Walton and another v Allman

Property – Charging order – Beneficial interest – Court making charging order against property held in sole name of first appellant – Second appellant claiming and then denying beneficial interest in property – Court making final charging order – Judge granting permission to appeal but making directions for disclosure of documents – Appellants failing to comply with directions – Appellants appealing against charging order and refusal of relief from sanctions – Whether court having jurisdiction to make charging order – Whether appellants entitled to relief against sanctions – Appeal dismissed The appellants, a husband and wife, lived at Oak Tree Farm, Broad Tree Hill Road, Tickhill, Doncaster. The property was registered in the sole name of the first appellant. The second appellant issued proceedings against the respondent for breach of contract. The respondent applied for security for costs which the second appellant resisted on the basis that she had an equitable interest in the property. On the basis of that evidence, the application for security for costs was dismissed. The claim was dismissed and an interim costs order made in the sum of £30,000 which the second appellant had failed to pay. Relying upon the assertion by the second appellant that she had an equitable interest in the property, the respondent issued an application for charging order in respect of the judgment debt due to her. An interim charging order was made but the first appellant disputed that his wife had any interest in the property. The second appellant then fundamentally altered her stance and denied that she had any interest in the property. The district judge disbelieved the appellants’ evidence and made a final charging order over the second appellant’s beneficial interest in the property, albeit that he did not quantify the amount of that interest. The second appellant was subsequently granted permission to appeal against that order subject to a number of directions requiring the appellants to disclose certain documents. The appellants failed to comply with those directions, as a result of which the appeal stood dismissed without further order. The judge also refused to grant the appellants relief against sanctions, having considered the application on the basis suggested by the Court of Appeal in Denton v TH White Ltd [2014] 1 WLR 3926 The appellants appealed against the refusal of relief against sanctions. They argued that the district judge had lacked jurisdiction to make a final charging order without quantifying the precise beneficial interest of the second appellant in the property. They contended that where a property was registered in the sole name of someone who was not the judgment debtor, the court had to apply the two-stage test in Jones v Kernott [2012] 1 AC 716 to quantify the judgment debtor’s beneficial interest in the property before it could make a charging order. The making of a charging order which the district judge had no jurisdiction to make was a very weighty factor that should lead the court to grant relief against sanctions. Held: The appeal was dismissed. (1) Pursuant to the Charging Orders Act 1979, a charging order could be granted over a judgment debtor’s beneficial interest in land. It was also clear that a charging order could be made in respect of any interest held by the debtor beneficially, provided that it could be specified in the order. When a charging order was granted, it gave the judgment creditor the equivalent of an equitable charge over the judgment debtor’s property. The purpose of a charging order was to give a judgment creditor the equivalent of an equitable charge over the judgment debtor’s property. In the same way as it had to be possible for a debtor voluntarily to grant a valid equitable charge over his beneficial interest in an identified asset or under an identified trust, but without quantifying the precise value or extent of that interest, there was no reason why it should be necessary for the court to quantify the extent of a judgment debtor’s beneficial interest before making a charging order of equivalent effect under the 1979 Act: Jones v Kernott [2012] 1 AC 776 applied. First National Securities Ltd v Hegerty [1985] QB 850 and Royal Oak Property Co v Iktilat [2008] EWHC 1703; [2008] PLSCS 215 considered. (2) It was sufficient for the purposes of giving the court jurisdiction to make a charging order under the 1979 Act that the court was satisfied that the judgment debtor had some beneficial interest in relevant property, even though the precise extent of that interest could not be quantified at the time that the charging order had been made. The obvious juncture at which the court would be likely to be called upon to resolve the precise extent of the judgment debtor’s beneficial interest in the property would be if and when the judgment creditor decided to apply for an order for sale. But there was nothing inappropriate in having to resolve the precise extent of the judgment debtor’s interest some time after the final charging order had been made. Even when a judgment creditor obtained a final charging order, he might not be able to obtain an order for the sale of the property for some time or at all. The process of obtaining an order for sale was a separate step from the obtaining of a charging order itself. The general rule was that a chargee could look to his own interests in deciding whether and, if so, when to enforce his security by seeking to exercise a power of sale. The same had to apply to the holder of a charging order: Tse Kwong Lam v WON Chit Sen [1983] 1 WLR 1349, China and South Sea Bank v Tan [1990] 1 AC 536, Raja v Austin Gray [2003] 1 EGLR 91 and Silven Properties Ltd v Royal Bank of Scotland [2003] 3 EGLR 49 considered. (3) In the present case, the respondent had already incurred very substantial costs in litigating against the second appellant and none of the outstanding costs had been paid. The district judge had concluded, after hearing evidence, that the second appellant did have a beneficial interest in the property. The county court judge had obviously thought that it would have been entirely unjust to require the respondent to continue to incur yet further (possibly irrecoverable) costs in circumstances in which the appellants had not made any effort to pay any of the outstanding costs, they had still not produced the necessary documents to enable the appeal against the district judge’s grant of a final charging order to be heard, and the respondent had indicated that she did not wish to seek an immediate order for sale of the property. Accordingly, the judge in the county court had correctly applied the three stage test in Denton and was fully justified in refusing the appellants relief from sanctions: Denton v TH White Ltd [2014] 1 WLR 3926 applied. Rebecca Bailey-Harris (instructed by Paul Brook Solicitors, of Chesterfield) appeared for the appellants; Yasmin Yasseri (instructed by Hutton’s Solicitors, of Cardiff) appeared for the respondent. Eileen O’Grady, barrister Click here to read transcript: Walton v Allman