REF/ 2013/699

 

PROPERTY CHAMBER, LAND REGISTRATION

FIRST-TIER TRIBUNAL

 

LAND Registration act 2002

 

IN the matter of a reference from hm land registry

 

 

 

 

 

BETWEEN

GARY MARLOW

 

APPLICANT

 

And

 

JOHN DEAN CULLEN

(As Trustee in Bankruptcy of Timothy John Simpson Hardacre)

 

RESPONDENT

 

 

 

Property Address: The Crown Hotel, Everleigh, Marlborough SN8 3EY

(also known as Yew Tree Cottage, Everleigh, Marlborough SN8 3EY)

Title Number: WT168713

 

 

 

 

___________________________________________________________________________­

 

DECISION

___________________________________________________________________________

 

 

KEYWORDS – Rescission - Duress – undue influence – jurisdiction of Tribunal to impose conditions - affirmation – lapse of time - restitution

 

 

 

 

Introduction

 

 

1.       Mr Marlow is the registered proprietor of title number WT168713 (“the Cottage”). The Respondent (who is the trustee in bankruptcy of one Mr Timothy Hardacre) has the benefit of a unilateral notice over the Cottage in respect of a charge dated 1 October 2003. On 2 May 2013, Mr Marlow applied to Land Registry for the cancellation of the unilateral notice; the Respondent objected and the matter was referred to the Land Registration division of the Property Chamber of the First-tier Tribunal on 15 August 2013 for a determination of whether the Land Registry should cancel or give effect to Mr Marlow’s application.

 

2.       I heard this matter on 2 April 2014. I was assisted by a detailed presentation from Mr Marlow, acting in person, and Ms Daisy Brown of Counsel appearing for the Respondent. I heard evidence from Mr Marlow and the Respondent. Neither party sought to call any other evidence. In light of the evidence I heard, I find that the facts are as set out below.

 

 

The Facts

 

 

3.       Mr Marlow bought title number WT168713 in December 1997. Initially he bought it jointly with Kevin John Marlow and Mary King, but in 2000, it was transferred into his sole name.

 

4.       In 1997, and at all material times prior to 2005, the title comprised the Cottage and an adjacent hotel known as the Crown Hotel, Everleigh, Marlborough. In this judgment the Cottage and the Crown Hotel will together be referred to as the Property.

 

5.       The Property was charged, at all material times from at least 1999, to HSBC Bank plc.

6.       In 2002, as part of a wider strategy to rejuvenate the business of the Crown Hotel after a prolonged closure due to the foot and mouth epidemic, Mr Marlow entered into an agreement with a well known musician, Van Morrison, for him to give a concert at the hotel. Mr Marlow told me that he paid Van Morrison or his agent £20,000 and incurred other preparatory costs such as hire of a stage and advertising costs.

 

7.       Shortly before the concert, Van Morrison pulled out. He asserted (wrongly as it turned out) that Mr Marlow had breached the terms of the agreement. Mr Marlow obtained the name of a solicitor, Tim Hardacre, who could help him and went to see him in London. Mr Hardacre was a sole practitioner, with 2 assistants.

 

8.       Mr Marlow told me that Mr Hardacre advised him that he had a good claim for damages and would win, and that he expected that Van Morrison would settle before trial in any event. Mr Marlow also told me that although he was asked to and did pay £12,000 (or £14,000) to Mr Hardacre in respect of costs up front, he made clear to Mr Hardacre at that initial meeting what his financial position was – namely that he did not have the means to fund the litigation. Mr Marlow told me that Mr Hardacre accepted that. Mr Marlow also told me that Mr Hardacre told him that he would recover his costs from the other side if he won. I accept that evidence.

 

9.       Mr Marlow also suggested in his evidence that he had a “no win no fee” arrangement with Mr Hardacre. I do not accept that he had what is generally meant by a “no win no fee arrangement” because Mr Marlow did pay some money to Mr Hardacre at the beginning and there was no discussion about this money being paid back to Mr Marlow if he lost the case. I suspect that in truth both Mr Marlow and Mr Hardacre did not really consider the possibility that a costs order might not be made in Mr Marlow’s favour, and that Mr Hardacre accepted that he would not be paid on account for all of the costs that he was incurring and he was content with this because it would be a high profile case and there was little risk that the opponent would not be able to satisfy a costs order made against him.

