Williams & Anor v Simm & Ors

In these proceedings the Claimants, as joint fixed charge receivers appointed pursuant to the terms of a legal charge dated 11 October 2016 and made between the Defendants (1) and LSC Finance Ltd (“LSC”) (2) (“the Legal Charge”), seek declaratory relief as to the validity of the Legal Charge and their appointment as fixed charge receivers, and other relief to enable them to carry out their functions as fixed charge receivers.

The proceedings were commenced by way of Part 8 Claim Form on 15 April 2020, but on 22 September 2020 District Judge Carter ordered that the claim be “transferred to Part 7 and allocated to the Multi-Track”, and gave directions for the filing and service of statements of case. These statements of case, comprising Particulars of Claim, a Defence and Counterclaim, a Reply and Defence to Counterclaim, and a Reply to Defence to Counterclaim were subsequently filed and served.

I had before me on 14 January 2021:

The SJ Application was supported by the third witness statement of Ellen Yeates dated 24

Thereafter, on 11 January 2021, the Defendants issued the Defendants’ Application, which was also made returnable on 14 January 2021. The Defendants’ Application is supported by the second witness statement of the First Defendant dated 11 January 2021 (“JA Simm 2”). This latter witness statement takes a number of procedural points in relation to the SJ Application, and also deals with various defences to the proceedings advanced by the Defendants as pleaded in their Defence and Counterclaim, and Reply to Defence to Counterclaim.

Given that the Defendants, by the Defendants’ Application, took a number of procedural objections to the SJ Application, I considered it appropriate at the hearing on 14 January 2021 to first determine whether the SJ Application ought to proceed on its merits in the light of those procedural objections, or whether I ought to strike out, dismiss or adjourn it in the light of the procedural issues taken by the Defendants’ Application as developed and expanded upon in the course of submissions.

For reasons set out in an oral judgment given on 14 January 2021 (as supplemented by further observations made shortly prior to the short adjournment on that day), I declined to strike out, dismiss or adjourn the SJ Application, and proceeded to hear the SJ Application on it substantive merits.

In this judgment, I propose to

The Claimants appeared by Oliver Wooding of Counsel. The Defendants appeared in person, with the Second Defendant conducting the advocacy on their behalf. As demonstrated by the contents of JA Simm 2 and the Skeleton Argument prepared by the Defendants for the hearing with their impressive citation of provisions of the CPR and case law, and by the quality of the advocacy of the Second Defendant, the Defendants have a sophisticated grasp of the issues involved in the present case. I am grateful to both Mr Wooding and the Second Defendant for the assistance that they provided to me in identifying and dealing with the issues that arise for consideration.

By the Defendants’ Application and the evidence in support (JA Simm 2), and as expanded upon in the course of submissions, the Defendants took a number of procedural objections in respect of the SJ Application, namely that:

The Defendants further relied upon the fact that the Claimants’ Skeleton Argument had been served late, and that the final electronic bundle for the hearing had only been provided late the previous evening.

As to the issues raised, I held that:

Further, I held that it was not open to the Defendants to apply pursuant to CPR 3.4(2)(a) to strike out the SJ Application, or to seek summary judgment in respect of it pursuant to CPR

I consider that my decision to proceed with the hearing was vindicated by the fact that it was able to proceed without the Defendants encountering any difficulty in being able to present their case in respect of the merits.

The Defendants are the trustees of the Albert Tims Will Trust (“the Trust”). In that capacity, they are the freehold owners and registered proprietors of the property known as Land lying to the South East of the A6070, Burton in Kendal, Cumbria registered at HM Land Registry with title number CU 142934 (“the Property”).

The Defendants, on behalf of the Trust, have sought to develop the Property by the construction of residential homes. After a number of unsuccessful attempts, the Defendants obtained planning permission for residential development from South Lakeland District Council (“SLDC”) on 29 December 2015, albeit subject to a number of planning conditions.

The development of the Property has been funded by monies advanced by LSC pursuant to the terms of:

The above advances were secured by the Legal Charge.

LSC was defined as entering into in each of the Facility Agreement, the Legal Charge and the Loan Agreements as “the Lender”.

The Facility Agreement and the Loan Agreements each defined the Defendants as “the Borrower”, and the Legal Charge defined the Defendants as “the Chargor”. In respect of each such deed, the Defendants were described as entering into the same “as trustees for the time being of the Albert Tims Trust” … “on behalf of the Beneficiaries”, the “Beneficiaries” being defined as the named individual beneficiaries of the Trust.

The Facility Agreement and the Loan Agreements dated 13 September 2017, 19 September 2018, 25 February 2019, and 2 July 2019 were preceded respectively by loan offer letters dated 8 April 2015, 28 April 2017, 6 September 2018, 19 February 2019, and 27 June 2019 (“the Offer Letters”), which were each signed by way of acceptance by the Defendants. In respect thereof, it is to be noted that:

The Facility Agreement contained the following provisions of relevance for present purposes:

The Legal Charge contained the following provisions of relevance for present purposes:

The Proprietorship Register relating to the Property has, at all relevant times, contained a restriction in the following terms (“the Restriction”):

“Except under an order of the registrar no disposition by the proprietor of the land is to be registered without a certificate signed by the solicitor to the registered proprietors that the said disposition is in accordance with the terms of the trust of the will of Albert Tims, deceased”.

