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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Sarwar v Royal Bank Of Scotland Plc [2001] EWCA Civ 252 (8 February 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/252.html Cite as: [2001] EWCA Civ 252

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE BLACKBURNE)

		Royal Courts of Justice The Strand London Thursday 8 February 2001

Thursday 8 January 2001

1. LORD JUSTICE CHADWICK: This is an application for permission to appeal against an order made on 14 July 2000 by Mr Justice Blackburne sitting as Vice-Chancellor the County Palatine of Lancaster in proceedings brought by the applicant, Mr Mohammed Sarwar, against the Royal Bank of Scotland Plc. After a hearing over four days, the judge dismissed the action. He refused leave to appeal to this court.
2. The proceedings were commenced by a writ issued out of the Chancery Division on 22 August 1997. The writ was endorsed with a claim for a declaration that two legal charges -- the first dated 9 August 1991, and the second dated 29 August 1991 -- executed by the applicant in favour of the bank were unenforceable, void for misrepresentation or had been released; and for delivery up of the title deeds in respect of the properties which were the subject of those legal charges. The basis upon which that claim was advanced is set out in the Statement of Claim served on 1 October 1997. Put shortly, it is said that the charges were executed by the applicant as security for a loan facility, initially of £50,000, advanced by the bank for the purpose of funding a garment manufacturing business (trading as Dalecrest Fashions) carried on by the applicant. The applicant contended, unsuccessfully, that the business was carried on in partnership with his wife but nothing, I think, turns on that.
3. The applicant alleged that the facility had been agreed at a meeting on 15 July 1991 with Mr Terry Cooper, the manager of the bank's Bury branch, upon terms that it was to be secured by a temporary charge over commercial leasehold property known as 2 Cannon Street, Bury; that part of the advance would be used to discharge an existing charge dated 27 August 1987 in favour of Midland Bank Plc over commercial property known as 5 St Peter's Place, Leeds; and that, when that had been done, a charge over the Leeds property would be substituted for the charge over the Bury property. It is said that the bank agreed that, upon the granting of the charge over the Leeds property, the Bury property would be released. The bank accepts that.The charge over the Bury property was executed by the applicant on or about 17 July 1991, undated. It was subsequently dated 9 August 1991, and it seems that it has been held by the bank ever since. It was not registered at HM Land Registry until very much later, in 1998.
4. The prior charge over the Leeds property in favour of the Midland Bank was discharged on or about 12 September 1991. Thereafter, the charge over the Leeds property was executed by the applicant and it was dated 29 August 1991. That appears to have been an ante-dating of the charge; but, again, nothing turns on that.
5. No steps were taken at that time, or thereafter, formally to discharge the charge over the Bury property. As I have said, it appears that the bank continued to hold the charge document; but it held no deeds to the Bury property, and the charge was not registered. The applicant asserts that, on executing the charge over the Leeds property, he believed that the bank would release, and no longer rely on, the charge over the Bury property.
6. Thereafter, the facility was extended and increased; first, by letter of 4 October 1991 to £70,000, and secondly by letter dated 10 April 1992 to £100,000. The facility was further extended by letter of 15 January 1993 until the end of February of that year.
7. The applicant met Mr Cooper, the bank manager, in March 1993. It was agreed at that meeting that the facility should be increased to £140,000. The applicant contended at trial that it was at that meeting that he discovered for the first time that the bank had retained, and intended to rely upon, the charge over the Bury property. He contends that he protested about that and was told that Mr Cooper was about to retire from the bank and that the matter would be dealt with. In fact the bank took no action, but continued to rely on the charge over the Bury property; retaining the charge document for that purpose.
8. Mrs Butterworth succeeded Mr Cooper as manager of the branch in or about July 1993. Thereafter, the facility was progressively reduced, first to £130,000, and then by letter of 17 March 1994, to £115,000. It was made clear in the letter of 17 March 1994 that the bank was treating both the Leeds and the Bury properties as its security.
9. The applicant's business ceased trading in July 1994. The bank demanded repayment. The demand was not met. Eventually, in August 1997, the bank appointed receivers over the Leeds property. The Leeds property has subsequently been sold and the proceeds applied in reduction of the debt. No challenge to the validity of the charge over the Leeds property is now pursued. That challenge was, in effect, abandoned at trial.
10. It can be seen from that short account of the facts that the principal issue which the judge had to determine was whether, once the bank had the charge over the Leeds property, it was entitled to retain and rely upon the charge over the Bury property. There was a further issue as to the rate of interest payable between November 1993 and March 1994; but that is not the subject of the present application.The judge accepted -- as the bank had accepted -- that the agreement made in July 1991 did provide for the release of the Bury charge once the Leeds charge was in place. But he held that the arrangement was re-negotiated in October 1991 when the facility was increased to £70,000. He based that conclusion on the bank's internal note of the meeting which preceded that facility letter -- a meeting held on 2 October 1991. He held also that, whether or not the applicant was aware in October 1991 that the bank was intending to rely on both the Leeds charge and the Bury charge, he was clearly aware of that when the facility was further increased to £100,000 in April 1992. Confirmation of that is found in a letter of 17 September 1992 from the applicant's then solicitors and the reply from the bank dated 22 September 1992, to both of which the judge referred in his judgment.
11. On the basis of that correspondence, the judge rejected the applicant's contention that he was "stunned and very concerned" when, as he said, he discovered in March 1993 that the bank held and intended to rely upon both the Leeds charge and the Bury charge. It was to be three years later, on 15 March 1996, that the applicant first raised in writing the complaint that he now makes; namely, that the bank was no longer entitled to rely on the Bury charge once the Leeds charge had been put in place.
12. The judge's finding is expressed at page 30C-D of his judgment. He said:

"Against that background, it is abundantly clear that by 1992, if not earlier, Mr Sarwar was aware of and raised no objection to the bank's retention of the Bury legal charge as security for the overdraft facilities it was affording him."