 

10.   No retainer letter was produced (although I note that it appears to have been before the Law Society Adjudication Panel). The Respondent must therefore contend that I should infer that this contained an express agreement to pay fees, or that it was implicit that Mr Marlow agreed to pay Mr Hardacre for the work that he was carrying out at his usual or a reasonable hourly rate, in excess of the sums that Mr Marlow in fact paid from time to time. Despite Mr Marlow’s clear evidence that he had not understood that he would be obliged to pay Mr Hardacre anything, I have reached the conclusion that it was indeed implicit (if not explicit) in the relationship that he would have that liability – for it was of the essence, as far as Mr Hardacre was concerned, that he would be able to recover his costs from the other side, if Mr Marlow was successful. That would only have been possible if Mr Marlow was obliged to pay him, because of the principle that a litigant is only obliged to indemnify his opponent against a costs liability which he actually has. (This principle is discussed in a leading text: Cook on Costs 2014 at 12.3). There may well have been a hope that Mr Hardacre would not seek to enforce that entitlement save to the extent that a costs order was obtained from the other side, but for the reasons I have given, I do not consider that there can have been any enforceable agreement to this effect.

 

11.   It seems (although I have not seen the documents) that Mr Hardacre caused a claim against Van Morrison and his promoter to be issued on behalf of Mr Marlow. As time went on, Mr Hardacre did from time to time ask Mr Marlow for additional sums for costs. According to Mr Marlow, he explained this on the basis that the case was taking longer to conclude and involved more work than he had expected, and that he (Mr Hardacre) also had some financial pressures. It seems that Mr Marlow and Mr Hardacre discussed from time to time how Mr Marlow could release additional funds, and ultimately Mr Hardacre took over the conduct of an insurance claim on behalf of Mr Marlow (and retained the bulk of the monies paid) and also advised Mr Marlow that he (Mr Marlow) would have to sell a property in Weymouth (in which his mother was living) in order to release some additional funds. Mr Marlow did so. Overall, Mr Marlow paid £53,430.

 

12.   Mr Marlow told me that the trial was initially listed in about May 2003, but it was adjourned. Shortly after this, Mr Marlow experienced significant difficulties in getting hold of Mr Hardacre.

 

13.   The trial was re-listed in a trial window commencing 1 October 2003. A number of witness statements were prepared, an expert witness in the field of forensic accountancy was retained and reported and Counsel was briefed.

 

14.   Mr Marlow said that Mr Hardacre had not asked him for any further money in respect of the trial costs because he (Mr Hardacre) knew that Mr Marlow did not have any more money, or any further assets. I accept that evidence. It was entirely consistent with the picture that I obtained of the relationship between the two men, namely that they were both in financial difficulties and had staked everything on winning the case, which was like something of a common enterprise to them. Mr Marlow told me that the amount of time that the litigation took was viewed by both as a “nightmare”, as both were being stretched by it and were anxious to bring it to a conclusion. I had the strong impression that they viewed bringing it to a speedy and successful conclusion as a common goal and both were making sacrifices to do so (Mr Marlow in selling the Weymouth property and in diverting payments that he would otherwise have made to other creditors to Mr Hardacre; and Mr Hardacre in doing substantial work without rendering interim bills as he might otherwise have expected to do). By way of example, Mr Marlow told me that the witness statements were taken by an assistant of Mr Hardacre’s named Ed, who was paid £6.50 per hour by Mr Hardacre, and that, when Ed came to Everleigh to do the witness statements, Mr Marlow paid him to work in his bar at the Crown Hotel during his stay in order to supplement his income.

 

15.   What also emerged from the evidence was that Mr Hardacre was not good at accounts. It seems that Mr Hardacre did not record the hours that were being spent on the case or issue interim bills to Mr Marlow when sums were requested from him – nor indeed did he record the sums that were being paid. Subsequently, Mr Hardacre has been suspended from acting as a solicitor for breaches of the accounting rules, by reference to his handling of Mr Marlow’s case and other matters. In light of that, I am not prepared to infer (as the Respondent would have me do, in face of Mr Marlow’s evidence) that Mr Hardacre must have been discussing the trial costs and how these were to be funded with Mr Marlow in advance of the trial.

 

16.   At the eleventh hour, Mr Hardacre appears to have got cold feet. It is fair to assume that in the run up to trial he would have had to agree Counsel’s brief fees, which might perhaps have brought home to him the fact that, in addition to not billing for his own time, he was incurring substantial liabilities. Whatever his motivation, at some time prior to 1 October 2003, he drew up (or caused to be drawn up) a draft legal charge.

