Fraenkl -Rietti v Cheltenham & Gloucester Plc

A creditor does not require the court’s permission to apply for a charging order merely because six years have elapsed since judgment. The rules contain no implied six-year permission condition. An express requirement governing writs of execution cannot be extended by analogy to charging orders. The passage of time may be considered when deciding whether to make the order, but has no other procedural significance. Negative equity is likewise a matter for the court’s discretion. It does not create a legal bar or, without more, raise an important point of principle for a second appeal.

Cheltenham & Gloucester Plc obtained a money judgment and possession order against Irene Fraenkl-Rietti in 2001. After the mortgaged property was compulsorily purchased, an unpaid balance remained. In 2009 the creditor applied for a charging order over another house owned by the appellant, which was in negative equity.

District Judge Smith made a final charging order. His Honour Judge Holman dismissed the appellant’s appeal on 27 October 2010. The appellant then renewed her application for permission to pursue a second appeal, arguing that an application made more than six years after judgment required permission and that negative equity should prevent a final charging order. The central issue was whether either contention was properly arguable and raised a point warranting a second appeal.

Rimer LJ refused the renewed application for permission to pursue a second appeal.

1. Permission for a second appeal depended on satisfying one of the two hurdles in Civil Procedure Rules 1998 Part 52.13. The six-year argument would have raised an important point of principle if properly arguable, but it was unarguable and had no prospect of success.
2. Neither the Charging Orders Act 1979 nor Civil Procedure Rules 1998 Part 73 supported a requirement for permission before applying for a charging order more than six years after judgment. The argument based on the express permission requirement for writs of execution in RSC Ord 46, rule 2 was a non sequitur. That rule could not, without more, be extended by analogy to charging-order applications merely because the making of a charging order involves judicial discretion.
3. The decision in [1999] 1 AC 329 did not assist the appellant. It decided that section 24(1) of the Limitation Act 1980 applied to the time for bringing a fresh action on a judgment, not to proceedings by way of execution. It also treated section 24(2) as limiting recovery of interest to six years. The House of Lords had not decided that prior permission was required for a charging-order application. Lord Lloyd’s discussion of the Law Reform Committee’s proposed package could not create a requirement which Parliament and the rules had not implemented.
4. The passage of time could be a factor in the discretion whether to make a charging order, but that was its only significance. Negative equity was also a matter for that discretion. It raised no separate point of principle capable of justifying a second appeal. Permission was therefore refused on both grounds.

• Court of Appeal (Civil Division): renewed application for permission to pursue a second appeal refused; [2011] EWCA Civ 524.
• Manchester County Court: District Judge Smith made a final charging order on 14 December 2009. His Honour Judge Holman dismissed the appellant’s appeal on 27 October 2010, rejecting the alleged six-year permission requirement and treating negative equity as relevant to the exercise of discretion.