Contemporaneously with the grant of the Legal Charge, Cartmell Shepherd, Solicitors, provided a certificate in the following terms (“the Certificate”):

“Title Number: CU142934

Land Lying to the South East of the A6070 Burden in Kendal (“the Property”)As Solicitors for John Adrian Simm, James Richard Simm, and Jeremy Mark Simm, being the Registered Proprietors of the Property, we confirm that the legal charge dated 11 October 2016 and made between (1) John Adrian Simm, James Richard Simm, and Jeremy Mark Simm and (2) LSC Finance Ltd is in accordance with the terms of the trust of the Will of Albert Tims, deceased.”

The production of the Certificate to HM Land Registry enabled the Legal Charge to be registered against the title to the Property on 1 November 2016.

The Loan Agreements, entered into after the Facility Agreement and the Legal Charge, provided for further facilities for the drawdown of funds for the development of the Property in the amounts referred to in paragraph 17.2 above. Each included and incorporated “Specific Terms”, and “General Terms and Conditions (version 3)”, and thereby incorporated similar terms to the Facility Agreement, and specifically provided for the liabilities of the Defendants thereunder to be secured by the Legal Charge.

It is to be noted that the Loan Agreements each included:

Funds were drawn down pursuant to the Facility Agreement and the Loan Agreements in order to fund the development of the Property. LSC has produced redemption statements as at 30 September 2020 showing the total sum outstanding thereunder as being £6,314,453.34.

It is the Claimants’ case that the Defendants had anticipated that the development of the Property would have been completed by summer 2019, whereupon individual dwellings could have been sold in order to repay LSC.

It was, as referred to above, an express term of the Facility Agreement that the Defendants would comply with any relevant planning permission, and it is the Claimants’ case that the Defendants were in breach of the conditions provided for by the planning permission granted by SLDC. On or about 24 August 2019 the First Defendant applied to SLDC to request a discharge from certain of the conditions.

It is the Claimants’ case that the Loan Agreement dated 19 September 2018 provided for the relevant loan to be repaid by 13 September 2019, and that upon this loan not being repaid, there was an “Event of Default” under that Loan Agreement, and in consequence under the Facility Agreement and the other Loan Agreements, entitling LSC to formally demand the repayment of all sums due and owing thereunder. Such a demand was made by LSC by letter dated 15 October 2019, but has not been satisfied.

It is the Claimants’ case that, on 21 October 2019:

Contemporaneously therewith, discussions took place between LSC, the Claimants and the First and Second Defendants with regard to the steps that might be taken to finish the development of the Property. Consequential thereupon, LSC advanced some further limited funds, and the Defendants undertook further limited works.

Against this background, by an email dated 21 October 2019, Shaun Morley (“Mr Morley”), the Managing Director of LSC, wrote to the First Defendant in the following terms:

“The min we would accept is £3m from yourselves we are currently at over £3.5m not including default interest and other associated costs.

The £3m would be on the basis that the site continues to be finished with immediate effect and there are no delays, all monies to finish would be on the basis of previous working with jonathan (sic) and paid down when falling due.

We have offered a solution, I will stress again we will not accept anything less.

Kind Regards,

Shaun Morley

Managing Director

LSC Finance Ltd”

At the bottom of this email appeared the following:

“Reservation of Rights: Notwithstanding any settlement, whether express or implied, made by [LSC] or any officer on their behalf under this email, [LSC] does not waive any rights title or interest to any provision under or pursuant to any written agreement between [LSC] with (sic) any other person (whether an individual or corporate body).”

It is the Defendants’ case that the email dated 21 October 2019 amounted to a contractual offer made against the background of a threat by the Defendants to seek injunctive relief to prevent LSC from enforcing its security, which such offer was accepted by the Defendants going back on site and continuing the building works, thereby resulting in a variation of the Facility Agreement and Loan Agreements whereunder LSC would provide further funds for the continuation of the building works, and accept the sum referred to in the email dated 21 October 2019 in settlement of the Defendants’ liabilities. Alternatively, the Defendants maintain that these dealings gave rise to an estoppel. I return to these contentions in due course below.

In the event, on 28 October 2019, SLDC refused the First Defendant’s application for the discharge of the relevant planning conditions. Further discussion between the parties failed to provide a solution satisfactory to LSC, and on 27 November 2019, LSC informed the Defendants that the Claimants, as receivers, would take control of the development of the Property.

Thereafter, the Claimants did take possession of the Property, and took steps to complete the development thereof. The Defendants disputed the right and entitlement of the Claimants to take this course of action.

In the light of this challenge, the Claimants commenced the present proceedings by Part 8 Claim Form on 15 April 2020 seeking:

The Defendants, acting in person, filed a lengthy witness statement disputing the Claimants’ entitlement to the relief that they sought.

