The Royal Oak Property Company Ltd v Iktilat & Anor

A mortgagor’s equity of redemption is a beneficial interest in land capable of being charged under section 2 of the Charging Orders Act 1979. The existence of an equitable mortgage does not deprive the mortgagor of that interest. A court may order sale under CPR 73.10 where the judgment debt will not otherwise be paid, but the remedy is extreme, particularly where the property is the debtor’s home. A pending application to set aside the judgment may justify staying the sale order. The court should balance the amount outstanding, available equity, the debtor’s occupation and the need to enforce the judgment, and may direct sequential sales of properties.

The claimant sought orders for sale of two properties registered in the name of the first defendant to enforce final charging orders. The first defendant contended that he had transferred the beneficial ownership to the second defendant under deeds of trust and therefore had no interest capable of being charged under section 2 of the Charging Orders Act 1979.

The court examined the underlying loan arrangement, the deeds of trust, later transfer documents, mortgages and related evidence. It also considered the effect of a pending application to set aside the judgment and a restraint order made under the Proceeds of Crime Act 2002. The central issues were whether the first defendant retained a beneficial interest and whether sale should be ordered under CPR 73.10.

1. Beneficial interest. The deeds of trust formed part of an arrangement securing a loan. The first defendant retained a right to redeem the properties if the money owing was repaid. That right was an equity of redemption and therefore an interest in land. It was sufficient to bring him within section 2 of the Charging Orders Act 1979.
2. The arrangement had the essential character of an equitable mortgage. Its mortgage character meant that the mortgagor’s right to redeem could not be defeated merely because the deeds placed the beneficial interest in the second defendant while the indebtedness continued. The first defendant therefore retained a beneficial interest capable of being charged.
3. On the subsequent evidence, the court inferred that the first defendant had become the beneficial owner by mid-2004. The transfer forms, his later mortgage and the absence of reliable evidence supporting the defendants’ account outweighed the unpaid-loan assertions, proposed refinancing and stamp-duty evidence. The whole legal and beneficial ownership remained with the first defendant.
4. Under CPR 73.10, the discretion to order sale is separate from the discretion to make a charging order. Sale is an extreme remedy, especially where the property is the debtor’s home, but it may be justified where the debt will not be paid without it. The pending application to set aside the underlying judgment meant that sale should not proceed until that application and any appeal were finally determined, provided it was pursued with due diligence.
5. The court ordered sale of both properties, with All Souls Avenue to be sold first. Bevin Road was to be sold only if the net proceeds of the first sale, after prior charges, were insufficient to discharge the judgment debt. The sale order was stayed on the stated condition.