PROPERTY CHAMBER
FIRST – TIER TRIBUNAL
LAND REGISTRATION DIVISION
IN THE MATTER OF A REFERENCE FROM HM LAND REGISTRY
LAND REGISTRATION ACT 2002
REF 2012/0953/0955 and REC 2013/0049
BETWEEN
(1)	MARGARET ANN MORRIS
(2)	BRENDA REDPATH
APPLICANTS
and
(1)	GODIVA MORTGAGES LIMITED
(2)	BERNICE SMITH
RESPONDENTS

Property Address: Toad Hall, Waren Mill, Belford NE70 7EE

Title Number: ND84147

Before: Mr Simon Brilliant sitting as Judge of the Property Chamber of the First-tier Tribunal

Sitting at: Newcastle Social Security and Child Support Tribunal, Manorview House, Kings Manor, Newcastle-Upon-Tyne NE1 6PA (first two days) and North Shields Immigration and Asylum Tribunal, Kings Court, Royal Quays, Earl Gray Way, North Shields NE29 6AR (other days) 

On: 7 and 8 January, 27 March and 13 and 14 October 2015

Applicants’ Representation:		In person. 

First Respondent’s Representation:	Mr D Mitchell of counsel.

Second Respondent’s Representation:	Mr H Derbyshire of counsel (first two days).

DECISION

Sale and lease back of their home by the applicants to the second respondent – the applicants allege that the transfer and the lease are a nullity as they were forged on behalf of the second respondent - alternatively, the applicants allege that the transfer and the lease should be set aside as they were induced to enter into them by a fraudulent representation made on behalf of the second respondent.

Hayer v Hayer [2012] EWCA Civ 257, Scott v Southern Pacific Mortgages Ltd [2015] AC 385. 

Introduction

1.	I have found this a troubling case. It concerns the ownership of Toad Hall, Waren Mill, Belford NE70 7EE (“Toad Hall”). This is a four bedroomed detached timber framed house of character. Belford is a village in rural Northumberland situated about halfway between Alnwick and Berwick-upon-Tweed, a few miles inland from the east coast and just off the Great North Road.

2.	On 13 July 2001 the applicants purchased Toad Hall as their home. The purchase price was £220,000. On 22 August 2001 they were registered as the freehold proprietors of Toad Hall at Land Registry under title number ND84147. 

3.	The applicants have lived at Toad Hall ever since they purchased it and are still in occupation of the house today. However, the applicants are no longer the registered proprietors of Toad Hall. On 10 February 2009, Mrs Smith, the second respondent, was registered as the proprietor in their place. Mrs Smith does not occupy and has never occupied Toad Hall. She lives with her husband, Mr Ben Smith (“Ben”) and her son, Mr Simon Smith (“Simon”), in Middridge, County Durham, some 80 miles to the south of Belford.

4.	On 6 February 2009, Godiva Mortgages Ltd (“Godiva”) advanced £194,965 to Mrs Smith, which was secured by a first legal charge over Toad Hall (“the Godiva charge”).   Godiva was registered as the proprietor of the Godiva charge on 10 February 2009.  As at the date of the hearing on 13 October 2015 the amount required to redeem the Godiva charge stood at £200,891 with interest accruing at £26 per day.

Mrs Smith’s case in outline

5.	Mrs Smith’s explanation of her ownership of Toad Hall is set out in outline in paragraphs 6 – 15 below.

6.	Ben was employed from 2005 by the mortgage brokers Crown Financial Solutions Ltd (“Crown”).  He became acquainted with Mrs Morris because he arranged a series of loans through Crown to the applicants which were secured on Toad Hall.

7.	In 2008 Ben was a partner in a firm trading under the style “DB Housing Solutions” (“DBHS”). DBHS’s business was to arrange sales and leasebacks of houses for its clients.

