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  • Feb 26, 2025

Enforcement of charging order  – Liquidator resists high court claim for rectification

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On 26 February 2025, Deputy Master Scher handed down judgment in the case Suman Bhatia v Christopher Purkiss, as liquidator of JD Group Limited [2025] EWHC 359 (Ch).   Wedlake Bell LLP (partner Edward Saunders), and Nora Wannagat (Tanfield Chambers) acted for the successful liquidator.

A copy of the judgment is available here.

Background

The immediate background to the case is that, in February 2022, the liquidator of JD Group Limited obtained a substantial judgment in the Insolvency and Companies Court against a Mr Deepak Bhatia (“Deepak”) for sums in excess of £2.9m. Upon the handing down of judgment, the Liquidator was granted an Interim Charging Order in respect of Deepak’s interest in a luxury 7-bedroom property on a private road in Ickenham (“the Property”). According to the Property’s registered title and a TR1 transfer document held by HM Land Registry, the Property had, since 2007, been jointly owned by Deepak and his mother, Suman Bhatia (“Mrs Bhatia”), as beneficial joint tenants.   

After her receipt of the Interim Charging Order in February 2022, Mrs Bhatia, with the full support of Deepak, alleged that, due to a mistake, the TR1 executed in 2007 did not accurately record an agreement she had reached with him in about late 2006 or early 2007. The alleged agreement was to the effect that, upon the purchase of the Property, Mrs Bhatia would be the sole beneficial owner.

Although Mrs Bhatia did not contest the charging order, she reserved her rights to bring a claim for the rectification of the TR1. Thereafter, in 2023, she issued a CPR Part 7 claim within the Property Trusts and Probate List against Christopher Purkiss, as liquidator of JD Group Limited, (“the Liquidator”) seeking an order that the TR1 be rectified so as to state that she and Deepak were to hold the Property on trust solely for her.

By this time, the Interim Charging Order had been made final. The Liquidator then issued his own CPR Part 8 claim against Mrs Bhatia for an order for possession and sale. Thereafter, both claims came to be heard together in January 2025 before Deputy Master Scher. By such time, a legal mortgagee had already been granted an order for possession, with the 15 year mortgage term having expired in 2022 without repayment. This rather complicated the Liquidator’s claim for possession and sale.

The equitable remedy of rectification

Rectification as an equitable remedy can be granted in circumstances wherein a written agreement or associated document does not accord with what both the parties to the agreement intended it to say. In its application within a contractual context, rectification lies outside the ambit of Limitation Act 1980. Thus, in theory at least, written agreements dating back decades or longer can be rectified by the court if there is convincing proof that they do not represent the common intention of the parties. The remedy is, however, discretionary and the court may refuse relief in the event of undue delay or in the event that some other equitable defence applies.

As for what is required by way of convincing proof, the law is essentially that there needs to sufficient proof of some outward expression of accord between the relevant parties. This may have been expressed explicitly or tacitly.

The Claimant’s case in the claim for rectification

Mrs Bhatia’s case was that she had specifically agreed with Deepak in 2006/2007 that, although they were to purchase the Property in joint names, she was be the sole beneficial owner. In support, it was said that those of the purchase monies not borrowed from the legal mortgagee were, in effect, all hers. She said she had loaned large sums to her son Deepak and companies under his control and, in so far as part of the purchase monies came from those companies, such monies were repayments of loans made by her. She admitted that Deepak had, for 15 years, paid the mortgage instalments and utilities in respect of the Property. However, she said that the scale of the debt to her was such that Deepak had, in lieu of paying interest to her, agreed to meet such outlays. She said that it was agreed that Deepak would be a registered legal proprietor because, in order to obtain a mortgage loan, he needed to be a party to the same. Mrs Bhatia also specifically pleaded that Deepak had never lived at the Property since its purchase in 2007.

As to the alleged mistake, Mrs Bhatia’s case was that the TR1 had been signed by both her and Deepak without her reading it and without the section relevant to how the Property was going to be held being complete.  It was said that the solicitor, without instructions, had thereafter simply ticked the box signalling joint beneficial ownership with the effect that the finalised document mistakenly did not reflect her oral agreement with Deepak.

Mrs Bhatia served three witness statements: one each for herself, Deepak and her daughter Joti. To a greater or lesser extent, these supported her case including that Deepak had never lived at the Property. Mrs Bhatia served no statement from the solicitor instructed in the 2007 transaction and it was assumed that the solicitors’ file was no longer available. Thus, the only available transactional documents were certain incomplete records retained and disclosed by Mrs Bhatia. 