 

17.   This document recorded that Mr Marlow owed Mr Hardacre approximately £134,000 in legal fees (but that Mr Marlow could challenge this via a High Court taxation if he applied on or before 30 November 2003), and effected a legal charge over the Property .

 

18.   Mr Marlow told me that Mr Hardacre asked him to come to London a day or so before the trial window began, and that although the trial began on 1 October 2013, the judge (Mr Justice Cresswell) took that day as a reading day. Mr Marlow went to Mr Hardacre’s office in the morning of 1 October 2013. (I am not clear as to whether he went there expecting to go to Court that day and was only told it was a reading day when he got there, or whether he knew that the Court would not sit until the next day but Mr Hardacre asked him to come in - but that does not matter). He told me that Mr Hardacre met him on the steps of the building, and handed him an envelope. He said that Mr Marlow was to go to a particular address (the address of Scudamores solicitors) and sign the document in the envelope there. When he asked why, Mr Hardacre said that if he did not do it, he (Mr Hardacre) would not support Mr Marlow further – ie would not continue to act for him in the litigation. Although it was suggested to Mr Marlow that this was not right (because he had not raised the issue of duress / undue influence before the Solicitors Disciplinary Tribunal (to which I will return later)), I am satisfied on the basis of the evidence Mr Marlow gave before me that this did occur. I note that there was evidence (discussed below) that Mr Marlow did inform his IVA Supervisor of his complaint about the alleged debt to Mr Hardacre and the charge in or before February 2005. I do not therefore consider that I can attach much weight to the suggestion that he did not make the allegations to the Solicitors Disciplinary Tribunal (particularly as I am far from satisfied that he did not).

 

19.   I should also mention that Ms Brown suggested that Mr Marlow’s credibility was poor because he had attempted to suggest that the document was signed 1-2 hours before the trial started, when in reality he did not have to attend Court until the next day. I am not prepared to reject Mr Marlow’s evidence on this basis (in the absence of any evidence to the contrary). I am prepared to accept that Mr Marlow’s overriding impression was that he felt that this occurred as the trial was on the verge of starting and that, after this passage of time, Mr Marlow made a mistake as to precisely how imminent the trial was.

 

20.   Ms Brown also suggested that I should infer that no illegitimate pressure had been brought to bear on Mr Marlow because Mr Hardacre suggested that he seek independent advice. I am not prepared to draw that inference, not least because it is clear that Mr Marlow was sent to a particular solicitor who had, presumably, been briefed in some sense by Mr Hardacre.

 

 

21.   Mr Marlow did as Mr Hardacre asked, although it took him about an hour to find Scudamores. He recalls arriving there around late morning. He says that the solicitor was expecting him, no doubt because this had been arranged by Mr Hardacre, and that he was there about 10 minutes in total. He says that Mr Scudamore asked him if he knew what the document was, and that he replied that it did not matter what it was, and he had to sign it. He accepted that Mr Scudamore advised him to read it, and made an attempt to explain the document, starting by explaining that it was made between him and Mr Hardacre, but said that he could not recall being told that it created a mortgage over the Crown Hotel or any mention of the figure of £130,000, and that he (Mr Marlow) had been insistent that it did not matter what the document said because he had to sign it anyway. He said that he did not read the document, and was not at that stage aware of its effect. Ms Brown suggested that I should reject Mr Marlow’s evidence as to what took place at this meeting, on the basis that it was implausible that Mr Marlow would have signed it without looking at it, and because Mr Scudamore could not properly have certified (as he did on the legal charge) that he had explained the terms and effect to him, if Mr Marlow’s account is accurate. She also suggested that it was inconsistent with his tale of having signed it “blindly” that he did not give any evidence about being shocked when he subsequently saw the legal charge.

 

22.   Mr Scudamore was not called to give any evidence as to what occurred at that meeting. No explanation as to why he was not called was provided to me. Without any evidence to contradict Mr Marlow’s account as to the advice that he was (or was not) given, and the length of the meeting, I am not able to reject Mr Marlow’s evidence on this point. I therefore find that the meeting lasted about 10 minutes and that Mr Scudamore did not, for example, suggest to Mr Marlow that he had any practical alternative to signing the charge, or advise Mr Marlow as to his rights or the position that he would be in if he did not sign it.

