowing from the Paddington case does not appear to me to be so limited. 106. Mr Qutb relied, too, on his mother’s lack of capacity. He pointed out that Warren J had found that his mother lacked capacity at the time of the sale, and he submitted that that lack of capacity meant that there could be no estoppel. 107. It seems to me, however, that a mortgagee will be unaffected by a want of capacity of which he has no notice. With estoppel, as in contract law, an objective principle applies (see e.g. Spencer Bower, “The Law Relating to Estoppel by Representation”, 4th edition, at paragraph V.3.3, and Thorner v Major [2009] UKHL 18, [2009] 1 WLR 776, at paragraphs 5, 17, 26, 60 and 78). In a contractual context, the objective principle will be displaced if a person knows that another party lacks capacity. In contrast, a person with no notice of another contracting party’s lack of capacity will be unaffected by it (see Chitty on Contracts, 30th edition, at paragraph 8-068, and Hart v O’Connor [1985] AC 1000). I can see no reason why the position should be different with estoppel or, more specifically, in relation to the principle flowing from the Paddington line of authority. It follows, in my judgment, that Mrs Qutb’s lack of capacity could only have been of significance if the Bank had had notice of it. As it did not, Mrs Qutb’s lack of capacity is immaterial. 108. Mr Qutb also submitted that the Bank should have known that his mother might not be able to give vacant possession of 30 Drayton Road. One of the matters to which he referred in this context was the fact that the amount Mrs Qutb was to give to Mr Hussain changed from £155,000 to £80,000 after 30 Drayton Road had been valued at £225,000 (down from £300,000); Mr Qutb observed in a witness statement that the Bank “appears not to have been given pause for thought by the fact that the size of the ‘gift’ simply fluctuated in accordance with Mr Hussain’s requirements”. Mr Qutb also asked, rhetorically, where the Bank thought his mother was going to go, and noted that there was no removal van. Further, Mr Qutb said that the Bank had “failed to spot a whole series of obvious warning signs that Mr Hussain was engaged in mortgage fraud”. 109. It appears to me, however, that the Bank had no reason to doubt that vacant possession would be given on completion. Mr David Grant gave evidence to the effect that it is not unusual for properties to be transferred at less than market value, especially to benefit a friend or family member. I cannot see that either the fact that Mrs Qutb was transferring 30 Drayton Road at less than market value, or the fact that the extent of the gift changed after the property had been valued (so that the net payment would be unaltered), should in any way have served to warn the Bank that Mrs Qutb would not give up possession. Moreover, it was not incumbent on the Bank to consider where Mrs Qutb might be moving to, and the Bank was of course unaware of the absence of a removal van. As for the suggestion that the Bank had failed to spot “signs that Mr Hussain was engaged in mortgage fraud”, I was not persuaded, having regard to Mr David Grant’s evidence, that the Bank had failed to exercise due diligence. Even, however, if I had been, it would not have followed that the Bank should have realised that Mrs Qutb might not give vacant possession. 110. In all the circumstances, I have concluded that the principle established by the Paddington line of authorities is applicable and that Mrs Qutb is accordingly bound by the Charge. 111. An alternative analysis would be that estoppel by convention applied. In Republic of India v India Steamship Co Ltd (The Indian Endurance) (No. 2) [1998] AC 878, Lord Steyn summarised the law in the following terms (at 913): “It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption …. It is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for an estoppel by convention.” In the present case, it can be said that, viewed objectively, Mrs Qutb and the Bank had a shared assumption that 30 Drayton Road would be vacant on completion and that Mrs Qutb would be bound by the Charge or, alternatively, that the Bank made such an assumption and Mrs Qutb acquiesced in it. The nature of Mrs Qutb’s rights 112. Mr Grant argued that Mrs Qutb’s rights would in any event be limited to those granted by Warren J’s order and so (in accordance with paragraph 4 of that order) would be “subject to the first legal charge in favour of the [Bank]”. Having regard to the conclusions I have arrived at in the previous section of this judgment (in relation to consent and estoppel), this point does not arise. However, it seems to me that Mr Grant’s submission is probably correct. The right which Warren J held Mrs Qutb to have was a right to have the sale of 30 Drayton Road set aside subject to the Charge, and Mrs Qutb has not to my mind established in these proceedings (nor even really contended for) any greater right. It is to be borne in mind in this context that, as can be seen from Paddington Building Society v Mendelsohn, section 70(1)(g) preserves rights rather than creating them. The Administration of Justice Acts 113. Mrs Qutb’s Defence and Counterclaim includes a request that the Court exercise its jurisdiction under section 36 of the Administration of Justice Act 1970 and section 8 of the Administration of Justice Act 1973 to adjourn the possession claim or to suspend any possession order pending payment of instalments. However, this point was not developed at trial, and there is in any event no evidence to support it. Conclusion 114. In all the circumstances, the Bank’s claim succeeds and I shall make a possession order in its favour.
