Nelson v Greening & Sykes (Builders) Ltd.

J U D G M E N T

1. LORD JUSTICE JONATHAN PARKER: Before the court are two applications for permission to appeal with the substantive appeal to follow if permission is granted. The applications raise common issues. The first application (the reference number of which is 2003/2608) is by Mr David Nelson and Miss Shirene Hanley. They apply for permission to appeal against an order made by Mr Justice Lindsay on 1 December 2003. The second application (the reference number of which is 2004/0047) is by Mr Nelson alone. He seeks permission to appeal against an order made by Mr Justice Lewison on 5 February 2004.

2. In order to explain what these applications are about and how they arise, it is necessary to refer - albeit briefly - to the lengthy history of this matter.

3. On 6 October 1997 Greening & Sykes (Builders) Ltd ("Greening") exchanged contracts for the sale to Mr Nelson of a plot of development land known as Plot 9, High Meadows, Thornhill Edge, Dewsbury, West Yorkshire. The contract provided that the transfer was to contain certain covenants by Mr Nelson.

4. In about November 1997 Mr Nelson requested Greening to execute a transfer to Miss Hanley and her daughter. Greening refused to do so, contending that it was not required to do so under the terms of the contract. On 19 November 1997 Greening served notice to complete. Mr Nelson failed to comply with that notice. At about that time Miss Hanley, as is common ground, paid the full purchase price to Greening.

5. On 1 December 1997 Mr Nelson commenced an action against Greening in the Chancery Division ("the first action") seeking specific performance of the contract by the execution of a transfer of the land to Miss Hanley and her daughter. In April 1998 the first action was struck out by His Honour Judge Cooke. Permission to appeal was refused by the judge and by the Court of Appeal.

6. On 26 October 1998 Mr Nelson started a second action, seeking declarations that the contract between him and Greening was unenforceable; and that Greening held the property as bare trustee for him. On that footing Mr Nelson claimed to be entitled to require Greening to execute a transfer of the land to Miss Hanley and her daughter which did not contain any of the covenants required by the contract. The second action came on for hearing before Mr Robert Englehart QC, sitting as a Deputy High Court Judge in the Chancery Division.

7. By his order dated 2 February 2000 Mr Englehart QC held that there was a binding contract, and he ordered specific performance of it by the execution of a transfer in one of two alternative forms. One was a transfer to Mr Nelson in the form required by the contract (that is to say containing the specific covenants for which the contract provided). The alternative form of transfer was a transfer to Miss Hanley and her daughter also containing covenants in the terms required by the contract. Mr Englehart QC also ordered Mr Nelson to pay the costs of the second action, including costs which he had been ordered to pay by various interlocutory costs orders. Once again, permission to appeal was refused by the deputy judge and by the Court of Appeal.

8. Mr Nelson failed to comply with Mr Englehart QC's order, and no transfer was in fact executed.

9. On 1 July 2002 Miss Hanley started an action against Greening in the Leeds District Registry. In that action she alleged that Greening held the property on a bare trust for her, and that it had wrongly obstructed her building company from commencing with the development of the land. She also sought interlocutory injunctive relief. The application for an interlocutory injunction was heard by His Honour Judge McGonigal on 2 July 2002, the day after the commencement of proceedings. He dismissed the application and ordered that the action be transferred to London to be heard with Mr Nelson's second action, directing that Miss Hanley be added as an additional defendant to that action. It is not entirely clear how he could have made that order, since the second action had already been heard and in any event was not before him.

10. Greening then applied to set aside the order for specific performance made by Mr Englehart QC, on the basis of Mr Nelson's continuing non-compliance with it. Instead of specific performance, Greening now elected to seek rescission of the contract and damages.

11. Miss Hanley also renewed her application for the injunctive relief which Judge McGonigal had refused.

12. Both those applications came before Mr Justice Etherton. He declined to order rescission of the contract. Rather, by his order dated 12 November 2002 he directed that the order for specific performance be carried into effect by a Master executing the transfer of the property on behalf of Mr Nelson. In December 2002 the Master duly executed the transfer (although it appears that at that stage he did not date it).

13. One of the factors which weighed with Mr Justice Etherton in declining to order rescission of the contract was the fact that the land had substantially increased in value since the date of the contract.

14. By this time, Greening was becoming increasingly concerned about recovery of the costs which Mr Nelson had been ordered to pay. At that stage, those costs amounted to some £40,000: we are told that the amount has since doubled and now stands at some £80,000.

15. Mr Nelson's only asset was the land, and Greening was concerned that if the land was transferred to him he might immediately transfer it on Miss Hanley before Greening could take any effective steps to secure their entitlement to costs by registering a caution against the title or by obtaining a charging order over the land. Accordingly, Greening applied to Mr Justice Neuberger for a freezing order against Mr Nelson, the effect of which was to prevent him from disposing of the land until he had been registered as proprietor of it and Greening had secured its entitlement to costs by the imposition of a charging order. On 30 April 2003 Mr Justice Neuberger made an order in those terms. He also directed that the Transfer should be dated that day, and he ordered Mr Nelson to apply within 14 days to register it at the Land Registry.

16. The dated and executed Transfer was sent to Mr Nelson as soon as Mr Justice Neuberger's order had been sealed, but Mr Nelson nevertheless failed to comply with the order to apply to register it. Rather, he applied to set aside the freezing order. That application came before Mr Justice Peter Smith on 13 June 2003. Having heard submissions from Mr Nelson and Miss Hanley, and from counsel for Greening, and in an attempt to progress the matter, Mr Justice Peter Smith made two orders. By his first order he directed that the court sign a form "TP1" and execute the transfer of the land to Mr Nelson forthwith; and that the transfer be registered by Greening (rather than by Mr Nelson). He further ordered that the land stand charged with payment of all sums due to be paid by Mr Nelson to Greening in respect of the various costs orders which had been made against Mr Nelson, and that Greening retain the land certificate until satisfaction of the charge. By his second order, Mr Justice Peter Smith formally granted a charging order over the land to secure the payment of the costs in question.

17. Miss Hanley then applied to set aside the orders made by Mr Justice Peter Smith on the ground, essentially, that they were nullities. In support of this contention she took a number of procedural objections to the judge's orders, asserting (among other things) that he had made them without notice to her, that she was not a party to the proceedings and that the judge had made the orders of his own motion. For their part, Greening applied to dismiss Miss Hanley's application.

18. On 7 October 2003 Miss Hanley's application together with Greening's application in opposition came before Mr Justice Lightman. He adjourned both applications to be heard as an application in the Chancery Division by order.

19. The application by order (comprising Miss Hanley's application and Greening's application in opposition) came before Mr Justice Lindsay on 1 December 2003. Both Miss Hanley and Mr Nelson attended the hearing and made submissions in the same interest (although it appears that Mr Nelson's application to set aside the orders made by Mr Justice Peter Smith was not formally issued until after the hearing). At all events, they contended that the orders were nullities and, on that footing, that it was appropriate to apply to a court of co-ordinate jurisdiction to set them aside, rather than to appeal them.

20. In the event Mr Justice Lindsay concluded that Mr Justice Peter Smith's orders were not nullities. He concluded that "at most" the orders might be in some respects irregular. Accordingly, by his order date 1 December 2003 he dismissed Miss Hanley's application and ordered her and Mr Nelson jointly to pay the costs of the hearing. He refused permission to appeal.

21. Mr Nelson's application to set aside the orders made by Mr Justice Peter Smith came before Mr Justice Lewison on 5 February 2004. Mr Nelson addressed to Mr Justice Lewison essentially the same arguments as he and Miss Hanley had addressed to Mr Justice Lindsay on 1 December 2003. Mr Justice Lewison agreed with Mr Justice Lindsay that the orders were not nullities, and that he had no jurisdiction on that footing to set them aside. He concluded, as Mr Justice Lindsay had also concluded, that only an appellate court could make such an order. Accordingly, by his order dated 5 February 2004 he dismissed Mr Nelson's application. Like Mr Justice Lindsay, he refused permission to appeal.

22. Permission having been refused by Mr Justice Lindsay and Mr Justice Lewison, Miss Hanley and Mr Nelson applied to this court for permission to appeal against the respective orders of Mr Justice Lindsay and Mr Justice Lewison.

23. The application by Miss Hanley and Mr Nelson in relation to Mr Justice Lindsay's order came before Lord Justice Chadwick on 26-February 2004. In his judgment, Lord Justice Chadwick agreed with Mr Justice Lindsay and Mr Justice Lewison that on no footing could Mr Justice Peter Smith's orders be described as nullities. Accordingly, he concluded, it was not appropriate to apply to the Chancery Division to set them aside; the correct procedural course would be to appeal them. However, Lord Justice Chadwick noted that by virtue of Section 3 (5) of the Charging Orders Act 1979 ("the 1979 Act") any person interested in any property to which a charging order relates may apply to the court at any time to discharge or vary the charging order. In the circumstances Lord Justice Chadwick took the view that the appropriate course was to adjourn the application before him (that is to say the application by Miss Hanley and Mr Nelson for permission to appeal against the order made by Mr Justice Lindsay) so that it could be heard with Mr Nelson's similar application for permission to appeal against the order made by Mr Justice Lewison. Lord Justice Chadwick plainly had in mind that at the adjourned hearing, when both applications were before this court, this court could address the question whether the appropriate course might be to remit both applications to be heard in the Chancery Division as applications under Section 3 (5) of the 1979 Act, "unencumbered [as he put it] by the misconceived suggestion that those orders were nullities ..... ".

24. Before this court today, then, are the applications by Miss Hanley and Mr Nelson for permission to appeal against the order made by Mr Justice Lindsay and Mr Nelson's application for permission to appeal against the order made by Mr Justice Lewison. Pursuant to directions given by Lord Justice Chadwick, the applications are on notice, and Greening is represented by Miss Caroline Bolton of counsel (who has represented Greening throughout). In the event we did not require her assistance. Miss Hanley and Mr Nelson appear, as they have done throughout, in person.

25. Mr Nelson submits (among other things) that Mr Justice Peter Smith made the charging orders of his own motion without any prior notice of his intention to do so. He points out that there are provisions in the CPR which enable a party to apply to the court which made the order to set it aside in certain circumstances. He submits that those issues were before Mr Justice Lindsay and Mr Justice Lewison and that in the circumstances they were in error in not dealing with those issues. He further contends, so far as it is necessary for him to do so, that the orders made by Mr Justice Peter Smith were nullities. His submissions are supported by Miss Hanley who has submitted a brief written document which we have considered.

26. The true position, as it seems to me, is this. The applications before Mr Justice Lindsay and Mr Justice Lewison in the form in which they were presented and dealt with by the judge were not applications under Section 3 (5) of the Charging Orders Act 1979 to vary or discharge the charging orders made by Mr Justice Peter Smith. Nor, for that matter, were they, as presented and decided, applications under the Civil Procedure Rules to set aside or vary an existing valid order. As presented to court and dealt with respectively by Mr Justice Lindsay and Mr Justice Lewison, they were applications to set aside the orders made by Mr Justice Peter Smith as complete nullities (see paragraphs 3 and 8 in the judgment of Mr Justice Lindsay and paragraph 12 in the judgment of Mr Justice Lewison). See also paragraph 23 in the judgment of Lord Justice Chadwick, to which I referred earlier, where he said:

"But that was not the basis upon which the application made by notice dated 16 June was advanced. The application was advanced, essentially, on the basis that the order of 13 June 2003 was a nullity. That was, if I may say so, misconceived. The order was not a nullity. It was an order properly made; but an order that was always subject to discharge or variation under the statutory power conferred on the court that made it by section 3 (5) of the 1979 Act."

27. In the event both Mr Justice Lindsay and Mr Justice Lewison rejected the nullity argument, and accordingly they dismissed the applications. Plainly, in my judgment, they were right to conclude that the orders were not nullities. I have already drawn attention to the fact that Lord Justice Chadwick described the nullity argument as "misconceived".

28. In Miss Hanley's case the fact that she may not have formally become a defendant to the proceedings in which the charging orders were made, despite the terms of the order made by Judge McGonigal does not mean that the charging orders made in those proceedings are nullities as against her. It is of the nature of a charging order that it may affect the interests of third parties. That is precisely why the 1979 Act contains an express provision enabling a third party to apply in the proceedings to have the charging order varied or discharged. Moreover if she is not a party she has a general right to apply to set aside or vary the orders under the Civil Procedure Rules, but not on the basis that the orders were nullities.

29. So far as Mr Nelson is concerned, if there were defects in the procedure which led to the making of the charging orders - and I am not saying that there were, but if there were - such defects could not possibly render the charging orders nullities. Any such defects would have to be made the subject of appeal against the charging orders or, if appropriate, and I emphasis those words, on an application under the Civil Procedure Rules.

30. The decisions therefore with which we are concerned today are decisions that the orders made by Mr Justice Peter Smith were nullities. Plainly, in my judgment, the decision that they were not nullities was a correct decision and any appeal against it would be bound to fail. On the other hand, there may be a possibility that an application can be made under the Civil Procedure Rules or under Section 3 (5) of the 1979 Act. However those are not matters with which we have been concerned today.

31. Lord Justice Chadwick in the course of his judgment (see paragraph 26) was concerned that some issue estoppel might arise in relation to any such application. It does not seem to me that that is a real possibility. We have been concerned today only with the decisions by Mr Justice Lindsay and Mr Justice Lewison that the charging orders made by Mr Justice Peter Smith were not nullities. That decision being plainly right, these applications for permission to appeal from it should be, in my judgment, dismissed.

32. LORD JUSTICE KENNEDY: I agree.

Order: Applications dismissed with the costs assessed summarily as claimed at £1,864.00.