 

23.   However, I agree that it is somewhat implausible that despite Mr Scudamore’s attempts to explain to him what the effect of the document was, Mr Marlow had no idea that it was mortgage over the Property (or the Crown Hotel), or that a figure of £130,000 had been inserted for costs. Mr Marlow’s evidence was least clear when discussing when he became aware of the contents of the charge, and I agree with Ms Brown that it is surprising that he could not identify and remember a particular occasion on which he read the charge and discovered with shock what he had signed. I therefore find that he was aware, in general terms, what the effect of the document was at the time he signed it but felt that he had no choice but to sign it because otherwise Mr Hardacre would not represent him at the trial. Mr Marlow told me (and I accept) that he felt that he had no choice but to sign given what Mr Hardacre had said, the fact that the trial had started and it would not be practical to find someone else to represent him at that stage. At that stage, he may also have felt that it did not matter because he was still being advised that he would win – and there was no suggestion that he was advised by Mr Scudamore that there was a risk that he might not.

 

24.   Mr Marlow then took the document back to Mr Hardacre. Mr Hardacre apparently said something along the lines of he had always wanted a country home, but Mr Marlow says that he paid no attention to it at the time, or indeed to the document, as he was wholly focussed on the upcoming trial.

 

25.   Although Mr Marlow was not able to remember this, I find that Mr Marlow was given a copy of the charge on or soon after 1 October 2003. Mr Marlow was not clear as to when he next looked at it as he said that he did not really pay it much attention until much later, but there was no suggestion in his evidence of his not having been able to look at the charge or of having it obtained it subsequently, so I think it most likely that Mr Marlow was given a copy on or soon after 1 October 2003.

 

26.   The trial then ensued. Van Morrison was represented by Theodore Goddard (then Addleshaws), and Counsel. Mr Marlow said that his own expert was awful, and the other side’s gave an awesome portrayal to the judge (Mr Justice Cresswell).

 

27.   Judgment was handed down on 11 November 2003. I have read a copy of the judgment. The Judge accepted that it was Van Morrison and not Mr Marlow who had breached the agreement, and awarded damages of £40,000. He rejected Mr Marlow’s wider claims for loss of business, not least because there was an exclusion clause which he found to be reasonable.

 

28.   Costs were dealt with subsequently. Mr Marlow told me that the judge ordered that each side should bear their own costs, save that he (Mr Marlow) should pay Van Morrison’s experts costs, and that these amounted to £32,000 (or perhaps £36,000). That meant that although Mr Marlow had won, he recovered only £8,000 at best (and I think that Mr Hardacre retained that sum on account of costs too).

 

29.   Mr Marlow was, as one would expect, devastated. He complained to Mr Hardacre, but Mr Hardacre did not reply. He (Mr Marlow) had other issues to contend with, due to the financial pressures which losing the case had put on him, and had no capacity to do other than let matters lie.

 

30.   At some time, I think during 2004, Mr Marlow entered into an IVA.

 

31.   In November 2004, Mr Hardacre registered a unilateral notice against the Property (ie the Crown Hotel and the Cottage) in respect of the charge. Mr Marlow accepted that he knew this had been done, and that it was this which triggered his complaint about Mr Hardacre to the Law Society (because he did not then have funds to litigate, and hoped that if he established that Mr Hardacre was guilty of misconduct that would pave the way for a claim against him later). He said he was cross and surprised because he had not expected Mr Hardacre to seek to register the charge – and, for the same reason he had not, up until this point, given the charge much thought. It was perhaps for this reason that he did not apply to have the costs assessed. I was not shown his initial complaint, but Mr Marlow told me that the Law Society told him that they were not able to award any substantial compensation

 

32.   In January 2005, Mr Hardacre was adjudged bankrupt. It seems (from a letter dated 10 February 2005 that I have seen) that he attempted to appeal against the order on the basis that he had offered the creditor, as security for the debt, the charge which he had over the Property. The creditor’s enquiries appear to have led them to Mr Marlow’s IVA supervisor, who informed them that the debt and the charge were disputed.

 

33.   The Bank sold the Hotel in February 2005 (free of the Unilateral Notice, because the Bank had priority). All of the proceeds went to the Bank. Mr Marlow retained the Cottage, and the unilateral notice remained against the title to the Cottage.

 

34.   Mr Hardacre lost or withdrew his appeal, and the Respondent was appointed as his trustee in bankruptcy in April 2005. That had the effect of vesting the benefit of the legal charge in the Respondent, and in July 2005, the Respondent applied to Land Registry for his name to be recorded as the beneficiary of the unilateral notice.

