REF/2014/0902
PROPERTY CHAMBER LAND REGISTRATION
FIRST-TIER TRIBUNAL
LAND REGISTRATION ACT 2002

IN THE MATTER OF A REFERENCE FROM HM LAND REGISTRY

BETWEEN
DONALD RICKETTS
APPLICANT
and

ANDREW CHINSEE
HUBERT JAMES
RESPONDENTS

Property Address: 325A Shirland Road, London W9 3JJ

Title Number: NGL855022
Before: Judge Owen Rhys
Sitting at:  10 Alfred Place, London
On: 13th July 2015
Applicant representation:	Mr Kpocho of Able Solicitors
Respondent representation:	Mr Hyde of Counsel 
	
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D E C I S I O N
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INTRODUCTION
1.	On 4th August 2014 the Objectors registered a unilateral notice in the register of 325A Shirland Road, London W9 as registered under title number NGL855022 (“the Property”).  The notice relates to a purported Second Charge on the Property dated 26th October 2008 (“the Disputed Charge”) securing a loan made by the Respondents of £399,000 plus interest.  On 10th September 2014 the Applicant, the registered proprietor, applied for cancellation of the unilateral notice, and the dispute was referred to this Tribunal on 2nd December 2015.  Mr Kpocho of Able Solicitors represents the Applicant.  Mr Hyde of Counsel represents the Respondents.  In fact, only Mr James attended the hearing, and gave evidence, the other Respondent being abroad according to Mr James, who states that he is authorised to represent him, although no written authority was produced.

2.	The background to the dispute is as follows.  It is common ground between the parties that the Applicant entered into a contract to purchase the Property in October 2008 from a Susan Green.  There is a dispute as to the contract price – the Applicant says it was £160,000, and Mr James says that it was £250,000.  The figure of £250,000 appears on a mortgage offer document dated 22nd October 2008 (B31) recording the offer of a loan to the Applicant in the net sum of £127,965.  A Legal Charge (“the First Charge”) was executed by the Applicant and the net sum of £127,965 was released to the Applicant’s solicitors by the mortgagee, Birmingham Midshires (“the Mortgagee”) on 24th October 2008, when completion took place.  According to Mr James, the Applicant executed the Disputed Charge on 26th October 2008, after completion of the sale.  For unknown reasons, the solicitors who acted for the Applicant and the Mortgagee – TMJ Law Solicitors – did not lodge either the TR1 or the First Charge for registration at Land Registry.  In January 2010 the Applicant made a complaint to the Legal Complaints Service regarding this failure.  TMJ Law Solicitors were the subject of a Law Society intervention, and the Mortgagee appointed a different firm of solicitors, Cobbetts, to complete the registration.  The original First Charge and transfer had gone missing. From the correspondence produced by the Applicant, it appears that in order to obtain registration, Cobbetts were obliged to “reconstitute” the conveyancing documents, namely the TR1 and the First Charge.  It also appears that the vendor, Ms Green, executed a transfer that recited the purchase price as being £160,000  - this is apparent from the office copy entries on the register.  Eventually, on 14th April 2010, the Applicant was registered as proprietor in the Proprietorship register, and the First Charge was registered in the Charges Register.  This registration was of course made on the basis of the “reconstituted” documents, not the documents executed at the time of the purported completion in 2008.

3.	Both parties served their Statements of Case.  The Applicant’s case is that Mr James was known to him as a Solicitor, for whom he had carried out electrical works over a period of years at various properties owned by Mr James.  Mr James was “involved in the initial conveyancing process” in October 2008.  Although he “cannot recall executing” the Disputed Charge, he was asked to sign a number of documents “trusting the Solicitors to be acting in the best of his interest at the time.”  He admits receiving the sum of £127,965 from the Mortgagee, which was used to fund the purchase of the Property, together with other sums derived from family and friends.  The contract price was £160,000.  He denies receiving any money by way of loan from either of the Respondents.  The Respondents’ case is that the Applicant did sign the Second Charge, and that the Applicant contributed nothing to the purchase of the Property other than the funds from the Mortgagee.  The amount specified in the Disputed Charge was said to be the true value of the Property which, the Respondents contend, was held on trust for them by the vendor Ms Green.  Since the balance of the purchase price was left outstanding, this was reflected by the £399,000 specified in the Disputed Charge.  It was admitted that no money actually changed hands.

