The Royal Oak Property Co Ltd v Iktilat and another

Charging order – Order for sale – Beneficial interest in property – Charging orders made against properties held in name of first defendant – Trust deed showing second defendant as beneficial owner – Second defendant lending money to first defendant – Claimant seeking order for sale – Nature of transaction with second defendant – Whether first defendant having beneficial interest over which charging orders properly made – Claim allowedFollowing litigation between the claimant and the first defendant, the claimant obtained charging orders over two properties that were registered in the first defendant’s name. The claimant subsequently sought an order for the sale of the properties. The first defendant resisted the application on the ground that he held no beneficial interest in the properties and, accordingly, there was no jurisdiction to make the charging orders under section 2 of the Charging Orders Act 1979.Each property was subject to a deed of trust that the first and second defendants had entered into in 2003, under which the first defendant was stated to hold the properties on trust for the second defendant as “beneficiary”. There was evidence to suggest that the first defendant had transferred the beneficial ownership of the properties to the second defendant in return for the latter lending him substantial sums of money, on the understanding that the properties would be returned to the first defendant once the money had been repaid; the defendants asserted that the money had not yet been repaid in full. The definitions clause of the deeds also referred to “indebtedness”, which was defined as “all of the money from time to time owing on the security”.In 2004, the defendants completed and signed Land Registry TR1 forms, purporting to record a transfer of the properties to the second defendant for a consideration of £250,000. However, in 2005, the first defendant obtained a mortgage against one of the properties from a third party. Issues arose as to the nature and effect of the arrangements between the defendants.Held: The claim was allowed. It appeared from the evidence and from the face of the trust deeds that the deeds were not self-contained transactions but formed part of a wider transaction. They had been entered into as security for the loan of money by the second defendant to the first defendant in 2003. Although the money was owed, the first defendant held the properties on trust for the second defendant; however, the first defendant had the right to cancel the deeds in the event that he repaid what was owed. The transaction had the character of an equitable mortgage. The first defendant retained a beneficial interest in the property in the shape of his right to redeem. The equity of redemption was a sufficient interest in land to bring the first defendant within the terms of section 2 of the 1979 Act.Moreover, the inference to be drawn from events subsequent to the trust deed was that, by mid-2004 at the latest, the first defendant was no longer the trustee of the properties for the second defendant. There was no credible explanation of how the 2004 Land Registry documents had come to be completed. However, those documents were consistent with the first defendant believing that he held a valuable interest in the properties by that date, since he had purported to enter into a transaction as the beneficial owner of the properties. Those transactions had not been completed. The 2005 mortgage that the first defendant obtained must have been entered into on the basis that he was the beneficial owner of the property in question. It was not possible to accept the unsupported assertions of the defendants that the money advanced to the first defendant had not been repaid. Accordingly, the legal and beneficial ownership of the properties remained with the first defendant. There had been jurisdiction to make the charging orders and it was appropriate to make an order for the sale of both properties.Timothy Davey (director) appeared for the claimant; Nathaniel Duckworth (instructed by Alexander & Partners) appeared for the first defendant; the second defendant appeared in person.Sally Dobson, barrister