13. He returned to the point at page 32E:

".... it is quite clear that, whatever the position may have been in mid or late September 1991 when the Leeds legal charge was first in place, the parties thereafter entered into fresh lending arrangements, one of the terms of which, as on the evidence Mr Sarwar clearly knew and accepted, was that the bank should be secured by the Bury legal charge."

14. The judge, therefore, has made a finding of fact that, by the time of the facility letter of 4 October 1991, Mr Sarwar knew that the bank was holding the Bury charge and intended to rely upon it. The facility letter is not in the bundle that has been put before me, but its terms are set out in paragraph 12 of the bank's amended defence. That is a paragraph upon which the applicant, through his counsel, relies. So I can take the term stated in paragraph 12(e) of the amended defence as accurate.
15. The terms of the facility letter of 4 October 1991 included a term that the new facility of £70,000 would be secured by any security which the bank already held. In the context of Mr Sarwar's knowledge that, at the time when that letter was written, the bank held the charge document which he had executed over the Bury property in July 1991, that must be taken to mean that the bank intended to rely upon that charge as well as upon the charge over the Leeds property.
16. The basis upon which permission to appeal is sought is that it is said that the judge ought to have analysed the events in the context of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. As is well known, the Act requires that a contract to create an interest in land must be in writing and must contain the material terms. What is said is that, by the time the parties had reached October 1991, the Bury charge had gone; so that, in order to create a new security, it was necessary to have a contract in writing. The judge thought it unnecessary to make findings of law in relation to the 1989 Act because, as he said, it was quite clear that, whatever the position may have been earlier, the parties entered into fresh lending arrangements upon terms set out in the letter of 4 October 1991, which terms included, as Mr Sarwar well knew, that the bank was relying upon the security which it held. Mr Sarwar must have known that the bank held the charge document over the Bury property because he had taken no steps to get that document back.
17. The bank's position is that it relies upon a charge executed in July 1991 which, on its terms, secures all monies owing from Mr Sarwar to the bank. It says, in effect, that there is no reason in equity why it should not rely upon that charge. The equitable fetter imposed by the agreement that the charge would be released once the Leeds charge had been put in place fell away when the new arrangements were made in October 1991.
18. The test to be applied on this application is that permission to appeal should be granted unless the court is satisfied that the appeal has no real prospect of success. In the circumstances of this case I am satisfied that this appeal has no real prospect of success. Accordingly, the application should be dismissed.
19. I should add this. The order from which permission to appeal is sought was made on 14 July 2000. The appellant's notice in the form in which it has been included in the bundle bears no date, but it appears to have been lodged at or about the same time as the skeleton argument prepared by leading counsel who now appears for the applicant. That skeleton argument is dated 10 December 2000. So the application for permission to appeal is several months out of time. The explanation for the delay is set out at section 4 of the skeleton argument. The position appears to be this. First, the applicant had been without legal aid at the trial; as the judge observed, legal advice and representation had been available until shortly before the trial, but the applicant had represented himself at trial with the assistance of a McKenzie friend. Second, immediately after judgment the applicant sought permission form the judge to appeal; that was refused. Third, immediately thereafter, the applicant took steps towards lodging an appeal. He sought to obtain the relevant forms and he sought to obtain a transcript. Fourth, legal aid was reinstated on 11 August 2000, but was withdrawn a fortnight later on 25 August. In any event, it appears that it did not cover an application for permission to appeal. Fifth, legal aid was granted following a review on 27 October 2000. Sixth, thereafter it took until 29 November 2000 for legal aid to become available. There is no explanation why, in the period from 14 July to 27 October 2000, when the applicant was without legal aid (save for a period in August when it appears there was no funding available for the application for permission to appeal), the applicant could not have lodged an appellant's notice. The judge described him as "shrewd and intelligent"; he was a businessman and he had the benefit -- at the trial at least -- of assistance from an organisation known as "Bank Watch".
20. In the circumstances that I have taken the view that there is no real prospect of success on an appeal, it is not necessary to consider separately whether I would have regarded the delay which took place in this case as sufficient of itself to refuse an extension of time for appealing. But it should not be assumed that a litigant who does not have legal advice can safely refrain from lodging an appellant's notice for a period of some three or four months if he intend to pursue an appeal against an order which has been made against him.
21. In the circumstances I refuse this application.

ORDER: Permission to appeal refused; legal aid assessment.

(Order does not form part of approved Judgment)