UK: High Court grants possession order in complex claim seeking a late amendment

Why should I read this?

In this rather complex possession claim, the High Court granted a possession order in favour of Together Commercial Finance Ltd (“TCFL”) and refused an application by Fay of London Limited (“FOL”), in which FOL sought to (a) amend its defence and bring a counterclaim against TCFL and (b) join the occupant of the property (“Ms P”) into proceedings. The Judgment considered the test to be applied by the Court when considering an application to amend a defence and whether, on the facts of the case, Ms P had a beneficial interest in the property either by proprietary estoppel or by common intention constructive trust. Victoria Savage led on this claim for TCFL.

Key Takeaway

A heavy burden lies upon a party seeking a particularly late amendment. There must be a good explanation why the application was not made earlier, and the prospects of success on the amendment must eclipse the interests of other parties in the litigation as well as potentially those of court users more generally. In this case, it was decided that there were no real prospects of success which resulted in the application being dismissed and the possession order being granted. 

Case Summary

By a Deed of Settlement made in 2008 (the “Trust”), a discretionary family settlement trust was set up in favour of Ms P, her husband and her children.

The Trust empowered the trustees to borrow money on the security of the Trust Fund and also empowered them to permit occupation of any land which might for the time being be subject to the Trust by a beneficiary. By a Supplementary Deed dated 1^st September 2010 Ms P’s husband ceased to be a beneficiary of the Trust, so he was neither a trustee nor a beneficiary.

FOL was incorporated on or around 23 June 2011 in the British Virgin Islands.

By a Licence dated 11 November 2011 the landlord of the flat in Eaton Square (the “Flat”) consented to the then tenant assigning the Underlease of the Flat to FOL. By virtue of the Licence, FOL covenanted not to hold the Flat on trust for another. On 18 November 2011 FOL purchased the lease of the Flat for £4,250,000.

Then in 2013 the Flat was on the market, and Ms P and her husband decided to acquire it as their family home. Rather than purchase the Flat in their own capacity, the mechanism adopted was by injecting funds into the Trust to enable the then Trustee to acquire the shares in FOL and hold them under the discretionary trusts. The family then moved into the Flat. Notice was served by FOL claiming an extended lease under Chapter 2 of Part 1 of the Leasehold Reform, Housing and Urban Development Act 1993. FOL then became the tenant under a Lease.

In 2016 TCFL received an application for a bridging loan through FOL’s solicitors. TCFL provided a bridging loan (the “Loan”) to FOL in the sum of £3,150,000. The Loan was secured by way of a legal mortgage (the “Mortgage”) over the title to the lease of the Flat, with FOL being the registered leaseholder of the Flat. At all material times, Ms P and her family were in occupation of the Flat.

When FOL defaulted under the terms of the Loan, TCFL commenced possession proceedings with a view to enforcing its Mortgage. FOL initially defended the claim by way of a bare denial, which TCFL applied to strike out. In a claim which was later case managed alongside the possession claim, Ms P brought her own claim against TCFL (and others) in the High Court alleging against TCFL that the Loan was void for undue influence. In July 2024 she discontinued that claim as against TCFL.

Having discontinued her claim against TCFL, Ms P then sought to assert in the current possession proceedings that she had a beneficial interest in the Flat either by proprietary estoppel or common intention constructive trust, and that neither she or her husband knew anything about the Loan or the Mortgage which was made by the Trustees without her knowledge or consent. FOL applied to amend their defence and counterclaim, and applied to bring Ms P into the proceedings. FOL alleged that, assuming Ms P does have a beneficial interest (and had it in 2016 at the time the Loan was drawn down and at the time the Mortgage was secured) then the Loan and associated Mortgage by TCFL was a regulated mortgage contract
(“RMC”) under the Financial Services and Markets Act 2000 (“FSMA”) and because TCFL lacks relevant authorisation by the Financial Conduct Authority (“FCA”), the Loan and the Mortgage granted by FOL are void under s.26 FSMA, subject to the power of the court under s.28 FSMA to allow the agreements to be enforced. As such, FOL’s proposed amended defence and counterclaim is dependent upon the validity of Ms P’s case.

Issues

HHJ Davis-White KC, considered the following issues.

Amendments of statements of case

The Judgment addresses the test to be applied when considering an application to amend a statement of case as follows:

• The Court should have regard to all the matters in CPR r1.1(2) so as to deal with the case “justly and at proportionate cost”; and
• The merits test in Kawasaki Kisen Kaisha Limited v James Kemball Limited [2021] EWCA Civ 33 requires a claimant to establish a serious issue to be tried, which means a case which has a real, as opposed to fanciful, prospect of success. The Court will refuse permission to amend where the case does not have a real prospect of success. It is not enough that the claim is merely arguable; it must carry some degree of conviction, the pleading must be coherent and properly particularised and the pleading must be supported by evidence.

HHJ Davis-White refused permission for FOL to amend the defence on the basis that the requisite test had not been met.