8.	In 2008 Mrs Morris needed to raise £10,000. She contacted DBHS. It was not possible for DBHS to arrange a further loan for her. Instead the firm offered a sale and leaseback arrangement which Mrs Morris accepted on behalf of the applicants. Toad Hall was valued at £300,000 which was expressed to be the purchase price. But the applicants would receive only £100,000 as they agreed that £200,000 would be paid out of the net proceeds of sale to a third party at the direction of DBHS. The third party was PJT Finance Ltd. 

9.	The £100,000 payable to the applicants would comprise £90,276 to redeem the existing charge in favour of Abbey National plc (“the Abbey National charge”) and £9,724 cash paid to Mr Morris (in effect the £10,000 she wished to raise). 

10.	Both sides then instructed solicitors. Berkson Wallace, a firm practising in Ellesmere Port, acted for the applicants on their sale.  Gillies, a firm practising in Brighton, acted for Mrs Smith on her purchase. 

12.	Mrs Smith used the £194,965 borrowed from Godiva in order to assist DBHS with the purchase costs. In the usual way, Gillies was also instructed to act for Godiva. 

13.	On 6 February 2009 the applicants transferred Toad Hall to Mrs Smith, as the nominee of DBHS, by a transfer in Land Registry form TR1 (“the 2009 transfer”). Both the applicants signed the 2009 transfer.

14.	On 9 February 2009 Mrs Smith granted the applicants a two year assured shorthold tenancy of Toad Hall at the rent of £210 per month (“the 2009 lease”). Both the applicants signed the 2009 lease. Following the expiry of the two years, DBHS sought to negotiate an increased rent and at that stage relations between the parties broke down. 

15.	On 18 October 2011 Mrs Smith gave the applicants notice under section 21 of the Housing Act 1988 requiring possession of Toad Hall on 8 January 2012. For the last four years the applicants have continued in occupation of Toad Hall as trespassers and are not making any payments for their occupation. Mrs Smith wants possession of Toad Hall, although this is not a remedy available to her in these proceedings. 

The applicants’ case in outline

16.	The applicants deny that this is what has happened. Their case is as follows. They were never offered, and would never have accepted, a sale and leaseback arrangement. Their signatures on both the 2009 transfer and the 2009 lease have been forged. 

17.	Mrs Morris accepts that she was in discussion with Ben in late 2008 and early 2009. But she says that she was simply negotiating another loan secured on Toad Hall as she had done in the past. The £9,724 cash received by her was the new loan and not the proceeds of sale.

18.	The applicants have an alternative case. They say that if, contrary to their primary case, they are found to have signed the 2009 transfer and the 2009 lease, they were tricked by Ben into believing that the documents they were signing were connected to a remortgage and did not involve a sale and leaseback. 

Sales and leasebacks

19.	The practice of sales and leasebacks of houses was at one time prevalent, particularly in the North East of England. As Lord Collins of Mapesbury explained in Scott v Southern Pacific Mortgages Ltd [2015] AC 385, they were described by the Office of Fair Trading in 2008 as a relative new type of property transaction whereby firms bought homes from individuals, usually at a discount, and allowed the former home owners to stay on in the property as tenants.

20.	The deals were often sold to home owners in financial difficulties and the firms selling them often told the home owners that they would be able to stay in their homes for years, when in fact the tenancies were rarely granted for more than six or twelve months. Many firms financed the purchase of the properties through secured borrowing, and former owners were being evicted following proceedings for possession by mortgage lenders after purchasers defaulted on their loans.

21.	In 2009 sale and leaseback transactions became a regulated activity under section 19 of the Financial Services and Markets Act 2000, and the market for them has now all but disappeared.

22.	It is no part of the applicants’ case that they were promised a tenancy of Toad Hall for life or for many years but were only given a much shorter tenancy. As I have said, the applicants deny ever being offered a tenancy at all.

23.	Unlike the litigation giving rise to the test case of Scott v Southern Pacific Mortgages Ltd, these proceedings did not arise because Mrs Smith defaulted in repaying the Godiva charge. Mrs Smith has only recently fallen into arrears. The only reason she has done so is that she is no longer in receipt of an income stream from the applicants. 

