Residential property – Charging order – Stay of execution – Right to respect for private and family life – Defendant seeking suspension of order for sale of family home – Judge relying on letter from claimant – Letter not shown to second defendant — Whether failure to disclose letter constituting serious procedural irregularity – Whether irregularity affecting justice of decision – Appeal dismissed
The first defendant had provided a personal guarantee of £1m in respect of the indebtedness of a company. The company failed to satisfy the debt, and the claimant bank obtained a judgment debt against the first defendant followed by a final charging order over his interest in the family home that he owned jointly with the second defendant.
The claimant applied to sell the property under section 14 of the Trusts of Land and Appointment of Trustees Act 1996. A master, having considered section 15 of the 1996 Act, made an order for sale. The order was suspended pending resolution of the first defendant’s claim against the company’s former administrators provided that the second defendant made regular payments to the claimant.
The intended claims had not been resolved when the second defendant ceased to make the payments. The suspension was lifted and the order for sale came into effect. The second defendant applied to suspend the order for sale for a further two years. After the hearing but before judgment was delivered, the claimant wrote a letter to the master that was unseen by the second defendant, and to which she was given no opportunity to respond. However, the master relied on the letter when considering and dismissing the second defendant’s application for a further suspension.
The second defendant challenged the master’s order contending, inter alia, that the decision was unjust because of a serious procedural irregularity within CPR 52.11(3)(b), namely by relying on the claimant’s letter without obtaining the second defendant’s response, the master had acted in flagrant breach of the audi alterem partem principle (the right of the other side to be heard).
Further, he had made the irrational decision that it was inappropriate to give the second defendant the opportunity to bring a claim against the company’s administrators and had failed to consider or give effect to Article 8 of the European Convention on Human Rights. Finally, the master had failed to reconsider the factors set out in section 15 of the 1996 Act in his subsequent judgment in the light of changed circumstances.
Held: The appeal was dismissed.
The sending of the letter to the master without copying it to the second defendant, the master’s failure to give her a chance to respond to the letter and the master’s reliance on the letter as indicating that the second defendant had abandoned her alternative cases taken together amounted to a serious procedural irregularity. There was a clear breach of the audi alterem partem principle and, as a result, the second defendant was treated as having abandoned part of her case when she had not done so.
However, that irregularity did not render the entire decision unjust. The second defendant had not commenced proceedings against the administrators, as had been her stated intention at the time of the hearing before the master. Instead, shortly after the hearing, she commenced proceedings against the liquidators without explaining her change of mind or bringing it to the attention of the master. It followed that she had effectively abandoned the application she was making before the master for a further suspension of the sale pending the resolution of her claim against the administrators. In those circumstances, her criticisms of the master’s reasoning with regard to the proposed claim against the administrators were irrelevant.
The power to enforce a charging order under section 14 of the 1996 Act was compatible with the Convention. The court’s discretion, under section 15, had to be exercised compatibly with the Convention rights of those affected by an order for enforcement. For that purpose it would ordinarily be sufficient for the court to give due consideration to the factors specified in section 15. That would usually enable the court to balance the creditor’s rights, including its right under Article 1 of the First Protocol, with the Article 8 rights of those affected by an order for sale: Close Invoice Finance Ltd v Pile [2008] EWHC 1580 (Ch); [2009] 1 FLR 873 and C Putnam & Sons v Taylor [2009] EWHC 317 (Ch); [2009] BPIR 769 applied.
It was not appropriate to grant a further suspension of the order for sale pending the resolution of the second defendant’s claim against the liquidators because that claim could be regarded only as highly speculative and did not justify a further suspension.
Having concluded that it was appropriate to treat the appeal as a rehearing, and having considered the factors specified in section 15 and the defendants’ Article 8 rights, the court was satisfied that enforcement of the order for sale was justified and proportionate. Furthermore, it was likely that a further suspension would be contrary to the defendants’ own interests.
Ian Clarke (instructed by Liddigans LLP) appeared for the claimant; the first defendant appeared in person; David Hunt QC (instructed by Geoffrey Parker Bourne Ltd, of Warwickshire) appeared for the second defendant.
Eileen O’Grady, barrister