On or about 19 June 2020, the Defendants, on the Claimants’ case with others acting on their behalf, physically re-took possession of the Property from the Claimants, before the Claimants had been able to complete the development. In response thereto, the Claimants commenced proceedings in the County Court at Barrow-in-Furness, against the Defendants, and also against Rachel Simm, Lauren Simm and Lara Estates Ltd, claiming possession of the Property. On 16 October 2020, the Claimants were granted a limited form of interlocutory injunction by HHJ Dodd, sitting (remotely) in the County Court at Barrow in Furness. By his order dated 16 October 2020 HHJ Dodd ordered that these County Court proceedings be transferred forthwith to the Business and Property Courts in Manchester “for further case management and to consider whether the claim should be consolidated with” the present proceedings. The Order of His Honour Judge Hodge QC dated 4 January 2021 provides for the consolidation of the two sets of proceedings.

As I have mentioned, on 22 September 2020, District Judge Carter converted the present proceedings to a Part 7 Claim, and gave directions for service of statements of case, which were duly served as referred to in paragraph 2 above. As also referred to above, District Judge Carter also gave directions for a further Costs and Case Management Conference, which was initially listed for 4 January 2021.

The SJ Application was issued by the Claimants on 24 December 2020, after the Defendants had, on 10 December 2020, served their Reply to Defence to Counterclaim, whereby pleadings were closed. However, the SJ Application was issued before the present proceedings were consolidated with the Barrow in Furness proceedings by the Order of His Honour Judge Hodge QC dated 4 January 2021. Consequently the SJ Application is only addressed to the Defendants to the present proceedings, and I did not understand the other defendants to the proceedings as commenced in the Barrow in Furness County Court to be before me, not having been served with the SJ Application.

As to the application to strike out the Defence and Counterclaim under CPR 3.4(2)(a), my attention is drawn to PD3A para 1.62(2), which provides that: “A defence may full within rule 3.4(2)(a) where the facts it sets out, whilst coherent, would not even if true amount in law to a defence to the claim.”. The commentary in White Book 2020 at 3.4.2 observes that the Court should draw a distinction between a defence which is not valid as a matter of law, and a claim (or defence) in an area of “developing jurisprudence”.

The Claimants maintain that all of the defences relied upon by the Defendants are matters which are not valid in now well settled areas of law, and are therefore liable to be struck out. Thus the application to strike out does not seek to strike out particular paragraphs of the Defence and Counterclaim, but rather seeks to strike out the whole statement of case.

The relevant principles are not in dispute. Pursuant to CPR 24.2, the court may give summary judgment against a defendant in the whole of the claim or on a particular issue if it considers that the defendant has no real prospect of successfully defending the claim or issue and there are no other compelling reasons why the case or issue should be disposed of at a trial. Further, insofar as a defendant is to be treated as a claimant for the purposes of any counterclaim, the court may give summary judgment against the defendant on the counterclaim if the defendant has no real prospect of succeeding on the counterclaim or a particular issue raised thereby.

As the notes in the White Book 2020 make clear at 24.2.3, “real prospect of success” means a “realistic” as opposed to a “fanciful” prospect of success, in respect of a claim or defence that carries some degree of conviction. However, in considering the issue, the court must not conduct a “mini trial”.

The correct approach to an application for summary judgment - in that case on an application by a defendant - was helpfully explained by Lewison J (as he then was) in EasyAir Limited v Opal Telecom Limited [2009] EWHC 339 (Ch) at [15]:

“i)

The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 1 All ER 91;

ii)

A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]

iii)

In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman

iv)

This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]

v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;

vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;

vii)

On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.”

The Defendants raise four particular issues which they say provide them with a real prospect of successfully defending the claim, and pursuing their counterclaim, namely:

In addition, the Defendants argue that they are entitled to rely upon CPR 24.3(2), which provides that summary judgment is not available in the case of proceedings for possession of residential premises against a mortgagor or a tenant or a person holding over.

I consider each of these potential defences in turn. Subject thereto, the evidence does, in my judgment, establish that an “Event of Default” had occurred under the Legal Charge entitling LSC to validly appoint the Claimants as fixed charge receivers, and thereby entitling the Claimants as such fixed charge receivers to take steps falling within their powers as provided for by clause 12 of the Legal Charge referred to in paragraph 23.7 above.

The Defendants rely, in particular, upon the following provisions of the relevant documentation, namely:

It is said that the true effect of the relevant documentation was to exclude the Defendants from any form of personal liability, and to purport (impermissibly) to impose the liability upon the Trust as an entity.

The Defendants place reliance upon Investec Trust (Guernsey) Ltd & Ors v Glenalla Properties Ltd & Ors [2019] AC 271,[2018] UKPC 7 at [59] as authority for the proposition that a trust is not a legal person, and has no legal identity and/or capacity to contract. At [59], Lord Hodge said this:

“59.

For this reason, it is necessary to start by setting out some well-established principles of English trust law which are relevant to the present issue:

(i)

A trust is not a legal person. Its assets are vested in trustees, who are the only entities capable of assuming legal rights and liabilities in relation to the trust. In particular, they are not agents for the beneficiaries, since their duty is to act independently.