The original application and the two references

24.	On 21 February 2012, the applicants’ then solicitors applied to Land Registry to alter the register of Toad Hall in two respects (“the original application”). 

25.	First, the applicants applied to be restored as the proprietors of Toad Hall in place of Mrs Smith. This application was made under paragraph 5(a) of schedule 4 to the Land Registration Act 2002. This provides that the registrar may alter the register for the purpose of correcting a mistake. If the applicants’ signatures on the 2009 transfer were forged the document was a nullity and so the registration of Mrs Smith as the proprietor would have been a mistake.

26.	Secondly, the applicants applied to restrict the amount of the Godiva charge to £100,000. As explained in paragraph 9 above, this is the extent of the benefit received by the applicants as a result of the moneys advanced by Godiva and secured by its charge. It was accepted that Godiva would have subrogated rights to that sum in any event.

27.	On 28 February 2012 Godiva objected to the original application. On 7 March 2012 Mrs Smith objected to the original application. On 5 October 2012 these disputes were referred separately by Land Registry to the adjudicator under section 73(7) of the Land Registration Act 2002. They became references 2012/0953 and 2012/0955 respectively. All three parties were directed to serve statements of case. Since 1 July 2013 the adjudicator’s jurisdiction has been exercised by the tribunal. Both references have been case managed and heard together.

The setting aside application

28.	In paragraph 4 of their statement of case dated 30 November 2012 the applicants say:

A copy of the Transfer has been obtained from the Land Registry … The Applicants say they did not execute that Transfer. If they did execute it, they were led to believe that they had signed something else other than a Transfer. 

29.	If the applicants’ signatures were not forged then the 2009 transfer is not a nullity. There would be no mistake in the register to be corrected unless and until the applicants succeeded in setting aside the 2009 transfer on the grounds that they had been induced to sign it by Ben’s alleged fraud. 

30.	At a telephone case management conference on 29 October 2013 I ordered that, if the applicants wished to pursue this alternative case, they must apply directly to the tribunal under section 108(2) of the Land Registration Act 2002 to set aside the 2009 transfer. This provides that the tribunal may make any order which the High Court could make for setting aside certain documents, including one such as the 2009 transfer. 

31.	On 12 December 2013 the applicants’ then solicitors made an application to the tribunal to set aside the 2009 transfer and the Godiva charge (“the setting aside application”). 

32.	On 31 December 2013 the tribunal directed that the parties’ respective statements of case in the two references should stand as their statements of case in the setting aside application. Subsequently both references and the setting aside application have been case managed and heard together.

The evidence

33.	Prior to the hearing witness statements had been served by both the applicants, by Ms Heffernan who is a financial crime manager employed by Godiva, and by each of Mrs Smith, Ben and Simon. 

34.	A considerable number of documents have been disclosed. In particular, the purchase file of Berkson Wallace. Mrs Smith disclosed during the course of these proceedings the transcript of a secretly recorded conversation between Mrs Morris, Ben and Mr Lowerson, who is a business associate of Ben (“the 2011 transcript”). This conversation took place on 18 July 2011 in a car parked in the car park of Morpeth Golf Club. 

The issues which I have to decide

35.	There are two issues for me to decide:

(1)	Did the applicants sign the 2009 transfer and/or the 2009 lease?

(2)	If yes, they were tricked by Ben into believing that the documents they were signing were connected to a remortgage and did not involve a sale and leaseback?

The issues which I do not have to decide

36.	There are two issues which I shall not be deciding:

(1)	Is any part of the transaction between the parties susceptible to challenge because Mrs Morris misled Miss Redpath about its nature?

(2)	Is any part of the transaction between the parties liable to be set aside in equity as being an unconscionable transaction? The components of an unconscionable transaction are that (1) the party seeking to set aside the transaction is vulnerable, (2) the terms of the transaction shock the conscience of the court and (3) the other party (or his agent) knowingly took advantage of the first party’s vulnerability (see Snell’s Equity 33rd edition paragraphs 8-040 to 8-045). 