The Liquidator’s case

The Liquidator’s primary case advanced at trial was that Mrs Bhatia’s case was highly implausible. Not only was there no documentation to support the existence of the oral agreement contended for, but Mrs Bhatia had, in effect, exaggerated or mistermed the monies said to be her loans and purchase monies. The Liquidator said that the reason put forward by Mrs Bhatia for Deepak having agreed to pay the mortgage without taking a beneficial interest was commercially implausible with regard to a host of surrounding circumstances.

The Liquidator also pointed out that Deepak had repeatedly put forward the Property as his address and knew he was a joint registered proprietor. In such circumstances, it was noteworthy that Deepak had waited until the circulation of a draft judgment against him to claim that he had no beneficial interest in the Property. The proceedings before the Insolvency and Companies Court to achieve that judgment against him (for inter alia breach of duty as a director of JD Group Limited) had taken some time. If the alleged oral agreement had occurred, why had he not mentioned it before he realised he was about to be ordered to pay a large sum?

The Liquidator also said that, if Deepak had really never lived at the Property, then why – in a wide range of documents including a statement and an affidavit – had he specifically declared that he lived there?

The Liquidator also sought to rely on various factors going to the validity of equitable defences including the delay since 2007. The Liquidator said that Deepak’s joint beneficial ownership had been relied upon in the decision to bring the claim. It was also alleged that Mrs Bhatia had taken money from JD Group Limited in breach of her fiduciary duties as a director.

The Judgment

Deputy Master Scher was clearly profoundly unimpressed with Mrs Bhatia and her witnesses. He found all their evidence unreliable save to the extent that it was supported by contemporaneous documentary evidence. He found that, whilst Mrs Bhatia had made loans to companies run by Deepak, her reliance on them was problematic since she was a joint owner of them. She had not actually been owed money by Deepak at the date of the alleged oral agreement. As to the extent of the loans to the family companies, the Deputy Master found that Mrs Bhatia’s provision of security to support a company overdraft was not the same as a loan. Moreover, such security post-dated the date of the alleged agreement.

In determining the crucial issue as to whether Mrs Bhatia and her son had ever reached an agreement to the effect contended, Deputy Master Scher considered a wide range of commercial and other evidence surrounding not only the alleged agreement itself but also certain matters arising afterwards, such as whether Deepak had actually lived at the Property.

As to those circumstances surrounding the agreement, the Deputy Master said there was no contemporary evidence supporting its existence. He said the available documentation was actually rather inconsistent with there being such an agreement. He also accepted the Liquidator’s submission that the alleged agreement would have been extremely detrimental to Deepak and would have made no sense.

As to whether Deepak had lived at the Property, the Deputy Master went through a great deal of evidence concerning the Property and where is was said that Deepak had lived. Thus, in respect of one of the addresses, the Deputy Master said:  “While making due allowance for the various ways in which people might choose to live, I do not believe that Deepak (who prided himself on his success) lived for eight years in a glass-walled staffroom above a car showroom on an industrial estate”.   The conclusion was that Deepak had indeed lived at the Property from at least 2007 until at least 2019.

The upshot of his detailed review of the evidence was that the Deputy Master found that Mrs Bhatia and Deepak had not reached the alleged agreement regarding the purchase of the Property, its legal and beneficial ownership and the taking and repayment of the mortgage. Accordingly, Mrs Bhatia’s claim for rectification was duly dismissed with the Deputy Master indicating that he would allow the application for possession and sale subject to matters involving the legal mortgagee.

Comment

The decision, although not breaking new ground, may be of some interest in relation to the determination of claims for rectification.

But perhaps more pressingly, the case may serve as a salutary reminder to those seeking to enforce judgments and a warning and to who may be inclined to resist such enforcement. The original action, whilst a complex and fully pleaded Insolvency Act application for fraudulent breach of duty and fraudulent trading, reached trial just 17 months after the issue of proceedings (Re JD Group Limited, in liquidation [2022] EWHC 202 (Ch)).  In contrast, what was hoped to be a relatively simple enforcement process commenced by way of application for a charging order, proliferated into a complex set of proceedings that lasted considerably longer – over 3 years from the issue of the charging order application – again culminating in a 3 day trial.  

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