Daljit Kaur Dhillon v Jeffrey Orchard & Anor

Rights to recover money or property under sections 26(2)(a) and 27(2)(a) of the Financial Services and Markets Act 2000 are directed to the contractual counterparty. They do not extend to successors in title. The statutory scheme does not set out when successors could be liable, how tracing would operate, or how compensation claims against them would be assessed. An appellate court should be cautious before allowing a new point. It must consider the nature of the proceedings, the point raised and prejudice to the other party, including whether costs can adequately protect that party. A judge erred in permitting a new argument where the supposed equity in the property could not reliably meet an adverse costs order.

The appellant bought a property from a company which had acquired it from the respondents under a sale and rent back agreement. The respondents alleged that the original transaction contravened the general prohibition in the Financial Services and Markets Act 2000 and sought to recover the property under section 26. The county court rejected the respondents’ misrepresentation case and held that the appellant had not herself carried on the relevant activity by way of business.

On appeal, the High Court allowed a new argument that the respondents’ section 26 rights were a mere equity binding on the appellant as an overriding interest arising from actual occupation: [2025] EWHC 834 (Ch). The appellant appealed. The central issues were whether section 26 rights could bind successors in title and whether the new argument should have been admitted.

1. Appeal allowed. Sections 26(2)(a) and 27(2)(a) of the Financial Services and Markets Act 2000 confer rights to recover money or property against the contractual counterparty to the unenforceable agreement. They do not extend to successors in title.
2. Section 28(8), which substitutes the value of transferred property at the time of transfer where it has passed to a third party, is inconsistent with a right to recover the property itself from that third party. Sections 28(4)–(6) identify the knowledge or belief of the person carrying on the regulated activity, without addressing a successor’s knowledge or notice. Section 28(7) is apt to require restoration to the original counterparty.
3. The statutory silence is significant because sections 26–28 apply to varied assets and do not explain tracing, bona fide purchase, successive transfers, mortgages or compensation claims against successors. Possible remedies under section 382 of FSMA and section 423 of the Insolvency Act 1986 did not justify extending the section 26 remedies.
4. An appellate court should be cautious before allowing a point not raised below. It must consider all relevant factors, including the nature of the lower-court proceedings, the new point and prejudice. A pure point of law based on established facts is more readily admitted, but adequate time and protection against prejudice, including costs, remain important.
5. The judge’s assumption that there was sufficient equity in the property to meet costs was unwarranted. The respondents might not recover the property after the further issues were decided, and there was no reason to think they could otherwise meet an adverse costs order. This was an identifiable flaw warranting appellate intervention.

• Court of Appeal (Civil Division): Appeal allowed. The court held that section 26 rights did not bind successors in title and that the High Court judge should not have allowed the new argument.
• High Court (Chancery Division): The judge rejected the challenge to the “by way of business” finding but allowed the respondents to advance the new section 26 argument and concluded that their rights bound the appellant: [2025] EWHC 834 (Ch) (reported at [2026] Ch 35).
• County Court: Judge Duddridge rejected the respondents’ misrepresentation case and held that the appellant had not carried on the relevant activity by way of business. He ordered possession and payment of outstanding rent to the appellant.