37.	The reasons why I shall not be deciding these issues are set out in the next part of the decision.
 
The hearing

38.	The case was listed for hearing in Newcastle on 7 and 8 January 2015. The applicants were unrepresented at the hearing. Mr Derbyshire appeared for Mrs Smith and Mr Mitchell appeared for Godiva. The principal factual dispute was between the applicants and Mrs Smith and her witnesses. Godiva was an innocent party brought into the dispute without any direct knowledge of the critical events. 

39.	The 2011 transcript suggests a potential conflict of interest between the applicants. Some remarks made by Mrs Morris suggest that whilst she was fully aware of the sale and leaseback arrangement, she misled Miss Redpath into believing that Toad Hall was simply being remortgaged as had happened in the past. Mrs Morris denies that she did mislead Miss Redpath or that the 2011 transcript should be read in this way. 

40.	Nevertheless, on the first morning of the hearing I raised with all the parties whether it might be open to Miss Redpath to take this point. Not only did both counsel object as no case had ever been pleaded along these lines, but Miss Redpath was adamant that she had not been tricked by Mrs Morris, that she was not being put under any pressure by Mrs Morris and that she did not wish to take the point.  

41.	Accordingly, it is not open to me to consider whether any part of the transaction between the parties is susceptible to challenge because Mrs Morris misled Miss Redpath about its nature.

42.	The first morning was spent on case management, housekeeping and a neutral review led by Mr Mitchell of the trial bundles which contained over 1,100 pages. Mrs Morris gave oral evidence from 2.40pm until 4.50pm on the afternoon of the first day. 

43.	On the second day Mrs Morris gave oral evidence from 10.05am to 11.25am. Miss Redpath then started her oral evidence. After she had been cross-examined by Mr Derbyshire for an hour and 20 minutes it became apparent that Mrs Smith and Ben wished to change their account in certain material respects from what had been set out in their witness statements. It was agreed that Mr Derbyshire’s cross-examination of Miss Redpath would resume only after Mrs Smith had served further witness statements correcting the current ones.  Mr Mitchell then cross-examined Miss Redpath and called Ms Heffernan. 

44.	The hearing was adjourned to be relisted for a further three days. Provision was made for Dr Audrey Giles to provide a joint expert’s report on the authenticity of the applicants’ signatures on certain documents, including the 2009 transfer and the 2009 lease. Her report is dated 26 January 2015. Further witness statements were duly served by Mrs Smith and Ben. A full written transcript of the first two days of the hearing was provided to all the parties and to myself.

45.	The case was relisted for 27, 30 and 31 March 2015 in North Shields. Unfortunately, Mrs Smith’s solicitors were not notified of the listing so the hearing was adjourned on the first morning. By this time that Ben was undergoing treatment for prostate cancer so the case was relisted for 13, 14 and 15 October 2015 in the hope that he would be well enough to attend to give oral evidence.

46.	Although notice of the new hearing date was given to all parties on 9 June 2015, Mrs Smith and her witnesses did not attend at the resumed hearing and nor was she represented.  Six days before the hearing Mrs Smith’s solicitors wrote to the tribunal simply saying they were no longer instructed. At 16.09pm on the day before the hearing Simon emailed the tribunal to say that Ben’s health had not been good over the weekend. No medical evidence was produced and on that basis an adjournment was refused.

47.	I took the view that, regardless of Ben’s position, there was no good reason why Mrs Smith or Simon could not have attended. Whilst it may seem harsh, I am of the view that the decision not to attend was a tactical one. So Mr Derbyshire never completed his cross-examination of Miss Redpath. Mr Mitchell briefly cross-examined Miss Redpath on the morning of 13 October. The applicants then spent the day closing their case. 

48.	On the following morning Mr Mitchell closed Godiva’s case and I raised with both the applicants and Mr Mitchell whether the sale and leaseback might have amounted to an unconscionable transaction.  Subsequently all three parties were directed to send in written submissions as to whether it was open to the tribunal in the light of the evidence adduced to include within the setting aside application a case that either the 2009 transfer or the Godiva charge should be set aside on the grounds that the 2009 transfer was an unconscionable transaction. The parties were also asked to say what further directions should be given as to disclosure, witness statements and oral evidence if the tribunal were to consider this argument.   

