Thomas v Clydesdale Bank Plc (t/a Yorkshire Bank)

For an application to set aside a judgment entered in a party’s absence under CPR 39.3, the applicant must satisfy all three requirements in CPR 39.3(5). In deciding whether there is a reasonable prospect of success, actual occupation is a fact-sensitive concept. Physical presence may include the presence of builders or agents acting on the claimant’s behalf, particularly where the property is undergoing renovation. The relevant degree of permanence and continuity must be assessed in light of the property’s condition and intended use. Under Schedule 3 paragraph 2(c)(i) to the Land Registration Act 2002, a reasonably careful inspection concerns visible signs of occupation and does not automatically require enquiries or special knowledge. Under paragraph 2(c)(ii), actual knowledge may be knowledge of the facts giving rise to an equitable interest, even where the legal character of that interest has not been recognised.

The Bank obtained an order for possession of a property after Ms Thomas failed to attend the trial. She applied under CPR 39.3(3) to set aside that order, relying on illness as her reason for non-attendance. The County Court found that she had acted promptly and had a good reason for her absence, but dismissed the application because she had not shown a reasonable prospect of success at trial.

Ms Thomas appealed against that decision. The appeal concerned whether she had a reasonable prospect of establishing that an unregistered beneficial interest arising from a common intention constructive trust overrode the Bank’s registered mortgage under sections 29(1) and 29(2) and Schedule 3 paragraph 2 of the Land Registration Act 2002. The issues were actual occupation, whether occupation would have been obvious on a reasonably careful inspection, and whether the Bank had actual knowledge of the interest.

The appeal was allowed. Ms Thomas had a reasonable prospect of establishing the matters required to show that her interest overrode the Bank’s mortgage.

1. Actual occupation. The question was fact-sensitive and had to be assessed in light of the property’s condition and intended residential use. The presence of builders and an interior design and project-management company could amount to occupation on behalf of both intended occupiers. Ms Thomas’s regular, almost daily attendance, her involvement in the works, and the intention that she should live at the property after renovation provided a reasonable prospect of establishing actual occupation. The approach in Lloyds Bank Plc v Rosset [1989] 1 Ch 350 and the relevant factors identified in Link Lending Limited v Susan Bustard [2010] EWCA Civ 424 supported that conclusion.
2. Reasonably careful inspection. The visible signs of occupation, including building works, interior design activity, project management and Ms Thomas’s visits, provided a reasonable prospect that occupation would have been obvious on a reasonably careful inspection. The phrase was objective. It did not require the inspector to possess particular knowledge or, without more, to make reasonable enquiries. Enquiries might nevertheless be necessary to establish matters such as permanence, continuity and intention when deciding whether actual occupation existed.
3. Actual knowledge. Under Schedule 3 paragraph 2(c)(ii), the Bank’s actual knowledge could consist of knowledge of the facts giving rise to the alleged equitable interest. It was not necessary that the Bank should have recognised the legal interest or received a document expressly recording it. The credit memorandum referred to Ms Thomas as Mr Burtenshaw’s partner, her proposed contribution of £100,000 and the intention to create a family home. Those matters gave her a reasonable prospect of proving the Bank’s actual knowledge.

The County Court judge had applied an erroneous approach to each issue. The application to set aside the possession order therefore satisfied CPR 39.3(5)(c), and the appeal was allowed.

• High Court (Queen’s Bench Division): Ramsey J allowed the appeal against the County Court’s refusal of the CPR 39.3(3) application.
• Leeds County Court: His Honour Judge Langan QC dismissed Ms Thomas’s application to set aside the possession order made by His Honour Judge Kaye QC.