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

The claimant sought an order for sale under s.15 of the Trusts of Land and Appointment of Trustees Act 1994 to satisfy a judgment debt secured by a charging order against the beneficial interest of the first defendant in a family home. The court identified four issues: (1) whether a Land Registry form CH1 dated 30 September 2009 created an equitable charge over the first defendant’s beneficial interest; (2) whether a 20 February 2014 mortgage deed created an equitable mortgage over the property; (3) if either or both securities existed, whether the trustees would, in practice, enforce them; and (4) whether the court should exercise its s.15 discretion to order sale.

The judge held that the CH1 had been signed by the first defendant in his personal capacity and created an equitable charge securing £1,399,217.78. The 2014 legal mortgage, although unregistered, took effect in equity as an equitable mortgage and created a prior security. The trustees were likely to enforce their security or at least not waive it, so a sale would be futile for the claimant. Applying the s.15 discretion, and having regard to the priority of the trustees’ security and Article 8 considerations, the court dismissed the claim for an order for sale.

Background and parties: The claimant held a judgment against the first defendant, Matthew Warnes, and obtained a charging order over his beneficial interest in Belmont House. The registered proprietors were Matthew Warnes, his father Charles Warnes and accountant Michael Bulcock, who were trustees of a discretionary trust. The claimant applied under s.15 TOLATA 1994 for an order for sale.

Nature of the claim/application: A first-instance Part 8 application for an order for sale of land to enforce a judgment debt secured by a charging order.

Issues framed by the court:

• Whether the CH1 dated 30 September 2009 created an equitable charge over Matthew Warnes’ beneficial interest.
• Whether the mortgage deed dated 20 February 2014 created an equitable mortgage over the property.
• If either security existed, whether the trustees would, in practice, enforce or waive their security if the property were sold.
• Whether, in the exercise of the court’s discretion under s.15 TOLATA, an order for sale should be made.

Key factual and procedural points: The Trust was discretionary and the beneficiary had no proprietary interest in the trust assets. The CH1 was executed the day after completion and contained a mistaken loan figure. Michelle, a named legal co-owner, did not sign the CH1. A later deed (the Legal Mortgage) was executed on 20 February 2014 as part of matrimonial settlement arrangements; it was not registered. The property also carried two prior legal charges to banks.

Court’s reasoning:

• Signature and capacity: Applying the approach in Homburg and Redcard, the judge found on balance that a reasonable reader would understand Matthew Warnes to have signed the CH1 both personally (as borrower) and as trustee (as lender), so the CH1 satisfied the s.2 LPMPA 1989 requirements as to signature/capacity and constituted a contract giving rise in equity to an equitable charge.
• Repayment on sale: The judge rejected the argument that a debt repayable only on sale cannot be secured. An agreement appropriating an identified property to the payment of a debt advanced to buy that property can create an equitable charge, enforceable by judicial process to appropriate sale proceeds.
• Legal mortgage of 2014: Although unregistered and thus not a legal charge at law, the 2014 deed operated in equity as an equitable mortgage. Handwritten amendments were presumed to have been made before execution. The 2014 instrument was a separate, fresh security rather than a variation of the CH1, and being a deed did not require consideration.
• Likelihood of enforcement by trustees: The trustees’ witness evidence was unreliable and drafted by the defendant’s solicitors, but the judge concluded the trustees were likely, after legal advice, to require the net sale proceeds (after prior bank charges) to be paid to them to purchase alternative accommodation for the first defendant, rather than waiving security. It was therefore unlikely the claimant would receive any meaningful benefit from a sale.
• Discretion under s.15: Given the priority of the trustees’ equitable security, the futility of sale for the claimant, and Article 8 considerations, the judge declined to make an order for sale. The judge noted that if no prior security had existed or if trustees were likely to waive it, he would have ordered sale but suspended consideration of terms.

Outcome: The claim for an order for sale was dismissed because prior equitable securities in favour of the trustees would absorb the sale proceeds, rendering an order futile.

First instance: The claim for an order for sale under s.15 TOLATA is dismissed. The court found that the CH1 was signed by the first defendant in his personal capacity and created an equitable charge securing £1,399,217.78; the 20 February 2014 mortgage deed, though unregistered, operated as an equitable mortgage creating prior security. Because the trustees were likely to enforce or not waive their security, a sale would confer no benefit on the claimant and therefore the court refused to order sale.