(ii)

English law does not look further than the legal person (natural or corporate) having the relevant rights and liabilities. As Purchas LJ observed in dealing with the legal personality of a temple under Indian law in Bumper Development Corpn Ltd v Comr of Police of the Metropolis [1991] 1 WLR 1362, 1371:

"The particular difficulty arises out of English law's restriction of legal personality to corporations or the like, that is to say the personified groups or series of individuals. This insistence on an essentially animate content in a legal person leads to a formidable conceptual difficulty in recognising as a party entitled to sue in our courts something which on one view is little more than a pile of stones."

(iii)

The legal personality of a trustee is unitary. Although a trustee has duties specific to his status as such, when it comes to the consequences English law does not distinguish between his personal and his fiduciary capacity. It follows that the trustee assumes those liabilities personally and without limit, thus engaging not only the trust assets but his personal estate. As Lord Penzance put it in Muir v City of Glasgow Bank (1879) 4 App Cas 337 , 368, where debts are incurred by a trustee for the benefit of the beneficiaries, the trustee

"could not avoid liability on these debts by merely shewing that they arose out of matters in which he acted in the capacity of trustee or executor only, even though he should be able to shew, in addition, that the creditors of the concern knew all along the capacity in which he acted."

(iv)

This liability may be limited by contract, but the mere fact of contracting expressly as trustee is not enough to limit it. It merely makes explicit the knowledge of the trustee's capacity which Lord Penzance regarded as insufficient: see Lumsden v Buchanan (1865) 3 M (HL) 89 . There must be words negativing the personal liability which is an ordinary incident of trusteeship. In Gordon v Campbell (1842) 1 Bell App 428 and Muir v City of Glasgow Bank itself, it was held that the words "as trustee only" were enough.

(v)

A trustee is entitled to procure debts properly incurred as trustee to be paid out of the trust estate or, if he pays it in the first instance from his own pocket, to be indemnified out of the trust estate: In re Blundell (1888) 40 Ch D 370 , 376. To secure his right of indemnity, the trustee has an equitable lien on the trust assets: Lewin on Trusts , 19th ed (2017), para 21-043. Because an equitable lien does not depend on possession, it normally survives after he has ceased to be a trustee: In re Johnson (1880) 15 Ch D 548 , 552.

(vi)

A creditor has no direct access to the trust assets to enforce his debt. His action is against the trustee, who is the only person whose liability is engaged and the only one capable of being sued. A judgment against the trustee, even for a liability incurred for the benefit of the trust, cannot be enforced directly against trust assets, which the trustee does not beneficially own. The creditor's recourse against the trust assets is only by way of subrogation to the trustee's right of indemnity: In re Johnson (1880) 15 Ch D 548 .

(vii)

Because the creditor's recourse to the assets is derived from the trustee's right of indemnity, it is vulnerable. It is exercisable only to the extent that that right exists. It may be defeated if there are insufficient trust assets to satisfy his debt, or if the trustee's right of indemnity is defeated, for example because the debt was unreasonably or improperly incurred and the indemnity does not extend to such debts, or because the trust deed excludes it on account of the trustee's wilful default or gross negligence. More generally a breach of trust by the trustee, even in relation to a matter unconnected with the incurring of the relevant liability, will, to the extent that it creates a liability to account on the part of the trustee, stand in the way of the enforcement of the indemnity. As has frequently been observed, this can be hard on the creditor, who will usually have no knowledge of the state of account between the trustee and the beneficiaries. But the creditor can in principle protect his position, for example by taking a fixed charge over the trust assets, or, as in the present case, by stipulating for a personal guarantee from the principal beneficiary.”

In reliance on this authority, it is the Defendants’ case that the effect of the relevant documentation was not to impose any liability upon them as trustees but to purport to impose it on the Trust as an entity, and that as the Trust is not a legal person with an ability to assume legal rights and liabilities, the relevant documentation was ineffective to create any liability on any party. Consequently, as there was no liability secured by the Legal Charge it could not be enforced because enforcement depended upon there being a liability being secured thereby as illustrated, so it is said, by s 101(1) of the Law of Property Act

On this basis, so the Defendants argue, as it was not open to LSC to seek to enforce the Legal Charge, it was not open to LSC to appoint the Claimants as fixed charge receivers, and so the Claimants are not entitled to the declaratory and other relief that they seek.

It is certainly right that certain of the documentation produced by LSC or its Solicitors does appear to demonstrate a confusion as to the true legal status of a trustee vis-à-vis the trust of which he or she is trustee, and the beneficiaries thereof, and as to the capacity by which and in which a trustee enters into a contract as trustee of a trust where the correct position is that the trust has no distinct legal personality, and the counterparty to the contract entered into with the trustee has no right of recourse as against the trust assets save to the extent of the trustee’s entitlement to an indemnity out of the trust assets, at least unless the counterparty take security enforceable as against a trust asset. This confusion is evident in particular from paragraph 7 of the Offer Letters, clause 26.5 of the Facility Agreement, and the fact, that, at one stage it was envisaged that the Beneficiaries would, themselves, execute a charge.

