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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Gotham v Doodes  EWCA Civ 1080 (25 July 2006)
Cite as:  1 WLR 86,  1 WLR 87,  WLR 87,  1 All ER 527,  EWCA Civ 1080
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
CHANCERY DIVISION (IN BANKRUPTCY)
MR JUSTICE LINDSAY
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE CARNWATH
LORD JUSTICE MOSES
| PETER JOHN GOTHAM
|- and -
|KEVIN LEONARD DOODES
Mr Dan Stacey and Mr Timothy Akkouh (instructed by Budd Martin Burrett) for the Respondent
Hearing date : 28th June 2006
Crown Copyright ©
The Chancellor :
"a Charge be imposed upon the Bankrupt's property known as and situate at 22 Basildon Drive, Laindon, Essex in favour of the Trustee and that the said property be removed from the Bankrupt's Estate pursuant to Section 313(1) and (3) of the Insolvency Act 1986"
By a further order, purporting to be a charging order absolute, made by some unidentified individual in the Chelmsford County Court on 29th May 1992 it was ordered that:
"the interest of the Bankrupt, Kevin Leonard Doodes, in the asset specified in the schedule hereto, stand charged in favour of the Trustee of the Estate of Kevin Leonard Doodes, Peter Gotham."
The schedule contained the address of the Property and its title number in HM Land Registry, EX 362308.
"20. (1) No action shall be brought to recover—
(a) any principal sum of money secured by a mortgage or other charge on property (whether real or personal); or
(b) proceeds of the sale of land;
after the expiration of twelve years from the date on which the right to receive the money accrued."
The resolution of the issue before us depends on the proper application of that provision to the rights conferred on the Trustee by the two orders to which I have referred.
"(1) Where any property consisting of an interest in a dwelling house which is occupied by the bankrupt or by his spouse or former spouse [or by his civil partner or former civil partner] is comprised in the bankrupt's estate and the trustee is, for any reason, unable for the time being to realise that property, the trustee may apply to the court for an order imposing a charge on the property for the benefit of the bankrupt's estate.
(2) If on an application under this section the court imposes a charge on any property, the benefit of that charge shall be comprised in the bankrupt's estate and is enforceable[, up to the charged value from time to time,] for the payment of any amount which is payable otherwise than to the bankrupt out of the estate and of interest on that amount at the prescribed rate.
[(2A) In subsection (2) the charged value means—
(a) the amount specified in the charging order as the value of the bankrupt's interest in the property at the date of the order, plus
(b) interest on that amount from the date of the charging order at the prescribed rate.
(2B) In determining the value of an interest for the purposes of this section the court shall disregard any matter which it is required to disregard by the rules.]
(3) An order under this section made in respect of property vested in the trustee shall provide, in accordance with the rules, for the property to cease to be comprised in the bankrupt's estate and, subject to the charge (and any prior charge), to vest in the bankrupt.
(4) Subsections (1) and (2) and (4) to (6) of section 3 of the Charging Orders Act 1979 (supplemental provisions with respect to charging orders) have effect in relation to orders under this section as in relation to charging orders under that Act.
[(5) But an order under section 3(5) of that Act may not vary a charged value.]
"(1) A charging order may be made either absolutely or subject to conditions as to notifying the debtor or as to the time when the charge is to become enforceable, or as to other matters.
(4) Subject to the provisions of this Act, a charge imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor by writing under his hand.
By CPR Rule 73.10 subject to the provisions of any enactment the court may, upon a claim made by a person who has obtained a charging order over an interest in property, order a sale of the property to enforce the charging order.
(1) Any application by a trustee of a bankrupt's estate under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 (powers of court in relation to trusts of land) for an order under that section for the sale of land shall be made to the court having jurisdiction in relation to the bankruptcy.
(2) On such an application the court shall make such order as it thinks just and reasonable having regard to—
(a) the interests of the bankrupt's creditors;
(b) where the application is made in respect of land which includes a dwelling house which is or has been the home of the bankrupt or the bankrupt's spouse or civil partner or former spouse or former civil partner—
(i) the conduct of the spouse, civil partner, former spouse or former civil partner, so far as contributing to the bankruptcy,
(ii) the needs and financial resources of the spouse, civil partner, former spouse or former civil partner, and
(iii) the needs of any children; and
(c) all the circumstances of the case other than the needs of the bankrupt.
(3) Where such an application is made after the end of the period of one year beginning with the first vesting under Chapter IV of this Part of the bankrupt's estate in a trustee, the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt's creditors outweigh all other considerations.
(4) The powers conferred on the court by this section are exercisable on an application whether it is made before or after the commencement of this section.
"no action, suit or other proceeding shall be brought to recover any sum of money secured by any mortgage...or otherwise charged upon...any land...but within twelve years next after a present right to receive the same shall have accrued to some person capable of giving a discharge...."
