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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Halifax Building Society v Khan (aka Daniel James) & Ors [2001] EWCA Civ 618 (25 April 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/618.html Cite as: [2001] EWCA Civ 618

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(His Honour Judge Howarth)

		The Royal Courts of Justice The Strand London WC2A Wednesday 25 April 2001

Wednesday 25 April 2001

1. LORD JUSTICE CHADWICK: This is an application for permission to appeal against an order made on 17 January 2001 by his Honour Judge Howarth, sitting as a judge of the High Court in the Chancery Division, in proceedings brought by Halifax Plc against Mr Richard Khan (otherwise known as Daniel James) and others in relation to Flats 546 and 528 at Park West, Edgeware Road, London W2.
2. The litigation history is of some length. Proceedings under reference 1991 H 436 were commenced by the issue of a writ in the Leeds District Registry of the Chancery Division on 6 September 1991. The claimant (then the Halifax Building Society) sought orders for possession and sale of Flat 546, Park West. The defendants to those proceedings were Mr John Lee, Mr Richard Khan (otherwise known as Daniel James) and Mr Jonathan Holland. Mr Holland was registered as proprietor of a leasehold interest in the flat, under a lease dated 29 September 1982 for a term of 125 years. It was alleged in those proceedings that on 8 May 1990 the first defendant, Mr Lee, had submitted a fraudulent mortgage application to the claimant building society in respect of a proposed purchase of the flat by him. The application was said to be false and fraudulent in that the stated purchase price was £150,000, whereas in fact there was no genuine sale agreed at that price. This was, as alleged, a classic mortgage fraud in which a value was put forward on the basis of a fictitious sub-sale.
3. In reliance on that application form, the building society approved a loan of £137,750 and sent a cheque for that amount to solicitors, Messrs Thompsons, who were purportedly acting for Mr Lee. On 19 June 1990 Mr Holland executed a transfer of his interest in the flat to "Daniel James" at an express consideration of £93,000. Monies received by Thompsons were applied first to the payment to Mr Holland of that £93,000 – being the stated price of the transfer to Mr James; and, secondly, of the balance to Mr Lee. Thompsons took no steps to register the transfer from Mr Holland to Mr James, or from Mr James to Mr Lee. The property remained throughout registered in the name of Mr Holland.
4. In proceedings 1991 H-36 the building society sought a declaration that the property was held by Mr Holland upon trust to Mr Lee; that it was entitled to an equitable mortgage over the interest of Mr Lee; and that Mr James had no interest in the property.
5. Mr James – as I shall call him, although he is known by other names, as I have indicated - served a defence to those proceedings on 14 December 1992. He asserted that he had an interest in the property under the sale of 19 June 1990; that on 5 September 1990 he granted a 20-year lease to Lorena Bastjnic (described there as his girlfriend) and Dominic Sheehan (described as his godson). It was denied that he had been party to any fraudulent activities.
6. On 14 December 1993 the building society obtained an order for summary judgment. On 20 April 1994 it commenced new proceedings (1994 H 204) - also in the Leeds District Registry – against Dominic Sheehan, Lorena Bastjnic and Mr James, in which it sought possession of Flat 546 on the basis of the summary judgment that it had already obtained in proceedings 1991 H 436.
7. I leave the history of those proceedings in relation to Flat 546 for the moment; in order to refer to parallel proceedings in relation to Flat 528. Proceedings in relation to that flat (under reference 1991 H 437) were commenced by the building society on the same date (6 September 1991) as the proceedings in relation to Flat 546. The defendants to those proceedings were Mr James (sued there as Mr Richard Khan), Mr Hussain Jaffrey and his wife Mrs Shireen Jaffrey, and the Leamington Spa Building Society. Mr and Mrs Jaffrey were registered as joint proprietors of the leasehold interest of Flat 528 under lease dated 17 November 1982 for the same term of 125 years. It was alleged that, on 2 April 1990, Mr Jonathan Aiken (also known as John Lee, the nominal sub-purchaser of the other flat) had submitted a fraudulent mortgage application to the Halifax Building Society in respect of the proposed purchase by him of flat 528 at a price of £150,000. In fact, the property was to be purchased from the Leamington Spa Building Society, as mortgagees at a price of £82,500 in the name of Daniel James. The Halifax Building Society approved a mortgage advance of £142,500 and sent a cheque for that amount to Thompsons. £82,500 of that money was used to pay the Leamington Spa Building Society and the balance was applied by Thompsons or Mr Lee for their own purposes. No transfers were executed by anyone. The property remained registered in the name of Mr and Mrs Jaffrey, subject to the existing mortgage in the name of the Leamington Spa Building Society.