 

35.   In late 2005 or early 2006, Mr Marlow learned that there was an offer of £150,000 on the Cottage. He informed the Bank that he was content for this offer to be accepted, and told me that he had not heard any more from the Bank thereafter, and assumed that the offer had been accepted and the proceeds had been used to pay his debtors. No evidence was put before me to suggest that Mr Marlow had, in fact, been aware that the Cottage had not been sold, and I therefore accept his evidence.

 

36.   He said that it was not until 2013 that he drove past the Cottage and saw that it was derelict that it occurred to him that it might not have been sold in 2006. He said that he checked at Land Registry and discovered that he still owned it, and contacted the Bank to enquire why they had not sold it and what was going on. The Bank informed him that they had recently obtained a possession order. Mr Marlow took legal advice and, following that advice, moved back into the property. The Bank then agreed that he should remain in possession and renovate the Cottage in order to sell it. The trial bundle contained correspondence between the Bank and Mr Marlow which appeared to be consistent with this evidence.

 

37.   Shortly thereafter Mr Marlow contacted the Respondent, and set about seeking to have the unilateral notice removed. As the Respondent would not agree, he (Mr Marlow) applied to Land Registry on form UN4 under section 36 of the Land Registration Act 2002. The Respondent objected to Mr Marlow’s application, and the dispute was referred to this Tribunal. I assume, although neither party produced a valuation, that there is now some equity in the property beyond the sums owing to the Bank. If there is not, a significant sum of costs have been incurred pointlessly.

 

 

The Issues

 

38.   Mr Marlow’s case is that the legal charge was entered into as a result of duress and/or undue influence, so it should be set aside. The Respondent contended that the Tribunal could not order the cancellation of the unilateral notice unless and until the charge was set aside, and pointed out that Mr Marlow had not made any application for the charge to be set aside. On 31 January 2014, Judge Brilliant ordered that, if Mr Marlow confirmed that he wanted to argue that the charge should be set aside, that application should be heard at the hearing (which was ultimately listed in front of me) without the need for any further statements of case or evidence being filed. Mr Marlow did so confirm and that was the basis on which the parties’ positions were set out to me at the hearing. The Respondent did not accept that there had been any duress or undue influence, but asserted that even if there had been, rescission should not be ordered.

 

39.   My jurisdiction to set aside the charge derives from section 108 of the Land Registration Act (as amended). This states:

 

“ ……………..

( 2) Also, the First-tier Tribunal  may, on application, make any order which the High Court could make for the rectification or setting aside of a document which—

(a) effects a qualifying disposition of a registered estate or charge

………………….

(4) The general law about the effect of an order of the High Court for the rectification or setting aside of a document shall apply to an order under this section.”

 

 

40.   I therefore have the power to make any order which the High Court could make for the setting aside of the charge. The High Court will refuse an order unless the applicant agrees to submit to such conditions as are necessary in order to restore the parties to substantially the same position that they would have been in if the transaction had not occurred. In S turgis v Champneys (1839) 5 Mylne & Craig 97; 41 E.R. 308, 1839 the Lord Chancellor explained the basis on which such conditions were imposed by a Court of Equity:

 

“102 Hence arises the extensive and beneficial rule of this Court, that he who asks for equity must do equity, that is, this Court refuses its aid to give to the Plaintiff what the law would give him, if the Courts of common law had jurisdiction to enforce it, without imposing upon him conditions which the Court considers he ought to comply with, although the subject of the condition should be one which this Court would not otherwise enforce.”  

 

41.   I am therefore satisfied that the Tribunal too has the power, in appropriate cases, to decline to make an order setting aside a document unless the applicant agrees to comply with appropriate conditions to restore the parties to substantially the position that they would have been if the transaction had not occurred. The contrary was not suggested by either Mr Marlow or the Respondent’s Counsel.

 

42.   Accordingly, the issues before me were, in broad terms, as follows:

 

(a)     Was the charge entered into as a result of duress;

(b)    Was the charge entered into as a result of undue influence;

(c)     If there was, should it now be rescinded – and if so, on what terms as to counter-restitution?

 

 

The Legal Framework

 

43.   The basic principles are summarised in Chitty on the Law of Contracts at paragraph 7-001:

 

“In outline, a party may be able to avoid a contract for duress where he or she entered it because of a wrongful or illegitimate threat or other form of pressure by the other party, normally because the threat or pressure left him or her with no practical alternative.   A contract may be voidable for undue influence where one party was subjected to pressure by the other or, more usually, where the other took advantage of the first party's trust and confidence.”  