49.	All parties sent in written submissions. I am grateful to Mr Derbyshire for drawing my attention to the Court of Appeal’s decision in Hayer v Hayer [2012] EWCA Civ 257. In that case it was held that a judge should not have permitted a late amendment to the defendant’s pleaded case on the last day of the trial arising out of the judge’s own suggestion that a trust deed might have been signed as a result of undue influence, the defendant’s pleaded case being of forgery.

50.	In any event the applicants wrote to the tribunal on 20 November 2015 that, having sought legal advice, they did not wish to advance a case on the grounds that the 2009 transfer was an unconscionable transaction. Accordingly, I am only concerned with the two issues set out in paragraph 35 above.

The applicants’ evidence

51.	When the applicants purchased Toad Hall as their home in 2001, Mrs Morris was then aged 58 and Miss Redpath was then aged 46. Mrs Morris had previously been married and had helped her then husband run a pub. I find her to be a strong, determined and worldly-wise lady. Miss Redpath is the better educated of the applicants, has led a more sheltered life and has a more reserved nature. She once had a successful career in the City in specialist recruitment. She bravely told me that following a random unprovoked attack she developed agoraphobia and suffered a breakdown. I am satisfied that she leaves much of the decision making in their household to Mrs Morris.

52.	When the applicants bought Toad Hall in 2001 it was unencumbered. In 2003 they incurred expenditure on landscaping the garden and building a conservatory. Their combined income is modest and the ownership of a substantial house brings with it financial obligations. This is particularly so as the house is timber framed and is exposed to the North East coastal climate. It is understandable that over the years the applicants have needed to raise amounts of capital from time to time to pay for improvements and repairs, and items such as new boiler or a new car. It is not suggested they lead an extravagant lifestyle inappropriate to their means.

53.	As I have said, the applicants raised money by a series of loans secured on Toad Hall. These loans were arranged for them by Ben who was employed by Crown. The last of these loans was provided by Abbey National plc on 23 August 2007 and was secured by the Abbey National charge. 

54.	I shall summarise Mrs Morris’ evidence in paragraphs 55 – 59 below.

55.	In late 2008 Mrs Morris received an unsolicited telephone call from Ms Sarah Smith, who had worked for Ben at Crown, explaining that she could offer a better mortgage deal than the one secured by the Abbey National charge. Ms Smith said the business she now worked for was not Crown but was DBHS. 

56.	Following this conversation Ben came to Toad Hall and offered to remortgage Toad Hall for the applicants. Mrs Morris and Ben discussed the offer and the new payment structure. Subsequently, forms were produced to sign which the applicants understood to be in connection with the remortgage. On one occasion Mrs Smith came into the house but she never contributed to the conversation. There was never a discussion with Simon. Miss Redpath never took part in the discussions.

57.	Mrs Morris received £9,724 into her bank account. She believed this was the new loan and not the proceeds of sale. The new monthly payment was £210. Mrs Morris believed this was the mortgage repayment. The applicants were able to pay this. The new arrangement went smoothly until someone from DBHS telephoned Ms Morris on 10 June 2011 to say that Ben and Mr Lowerson wished to meet her. This meeting, which took place on 18 July 2011, is the one referred to in paragraph 34 above.

58.	At the meeting Mrs Morris was told that the monthly repayments would have to increase from £210 to £400 per month. She said she could not afford this. Ben said that Mrs Smith “is not going to be very happy about this.” Mrs Morris was confused and asked what this had to do with Mrs Smith. Ben replied that it was because she was the owner of the house. Mrs Morris could not understand what he meant. She felt physically sick and did not know what to say. It was only after her solicitors had received documents from Land Registry that she saw the applicants no longer owned Toad Hall. 

59.	Miss Redpath’s evidence is that she did not take part in any of the discussions. At no time did she think that what she was signing was anything other than a remortgage. 

