Centremodel Projects Ltd v Royal Bank of Scotland

A claimant cannot obtain a proprietary interest in sale proceeds of land through an agreement with a chargee where the landowner was not a party to, and did not consent to, that arrangement. A charge gives the chargee rights against the charged property but does not permit it unilaterally to enlarge or alter the charge. An appellate court should not substitute its own factual assessment for that of a trial judge who saw and heard the witnesses unless the findings are shown to be perverse or otherwise unsafe. The court dismissed the appeal because the pleaded proprietary claim could not succeed on the ownership and charge structure established at trial.

Centremodel carried out reclamation works on land owned by William Ainscough and Sons Ltd, which was subject to the Bank’s charge securing group indebtedness. Centremodel alleged that, at a meeting on 11 January 1995, the Bank agreed how future land-sale proceeds would be distributed between the Bank and Centremodel. It claimed a proprietary right or trust over proceeds later received by the Bank.

Judge Kershaw QC dismissed the claim after finding on the facts that an agreement had been reached. Centremodel appealed. The Bank challenged the factual findings by respondents’ notice and argued that the proprietary claim failed because the landowner was not a party to the alleged agreement.

1. Appeal dismissed. The Court of Appeal declined to disturb the trial judge’s finding that the January 1995 meeting resulted in an agreement. Although the finding appeared commercially surprising and the judge had not fully analysed the documentary history, he had seen and heard the witnesses and had unhesitatingly preferred Mr Ruttle’s evidence. The appellate court could not substitute its own view, and the finding was not shown to be perverse: [2000] EWCA Civ 206 [81]–[82].
2. The claim was proprietary rather than a claim for damages for breach of contract. The alleged agreement involved the Bank applying proceeds of sale of land owned by Ainscough Sons. Ainscough Sons was not alleged to have been a party to, or to have consented to, that agreement.
3. The Bank’s rights over the proceeds arose only through its charge. The Bank could not unilaterally enlarge or alter the terms of that charge without the chargee’s consent. Accordingly, neither the Bank nor Metals could create a proprietary right in Centremodel over proceeds of sale of Ainscough Sons’ land without Ainscough Sons’ knowledge or consent: [2000] EWCA Civ 206 [83]–[92].
4. The alternative argument that the Bank had agreed to pay Centremodel from its own money was not available because it had not been pleaded or pursued at trial. The court therefore upheld the dismissal of the proprietary claim.
5. Lord Justice Peter Gibson additionally observed that an equitable charge appropriates specific property to discharge an obligation without changing ownership, and therefore does not itself confer a proprietary right to the proceeds: [2000] EWCA Civ 206 [101].

The appeal was dismissed. The Bank was awarded half the costs of the appeal, including the respondents’ notice. Permission to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): Appeal from the order of Judge Kershaw QC, sitting as a High Court judge in the Manchester District Registry Mercantile List on 26 March 1999. Appeal dismissed: [2000] EWCA Civ 206.