Mortgage – Possession – Settlement – Respondent claiming statutory charge over appellant’s property in possession proceedings – Whether appellant preserving property – Appeal allowed
The appellant and her husband jointly acquired the freehold of a residential property (the cottage). To do so, they obtained a mortgage, the benefit of which subsequently became vested in BM, which was registered as the mortgagee at the Land Registry. In 1997, BM brought possession proceedings against the appellant and her husband in respect of outstanding arrears on their mortgage. The appellant obtained legal aid to defend the proceedings. The case was settled on 30 January 2002 and a consent order was made under which the appellant and her husband were to pay £265,000 to BM to redeem the mortgage. In November 2003, title to the cottage was transferred into the appellant’s sole name and she was registered as the proprietor subject to a registered charge in favour of a new mortgagee.
The respondent commission claimed to be entitled, under section 16(6) and (7) of the Legal Aid Act 1988, to a statutory charge over the cottage as property preserved for the appellant as a legally assisted person in the possession proceedings. Following an oral hearing, the deputy adjudicator to the Land Registry ordered the chief land registrar to give effect to the respondent’s application for registration of the statutory charge.
The appellant appealed, contending that since no property had been preserved for her in the possession proceedings the cottage could not be subject to a statutory charge. Further, regulation 99(6) of the Civil Legal Aid (General) Regulations 1989 provided that the amount of any charge created by section 16(6) of the 1988 Act was the amount of the costs or “the value of the property to which it applied at the time when it was recovered or preserved”, whichever was less. She submitted that if any property had been preserved it had a nil or negative value after taking the mortgage into account.
Held: The appeal was allowed.
It was clear that the appellant and her husband had achieved a reduction in the sums claimed before the settlement by reason of their defence of the possession proceedings. The correct approach was to take the amount of the BM claim as at the date of the settlement rather than at the start of the proceedings because the amount claimed would have changed as a result of interest and possible payments to BM.
It was necessary to distinguish between a secured and an unsecured debt. In the latter case, the reduction in the amount of the monetary liability did not involve the recovery or preservation of property. In the case of a secured debt such as the present, where the property was clearly the subject matter of the proceedings, the property would be preserved in that the incumbrance on the property was reduced: The Philippine (1867) LR 1 A&E 309 and Pelsall Coal Iron Co v London & North Western Railway Co (No 3) (1892) 8 Railway and Canal Traffic Cases 146 applied.
In the instant case, the appellant and her husband had preserved their possession of the cottage under the settlement. Although that had principally been achieved by reducing the debt due under the charge and redeeming the charge, the fact remained that in proceedings in which the possession of the property was in issue, they had preserved possession and the court was bound to hold that they had also preserved the property for purposes of section 16(6) of the 1988 Act in the form of the title to the cottage, subject to the obligation to pay £265,000 to redeem the BM charge: Curling v Law Society [1985] 1 WLR 470 and Parkes v Legal Aid Board [1997] 1 WLR 1547 applied.
As at 30 January 2002, the statutory charge automatically applied to the appellant’s beneficial interest in the property but not to the legal title owned jointly. When the legal title was transferred in the appellant’s sole name, the statutory charge on her beneficial interest was not promoted to attach to the legal title. It followed that the respondent did not have a charge on the legal title and could not register a charge against the registered title. Equally, it could not register a notice to protect a charge on a beneficial interest under a trust of land by virtue of section 33(a) of the Land Registration Act 2002.
Conversely, the respondent was entitled to register a restriction on title pursuant to section 42(1)(c) of the 2002 Act, as extended by r 93(w) of the Land Registration Rules 2003, referring to a restriction in form JJ in Schedule 4 to the 2003 Rules.
The appellant was represented by her husband; Michelle Stevens-Hoare (instructed by the Legal Services Commission) appeared for the respondent.
Eileen O’Grady, barrister