The evidence of Mrs Smith and her witnesses

60.	I shall summarise the evidence of Mrs Smith and her witnesses in paragraphs 61 – 71 below.

61.	In October 2008 Mrs Morris contacted DBHS looking for a cash advance of £10,000 to be secured on Toad Hall. DBHS was unable to arrange this because of the credit crunch and the level of Mrs Morris’ income. Instead an offer was made to buy Toad Hall for £101,000. This would enable the applicants to redeem the Abbey National charge and receive a cash sum of £10,000. 

62.	DBHS wrote to the applicants confirming an appointment with Simon at Toad Hall on 7 November 2008. Simon duly met Mrs Morris at Toad Hall on 7 November 2008 when he showed her a written illustration of the proposal. According to the illustration Toad Hall would be bought for £101,000. The applicants would be granted a two year tenancy at a discounted rent of £210 per month. Simon told Mrs Morris that the rent would be increased after two years. Miss Redpath kept coming in and out of the room but did not stay to listen to the explanation.

63.	At the meeting the applicants handed their passports and proof of identity to Simon so that he could forward them to Berkson Wallace. This firm had been chosen by DBHS to represent the applicants in the transaction.

64.	On 6 January 2009 DBHS wrote to the applicants to inform them that the purchaser of Toad Hall would be Mrs Smith. It stated that the anticipated valuation was £450,000 which would be the contract price if confirmed by a surveyor at a forthcoming valuation inspection. The surveyor carried out an inspection but only valued Toad Hall at £300,000. This became the contract price instead. 

65.	On 20 January 2009 DBHS wrote two letters to the applicants. One confirmed the lower valuation of £300,000. The second enclosed an irrevocable instruction to be signed by the applicants to Berkson Wallace to pay £200,000 out of the net proceeds of sale to PJT Finance Ltd.   This had the effect of reducing the price payable to the applicants to £100,000.   

66.	On 2 February 2009 Berkson Wallace wrote to the applicants enclosing the contract and form TR1 to be signed and returned. 

67.	On 3 February 2009 Godiva agreed to advance Mrs Smith £194,965 on an interest only basis repayable after 10 years. The monthly interest repayment was fixed at £934 until 31 March 2012.

68.	Shortly after 2 February 2009 Mrs Smith and Ben went to Toad Hall to meet Mrs Morris. Miss Redpath was not present at the meeting as she was ill in bed. Mrs Smith was introduced as the new owner and landlord. Mrs Morris said she was pleased that Mrs Smith was going to be her new landlord. Mrs Morris signed the from TR1 in the presence of Ben who witnessed her signature. Mrs Morris took the form TR1 to Miss Redpath to be signed. Ben signed as a witness to that signature even though Miss Redpath had not signed in his presence.

69.	Contracts were exchanged and the transfer was completed on 6 February 2009. From the net proceeds of sale £200,000 was paid to PJT Finance Ltd, £90,276 was used to redeem the Abbey National charge and the balance of £9,724 was remitted to Mrs Morris’ bank account. 

70.	On 24 May 2011 either Ben or Mr Lowerson spoke to Mrs Morris to discuss the terms of a new tenancy of Toad Hall. As she was about to go into hospital it was agreed to meet later in the year. The meeting took place in the car park at Morpeth Golf Club on 18 July 2011 and is recorded in the 2011 transcript. Mrs Morris agreed to pay an increased rent of £310 for twelve months.

71.	The applicants paid rent of £210 per month until 6 July 2011 and then made only one final payment of £310. Since then Mrs Smith has had to meet the monthly instalments due under the Godiva charge without receiving any payment from the applicants although they remain in occupation of Toad Hall.

My findings

72.	I regret to say that I am unable to accept the evidence of the applicants. They have come nowhere near showing that any one of the signatures challenged was forged or that they were misled by Ben as to the nature of the transaction they were entering into. 