44.   The right to rescind can be lost if:

(a)     The claimant delayed in advancing his claim once the duress / undue influence has come to an end and he knew his rights, and it would be unconscionable now to permit the claim to be advanced because the other party has relied on the fact that the claim was not pursued to his detriment: Snell’s Equity at 5-019;

(b)    There is affirmation by express words or unequivocal conduct (for example by choosing to take the benefit of the contract) after the duress / undue influence has come to an end and with knowledge of the right to rescind: Snell’s Equity at paragraph 15-013; or

(c)     It is not possible to put the parties substantially in the position that they were in before: Snell’s Equity at paragraph 15-014.

 

 

Findings: (1) Duress

 

45.   The starting point must be to consider whether Mr Hardacre’s threat to cease acting for Mr Marlow was legitimate.

 

46.   The rules applying in 2003 provided:

 

“ A solicitor must not terminate his or her retainer with the client except for good reason and upon reasonable notice”: Solicitors Practice Rules 1990 paragraph 12.2.

 

47.   Section 65(2) of the Solicitors Act 1974 provides:

 

“ If a solicitor who has been retained by a client to conduct contentious business requests the client to make a payment of a sum of money, being a reasonable sum on account of costs incurred or to be incurred in the conduct of that business and the client refuses or fails within a reasonable time to make that payment, the refusal or failure shall be deemed to be a good cause whereby the solicitors may, upon giving reasonable notice to the client, withdraw from the retainer.”

 

48.   I therefore accept that failing to pay sums on account within a reasonable time of being asked would provide a good reason to terminate the retainer.

 

49.   Some guidance as to what a reasonable time might be can be gleaned from Hoby v Built, Gentleman 110 ER 131, where the solicitor demanded funds for Counsel’s fees 5 (or 7) days before trial, and when these were unpaid, did not appear. The jury found that this was not reasonable notice, which was endorsed by Littledale J on appeal on the basis that there would not have been sufficient time to change lawyers before the trial, or, perhaps, to raise the funds.

 

50.   As I have already said, I am not satisfied that Mr Hardacre demanded these sums (or a charge to secure them) on any date before 1 October 2003. Mr Marlow was entitled to a reasonable time to pay before the retainer could be terminated. Mr Hardacre would not therefore have been able to terminate the retainer on 1 October 2003, or, I suggest, at any time before the conclusion of the trial. In the circumstances, I do not consider that Mr Hardacre could have refused to represent Mr Marlow at the trial. I am therefore satisfied that his threat to do so was illegitimate, and amounted to the imposition of unfair pressure on Mr Marlow on the eve of a substantial High Court trial against a well known personality, represented by a city firm of solicitors.

 

51.   The second question which I must address is whether Mr Marlow executed the legal charge because of that threat.

 

52.   The test is summarised in Chitty on Contracts at paragraph 7-037:

 

“.. the victim must show that “but for” the threat he would not have entered the contract.  It is not necessary that the victim shows that the threat was the predominant reason for him entering the contract or that it was particularly coercive. On the other hand, it is insufficient that the economic pressure was merely “a reason” for the victim entering the contract.

 

53.   Mr Marlow was asked what he would have done if asked to give security for the costs at an earlier stage – ie to enter into this legal charge without the illegitimate pressure being applied. He indicated that he would have explored the potential of a charge, but would have sought to persuade Mr Hardacre that there was little point because the Bank had a first legal charge. However, that is not, in my view, quite the right comparison. At that stage, Mr Hardacre could properly have declined to go further, so I am not sure that considering Mr Marlow’s evidence in answer to this question assists greatly with finding the answer to what he (Mr Marlow) would have done if asked on 1 October 2003 to sign a legal charge without any threat being attached. It does not seem to me that there would have been any advantage to Mr Marlow in doing so (given that Mr Hardacre would have to represent him whether he did it or not) and I find on the balance of probabilities that he would not have done so.

 

54.   I am therefore satisfied that Mr Marlow would not have entered into the charge if Mr Hardacre had not threatened to cease representing him. As I explain below, it is clear that there was a second matter potentially operating on Mr Marlow’s mind (namely the trust and confidence that he reposed in Mr Hardacre), but it seems to me that this was (if anything) a concurrent cause and not something which would have prevented this serious threat from being an operative cause of the execution of the legal charge.

