Amari Lifestyle Ltd (t/a Amari Super Cars) v Warnes & Ors

An equitable charge may secure a debt repayable only when identified property is sold, provided the owner has undertaken to appropriate the sale proceeds to the creditor. The charge need not secure a debt payable at a fixed time or give the creditor an immediate right to compel a sale.

In an application for sale under section 15 of the Trusts of Land and Appointment of Trustees Act 1994, the court must consider whether a sale would produce any benefit for the judgment creditor. A sale is futile where prior security interests are valid and the secured trustees are likely to take all net proceeds. The claim was therefore dismissed.

The claimant held a judgment debt against the first defendant and obtained a charging order over his beneficial interest in a property. It sought an order for sale under section 15 of the Trusts of Land and Appointment of Trustees Act 1994.

The property was held for the first defendant and a discretionary trust. The claimant challenged two alleged trust securities: a Land Registry form CH1 and an unregistered legal mortgage. The court had to decide whether either created an equitable security, whether the trustees were likely to enforce it, and whether a sale would benefit the claimant.

1. Equitable charge. The CH1 did not create a legal charge because one legal owner had not executed it. It nevertheless created an equitable charge over the first defendant’s interest. The document satisfied section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, because a reasonable reader would understand that he signed both personally as borrower and as trustee. The court applied Redcard Ltd v Williams [2010] EWHC 1078 (Ch), applying the approach stated in Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715.
2. An agreement appropriating identified property to repayment of a debt advanced to acquire it can create an equitable charge even where repayment is due only on sale and from the sale proceeds.
3. Legal mortgage. The 2014 mortgage was not registered and therefore did not create a legal charge under section 27 of the Land Registration Act 2002. It did create a separate equitable mortgage, taking priority over the claimant’s charging order. The charging order was subject to prior legal or equitable mortgages and charges under section 3(4) of the Charging Orders Act 1979.
4. Likely enforcement. The trustees were very likely to require all net sale proceeds, after payment of prior legal charges, to acquire another home for the first defendant and his family. They were not legally obliged to waive their security.
5. Disposition. A sale order would confer no benefit on the claimant and would be futile. The claim was dismissed. Had the securities been invalid or likely to be waived, the judge would have ordered a sale, having regard to the exceptional nature of sale of a debtor’s home and Article 8.