4.	Evidence was given by the Applicant himself, and by Mr James and the two witnesses to the Disputed Charge, namely Mr Martin and Mr Hosein.  They all made witness statements, upon which they were cross-examined.

5.	The Disputed Charge is a somewhat curious document.  The document produced at the hearing consists of two A4 pages stapled together, with some of the witness details on the second page, “orphaned” both from the text and the signature of Mr Ricketts.   There has been some heavy “tippexing” at the bottom of the first page, immediately underneath the words “SIGNED and delivered as a Deed By the Borrower (Donald Ricketts)” and the Applicant’s signature is written over the “tippexed” area.  The document makes no mention of the purchase price of the Property being left outstanding – indeed the vendor, Ms Green, is not a party.  The document contains a receipt for the sum of £399,000, and is made repayable on the same day.  Interest at the rate of 20% per annum is stipulated until payment of the principal sum.  Recital 1.4 reads as follows: “The Prior Charge means a charge in favour of Bank Scotland (Birmingham Midshires) dated 24th October 2008 to secure £120,000 and interest on it as stated in the Charge.”
6.	As I have said, the Applicant Mr Ricketts gave evidence, as did Mr James and the two witnesses to the Disputed Charge.  Mr Ricketts accepted that Mr James had introduced him to the vendor of the Property, Ms Green.  He confirmed that he was an electrician, and had carried out electrical works for Mr James at various investment properties.  He knew Mr James to be a solicitor, and trusted him. He had lived at the Property for a period of time before he actually bought it.  He denied that Mr James had ever lived there.  According to him, Mr James had a property in South London where he resided.  He said that he had never met Mr Chinsee, or even heard of him, and was unaware that the Respondents were the true owners of the Property as Mr James now claimed.  He had paid for the Property using monies borrowed from Birmingham Midshires and made up the balance of the purchase price with cash contributions from family members. He said that although solicitors were instructed to act in the purchase, and in relation to the First Charge, Mr James was also involved as his solicitor.  He had signed various documents at his behest although he had no recollection of signing the Disputed Charge.  He denied that he had ever borrowed any money from either Mr James or Mr Chinsee.  In answer to a question from the Tribunal, he stated that he had been solely responsible for making the repayments under the First Charge from the date of his purchase.

7.	Mr James made a witness statement, and was cross-examined on it. At paragraph 8 he says that the Applicant “has never contributed any monies towards the purchase price of 325a Shirland Road apart from £125,000 mortgage funds and again request strict proof of any other payments made by him.”   As regards the execution of the Disputed Charge, this is what he says in paragraph 9: “…Mr Donald Ricketts executed two copies of the [Disputed Charge] in front of two independent witness [sic], Mr Michael Martin and Mr Ackbar Hosein, he was advised to seek independent legal advice but declined to do so…… Mr Donald Ricketts was provided with a photocopy of the said legal charge.”  In paragraph 14 he says this: “….. it was never the intention to transfer the title of 325a Shirland Road to the Applicant, a fact of which he was aware of and for this reason he was not requested to contribute any funds towards the purchase price, instead he was requested to execute the second charge agreement dated 26th October 2008.”

8.	Under cross-examination, Mr James confirmed that he had been a practising solicitor in 2008 at the time of the sale of the Property.  It seems that he had come across Ms Green as a client, in connection with the execution of a special needs trust.  He produced a power of attorney dated 14th October 2008 whereby Ms Green, with an address in York, appointed him as her attorney.  With regard to the details of the execution of the Disputed Charge, he departed somewhat from his written evidence.  In particular, when asked why it was necessary to make two “copies” of the Disputed Charge, rather than simply photocopying one original, he told me that he did not have access to a photocopier.   He also said that the original deed had been given to Mr Ricketts immediately after it had been executed, fior the purposes of registration.  He was unable to give any explanation why this was the case, and why he himself as the lender, and indeed a solicitor, did not present the document for registration at Land Registry.  As to the “tippexing” on the copy produced to the Tribunal, he said that the blanked out words had nothing to do with the Disputed Charge, but he was simply concerned not to waste paper and had therefore re-used a piece of paper from another document for the copy.  He also said for the first time that he had given Mr Ricketts a draft of the Disputed Charge to read prior to the actual execution, which took place at Mr James’s residence.  He said that he himself used to spend a lot of time at the Property, and usually spent weekends there. On one of these occasions he had given the draft to Mr Ricketts.  He was asked how the figure of £399,000 in the Disputed Charge was calculated.  He said that it represented the value of the Property.  He confirmed that, in his view, this was the value in 2008.  It was then put to him that Mr Ricketts had actually made himself liable to repay a total of nearly £530,000, being the combined indebtedness under the First Charge and the Disputed Charge.  At this point Mr James changed his evidence, suddenly recollecting that work had been done to the Property and this would have increased the value to around £530,000.  He was also asked how much Mr Ricketts would have to pay to redeem the Disputed Charge.  He gave a number of different responses, from which it was clear that he had never actually calculated the amount even on a rough and ready basis.