8. In the proceedings 1991 H 437, the Halifax building society sought similar relief to that in the parallel action 1991 H 436. Mr James served a similar defence; save that in this case he asserted that the premises had been sub-let on 5 September 1990 on a 20-year lease to Lorena Bastjnic jointly with Catryna Sheehan (described as Mr James' ex-wife). On 14 December 1993 the building society obtained summary judgment in those proceedings also; and on 20 April 1994 it commenced proceedings under reference 1994 H 205 in the Leeds District Registry against Catryna Sheehan, Lorena Bastjnic and Daniel James, seeking possession of Flat 528.
9. In the meantime, on 1 March 1993, Mr James had been convicted of mortgage fraud on a plea of guilty; for which he was sentenced on 30 April 1993 to four years' imprisonment. His solicitors applied on his behalf for a transfer of 1994 H 204 and 205 to London, on the ground that it would be more convenient for Mr James to attend in London rather than in Leeds, given his circumstances. That application was refused.
10. Mr James appealed from the orders made on 14 December 1993 in the actions 1991 H 436 and 437. On 21 April 1997 – in the absence of Mr James but with the consent of the Halifax building society (or Halifax plc as it had become) – those appeals were allowed by this court. The orders of 14 December 1993 were set aside by consent and Mr James was given unconditional leave to defend. The basis for the consent order does not appear from the papers which Mr James has filed in support of the present application; but the probability is that the Halifax had appreciated that it could not be subrogated to the interests of Mr Lee, a fictitious purchaser, and that the most that could be achieved was subrogation to the interests of the real vendors in respect of the amount actually paid to them.
11. Be that as it may, the summary judgments having been set aside, the 1994 actions (H 204 and 205) were consolidated with the 1991 actions (H 436 and 437) respectively. So it was that those proceedings came before His Honour Judge Howarth at the beginning of this year. He gave judgment on 17 January 2001.
12. The judge set out (at page 9 of the transcript of his judgment) the requirements for subrogation to a vendor's lien. He identified three. First, that the Halifax, as claimant, must be able to show that its money was used to discharge either the mortgage debt, or to pay the purchase price. Secondly, that Halifax, in releasing its money to Thompsons, intended that the money be used to discharge only the purchase price of the property; including within that such part of the purchase price required to pay off any existing charge. Thirdly, Halifax had intended to make its advance on the basis that it would become a secure creditor once completion of the transaction had taken place. He derived those principles from two decisions; the first a decision this court - Boscawen v Bajwa [1996] 1 WLR 328; and the second a decision of the House of Lords – Banque Financiere de la Cite v Park (Battersea) Limited [1999] AC 221. The principles are not open to doubt.
13. The judge then referred to the fact that it was not open to dispute that the second and third of those elements were satisfied. The difficulty lay in the first; namely whether Halifax's money could be traced. He satisfied himself that the money which Halifax had advanced by the payment to Thompsons had in fact been used, in the one case, to pay Mr Holland and, in the other case, to pay off the Leamington Spa Building Society. He held that the extent to which Halifax could claim to be subrogated to an unpaid vendor's lien was limited to the amount actually used to pay the real vendors of the property, namely Mr Holland and the Leamington Spa Building Society.
14. In those circumstances, he made orders in the action – of which the bundle contains only that made in 1991 H 437 – in which he declared that the interest of Mr and Mrs Jaffrey was subject to an equitable charge in favour of Halifax to secure repayment of the sum of £82,834, with interest (at a rate which he defined); that the defendants should forthwith deliver possession of the flat to Halifax; and that the flat should be sold by Halifax. For that purpose he vested in Halifax, under section 90 of the Law of Property Act 1925, a legal term of 125 years less four days in like manner as if the charge had been created by way of legal mortgage. It is clear from letters from Halifax's solicitors, dated 24 January 2001, that an order in similar terms was made in action 1991 H 436; save that, in that case, the subrogated amount was £93,000 rather than £82,500 odd.