The charge was imposed when the paving works were completed in 1875. The expenses were not apportioned until 1885. In 1887 a demand for payment was made on the defendant and in 1888 the local board sought to enforce the statutory charge against the defendant. The county court judge granted the relief sought, he was reversed on appeal to the Queen's Bench Division and the Court of Appeal affirmed the decision of the latter.
"The charge exists, though the exact amount charged may not be ascertained. It is suggested that a person in whose favour a charge is imposed cannot be entitled to receive an amount which is not ascertained. I do not see why this should be so. A sum may be offered to him, which the person offering it thinks to be the right sum, and which he may also think to be the right sum, although the actual calculation of the exact amount has not been made. What is there in law, or reason, or business, to shew that he is not entitled to receive the sum when so offered to him? I cannot see any difficulty in saying that there is a present right to receive the expenses. In the case where a person has only a reversionary right to receive money, or for some other reason the time when he is entitled to receive the money has not yet arrived, it would be different, and there would be no present right to receive the money."
"The section is dealing with charges on land, and it must be borne in mind that such charges are present charges and future charges, reversionary charges, charges in remainder, and such like. One general form of expression is used to include the whole, and that expression is "present right to receive." It seems to me clear that the meaning is that in each case the moment to be looked to is the moment when the charge comes into present operation; for instance, when reversionary charges are being dealt with, the moment to be looked to is the moment when the reversion falls in and the charge takes effect in possession."
"When, then, does the right accrue to the person or persons in whose favour the charge is imposed to receive the amount secured by the charge? It appears to me that it accrues the moment the charge is imposed on the premises by the statute, that is when the expenses have been incurred and the works completed. It may be that certain things have to be done before the right can be enforced, but the right to receive what is secured by the charge arises concurrently with the charge. The words are "present right to receive," not "present right to recover." The right to receive may exist though the definite sum to be received has not yet been ascertained. There are cases where the legislature requires a notice to be given before an action can be maintained. The right of action however exists as soon as an actionable wrong has been committed, though it cannot be successfully enforced until the statutory requirements are complied with."
"But I do not see that notion of fault on the chargee's part as crucial to the applicability of the decision to a case, such as the one before me, in which there has been no omission by the chargee-trustee "to do that which it is his duty by statute or common law to do". Rather the decision seems more to rest on what was taken to be the ordinary and natural meaning of a "present right to receive", coupled, if those words were not in contra-distinction to "a present right to enforce", with the difficulty that, where the chargor was minded to sit tight, the chargee could postpone limitation even beginning. Nor, whilst I can see that the added word "present" when added to the current phrase "right to receive", may lead to a different conclusion in some cases – e.g. the case of the reversionary charge referred to by Lord Esher on p. 6 and Lindley LJ on p. 10 – I do not see it as adding anything where, as here, whatever are the Trustee-chargee's rights, they were from the start vested in his possession and were in relation to property vested in the Bankrupt's possession."
"It is unfortunate that Mr Registrar Baister did not have Hornsey cited to him. I have seen no way round Hornsey and I must therefore allow the appeal. I do so with some reluctance and no enthusiasm. I have real doubts about whether the result is just."
(1) the amount secured by the order under s.313, namely, "the amount which is payable otherwise than to the bankrupt...out of the estate.." is not "a principal sum of money" for the purposes of s.20(1) Limitation Act;
(2) the charge imposed by an order under s.313 is not a charge within the meaning of that word in the context of s.20(1);
(3) the "right to receive" is deferred until an order for the sale of the Property is made because (a) there is no underlying obligation enforceable against a debtor, (b) the interest is rolled-up and (c) receipt of any money is dependent on an exercise of the court's discretion;
(4) the application of the Trustee for an order for possession and sale is not an action within the meaning of that word in the context of s.20(1);
(5) the application of s.20(1) for which the Bankrupt contends infringes Article 1 to Protocol 1 of the European Convention on Human Rights.
"An equitable charge may, it is said, take the form either of an equitable mortgage or of an equitable charge not by way of mortgage. An equitable mortgage is created when the legal owner of the property constituting the security enters into some instrument or does some act which, though insufficient to confer a legal estate or title in the subject matter upon the mortgagee, nevertheless demonstrates a binding intention to create a security in favour of the mortgagee, or in other words evidences a contract to do so: see Fisher and Lightwood's Law of Mortgage, 9th ed. (1977), p. 13. An equitable charge which is not an equitable mortgage is said to be created when property is expressly or constructively made liable, or specially appropriated, to the discharge of a debt or some other obligation, and confers on the chargee a right of realisation by judicial process, that is to say, by the appointment of a receiver or an order for sale: see Fisher and Lightwood, p. 14
Lord Justice Carnwath:
Lord Justice Moses: