National Westminster Bank Plc v Malhan & Ors

On 10th June 1986 Mr Navtej Bahadur Malhan ("Navtej") and his younger brother Mr Anil Kumar Malhan ("Anil") were registered under title number BK 120887 as proprietors of the residue of a term of 99 years from 31st March 1965 granted by a lease dated 6th March 1973 and made between the Bracknell Development Corporation (1) and Mr and Mrs Tindall (2) in respect of 11 Badgers Way, Bracknell, Berks ("the Property"). The proprietorship register contained a restriction in conventional form that no disposition by a sole proprietor of the land (not being a trust corporation) under which capital money arises is to be registered except under an order of the registrar or the court. On the same day Halifax Building Society was registered as proprietor of a registered charge dated 14th February 1986 ("the First Charge") conferring security over the Property in respect of the moneys mentioned therein. These registrations completed transactions effected earlier in the year whereby the Property was bought for £56,000 of which £25,000 was lent by Halifax Building Society.

On 7th September 1994 Navtej and Anil executed a charge ("the Second Charge") over the Property in favour of National Westminster Bank plc ("the Bank") to secure, subject to the First Charge, all moneys due to the Bank by either of them on any account. One of the liabilities so secured was the overdrawn account of SND Wholesalers ("SND"), a partnership of which Navtej, Anil and their father, Satya Paul Malhan and mother, Dulari Malhan were, or had been, the partners. At the time of the execution of the Second Charge the amount owing on that account was £20,617.

On 4th March 1997 the Bank demanded repayment of £181,797 being the amount then due on the SND account. SND was unable to pay. In April and June 1997 Navtej and Anil entered into Individual Voluntary Arrangements. In 1998 the warehouse and office premises of SND were destroyed by fire. On 15th March 2002 the Bank commenced proceedings in the Reading County Court against Navtej and Anil claiming possession of the Property so that it might enforce the Second Charge by sale with vacant possession. By then the amount due on the SND account was £210,216.

In May 2002 Mrs Puneeta Malhan ("Puneeta"), the wife of Anil, was joined as the third defendant at her request. By her defence and counterclaim dated 20th June 2002 she alleged that:

By its reply and defence to counterclaim the Bank admitted that Puneeta had been in occupation of the Property on 17th September 1994 but put her to strict proof of the resulting or constructive trust relied on and of her alleged equitable interest thereunder. As anticipated, the Bank contended that any such interest was overreached by s.2(1) Law of Property Act 1925. The Bank denied that that section was incompatible with any of the Articles of the European Convention on Human Rights relied on or that those Articles were capable of amounting to a defence to its claim to possession of the Property.

The trial of Puneeta’s counterclaim was transferred to the High Court and further proceedings against Navtej and Anil stayed in the meantime. Accordingly the issues before me are:

In order to consider this issue in its proper context it is necessary to describe the circumstances of Puneeta and her family in greater detail. Puneeta was born in England on 5th September 1959. She lived with her parents until she married Anil in August 1981. From the age of 16 Puneeta had part time jobs. For example she undertook baby-sitting for others, she took holiday jobs and had a Saturday job with D.H.Evans and Debenhams. Having completed her A levels she enrolled for a course of business studies at the Central London Polytechnic and later the South Bank University. From 29th October 1979 to 21st February 1982 Puneeta was employed by the Civil Aviation Authority in the accounts department but given day release to continue with her course. Puneeta saved what she could. She claims that between 1975 and her marriage in 1981 she saved about £4,000.

Anil’s background is slightly different. He was born in India in 1953 and came to England with his parents Mr Satya Malhan and Mrs Dulari Malhan, Navtej and a sister in 1967. SND was started by Mr Satya Malhan shortly after they arrived with money borrowed from his nephew. It carried on business in the distribution of clothing, mostly knitwear. In due course a warehouse and office accommodation was acquired and the business was constituted as a partnership with Mr Satya Malhan, his wife and two sons as the partners. They lived together in a house called Lynton, London Road, Bracknell. As Mr Satya Malhan described it

Navtej was married in September 1976. His wife Sunita joined him and his family at Lynton. Mr Satya Malhan described how

Anil and Puneeta were married in August 1981. This comprised a civil ceremony on 3rd August and a marriage in the Hindu Faith on 9th August. In her second witness statement Puneeta described how, on the latter occasion, she gave all her money to her father-in-law for him to keep on her behalf. She described such action "as traditional within my culture". She claims that such money comprised £4,000 saved from her various employments since 1975, £3,000 given to her by her parents and £1,000 given to her on the occasion of her marriage by various family and friends.

Following her marriage Puneeta continued with her job at the Civil Aviation Authority until 21st February 1982. When she left she went to work for SND. She had previously been involved in some accident. She accepted a payment into court of £3,500 in settlement of her claim. In July 1982 she received a cheque from her solicitors for £1,500. The balance of £2,000 was received later when her solicitors had been paid by the Legal Aid Fund. Puneeta claims that both these amounts were handed to Mr Satya Malhan on the same basis.

Puneeta’s first child was born in 1983. In due course she returned to work for SND. Her second son was born three years later in 1986. After that she gave up all regular work with SND. Between March 1982 and the spring 1986 Puneeta was living at Lynton with her in-laws free of any charge. She claims that during that period she saved substantial further amounts which were either retained by SND on account of her work or given by her to Mr Satya Malhan on the same basis as before. Finally she contends that further sums amounting to £1,000 were given to her, and by her to her father-in-law, on the occasion of the birth of each of her two sons.

The amount Puneeta claims to have contributed to the purchase price for the property is £31,000 made up of

There is no doubt that £31,000 was paid to the solicitors acting on the purchase of the Property for that is the balance of the purchase price after deducting the advance from the Halifax Building Society of £25,000. Both Mr Satya Malhan and the then book-keeper for SND, Mr Deepak Meehan, gave evidence that the requisite amount was paid by a cheque drawn on the account of SND. Indeed there was no other possible source. In fact the amount must have been more than that because there would also have been the solicitors costs and expenses and those of the Building Society and its solicitors. Accordingly I have no doubt, and so find, that the amount required to complete the purchase, which I estimate as £32,500, was paid by SND. The question is how that amount was dealt with in the accounts of SND. Before reaching any conclusion on that central issue it is necessary to refer to a number of subsequent events.

When the Property was bought Anil and Puneeta with their two children left Lynton and went to live there. In 1990 a third child was born. In her witness statement made on 29th October 2003 Puneeta stated that "it [the Property] is presently the home for my husband, my children and myself". As the Bank now accepts they were all, in particular Puneeta, in actual occupation of the Property when the Second Charge was executed on 7th September 1994.

In 1990 Mr Satya Malhan retired. Thereafter he played no part in the business of SND. By May 1994 the Bank was concerned at the level of borrowing of SND. It was offered and took security over what it understood to be Anil’s property. This was the Second Charge. It was executed by Navtej and Anil, as the two registered proprietors, and registered in the name of the Bank on 19th September 1994. It secured payment to the Bank of all moneys due from Navtej and Anil or either of them. One of those liabilities was in respect of the account of SND. The Bank took no steps to obtain the consent of Puneeta. She claims not to have been consulted either by Anil or anyone else. She says that she would not have agreed to the Second Charge if she had been asked.

Puneeta found out about the Second Charge when she saw the Bank’s letter dated 4th March 1997 addressed to Anil requiring payment of the SND overdraft. On 24th March 1997 a firm of solicitors acting on her behalf wrote to the Bank. They said that Puneeta had "registered a Matrimonial Homes Act caution to protect her interest in the property". They referred to the fact that proceedings for possession had been threatened and asked the Bank to note that such "proceedings will be resisted by her on the basis that she is a wife in occupation".

In fact there was no registration until May 1999. On 20th May 1999 another firm of solicitors acting for Puneeta registered a caution. The statutory declaration dated 18th June 1999 made by her solicitor described Puneeta’s interest as

As I have already recorded the warehouse and offices of SND were destroyed by fire in 1998. Neither Mr Satya Malhan nor Puneeta was able to give any further details. Seemingly each of them has been told that all the accounting records were burned and that because the fire effectively brought the business of SND to an end no one has tried to recreate them. Accordingly the principal documentary evidence which relates to the case of Puneeta is unavailable.

But the books of SND are not the only material documents which have not been produced. In her cross-examination Puneeta revealed for the first time that at the time of her marriage to Anil they had opened a joint account with the Abbey National Building Society. No statements for such an account had been disclosed. I made an order for their production, but all that was produced related to the period after November 1991. In January 2003 Puneeta telephoned the Civil Aviation Authority asking for details of her employment. They confirmed the dates of her employment but were unable to provide any other information. In August 2003 Puneeta wrote to the Inland Revenue. She did not disclose a copy of her letter but produced the answer dated 1st September 2003, with which a copy of her tax return for 2002 was included, stating that the Revenue did not hold any of Puneeta’s P60s.

The principal documentary evidence on which Puneeta relied was a statement from her mother Mrs Urmil Bhuchar dated 19th May 2003 and a letter dated 23rd July 1982 from the solicitors acting for her in relation to her personal injuries claim in 1982. With that letter was sent a cheque for £1,500 on account of the £3,500 paid into court and accepted by Puneeta. The solicitors promised to send the balance with interest when their costs had been paid.

The statement of Mrs Urmil Bhuchar is written from an address in Battersea, London. She confirms the sources and amounts listed in Paragraph 13(1),(2)and (4) above. She did not make a witness statement nor did she give any oral evidence. I was not given any reason why she could not or would not give evidence. In her second witness statement Puneeta claimed to have saved all her earnings in the period 1975 to 1981 but she could not recall the amount and relied on her mother’s statement in that regard. Indeed she was unable to say, even approximately, how much per week she earned with the Civil Aviation Authority. Similarly she relied on her mother’s statement to provide the amounts attributable to the sources referred to in paragraph 13(2) and (4). The evidence of Puneeta, if accepted, involves the proposition that she saved at a consistent rate of about £13 per week throughout this period.

In Puneeta’s oral evidence she described how when the sum saved made it worthwhile she would give an envelope containing bank notes to her mother for safe-keeping. Her mother would then hide them under clothing in her bedroom. Her mother gave her no receipt or other written record and Puneeta kept no written record of her own. She described how her mother handed the money back to her following the religious ceremony on 9th August 1981. Puneeta said she then showed it to Anil. He said "oh my God" and she then passed it on to her father-in-law. When asked how many envelopes were involved or what the bundle of notes looked like she pointed out that the incident took place over 20 years ago and she could not remember. In relation to the gifts referred to in paragraph 13(2) Puneeta said in cross-examination that she saved them all and handed them to her father-in-law over a period. In relation to the money received in respect of the damages for personal injuries Puneeta also said that she saved it all and handed it to her father-in-law, though how the cheques were cashed and by whom was not explored in evidence.

With regard to all these moneys Puneeta said that she handed them to her father-in-law and asked him to look after them for her. She accepted that if he needed the money for the business of SND he might use it. In his witness statement Mr Satya Malhan confirmed that Puneeta handed to him all income and gifts received by her. He did not deal specifically with the pre-marriage savings or the personal injuries damages. He said that all money handed over to him by either of his daughters in law was paid into the SND account and correctly recorded in the SND accounting records.

With regard to the source described in paragraph 13(5) above in the period from August 1981 to February 1982 Puneeta worked for the Civil Aviation Authority. From February 1982 to summer 1986 she worked for SND. She worked full time until the birth of her first child in 1983 and then part time until the birth of her second child in 1986. She was unable to remember, even approximately, how much she was paid by SND even though, as she claimed, tax and National Insurance contributions were duly paid and accounted for in the books of SND. She said that she was not given any formal pay packet but her father-in-law would give her money at the end of the week. She claimed that she saved as much of this as she could and put it under her clothes in her cupboard. To these savings she added any unused balance of what Anil gave her and when the amount made it worth it she would give it all back to her father-in-law on the same basis as before.

In his oral evidence Mr Satya Malhan said that Puneeta had been paid by SND by cheque or, if SND had the cash, for example having been brought in by a market trader, in cash. He did not know if Puneeta had a bank account. He said that Puneeta saved hard and some of what SND had paid came back for use in SND as before. He contended that all these dealings were duly recorded in the accounting records of SND. Mr Deepak Meehan was employed as book-keeper by SND from 1985 to 1991. He described the conventional double entry book-keeping system operated by SND and how he would enter transactions as reported to him by Mr Satya Malhan. One of the ledger accounts was in the name of Puneeta and he would post entries to it as instructed by Mr Satya Malhan. The amount Puneeta claims to have saved in this way is not less than £17,500. Over 5 years this represents saving at a consistent rate of £67 per week.

To assess now the probability of Puneeta’s account concerning the level of savings she claims to have made in the periods 1975 to 1981 and 1981 to 1986 it is necessary to take account of the decline in the purchasing power of £1 since then. There are a number of ways in which this can be done, but the simplest and, in my view, fairest is to uprate the aggregate amounts claimed of £4,000 and £17,500 by reference to the RPI and then divide that amount by the approximate number of weeks in the period in question. On that basis £4,000 in 1981 is now worth £9,690. Spreading that amount over six years produces a weekly saving of £31. In the case of the later period £17,500 in 1986 is now worth £33,300 giving an equivalent figure for weekly savings of £128 per week.

Mr Satya Malhan described how keen Puneeta was to have a house of her own. It did not appear from his evidence that he played any part in finding the Property or negotiating its purchase. Puneeta did not claim to have done so either. I infer that those tasks fell to Anil and his elder brother Navtej. But neither of them gave any evidence. Nor was there any evidence from the solicitors acting on the purchase. As I have already concluded the balance of the purchase price was paid by SND. Mr Satya Malhan and Mr Meehan said that the balance was debited to Puneeta’s account, but there is no corroboration. Mr Satya Malhan was plainly upset by what he considered to be the unacceptable conduct of the Bank in selling up the business he had created. Mr Meehan was asked in the autumn 2003 to recall the identity of the account to which he posted a cheque 17 years before.

From 1986 to 1994 the instalments due on the First Charge were paid. In her second witness statement Puneeta claimed that she paid them. In her cross-examination she said that she was expected to pay them. She accepted that they were paid by SND. She claimed that the cost was debited to her in the books of SND. Mr Satya Malhan also said that the mortgage instalments were paid out of the account of SND and debited to Puneeta. Mr Meehan said nothing about the mortgage instalments. None of this evidence is consistent with other evidence of Puneeta. In cross-examination she said that in 1986 Mr Satya Malhan told her and Anil to manage their own affairs. The implication was that they should no longer place their savings with him. They did not need to do so as they already had the joint building society account. In any event they would by then have had to pay the costs of maintaining their own house and two children. Plainly the ability of Puneeta to save out of her net income at all would have been seriously reduced.

There is no evidence from Navtej or Anil. If Puneeta and Mr Satya Malhan are right in saying that all concerned regarded the Property as belonging to her then either they sought and obtained her consent or they committed a dishonest breach of trust. It was not suggested that either of them was unavailable to give evidence and, according to Puneeta, she and Anil continue to live together in the Property although this episode put a strain on her relationship with him.

There is the curious discrepancy between the solicitor’s letter of 24th March 1997 and the statutory declaration made on 18th May 1999 referred to in paragraphs 17 and 18 above. It is true that the former does use the word ‘interest’ but in context I do not read it as more than the writer’s description of the right to occupy the property as the wife of Anil conferred by s.31(2) Family Law Act 1996. Such a right cannot be protected by a caution and is not an overriding interest, see s.31(10)(b) and (11). This, no doubt, accounts for the fact that there was no registration until over two years later. But it also demonstrates that Puneeta cannot have told the solicitor who wrote the letter that she had paid any part of the original purchase price or, indeed, any of the instalments due on the First Charge. Had she done so any competent solicitor would have claimed that she had an equitable interest in the property which was an overriding interest, quite apart from her position as a wife, and would have ensured that it was duly substantiated from the accounting records of SND which were then still available. It is not clear that the caution in fact registered claimed any more by the description contained in paragraph (ii), but that cannot avail Puneeta.

I have summarised the evidence both oral and documentary at some length. I have also pointed out the substantial omissions. Whether or not I accept the claim of Puneeta also depends on her credibility and that of Mr Satya Malhan and Mr Meehan. I find it very surprising that Mr Meehan claimed to remember one of thousands of entries in the books of SND he must have made and seventeen years after he made it. I am not prepared to accept his evidence that he debited the account of Puneeta with the sum of £31,000 paid in respect of the purchase of the Property unless corroborated by other acceptable evidence. Mr Satya Malhan is now aged 80. He is evidently deeply upset at the collapse, after he retired, of the business he created in, no doubt, difficult circumstances. He displayed considerable animosity towards the Bank because of what he perceived to be the part it played. In addition I am surprised at the details he claims to remember given the time which has elapsed since and his age. I do not regard his evidence as corroborating that of Mr Meehan concerning the identity of the account to which the £31,000 cheque was debited. In other respects I treat his evidence with reserve.

Puneeta is an intelligent woman. She has had the benefit of a course in business studies and worked in the accounts department of the Civil Aviation Authority. Given this background her failure, as claimed, to keep any records at all of the savings she says she made with either her mother or her father-in-law is surprising. The fact that the joint building society account with Anil was not disclosed by her earlier does not give confidence in her credibility. It was evident that she understood clearly what her case was and had to be. Equally it was apparent that before answering a question she was concerned to work out what point counsel was pursuing. I found her to be selective in what she could and could not remember. She gave me the distinct impression of one who claimed not to remember if she could not answer the question in the way she understood would advance her case.

I have given the claim of Puneeta most anxious consideration but I am not satisfied on the balance of probability that she had savings of anything remotely approaching £31,000 for use in paying the balance of the purchase price for the Property in 1986. I am unable to place any weight on the untested statement of her mother, so long after the event, as to the amount Puneeta saved or of the gifts she received. I find it improbable that a girl aged between 16 and 21 living at home could save consistently for six years, week in week out, at the rate of £13 (now £31) per week doing the type of work she described. I find it even more improbable that a wife working in a family business, as described by Mr Satya Malhan, and having two children in the period, even if living free of charge with her in-laws, could save out of net income at a consistent rate of £67 per week (now £128) every week for five years. If she did not have that level of savings the balance of the purchase price for the Property could not have been found from her account. No doubt it was paid by SND. Given the double entry book-keeping system in operation the sum of £31,000 must have been debited to some account or accounts. But it cannot have been debited to a sufficient credit balance in the name of Puneeta. If, by contrast, the purchase price was paid by SND on behalf of all or some of the partners that would be consistent with the later conduct of Navtej and Anil charging it to secure the overdraft of SND. It would also be consistent with the action of the solicitor instructed by Puneeta who wrote the letter of 24th March 1997 on the footing that she had not instructed him as to her contribution to the purchase price.

Puneeta’s case before me has been based on the proposition that she paid the whole of the balance of the purchase price. She would not accept that Anil contributed anything. At one stage I thought that there might be some lesser claim based on the savings I think that she must have had, namely the personal injury damages and the wedding and other presents. But it has not been pursued and it would not be right for me to construct one. In my judgment Puneeta’s counterclaim must be dismissed because she has not established an entitlement to the equitable interest she claims.

In these circumstances, the second issue of fact does not arise. Given my conclusion on the first issue Puneeta’s consent was not required. I have no reason to doubt her evidence that it was not sought.

This point does not arise either. But, in deference to the comprehensive arguments addressed to me I will briefly summarise what they were and my view on them. If I had concluded that Puneeta had provided the balance of the purchase price of £31,000 then, as she was in occupation of the Property at the time the Second Charge was created, her equitable interest arising under the resulting trust would have been an overriding interest pursuant to s.70(1)(g) Land Registration Act 1925.

S.2(1)(ii) Law of Property Act 1925 (before amendment by the Trusts of Land Act 1996) provided:

By s.28(1) Law of Property Act 1925 trustees for sale have all the powers of a tenant for life and the trustees of a settlement under the Settled Land Act 1925. The same section provides that

The contention of counsel for Puneeta is that because the Second Charge was not authorised by s.71 Settled Land Act 1925 there was no power conferred on Navtej and Anil by s.28(1) Law of Property Act 1925. The alleged consequences are that (i) the words "when exercised...", appearing later in the same subsection, cannot be satisfied, and (ii) the equitable interest affecting the legal estate in land is not "capable of being overreached" as required by s.2(1)(ii).

There have been three recent authorities bearing on this problem. They are City of London Building Society v Flegg [1988] AC 54; State Bank of India v Sood [1997] Ch. 276 and Birmingham Midshires Mortgage Services Ltd v Sabherwal (1999) 80 P&CR 256. Each of them contains at least dicta contrary to the argument for Puneeta. Counsel for Puneeta claims that each case is distinguishable on its facts as, in each case, there was, or was conceded to be, a power to charge.

I do not find it necessary to consider those cases in detail. I would conclude that the phrase in s.2(1) "capable of being overreached" refers to the terms and operation of Part I Law of Property Act 1925, not to the existence of the necessary power in the trustees to effect the disposition. Thus s.2(3) excepts certain equitable interests and powers from the operation of s.2(2). As is shown by the decision of the House of Lords in Shiloh Spinners v Harding [1973] AC 691, 720/1, other equitable rights may fall outside the range of equitable interests and powers referred to in s.2(1). The passage in the speech of Lord Wilberforce to which I have referred supports such a construction.

In any event I would not accept, in this context, the relevance of the distinction counsel sought to draw between cases where a power exists but is exercised in an unauthorised manner or to an unauthorised extent and those where there is no power at all. In either case the equitable interests of the beneficiaries are being infringed. If, in the latter case, a purchaser from trustees for sale is bound to enquire further into the powers of the trustees then the curtain put up by Part I Law of Property Act 1925 must be pulled aside in all cases where there is reason to put the purchaser on notice as to the propriety of the transaction. That would defeat one of the principal legislative purposes of the 1925 Property Legislation.

But, in any event, I do not accept the premise on which the argument of counsel for Puneeta was based. Ss.18 and 21 Land Registration Act 1925 confer on the registered proprietors of freehold and leasehold land respectively power in the prescribed manner to transfer the registered estate in the land by way of sale or charge. Accordingly the limitations on the power to charge by s.71 Settled Land Act 1925 will operate to limit the power of trustees vis a vis their beneficiaries but do not inhibit the power of registered proprietors to dispose of the registered land by way of charge. Accordingly Navtej and Anil had the power to create the Second Charge and, in doing so, overreached the assumed equitable interest of Puneeta. The consequence of such overreaching is that such interest exists in the equity of redemption and the Second Charge confers priority on the Bank.

Again this point does not arise in view of my conclusion on the first issue. But, again, in deference to the comprehensive arguments addressed to me I will briefly summarise what they were and my view on them. They arise from the circumstance that whether or not the overriding interests of a person in occupation are overreached depends on the number of trustees. Thus if only one trustee is involved such rights will not be overridden/overreached, Williams & Glyn’s Bank v Boland [1981] AC 487, but if there are two trustees then they may be, City of London Building Society v Flegg [1988] AC 54. Such discrepant treatment of an overriding interest has been commented on unfavourably by the Law Commission in its report (No.188) Transfer of Land Overreaching: Beneficiaries in Occupation 1989 para 3.5 and by Peter Gibson LJ in State Bank of India v Sood [1997] Ch. 276, 290.

In his reply Counsel for Puneeta accepted that he could not rely on Article 8 or Article 1 of Protocol 1 by themselves. He confined his case to Article 14 in conjunction with either Article 1 of Protocol 1 or Article 8. He contends that if he makes out his case under either combination then I should apply s.3 Human Rights Act 1998 so as to read and give effect to s.2(1)(ii) Law of Property Act 1925 in the way for which he contends in respect of the third issue. If I find myself unable to do so as a matter of construction then he invites me to make a declaration of incompatibility under s.4 Human Rights Act 1998.

The relevant Articles are in the following form:

Counsel for Puneeta invites me to approach the issue in the four stages suggested by Brooke LJ in Wandsworth LBC v Michalak [2003] 1 WLR 617, 625 para 20, namely:

Counsel for Puneeta submits that Article 8 is engaged, even if only technically, because the loss of one’s home constitutes a failure to respect it by whoever takes it away. He contends that the appropriate comparator is one in the identical position to Puneeta save that there is only one trustee. He suggests that the position of Puneeta and such comparator are relatively similar and that there is no objective and reasonable justification for the discrepant treatment. A similar argument is founded on the provisions of Article 1 of Protocol 1 in that Puneeta is being deprived of her possessions if an order for possession is made against her.

These contentions are opposed by counsel for the Bank and for the Lord Chancellor who was joined as an additional defendant pursuant to s.5(2)(a) Human Rights Act 1998. They contend that the discrimination (if any) occurred in September 1994 when the Second Charge was created and, in accordance with the decision of the House of Lords in Wilson v First County Trust plc (no.2) [2003] 3 WLR 568, Article 14 can have no application. In addition they contend that Puneeta’s right is not to a home but to an interest in the proceeds of sale which continues in the equity of redemption so that there is no deprivation or lack of respect. In any event any deprivation or lack of respect is justified on objective and reasonable grounds.

In my view the argument for Puneeta based on Human Rights Act 1998 fails because the Act does not apply to the execution of the Second Charge in 1994 or to the consequences which then arose. In Wilson v First County Trust plc (no.2) [2003] 3 WLR 568 the House of Lords considered the extent to which the Human Rights Act 1998 could apply to events occurring before that Act came into force on 2nd October 2000. The speeches of the members of the Appellate Committee may have differed in emphasis but they all agreed that the Human Rights Act 1998 did not have retrospective effect if to apply it retrospectively would produce an unfair result for one party or the other.

Puneeta’s assumed right was overreached on to the proceeds of sale of the equity of redemption in September 1994. As from that time the Bank has been entitled to sell the Property free from that right. It would create havoc in the mortgage lending field as well as substantial injustice to both borrowers and lenders if priorities clearly settled before the Human Rights Act 1998 came into force could be altered by its application thereafter.

In these circumstances it is unnecessary for me to deal any further with the arguments for the Bank and the Lord Chancellor based on Qazi v London Borough of Harrow [2003] 3 WLR 792; London Borough of Newhamv Kibata [2003] EWCA Civ.1785 para 39 and Bramelid v Sweden (1982) 5 EHRR 249. Suffice it to say that it appears to me that there is much force in those submissions. Nor do I need to consider the four questions posed by Brooke LJ in Wandsworth LBC v Michalak [2003] 1 WLR 617.

For all these reasons I dismiss the counterclaim of Puneeta on the ground that she has not made out an entitlement to the beneficial interest in the Property she claims. It follows that there is no defence to the claim for possession. The only court entitled to make that order is the County Court. Accordingly, unless I am entitled to constitute myself as a judge of that court, the matter must now be sent back to the Reading County Court.