15. Mr James attended at the trial before His Honour Judge Howarth for part of the first day. The trial extended over six days. Mr James, it appears, invited the judge to adjourn the trial for further hearing in London. That was an application which, if made without previous notice on the first morning of a trial fixed to last for six days, was never likely to be successful. If the application for transfer to London was to be made on solid grounds it could and should have been made in advance. Plainly, the judge did not accede to the application to transfer; and he continued with the trial, although Mr James took no further part in it. It does not appear that any other defendant took any part in the trial in relation to Flats 546 and 528. The trial continued not only in relation to those flats, but in relation to a third flat, Flat 178, in respect of which a Mr Omar, who was claiming an interest in that flat, was present and represented. He plays no part in this application.
16. Following the judge's orders of 17 January 2001, warrants for possession were issued in respect of both Flats 546 and 528. Those warrants were due for execution on 12 April 2001. Execution was stayed by an order made in this Court (by Henry LJ), adjourning the substantive application for permission to appeal (and a further stay of execution) after 26 April 2001. It is in those circumstances that this application has come on urgently.
17. When I commenced this judgment, the matter having been listed for hearing at ten o'clock, no one had appeared on behalf of the applicants. I started giving judgment at twenty past ten. I now interrupt that judgment, at twenty minutes to eleven, to indicate that Mr James has come into court.
(The Judge inquired of Mr Khan/Mr James the reason for his late arrival, and put back the case. After an oral hearing, the judge continued his judgment.)
18. This application for permission to appeal and a stay of execution is made in the following circumstances. These proceedings came before His Honour Judge Howarth, sitting as a Judge of the High Court in the Chancery Division in Manchester at the beginning of 2001. After a hearing of some six days, during part of the first of which the applicant, Mr Richard Khan (also known as Daniel James) had been present in person, the judge made orders for possession of two flats, known as Flat 546 and Flat 528 Park West, Edgeware Road, London W2. The circumstances in which he made that order are set out in that part of this judgment which I commenced earlier in the course of today; and I shall not repeat what I have already said.
19. The claimant in those proceedings, Halifax Plc, issued warrants for possession. Those warrants were due to be executed on 12 April 2001. At a late stage, Mr James applied to this Court for a stay of the warrants. That application came before Henry LJ, I think on paper, on 11 April. He granted a stay of execution until tomorrow 26 April 2001. He did so in the circumstances that Deputy Master Joseph had made an order on 21 March to the effect that, unless within 28 days of that date the applicants had filed their bundles and complied with the court's requirements, the applications for permission to appeal were to stand dismissed with costs without further order. It seems plain that Henry LJ took the view that the effect of that order of the Deputy Master was to give the applicants a further period of 28 days in which to put their applications for permission to appeal into a proper form; and that there should be a stay of the warrants for possession in the meantime.
20. The effect of Henry LJ's order is that eviction was stayed until tomorrow, 26 April. The application for permission to appeal was therefore listed before this Court, immediately after the Easter Vacation and on an emergency basis at 10.00 am this morning. I sat at 10.00 am but Mr James did not appear. At 10.20 I commenced giving judgment in his absence; there having been no indication as to whether or not he was going to appear. At 10.40 he did appear, and I interrupted the judgment that I was then giving. Another appeal had been fixed for hearing this day; and it had already been postponed to start at 10.45 am in order to accommodate Mr James' application. In those circumstances, I indicated that, if Mr James wished to pursue his application before me, he could do so when the hearing of that other appeal had been completed. He renewed his application at 4.45 pm. I have now heard it for about 25 minutes.
21. The matter needs to be dealt with today because, if no further order is made today, there will be no stay on the warrants for possession and eviction can take place tomorrow or on any day thereafter.
22. That part of the judgment which I have already given sets out the background to these proceedings. Put very shortly, Mr James was party to a transaction which the judge subsequently held was a mortgage fraud. The fraud took the familiar form of a fictitious sub-sale at an inflated price. That is to say, a purported sub-purchaser (in this case a Mr John Lee, also known as Mr Jonathan Aiken) made applications for mortgage advances on the basis that he was a purchaser of each flat at a price of £150,000. The building society approved, in the one case, a loan of £137,500 and, in the other case, a loan of £142,500. Those monies were paid to solicitors, Messrs Thompsons. The purported sub-purchase appeared to be on a sub-sale from Mr James, who was, himself, said to be buying the flats from those who then had registered title – in the one case, a Mr Holland, and, in the other case, the mortgagees of Mr and Mrs Jaffrey, the Leamington Spa Building Society. No transfers to Mr James were ever registered. In the case of the purchase of Flat 528, no transfer document was ever executed by the Leamington Spa Building Society. In the case of Flat 546, a transfer document into the name of Mr James was executed by Mr Holland at an expressed consideration of £93,000. Of the monies paid by Halifax to Thompsons, some £93,000 was used to pay Mr Holland in respect of the purported sale of his flat and some £82,500 was used to pay the Leamington Spa Building Society in respect of a purported purchase of Flat 528.