 

55.   Ms Brown suggested that the visit to Scudamores served to diffuse the pressure that Mr Marlow was under, so that I could conclude that it was not the threats which caused Mr Marlow to execute the legal charge. Had Mr Scudamore explained to Mr Marlow that he could safely ignore Mr Hardacre’s threat to cease acting for him because he would not be allowed to terminate the retainer at that stage, that might have cancelled out the effect of Mr Hardacre’s threats. But Ms Brown did not suggest to Mr Marlow that this explanation had been given to him (and nor was there any evidence to suggest that it was). Accordingly, I do not consider that the fact that Mr Marlow went to Scudamores precludes him from asserting that he entered into the legal charge because of the illegitimate threats which Mr Hardacre had made.

 

56.   For these reasons, I find that Mr Marlow did execute the legal charge under duress.

 

Findings – (2) Undue Influence

 

 

57.   In light of my finding that there was duress, there is, strictly, no need for me to consider whether there was also undue influence. However, the matter was argued before me, and I propose to set out in short form my findings, in case I am wrong in relation to duress.

 

58.   The Respondent accepted (rightly in my view, for what that is worth) that there was a relationship of trust and confidence between Mr Marlow and Mr Hardacre. The Respondent did not accept that Mr Hardacre abused that trust in asking Mr Marlow to sign the legal charge. Ms Brown submitted that it was a perfectly ordinary thing for a solicitor to ask a client to provide security for costs. Indeed section 65 of the Solicitors Act 1974 makes it plain that a solicitor is entitled to take security in respect of the costs of contentious business.

 

59.   However, that takes no account of the circumstances – asking Mr Marlow to provide security on account of costs at a time when Mr Hardacre was already obliged to represent him throughout the trial renders the transaction one-sided (for Mr Hardacre’s benefit only). For that reason it seems to me that the presumption of undue influence arises. This is a presumption that Mr Hardacre exerted undue influence over Mr Marlow, and that this caused Mr Marlow to enter into the transaction.

 

60.   The fact that Mr Marlow was able to get the costs assessed is not, in my view, an answer. Mr Hardacre had still obtained for himself security which he would not otherwise have obtained.

 

61.   Was that presumption rebutted by the legal advice which Mr Marlow received from Scudamores? The Respondent did not call any evidence which demonstrated what factual information Mr Scudamore had been given. It is not even clear that he was aware that the trial had already started (in the sense that the judge was reading the papers). I am not therefore satisfied that he did (or could have) given any proper explanation to Mr Marlow of his situation and the choices open to him. I do not therefore consider that this legal advice is sufficient to rebut the presumption.

 

62.   The fact that I have found that Mr Marlow did know what he was signing does not rebut the presumption either. It does not show per se that Mr Marlow was acting independently of Mr Hardacre’s influence.

 

63.   Was the presumption rebutted by anything else? Here, Mr Marlow’s evidence was that there were some illegitimate threats applied to him, and that he would not have signed the document otherwise. He indicated that he did ask some questions when Mr Hardacre told him to take the document to Scudamores to sign, and that is what led Mr Hardacre to say that he would not act further for him if he did not sign it. That appears to me to show that the trust and confidence which Mr Marlow undoubtedly did repose in Mr Hardacre was not sufficient, without out more, to persuade him to execute the document. That raises a question as to whether the undue influence caused Mr Marlow to execute the legal charge.

 

64.   The appropriate test is considered in Chitty at paragraph 7-072. The authors conclusion is that:

 

“ it will be for the stronger party to show that the undue influence had no impact at all on the complainant’s decision”

 

65.   The evidence does not, in my view, satisfy this hurdle. I find that it was part of Mr Marlow’s motivation (although of lesser causative potency than the threats) that his solicitor, whom he trusted, was telling him that this was what he should do.

 

66.   In the circumstances, I find that Mr Marlow also entered into the legal charge because of the undue influence exercised over him by Mr Hardacre.

 

Findings: (3) Bars to rescission

(a)    Delay

 

67.   Ms Brown submitted that Mr Marlow had delayed in advancing his claim to rescind the charge, and it would now be unconscionable for him to be permitted to assert it, given that Mr Hardacre was no longer contactable to provide evidence. Mr Marlow accepted that he was aware of the charge being registered in November 2004, so it is important to consider what explanation he provided for not having taken any steps prior to 2013 to get it set aside.

