Vickers v Jackson

A party seeking to enforce a charge must establish that a genuine debt or other obligation exists and is secured by it. A recital or acknowledgment in the charge is not conclusive. The court may investigate whether any sum is truly owing. A charge cannot exist where there was never an obligation which it was intended to secure. The illegality principle prevents the court assisting a party seeking to enforce an illegal or sham transaction, but does not prevent the opposing party proving the illegality.

Mr Vickers owned land used for a vineyard business and executed a deed of charge in favour of Mr Jackson. The charge purported to secure professional fees and further sums, but the trial judge found that it was a sham intended to mislead Mr Vickers’s creditors and that no fees were due or intended to become due.

Mr Vickers sought declarations that the charge was void and removal of the related entries from the Land Charges Register. Mr Jackson counterclaimed for payment and possession. HHJ Purle QC dismissed the counterclaim and granted relief to Mr Vickers. Permission to appeal was limited to whether that relief allowed Mr Vickers to rely on his own illegality, or whether Mr Jackson could enforce the apparent charge without being affected by the illegality principle.

1. Appeal dismissed. The charge was a sham, and Mr Jackson was not entitled to enforce it or obtain any remedy under it.
2. The court adopted the description of a sham in Snook v London and West Riding Investors Limited [1967] 2 QB 786: the parties intended to create an appearance of legal rights and obligations different from those they actually intended to create. The trial judge’s findings established that neither party intended the charge or the underlying invoices to have legal effect.
3. The principles in Tinsley v Milligan [1994] AC 340 concerning enforcement of property rights acquired through an illegal transaction did not assist Mr Jackson. He had to prove both the legal charge and the underlying indebtedness which it secured. A recital of a loan or debt is not conclusive. The borrower, or another person interested in the property, may put in issue whether any sum is truly owing, as recognised in Mainland v Upjohn (1889) 41 Ch.D. 926 and Close Asset Finance v Taylor [2006] EWCA Civ 788.
4. The court may investigate the legality of the transaction when the party seeking relief must rely on it to establish and enforce the alleged obligation. The fact that Mr Vickers commenced the proceedings did not alter the substance of the dispute. Mr Jackson sought payment and possession and was therefore the party seeking the court’s assistance to enforce the transaction. He could not prove the alleged debt without relying on the illegal agreement.
5. Because no genuine indebtedness existed, the charge secured nothing and was not a charge in substance. Mr Vickers was entitled, as owner, to have the related Land Charges Register entries removed.

1. Court of Appeal (Civil Division): appeal from the order of HHJ Purle QC dated 6 August 2010 dismissed. The court upheld the declaration that the charge was void and the order vacating the related Land Charges Register entries.
2. High Court of Justice, Chancery Division, Birmingham District Registry: HHJ Purle QC dismissed Mr Jackson’s counterclaim and granted relief to Mr Vickers. The judgment is reported at [2010] EWHC 2213 (Ch).