However, the function of the Court is to construe the relevant provisions of the Facility Agreement, the Loan Agreement and the Legal Charge applying the well settled principles of construction, namely that deeds and other documents require to be construed objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the relevant deed or other document, would have understood the language thereof to mean, evidence, whether from prior negotiations or otherwise, about what the parties subjectively intended or understood the deed or other documents of mean being inadmissible and irrelevant to the task of the Court – see eg Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173, at [62]-[66] per Lord Hodge.

In my judgment the reasonable objective observer with knowledge of the relevant background would plainly have understood the language of the Facility Agreement and the Loan Agreements to provide for some party to assume liability pursuant thereto following the advance of funds to the Defendants to enable the development of the Property to proceed, and would have understood these deeds to be providing by their terms for the liability to fall upon the Defendants.

I do not consider that the terms of the Offer Letters referred to in paragraphs 21.1 and 21.3 above materially assist for the purposes of the relevant construction exercise in that:

The fact that the Defendants were expressed to enter into the relevant deeds “on behalf of the Beneficiaries” does not, in my judgment, materially assist the Defendants given this is an essentially neutral way of describing matters bearing in mind that the Trust has no separate legal personality. Of more significance, in my view, is that the Defendants were described as entering into the relevant deeds “as trustees for the time being” of the Trust, pointing to them acting as trustees in a capacity intended to have legal effect. This is reinforced by the wording of the representation and warranty on the part of the Defendants at clause 12.1 of the Facility Agreement to the effect that they were each validly appointed Trustees acting in accordance with their powers under their constitution documents and/or with the consent of the Beneficiaries.

The reference to the Defendants not being required to act as guarantors as provided for by clause 26.5 of the Facility Agreement points more, as I see it, to a misunderstanding on the part of the draftsman than an intention, construing matters objectively, to exclude the Defendants from personal liability. The wording of clause 26.5 should be contrasted with the wording of the definition of “Obligor” in the Facility Agreement, namely: “the Borrower and any other guarantor or surety of any obligation to the Lender under the Finance Documents”. The reference to “any other guarantor or surety” may be a misnomer, but the definition necessarily presupposes that the Borrower (i.e. the Defendants) is liable under the terms of the Facility Agreement, as would be any guarantor or surety.

Further, clause 2 of the Legal Charge, which I consider to be an admissible aid to construction of not only the Legal Charge, but also the Facility Agreement and the Loan Agreements, points to an intention that the Defendants should be personally liable, but that that liability should be restricted to an amount representing the amount realised from the Property and any other security. If the proper construction of the relevant Deeds was that the Defendants were excluded from personal liability, and that the liability was intended to fall upon the Trust “in rem” as the Second Defendant put it, then the wording in clause 2 limiting liability would be otiose.

Although, perhaps, of limited or no assistance in construing the Facility Agreement and the Legal Charge, it is not without significance that the Loan Agreements each expressly provided for the Defendants to be jointly and severally liable, and contained the declaration referred to in paragraph 28.4 above, by which the Defendants expressly recognised their personal liability. It was, of course, default in relation to one of these Loan Agreements that gave rise to LSC seeking to enforce the Legal Charge in October 2019.

I consider this issue to be the type of short point of law or construction specifically envisaged by Lewison J in EasyAir Telecom (supra) at [15] to be suitable for determination in the context of an application for summary judgment. In view of the fact that I consider that, as a matter of true construction of the relevant deeds, the latter are plainly to be construed as subjecting the Defendants to personal liability, I do not consider that the Defendants’ argument that there was no personal liability secured by the Legal Charge can succeed.

I would add that I do not consider this to be a case where it can properly be said that further exploration as to the background circumstances is required before being able to reach a firm conclusion as to the proper construction of the relevant documentation, particularly having regard to the fact that evidence as to the parties’ subjective intentions and prior negotiations are inadmissible for this purpose.

In short, therefore, I do not consider there to be any real prospect of the Defendants succeeding in defending the claim, or pursuing their counterclaim, on this ground.

The Defendants’ argument on this issue is encapsulated in paragraphs 3.3(a) to (d) of JA Simm 2, where it is said:

The Claimants via paragraphs 13.5 and 13.6 of the first witness statement of Ellen Yeates have claimed that the Defendants did not have the right to borrow monies under the terms of the Trust of the will of Albert Tims

Further the Claimants at paragraph 39 (b) (see below) of the Reply and Defence to Counterclaim suggests that this was a matter for the Defendants and Beneficiaries and as a third party they could simply rely upon the “certificate” dated 11^th October 2016.

The Defendants refer to paragraph 7.6 of their reply to Defence to Counter Claim and point to the facts that:

In the circumstances, the Defendants aver that on the alleged facts ( which will require full trial e.g. cross examination of witnesses) there was a clear contractual requirement and / or tortious duty owed by Gunner Cooke to the Defendants and Beneficiaries (( and to LSC Finance Ltd ) to ensure that the Trustees had the power to borrow and develop – and ,therefore, LSC Finance Ltd could not simply rely upon the said “ Certificate” dated 11^th October 2016 in order to complete.”