9.	Both Mr Martin and Mr Hosein confirmed that the document which was relied on by the Respondents – the tippexed document that was present in court – was executed by Mr Rickets at the home of Mr James.  Under questioning from the Tribunal, they both were adamant that they only witnessed the execution of this single document and no other.

10.	The issue that I must decide in this case is whether the Respondents are entitled to maintain their Unilateral Notice in the Charges Register of the Property in the face of the Applicant’s application if Form UN4 to cancel it.  That, in turn, depends on my being satisfied that they have the benefit of the Disputed Charge or, rather, a charge in favour of the Respondents that is capable of registration.  Clearly, it is for the Respondents to satisfy me on this issue – the burden is on them.

11.	Although this is not the primary issue, the Disputed Charge represents a wholly improbable bargain from the point of view of the Applicant.  To all intents and purposes he bought the Property from Ms Green at a price of £160,000.  This is the figure that was inserted in the registered TR1 as the register itself confirms.  This figure must have been agreed by Ms Green since she executed the TR1 at the request of Cobbetts.  Mr James, in his witness statement, makes certain allegations about the circumstances in which the TR1 was signed, but no evidence has been adduced from Ms Green and nothing has been presented to me to cast doubt on the figure in the register.  It is known that Mr Ricketts obtained a loan from Birmingham Midshires which fell just short of the purchase price.  He accepts that he received £127,000 or so and has been repaying the loan ever since.  His evidence was that he funded the balance – some £30,000 – with cash contributions from members of the family.  I have no reason to disbelieve him.  He struck me as a truthful witness, albeit one with a very limited understanding of financial and legal matters.  I do not regard it as surprising that he did not produce any documents to support his evidence on this point, given the length of time that has elapsed since October 2008.  On any footing, it makes absolutely no commercial or practical sense whatsoever for him to have incurred a liability to the Respondents of £399,000, with interest accruing at 20% per annum.  Even with simple interest added, his total debt would now be approaching £900,000.  Mr James’s evidence that the balance of the purchase price was left outstanding is not consistent with the express terms of the Disputed Charge, and has not been corroborated by the vendor Ms Green, nor by any valuation evidence.  It is also inconsistent with the figure stated in the register of title.  Generally, I have to say that I found Mr James to be a wholly unreliable, indeed untruthful witness, whose version of events was quite improbable.  There are any number of inconsistencies between his written and oral evidence.  For example, the contrast between his written evidence that he gave a photocopy of the Disputed Charge to the Applicant, with his oral evidence that did not have access to a photocopier and therefore it was necessary to “execute” a further copy.  Another example: when he was asked whether he had notified the Mortgagee of the Second Charge he replied that he was unaware of the prior charge.  However, the existence of the First Charge is actually recited in the Disputed Charge itself.   Given that Mr James was admitted as a Solicitor in this country – although he no longer practises here having moved abroad – I found his approach to giving evidence to be surprising to say the least.  I have no hesitation in preferring Mr Rickett’s evidence where their versions conflict.

12.	Leaving to one side the underlying improbability of the second charge transaction, I shall now focus on the document itself.  As I have said, evidence was given by the two witnesses named in the Disputed Charge.  They are both well known to Mr James and are friends of his.  As it happens, these statements were not served on the Applicant until a matter of days before the hearing.  In his witness statement, Mr Hosein said that “In late October 2008” he was asked to witness the Applicant’s signature on the First Charge and the Disputed Charge.  He said that both documents were signed in his presence, and it was explained to Mr Ricketts that he should seek legal advice before signing the documents.  Under cross-examination, he said that the occasion was on a weekend.  He could not recall if the document had a “tippexed” section.  He arrived there before Mr Martin.  He was also asked to witness the First Charge.  He only witnessed one version of the Disputed Charge – there was no second copy.  In his witness statement, Mr Martin (a solicitor’s clerk) says that he recalls witnessing the Applicant’s signature on the Disputed Charge.  Under cross-examination, he recalled being at a social event at Mr James’s house, and being asked to witness the Applicant’s signature.  This was on a weekend, maybe some time after lunch.  He could only recall witnessing the Applicant signing one document.