73.	I say this for four reasons. First, because of the inherent improbability of the applicants’ case. Secondly, because of the sheer volume of contemporaneous documents - many of which are unchallenged and come from the files of Berkson Wallace - which undermine the applicants’ case. Thirdly, because of the expert evidence of Dr Giles.  Fourthly, because of the contents of the 2011 transcript.

The 2011 transcript

74.	In my judgment the applicants’ case is undermined by the 2011 transcript. In particular:

	Ben:		Because it’s actually, it’s like, it’s like, my wife owns that house.

	Maggie:	Yes I know.

75.	This is a very strange response if, as Mrs Morris asserts in her evidence, she could not understand what Ben meant when he said his wife owned Toad Hall and she felt physically sick and did not know what to say. This evidence is contained in paragraph 31 of her witness statement dated 10 December 2013. The transcript was not disclosed until after that date. The tape was played in open court and Mrs Morris’ response was a factual not a shocked one.

76.	The transcript suggests that Mrs Morris already knew that she was paying rent. Near the beginning of the conversation Mrs Morris said:

	… So, but from that, I understand that obviously I’m lucky to be able to still be in my house and pay that sort of money because, oh I’ll have to open the window a bit, because you know I know people are paying a lot more rent and everything.

77.	It was put to Mrs Morris in cross-examination that she was the first person in the conversation to mention rent. Her answer was as follows:

	I mentioned rent because where I live all the property, or virtually all of it in surrounding areas, people are paying rent.

78.	I find this answer wholly unconvincing. Mrs Morris accepts, in a tone of resignation, she no longer owns Toad Hall a little later in the conversation: 

Ben:	I mean, because, I mean we’ll have to get this sorted out and we will have to sort the rent out because…

Maggie	I know.

Ben:		You know what I mean?

Maggie:	I mean if I could, you see she [Miss Redpath] doesn’t realise that obviously we’ve lost the house.

The contemporaneous documents

79.	A number of contemporaneous documents have been disclosed which are entirely consistent with Mrs Smith’s case.	

80.	On 5 November 2008 Ms Sarah Smith wrote to the applicants from DBHS confirming an appointment with Simon on 7 November 2008. The letter is headed “Appointment regarding Sale and Rent Back”. The letter says:

The sale of the property will be arranged to a buyer who will agree to grant you a Tenancy Agreement.

81.	Mrs Smith has disclosed the two paged written illustration for the applicants prepared by DBHS dated 7 November 2008. These were the initial proposals and were subsequently modified slightly.  Toad Hall is valued at £350,000. The price offered is only £101,000. The tenancy offered is for two years at £210 per month. This is at a discount of £590 per month from the open market rent. After two years the rent will rise to £800 per month if no discount is applied.

82.	The illustration is very candid. It does not disguise the hard bargain which is being driven. DBHS is proposing to obtain the benefit of a £249,000 reduction in the perceived value of Toad Hall in return for receiving £14,160.00 less in rent than it would otherwise obtain in the open market in the subsequent two year period.

83.	On 17 November 2008 the applicants signed an authority to Berkson Wallace to act on their behalf to sell Toad Hall. I am satisfied on the balance of probabilities that it is their signatures on the document.

84.	On 16 January 2009 Mr Richardson MRICS inspected Toad Hall to value it for Godiva. Mr Richardson spoke to Mrs Morris. He was unable to have access to the main bedroom where Miss Redpath was. 

85.	On 20 January 2009 Berkson Wallace received the authority to act signed by the applicants on 17 November 2008. On the same day the firm wrote to the applicants at Toad Hall. They enclosed their Terms of Conditions of Business letter and an Overriding Interest Questionnaire, and asked them to sign and return these documents.

86.	The document confirming the acceptance of Berkson Wallace’s Terms of Conditions of Business was duly signed by the applicants on 26 January 2009. Mrs Morris accepted in her oral evidence that she had signed this document although she denied that it had been sent to her by Berkson Wallace. In cross-examination by Mr Derbyshire Miss Redpath denied it was her signature, but her account That could be attached to anything, though, surely to God was very evasive and defensive and I do not accept it.