In addition thereto, in the course of submissions I was taken to correspondence between Graham Hall of gunnercooke, Solicitors acting on the part of LSC, and the First Defendant which was said to show that LSC was aware that the granting of the Legal Charge would amount to a breach of trust, that Graham Hall should have informed the Defendants that they had no power to charge the Property, and that in the circumstances, LSC and/or its Solicitors having acted in bad faith, the Certificate should not have been submitted to HM Land Registry.

In addition, it was said that in so far as any form of overreaching by the Defendants as trustees is relied upon, this could not be effective if LSC had acted otherwise than in good faith.

Developing the point made in paragraph 3.3(d) of JA Simm 2, it was further said on behalf of the Defendants that the circumstances leading up to and concerning the submission of the Certificate to HM Land Registry required an investigation that rendered the matter unsuitable for summary determination.

I have considered the documentation said to show that LSC was made aware that it was concerned with a will trust, and that the powers of the Trustees thereof did not extend to granting the security in question, and therefore that LSC, by its Solicitors, acted in bad faith in taking the Legal Charge and submitting it for registration, particular reliance being placed by the Defendants on an emails dated 2 and 3 October 2016 from Graham Hall of gunnercooke to the First Defendant. However, I have been unable to detect any evidence at all that LSC or its Solicitors did act in bad faith, or believing that the Defendants did not have the power as Trustees of the Trust to enter into the Legal Charge.

It may be right that LSC’s Solicitors did at one point look to obtaining a charge from the Beneficiaries themselves. However, ultimately reliance was placed upon the Certificate. This was provided by Solicitors acting on behalf of the Defendants, and these Solicitors duly confirmed on behalf of the Defendants that the Legal Charge was in accordance with the terms of the Trust. LSC and its Solicitors were, in my judgment, plainly entitled to rely upon this certificate as given on the Defendants’ behalf, and I do not consider that it can now open to the Defendants to seek to go behind it, particularly in the light of the representations and warranties in clause 12 of the Facility Agreement.

Further, I can detect no proper basis for maintaining any claim that the Solicitors for LSC had reviewed the terms of the Trust and come to the conclusion that the Defendants did not have the requisite power and/or having done so were in breach of any contractual or tortious duty to advise the Defendants and the Beneficiaries in relation thereto. The email between Graham Hall and the Second Defendant does state that “I have checked the trust docs you sent and effectively it stems from a will rather than a formal trust deed”. However, there is no evidence that the entry into the Legal Charge involved any breach of Trust, or that the Solicitors acting for LSC considered that it did. In any event, LSC and its Solicitors were, in my view, entitled to rely upon the Certificate as provided by Cartmell Shepherd acting as Solicitors for the Defendants in this respect, and certainly owed no duty or duties to the Defendants as the counterparties to the relevant transaction.

The correct analysis is, as I see it, as follows:

This issue raises a short point of law that depends on essentially unchallengeable facts as to the circumstances behind the provision of the Certificate, which is, in my judgment, suitable for summary determination.

In the circumstances, I do not consider that the Defendants have any real prospect of successfully defending the claim or pursuing their counterclaim relying upon this particular line of argument.

The Defendants’ case in respect of this issue is most clearly set out in:

In addition, by reason of an offer made in writing via e mail on the 21^st October 2019 to the Defendants by Mr Shaun Morley [Managing Director and large majority shareholder of LSC Finance Ltd i.e. the de facto owner of LSC Finance Ltd] - LSC Finance Ltd agreed to vary the terms and conditions of the loans mentioned at paragraph 8 of the Claimants Statement of Claim to £3m in full and final settlement thereof and therefore the Defendants aver that LSC Finance Ltd are estopped by representation from resiling from the said agreement and as a consequence of breach contract.

In the course of submissions, I pressed the Second Defendant as to how it was suggested that the offer made by the email dated 21 October 2019 had been accepted. The Second Defendant’s response was that the offer was accepted by the Defendants going back on site and continuing the development works with LSC advancing further monies for that purpose. Of course, the Defendants were only back on site for a comparatively short period of time thereafter as referred to in paragraph 38 above.

It is to be noted that on 22 October 2019, the First Defendant responded to Mr Morley’s email dated 21 October 2019 in the following terms:

Thus the decision to return to site must be viewed in the context of the above exchange of correspondence.

There are, as I see it, a number of difficulties with the case as advanced by the Defendants, including questions as to certainty of terms and consideration for the variation of the existing contractual terms. However, in support of the application for summary judgment, Mr Wooding, on behalf of the Claimants, limits his case in respect of this defence to one line of argument, namely that:

The Defendants sought to place reliance upon the minority judgment of Lord Briggs in MWB Business Exchange v Rock. Although agreeing with the result, Lord Briggs considered that the parties can agree to remove an anti-oral variation clause from their bargain in a similar way to the parties removal of a “subject to contract” condition from their negotiations – see at [19], but that: “what is conceptually impossible is for the parties to a contract to impose upon themselves such a scheme, but not be free, by unanimous further agreement, to vary or abandon by any method, whether writing, spoken words or conduct, permitted by the general law” – see at [26]. However, he did hold that such an agreement must be express, or arise by strictly necessary implication, and that an implied agreement could not be found simply from the fact that the parties agree orally on a variation of the substance of their relationship without saying anything at all about the clause – see Cartwright, Formation and Variation of Contract, 2^nd Edn at 5-41 referring to Lord Briggs at [24] and [31].

