Halifax Building Society v Khan (aka Daniel James) & Ors

Permission to appeal should be refused where the proposed appeal has no real prospect of success. A lender whose money is traced into payment of a property’s purchase price may be subrogated to the unpaid vendor’s lien, but only to the amount actually so applied. A person who provides none of the purchase money, has no legal estate, and participated in the fraud obtaining the money cannot claim to be a bona fide purchaser for value. The court will not extend litigation by granting permission merely to postpone enforcement of a judgment that is not realistically challengeable.

Halifax obtained orders in the Chancery Division concerning two flats involved in mortgage fraud proceedings. The judge held that Halifax’s advance had been traced into payments to the real vendors and granted Halifax equitable charges and possession-related remedies, including orders under Law of Property Act 1925, section 90.

Richard Khan, also known as Daniel James, applied for permission to appeal and for a stay of execution. He argued that he had been denied a proper opportunity to participate, that the judge had erred factually and legally, and that he was a bona fide purchaser for value. The central question was whether the proposed appeals had any real prospect of success.

1. Applications refused. Permission to appeal and a further stay of execution were refused. The proposed appeals had no real prospect of success.
2. The applicant had attended the first day of a six-day trial and sought an adjournment and transfer to London. That request was refused, after which he chose not to participate further. He therefore could not complain that the judge reached conclusions without hearing further evidence or argument from him.
3. The judge was entitled to find that Halifax’s money had been traced through the solicitors to the real vendors. The principles governing subrogation to a vendor’s lien, derived from Boscawen v Bajwa [1996] 1 WLR 328 and Banque Financiere de la Cite v Park (Battersea) Limited [1999] AC 221, were not open to doubt. Halifax’s subrogated claim was limited to the sums actually used to pay the vendors.
4. The applicant could not rely on the bona fide purchaser doctrine in Pilcher v Rawlins (1872) LR Ch App 259. He had never acquired the legal estate, had provided none of his own money, and had been found to be a party to the mortgage fraud. He therefore could not be treated as a bona fide purchaser for value.
5. There was no basis for extending the litigation or maintaining a stay merely to delay possession. Separate applications purportedly made on behalf of other defendants were also refused because those persons had not addressed the court and the applicant was not prepared to make submissions for them.

• Court of Appeal (Civil Division): applications for permission to appeal and for a stay of execution from orders made on 17 January 2001 were refused.
• Chancery Division: His Honour Judge Howarth made orders granting Halifax equitable charges, possession-related relief and sale remedies in respect of the flats.