In the context of Ms P’s claim to a beneficial interest in the Flat, HHJ Davis-White found that there were two connected and fatal points which meant that Ms P’s case was insufficient to pass the test of raising an arguable case with a real prospect of success on the basis of either proprietary estoppel or common intention constructive trust as follows:

• Firstly, HHJ Davis-White considered the case of Lloyds Bank plc v Rosset [1991] 1 AC 107 (“Rosset”) and noted that “the facts of this case are not distinguishable from the scenario considered by Lord Bridge” in Rossett. The evidence given in both cases was that the property in question was intended to be a family home. In Rosset, Lord Bridge commented “I pause to observe that neither a common intention by spouses that a house is to be renovated as a "joint venture" nor a common intention that the house is to be shared by parents and children as the family home throws any light on their intentions with respect to the beneficial ownership of the property.” HHJ Davis-White agreed with Lord Bridge, and found that “The intention that a property should be a family home (whether or not “forever”) does not say anything about beneficial ownership of the property. Rather it focuses on a state of affairs and occupation”: and
• Secondly, in the present case, Ms P’s family were conferred an ability to occupy the Flat as a result of (a) the purchase of the shares of FOL by the Trust and (b) by the terms of the Lease of the Flat, a director of FOL was permitted to nominate a representative to occupy the Flat. A director of FOL accordingly nominated Ms P as a representative with permission to occupy the Flat with her family. The Lease of the Flat also stipulated that if anyone held a beneficial interest in the Lease or occupied the Flat otherwise than as a representative of FOL as provided for by the Lease, that would give rise to an event of forfeiture under the Lease. HHJ Davis-White found that it would be “exceedingly strange” if this arrangement gave rise to a constructive trust or proprietary estoppel as, if the facts that she asserts occurred, the consequence of Ms P having any beneficial interest in the Lease or in occupying the Flat other than as nominee of FOL as provided for by the Lease would give rise to an event of forfeiture under the Lease.

HHJ Davis-White further found that in relation to the allegation of proprietary estoppel, the evidence given was that the sole purpose of the purchase of the Lease of the Flat was for a family home for Ms P and her whole family to live in. Even if the Flat was to be a “family home” for the whole family, then Ms P’s ability to live in the Flat might have been jeopardised by the divorce that later came. Further, if it was correct that the Flat was to be a home for life for the family and if that in some way created a trust, it is difficult to see why the trust involves a life interest for Ms P and not any interest in Mr P (which was not pleaded).

Finally, HHJ Davis-White found that the arrangement regarding the occupancy of the Flat was one reached with (or through) Mr P who had no interest in the Trust or in FOL. The legal owner of the Lease of the Flat was FOL. In order for Ms P’s argument in this regard to succeed, it was essential that Ms P could show that FOL was a party to this arrangement. It was found that FOL had failed to evidence this.

With this in mind, HHJ Davis-White did not find there to be any binding common intention constructive trust or proprietary estoppel upon TCFL and so did not need to deal with the issue as to the binding nature of any such matter.

Delay

HHJ Davis-White was unimpressed by Ms P’s evidence as to why there was a delay in FOL applying to amend their defence and bring a counterclaim, and why there was a delay in bringing Ms P into the proceedings. However, having already decided that Ms P’s defence and counterclaim does not have a real prospect of success, HHJ Davis-White did not need to rely on any delay as casting doubt on the same.

RMCs

FOL’s argument that the Mortgage was an RMC was based upon the allegation that Ms P had a beneficial interest in the Flat.

As HHJ Davis-White found that Ms P had no real prospect of proving any such beneficial interest in the Flat, it followed that the allegation that the Mortgage was an RMC also had no real prospect of success. The result being, permission to amend the defence and bring a counterclaim was refused.

The Joinder Application

The application to join Ms P into the claim was not granted. HHJ Davis was prepared to join Ms P into the claim, to ensure that she is clearly bound by any possession order.

HHJ Davis-White went on to consider that in any event “CPR r55 does not require every person to be joined who is in occupation of a mortgaged property in relation to which the mortgagee seeks possession. A possession order operates against the world. The fact that notices must be given to occupiers (see CPR r55.10) and that prior to issue of a warrant of possession, a notice of eviction must be delivered to the premises and addressed to all named persons against whom the possession order was made and to “any other occupiers” (see r83.8A and note in The White Book para 55.8.11), makes clear that not all occupiers must be made defendants to the possession proceedings in relation to which a possession order is sought or made”.

As the application to amend the defence and bring a counterclaim had been refused, there stands no defence to the possession claim, no triable issues to decide, and HHJ Davis-White considered there be no reason why the Possession Order should not be granted.

Possession Order

As the application to amend the defence and bring a counterclaim had been refused, there stands no defence to the possession claim, no triable issues to decide, and HHJ Davis-White considered there be no reason why the Possession Order should not be granted. 

Further reading on mortgage possession proceedings

High Court Judgment Template

Are lenders on inquiry of undue influence in hybrid cases: Court of Appeal clarifies whether lenders are on inquiry of undue influence in hybrid cases (appeal to be heard in the Supreme Court on 27 February 2025)