In my judgment the Claimants are correct in their analysis.

There was no agreement to vary in writing, whether signed by or on behalf of each party to it, or otherwise in that:

The decision of the Supreme Court in MWB Business Exchange v Rock requires the Court to give effect to the terms of clause 26.1 of the Facility Agreement and the General Terms and Conditions of the Loan Agreements, with the effect that any agreement might have been concluded between LSC and the Defendants, to vary the Facility Agreement, the Loan Agreements and/or the Legal Charge that did not accord with the requirements of clause 26.1 will have no contractual effect, even if any such non-compliant agreement was reached. In view of the matters referred to in paragraph 86 above, the requirements of clause 26.1 were not satisfied in the case of any agreement that might have been concluded between LSC and the Defendants, and so it is not open to the Defendants to rely upon the same as having effectively varied the terms of the Facility Agreement and the Loan

As to any promissory or other estoppel, in MWV Business Exchange v Rock Lord Sumption at [16] said this :

“This is not the place to explore the circumstances in which a person can be estopped from relying on a contractual provision laying down conditions for the formal validity of a variation. The courts below rightly held that the minimal steps taken by Rock Advertising were not enough to support any estoppel defences. I would merely point out that the scope of estoppel cannot be so broad as to destroy the whole advantage of certainty for which the parties stipulated when they agreed upon terms including the No Oral Modification clause. At the very least, (i) there would have to be some words or conduct unequivocally representing that the variation was valid notwithstanding its informality; and (ii) something more would be required for this purpose than the informal promise itself: see Actionstrength Ltd (t/a Vital Resources) v International Glass Engineering IN.GL.EN SpA [2003] UKHL 17, [3] 2 All ER 615, [2003] 2 AC 541 at [9] (Lord Bingham), [51] (Lord Walker).”

I have considered whether it might be said that this is a developing area of law and that, in those circumstances, it can properly be said that there is a real prospect of a promissory or other estoppel argument succeeding and/or some other reason why the present case should go to trial. However, Lord Sumption has, in the passage referred to in paragraph 88 above, clearly identified certain minimum requirements as to the application of promissory or other estoppel in circumstances such as the present case by reference to earlier authority. On this basis, I consider that the relevant law can properly be considered as settled rather than developing.

Those minimum requirements are clearly not, in my judgment, satisfied in the circumstances of the present case. There is no suggestion of there having been any words or conduct unequivocally representing that any agreed variation was valid notwithstanding its informality, whether going beyond the promise of promises or otherwise. In any event, I am far from satisfied that even Lord Briggs’ alternative minority analysis in MWB Business Exchange v Rock provides any further assistance to the Defendants on this point bearing in mind his requirement that there be an express agreement, or an agreement arising by necessary implication to remove the anti-oral variation clause from the bargain, his observation that an agreement was not to be implied from the mere fact that the parties agree orally upon a variation without saying anything at all about the relevant provision, and the way that he, at [30] and [31], equated the circumstances in which an implied agreement and an estoppel might arise.

Further, I do not consider this to be a situation where it can seriously be suggested that further evidence might be available at trial that might lead to a different conclusion.

In the above circumstances, I do not consider that the Defendants have any real prospect of successfully defending the present proceedings, or of successfully pursuing their counterclaim, based on this line of defence.

The argument is, as understood, that as there were Beneficiaries in actual occupation of the Property at the time that the Legal Charge was granted, LSC took the Legal Charge subject to the interests of the Beneficiaries under the Trust, and that this now prevents LSC from enforcing the terms of the Legal Charge, and the Claimants from acting in their capacity as fixed charge receivers appointed pursuant to the Legal Charge.

The Defendants’ case is set out in the Reply to Defence to Counterclaim where the same responds to paragraph 39(g) of the Reply to Defence and Counterclaim. Paragraphs (a) to (c) thereunder plead as follow:

“a)

The property under CU142934 was in actual occupation by Beneficiaries as early as August 2015.

b)

All of the design work for the development was carried out “in house” by Rachel Simm BSc Architecture (Beneficiary) , the other Beneficiaries and the First Defendant.

In addition Rachel Simm is a director and Lauren Simm Secretary of Lake District Developments Ltd, which submitted the planning documents to SLDC and undertook the development as main contractor thus maintaining a continuous presence on the Property from the start.

c)

In the premises the Defendants aver that the Beneficiaries were at all times in actual occupation of the land by the Beneficiaries in order to survey, sample testing (foundation and drainage) and provide plans and elevations which culminated in plans being submitted under SL/2015/0427 (available on the SLDC website) and the properties then being built.”

Having referred to Link Lending v Bustard [2010] EWCA Civ 424 at [23] and [27], the Reply to Defence to Counterclaim continues as follows:

“e)

In particular Rachel Simm provided inter alia the site layout options and design for Plots 28 and 29 Church Bank Gardens, submitted plans to SLDC , and was involved in the build and now lives in plot 28 Church Bank Gardens along with James Simm (Plot 24) and Lauren Simm who owns plot 31 Church Bank Gardens where manifestly from the above there has been a continuing intention by the beneficiaries to occupy the

Property right from the start through planning, development and residing in the houses.”