13.	There are questions to be raised in relation to their evidence.  First, it is difficult to understand how, as Mr Hosein says, he could have been asked to witness the First Charge on the same occasion as the Disputed Charge. The Disputed Charge is dated 26th October 2008 – a Sunday.  Completion of the sale and mortgage of the Property occurred on 24th October 2008 – a Friday.  The First Charge cannot possibly have been executed after completion since the mortgage monies would not have been released unless the charge had been executed.   Secondly, neither Mr Hosein nor Mr Martin could recall witnessing more than one version of the Disputed Charge.  Mr James was adamant that two documents were executed by Mr Ricketts – an original and a copy.  The copy was executed because he did not have access to a photocopier, according to him.   It is this version that has survived – or, at least, it is a copy that he relies on to support the unilateral notice.  This is the copy that includes a “tippexed” section.  Mr James says that he gave the original to Mr Ricketts, but of course it has never been registered.  He assumes that it was given to the Applicant’s solicitors, and lost, given that this was the fate of the TR1 and First Charge.  Although this document – the copy – is in the same form as the original, according to Mr James, it is on his evidence merely a copy.  Yet neither Mr Hosein nor Mr Martin can recall this second document.  When Mr Martin was asked when he visited Mr James’s house on that day, he began by saying that it “after lunch”, then “it could have been after 6 o’clock” and then “late afternoon”. 

14.	In the light of these discrepancies, I find it difficult to accept their evidence at face value.  Despite their attempts to provide a little colour to their evidence – Mr Hosein’s evidence that they were in a badly-lit front room, or Mr Martin’s suggestion that it was a friend’s wedding anniversary – my overwhelming impression is that they had no actual recollection of Mr Ricketts signing the version of the Disputed Charge that the Respondents rely on, and I so find.  I accept that their signatures appear on the tippexed version of the document, but that is far as it goes. That is not in itself evidence of due execution. Even if I take the witnesses’ evidence at face value, that does not get the Respondents home.  If I accept that the Applicant did sign the tippexed copy in the presence of the witnesses, it cannot have been intended by the Applicant to take effect as a valid charge.  A deed has to be executed and delivered as a deed – i.e the signatory must intend to be bound by its terms.  If the Applicant had already signed the “original” second charge, which was given to him for the purposes of being registered, he cannot have “delivered” the copy as his deed whatever the attestation may say.  If he had intended to be equally bound by both documents, this would have exposed him to liability under both, which would clearly be absurd since it would double his indebtedness.  Each witness was unaware of the oral evidence of the other, since they were excluded from the hearing room while evidence was being given – confirmed that they only “witnessed” execution of the copy that is in evidence, not of the original (which Mr James says has gone missing).  They did not witness the execution of any other document.  There is no evidence, apart from that of Mr James, that another document was executed.  I have already stated that I cannot rely on Mr James’s evidence.  It might be possible to infer that an original had been executed, but I do not think that this would be justified.  I do not see why I should infer the due execution of another document in the absence of any evidence from attesting witnesses, in circumstances where the Applicant himself cannot recall signing the Disputed Charge.  

15.	It may be that the Respondents are still able to enforce the Disputed Charge in court proceedings, notwithstanding the removal of the restriction.  It might be argued that it is a contract to create a charge, or an equitable charge, or something similar.  However, the onus must be on them to take steps to enforce it.  This will allow the Applicant to deploy the arguments that were to a limited extent deployed before me, including misrepresentation, non est factum, the existence of various regulatory breaches, and  unconscionable bargain.  

16.	I therefore reject the Respondents’ case on the Disputed Charge, and I shall direct the Chief Land Registrar to cancel the unilateral notice.  I shall also make a direction under Rule 40(3)(b) to prevent any further applications for a restriction being made.  

17.	As regards costs, in view of the outcome I consider that the Respondents should pay the Applicant’s costs.  I direct the Applicant to file a Costs Statement within 7 days.  The Respondent may file and serve submissions on costs within 7 days of receiving the Costs Statement.  Any response by the Applicant is to be filed and served 7 days thereafter.  I shall then consider the matter further.  

Dated this 29th day of July 2015

BY ORDER OF THE TRIBUNAL