23. In neither case, as Judge Howarth found, was any money provided by Mr James. In those circumstances, the judge took the view that the Halifax was entitled to be subrogated to the rights of an unpaid vendor in respect of so much of its monies as were actually used to pay Mr Holland, in the one case, and the Leamington Spa Building Society, in the other case. He made orders under section 90 of the Law of Property Act 1925 vesting a legal term of years in the Halifax to enable it to enforce remedies as a chargee.
24. The effect of the judge's judgment is that Mr James had no interest in either flat, either legal or equitable. He had no legal interest in either flat because, throughout, the registered title had remained in Mr Holland, or in Mr and Mrs Jaffrey, as the case may be. He was never registered as legal owner of either flat. He had no equitable interest because, on the judge's findings, the money used to pay the purchase price was not his money; but money extracted from Halifax by means of a fraud to which he was a party. In those circumstances, not only did he have no interest in the flats, those who claimed under him through purported tenancies which he had granted on 5 September 1990 had no interest either. Those persons were his wife (or ex-wife), Mrs Catryna Sheehan, his son (sometimes described as his godson), Mr Dominic Sheehan, and Miss Lorena Bastjnic (described in his own defences as his girlfriend). They, variously, had been granted tenancies on 5 September 1990; but those were tenancies granted by someone, Mr James, who had no title whatever in that property.
25. Mr James, as applicant, seeks permission to appeal from the order of Judge Howarth. He says, first, that he was not given an opportunity to appear at the trial. Plainly he was given some opportunity to appear. He appeared on the first day and asked for an adjournment and a transfer of the proceedings to London. That request was refused and the trial continued. Mr James chose to take no further part in it. He can hardly complain in those circumstances if the judge reached the conclusions which he did without hearing either evidence or argument from Mr James.
26. Secondly, he says that the judge went wrong as a matter of fact and as a matter of law. The only question of fact the judge really had to decide, other than Mr James' participation in the fraud, was whether or not Halifax's monies could be traced through Thompsons into the hands of Mr Holland, in the one case, and the Leamington Spa Building Society in the other case. There is nothing in the substantial material put before me which suggests that the judge was not entitled to reach the conclusions that he did; in particular, nothing which suggests that Mr James, who (as the judge found) was a party to the mortgage fraud, should have chosen to use his own monies, rather than the monies which had been extracted from Halifax as a result of fraud, in the purchase of these properties.
27. The judge then had to consider the law. Mr James says that the judge failed to appreciate that he, Mr James, was a bona fide purchaser for value. He relies on the decision of this court in Pilcher v Rawlins (1872) LR Ch App 259. There are three difficulties in the way of that contention. The first is that Mr James is plainly not a purchaser of legal estate. he has never obtained the legal estate. Secondly, he is not a purchaser of value because he did not provide any monies of his own. Thirdly, he cannot be a bona fide purchaser in circumstances that the judge found that he was a party to the fraud. So there is nothing in that point.
28. This application must be seen as a last (and last-minute) attempt by Mr James to avoid the consequences of his conduct in 1990. The short point is that, as a judge has found, in 1990 Mr James obtained money fraudulently from a building society. He now seeks to claim that benefit of two properties purchased with the use of that money. There is a limit to the extent to which Mr James is entitled to engage the legal system. He has had the opportunity of a trial. A result has been reached at that trial which (for the reasons that I have indicated) is not capable of challenge; and there is no reason why this court should extend litigation by granting him permission to appeal in a case where the appeal is bound to fail. In those circumstances there is no basis for a further stay of execution in the meantime.
29. I have no doubt that the proposed appeals have no real prospect of success. Accordingly, Mr James' application for permission must be dismissed and, with it, the application for a stay of execution.
30. The notice of appeal prepared by Mr James purports to be made not only on his own behalf, but by him as litigation friend for others: those others include his son (or godson), his wife (or ex-wife) and his girlfriend. None of them have sought to address me in person and, given the history of this matter, I am not prepared to hear submissions from Mr James on their behalf. Accordingly, insofar as there are separate applications by any of them individually, those applications are refused also.
ORDER: Applications refused