The High Court was faced with complex mortgage possession proceedings.
Background:
Together Commercial Finance Limited (TCFL), a mortgagee, sought a possession order against the tenant, Fay of London Limited (FOL) in relation to Flat A, a premises leased to FOL, which comprises the ground and lower ground floors of No. 1.
FOL originally obtained a lease of the flat by purchase in November 2011. The lease was dated 24 September 1998 and was for a 75-year term commencing on 25 June 1998. Subsequently, notice was served by FOL claiming an extended lease under Chapter 2 of Part 1 of the Leasehold Reform, Housing and Urban Development Act (LRHUDA) 1993. FOL is now the tenant under a lease made on 15 September 2015 for a term which expires on 24 June 2163. Under the 1993 Act, the current lease in general, but with limited exceptions, should be on the same terms as the original lease.
FOL is owned by trustees of the Peganova Family Settlement Trust, of which Ms. Peganova is one of many discretionary beneficiaries. She asserts that, either by proprietary estoppel or common intention constructive trust, she owned a beneficial interest in the original lease and now the current lease. She claims that her beneficial interest in the lease binds the mortgagee.
The loan and interest on it were not repaid when due. Demand was made to FOL on 31 March 2022, to no effect and possession proceedings were started.
Decision:
The primary legal issues were whether Ms. Peganova had a beneficial interest in the property through proprietary estoppel or a common intention constructive trust, and whether the mortgage loan was void under the Financial Services and Markets Act (FSMA) 2000 due to lack of proper authorisation. The Court concluded that the alleged common understanding did not establish a beneficial interest in the property. To establish a proprietary estoppel the defendant is required to have made representation or assurance to the claimant; demonstrated that the claimant has reliance upon it; and can prove a detriment to the claimant as a consequence of his or her reasonable reliance.
As regards common intention constructive trust, in this case, the lease is registered in the name of FOL. Further, on the facts of this case, any constructive trust must have arisen after the acquisition of that lease by FOL and at, or about, the time when the shares in FOL were acquired by the trustee of the trust, for the trust. The intention for the flat to serve as a family home does not inherently establish beneficial ownership.
HH Judge Davis-White KC found that Ms. Peganova’s case had no real prospect of success and neither did the proposed defence and counterclaim of FOL. The Court granted a possession order to TCFL, emphasising the lack of substantial grounds to dispute the claim.
Implications:
The judgement gave good consideration of proprietary estoppel and common intention constructive trust claims. It highlights the challenges in asserting proprietary estoppel and constructive trust in complex financial arrangements.
The Judge also refused the application by FOL to amend its defence and to join Ms. Peganova in the proceedings. It demonstrates the heavy burden that lies upon the party seeking late amendment as the prospect of success on the amendment must eclipse the interests of other parties in the litigation.