87.	On 20 January 2009 DBHS wrote to the applicants enclosing an irrevocable instruction to pay £200,000 out of the net proceeds of sale to PJT Finance Ltd. This document was received by Berkson Wallace on 6 February 2009, the date of completion.  It bears the signatures of both applicants. 

88.	Dr Giles has examined a copy this document. Her findings as to whether Mrs Morris signed it are inconclusive. There are a number of reasons for this. A copy does not show all the detail of the original signatures. Mrs Morris provided only one original signature for comparison and analysis. Mrs Morris’ signature is simple in construction and variable, making it vulnerable to simulation and difficult to authenticate.

89.	On the other hand, Dr Giles concludes that there is strong support for the view that Miss Redpath’s signature on this document is genuine. The evidence is not conclusive but she considers it unlikely that it is a simulation. Miss Redpath’s signature is sufficiently fluent and complex to provide a significant challenge to anyone attempting a stimulation.

90.	I am satisfied on the totality of the evidence and on the balance of probabilities that both the applicants signed this document. Miss Redpath may not have appreciated its significance, but if she had read the document it would have been apparent that Toad Hall was to be sold.

91.	Mrs Morris accepted in her oral evidence that she had signed a number of other documents, including a declaration of solvency dated 17 November 2008 in which she said she wished to transfer her legal interest in Toad Hall, a certificate to be attached to a bankruptcy search dated 26 January 2009, and the Overriding Interest Questionnaire (referred to in paragraph 85 above) also dated 26 January 2009.

92.	On 30 January 2009 Berkson Wallace returned Mrs Morris’ passport and a Halifax statement to Miss Redpath to Toad Hall by special delivery.

93.	On 6 February 2009 Berkson Wallace wrote to the applicants at Toad Hall confirming completion of the transaction.

94.	Dr Giles’ findings as to whether Mrs Morris signed the 2009 transfer and the 2009 lease are again inconclusive, for the reasons already given. At the same time Dr Giles concludes that there is strong support for the view that Miss Redpath’s signature on the 2009 transfer and the 2009 lease are genuine.

95.	Berkson Wallace’s file contains a handwritten note on the financial statement showing the balance of £9,724 due to the applicants. The note is dated 6 February 2009. It was made by Mr McCallum, then working at the firm, and says that he had spoken to Mrs Morris and she was very happy with the service provided by the firm.

96.	Mr Mitchell makes the good point in his skeleton argument that, in contrast to all the documents relating to the sale and leaseback, there is not a single document relating to a remortgage. 

97.	The applicants made the point that throughout the conveyancing file “Waren” has been misspelt “Warren” and, as local people, they would not have let this pass unnoticed. But some of the documents which contain the misspelling are documents which Mrs Morris has admitted she signed. 

Conclusion

 98.	With the benefit of hindsight it can be seen that Mrs Morris allowed herself to enter, on the applicants’ behalf, an agreement which turned out to be unwise. But it is not the function of a court or tribunal to relieve a party from the consequences of his or her imprudence or poor advice. I am satisfied that when she appreciated the precarious nature of her situation in 2011 Mrs Morris panicked and thought she could best avoid the consequences of her earlier decision by claiming the critical documents were forged or that she had been tricked as to their nature. In doing this she has only dug a hole for herself and Miss Redpath out of which they cannot now escape.

99.	I will direct the registrar to cancel the original application.  I will make no order on the setting aside application. 

100.	My preliminary view is that costs must follow the event and be paid by the applicants.  If the applicants wish to argue to the contrary, they should send their representations in writing to the respondents’ solicitors and the tribunal within 14 days. If the applicants do send in any representations, I will then make a decision on any liability as to costs and give further directions.

101.	If the applicants do not send in any representations, any respondent wishing to have the benefit of an order for costs must within 14 days thereafter send to the applicants and to the tribunal a summary of the costs claimed since 5 October 2012. I will then give further directions.

Dated this 11th day of January 2016

BY ORDER OF THE JUDGE OF THE PROPERTY CHAMBER OF THE FIRST-TIER TRIBUNAL