Having particular regard to the fact that the Property was, as at the date of the Legal Charge, an undeveloped site, I do not consider that, on any view, the fact that one or more of the Beneficiaries might have been involved in the then proposed development, being involved with design work or in submitting planning documents and matters of this nature, goes anywhere near establishing, even if true, that any Beneficiary was in actual occupation of the Property. Such involvement falls, in my view, well short of any form of occupation of the Property. Whilst it is suggested that certain Beneficiaries may now be in occupation of certain properties that have now been built upon the Property, that was not the position as at the date that the Legal Charge was executed.

In any event, even if any Beneficiary was in actual occupation, I see no reason why the entry into the Legal Charge by two or more trustees of the trusts of land relating to the Property would not have overreached the interests of the relevant Beneficiaries in any event, at least once the Certificate had been obtained, and registration of the Legal Charge effected thereafter.

Thus, again, I do not consider that this issue provides the Defendants with a defence providing any real prospect of success, or a counterclaim that has any real prospect of success.

I consider it unlikely that CPR 24.3(2) applies to a claim for possession against the Defendants as mortgagors of a development site, albeit that residential units may have been constructed thereon.

However, I am concerned that the position is somewhat more complicated than this. As explained in paragraph 42 above, the possession proceedings in the County Court at Barrow in Furness were commenced against the Defendants and three other defendants. The Part 8 Claim Form and the Particulars of Claim do not in terms include a claim for possession. Further, the Barrow in Furness proceedings were only consolidated with the present proceedings by His Honour Judge Hodge QC’s Order dated 4 January 2021, after the SJ Application was issued. Consequently, the other defendants to the Barrow in Furness proceedings in which the possession order was sought are not parties to SJ Application, have not been served therewith and are not before the Court.

The draft order attached to the SJ Application includes the headings of both sets of proceedings, and provides for a possession order against the Defendants and the three additional defendants to the Barrow in Furness proceedings. However, in the light of the above, I do not consider that it would be appropriate for me, as matters stand, to grant summary judgment in respect of the Claimants’ claim for possession of the Property, notwithstanding that the Claimants’ powers as fixed charge receivers include the power to take possession of the Property. It would, as I see it, be necessary for the additional defendants to be party to this or some other application for summary judgment before this Court could properly consider making a possession order on a summary basis.

It follows from my consideration of each of the respective lines of defence raised by the Defendants that I do not consider that the Defendants have any real prospect of successfully defending certain at least if the Claimant’s claims, and that the defences raised are, on the basis of unchallenged or unchallengeable facts, bad at law with the consequence that the Claimants are entitled to summary judgment for the following heads of relief, namely:

For the reasons set out in paragraph 101 above, I do not consider it appropriate to make a possession order in relation to the Property at present given that the SJ Application was issued prior to consolidation, and given that the three additional Defendants joined to those proceedings are not before the Court. The further pursuit of this aspect of the claim is, as I see it and subject to further argument to the contrary, at a subsequent hearing.

Further, I do not consider it appropriate to grant a money judgment in the Claimants’ favour in particular for the full amount alleged to be outstanding of £6,314,453.34 plus continuing interest, enforcement and receivership costs. Irrespective of the fact that the relevant liability is to LSC rather than the Claimants as such, as Mr Wooding recognised in the course of submissions, the personal liability of the Defendants is limited by the terms of clause 2 of the Legal Charge to the proceeds of sale of the Property, and on this basis could not be finally quantified until the Property has been sold in enforcement of the Legal Charge. However, monetary judgment ought to be unnecessary, because if a sale of the Property can be achieved, then LSC can recover its full entitlement out of the proceeds of sale of the Property.

Whilst the draft order attached to the SJ Application makes provision for the Claimants’ claim for damages and interest to be stayed with liberty to restore, neither the Claim Form nor the Particulars of Claim in the present proceedings contain any claim for damages, albeit including a claim for sums outstanding under the Loan Agreements, and so I do not consider that it is open to me to make any such order in respect of damages and interest as the SJ Application was issued prior to consolidation. It may be, and I have not seen the Claim Form in the proceedings commenced in the County Court at Barrow in Furness, that damages are claimed in those proceedings. If so, any claim for damages would, as see it, have to await an application for summary judgment in the consolidated proceedings even if the Defendants had no real prospect of defending the claim for damages. The same considerations apply, in my view, to the injunctive relief provided for in the draft order, which is also sought as against the other defendants.

I have considered the relief claimed by the Defendants in their Counterclaim. In view of my findings above in relation to the issues that arise for consideration, I do not consider that the Defendants have any real prospect of success in respect of any of the various heads of relief set out in the Counterclaim. In those circumstances, I consider that the Claimants are entitled to summary judgment on the Counterclaim.

Given my findings, I consider that the present SJ Application is best more appropriately dealt with by granting summary judgment, rather than by ordering that any specific part or parts of the Defence and Counterclaim be struck out.

I would hope that the parties can agree a form of order consequential upon this Judgment, but if not I will hear submissions at an appropriate time thereupon.