 

68.   As regards the period 2004 – 2006, he indicated that he had other priorities but made his complaint to the Law Society as a stepping stone towards future action against Mr Hardacre. In my judgment, nothing which occurred in this time period bars Mr Marlow from advancing his claim. It was a relatively short period, and Mr Hardacre was, at this stage, still contactable.

 

69.   As regards the period from 2006 - 2013, Mr Marlow thought that the Cottage had been sold. He was not therefore aware, during this period, that he had a right to rescind. Insofar as it matters, I find that his belief was reasonable: he had agreed that the Bank could sell it, and received no further letters or demands about the Cottage. However, although this was not a point which was explored in the evidence, it seems to me that Mr Marlow would have been able to find out the true position (for example by contacting the Bank or undertaking a Land Registry search), if he had thought to do so, at any time.

 

70.   In Allcard v Skinner (1887) 36 Ch D 145, two judges considered the significance of a person failing to make enquiries as to what rights they had. Lindley LJ said (at 188):

 

“ In the next place, if the Plaintiff did not know her rights, her ignorance was simply the result of her own resolution not to inquire into them. She knew all the facts; she was in communication with her present solicitor in 1880, his remark that “it was too large a sum to leave behind without asking for it back,” was a clear intimation to her that she ought to ask for her money back, and was a distinct invitation to her to consider her rights. She declined to do so; she preferred not to trouble about it. Under these circumstances it would, in my opinion, be wrong and contrary to sound principle to give her relief on the ground that she did not know what her rights were. Ignorance which is the result of deliberate choice is no ground for equitable relief; nor is it an answer to an equitable defence based on laches and acquiescence.

 

Bowen LJ said ( at 192 ) :

Was she aware of her rights at the time she formed this resolution? In my view I incline to think that she must have been, having regard to the character of the advisers who surrounded her; but I do not consider it to be essential to draw that inference. It is enough if she was aware that she might have rights and deliberately determined not to inquire what they were or to act upon them. There, again, I unhesitatingly draw the inference that she was aware that she had rights or might have them and that she deliberately made up her mind not to enforce them.

 

71.   Mr Marlow’s evidence as to his attitude to the Cottage and the charge at the time of the sale was that he did not feel the need to take any steps to challenge the charge because he thought that there was more than £150,000 (the sale price as he understood it to be) owed to the other debtors. He said if the sale price had been £250,000 then he would have taken legal action about the charge. As it was, he accepted that he would walk away from the Cottage with nothing.

 

72.   I do not consider Mr Marlow’s state of mind as on a par with Ms Allcard’s. I do not consider that Mr Marlow had deliberately decided not to consider whether he had a basis for claim or not; instead he had considered that he had a claim, but that it was not worth pursuing given his understanding that the Cottage had been sold for £150,000. There was no evidence before me from which I could draw the inference that he had deliberately refrained from making any enquiries about the Cottage after 2006. Accordingly, I proceed on the basis that he was ignorant of his right to claim from 2006 until 2013.

 

73.   The curiosity about this case is that Mr Marlow did know of his rights and have capacity to bring the claim in the period prior to 2006. No authority on similar facts was cited to me, but Ms Brown accepted that she could not complain of delay during the period after 2006 if I accepted that Mr Marlow had not been aware of his right to claim during this period. I consider that she was right to do so, because it seems to me consistent with the accepted wisdom that delay only bars a claim if the person had knowledge of both the facts and the consequences, and capacity to bring the claim during the relevant period.

 

74.   I therefore reject the contention that Mr Marlow is barred from setting aside the contract for duress or undue influence because he has delayed in asserting his rights.

 

(b)    Affirmation

 

75.   Ms Brown also sought to persuade me that Mr Marlow had affirmed the contract (ie waived the right to rescind it) by choosing to take the benefit of it rather than seeking immediately to set it aside. I do not accept that submission. The earliest time that Mr Marlow could possibly have been said to have been free of the pressure / undue influence and in a position to make a choice as to whether to accept the benefit under the contract was after the trial had concluded (because as I have already said, I take the view that Mr Hardacre would have been obliged to represent him at the trial whether he had signed or not), but I do not consider that he had any practical alternative but to proceed with his existing legal team (who had conducted the trial) at the costs hearing. He could not sensibly have retained other lawyers to represent him at that hearing. I do not therefore consider that he can be said to have elected to affirm the contract at that point.

 

76.   Ms Brown also suggested that the fact that Mr Marlow’s IVA supervisor took no steps to get the charge set aside (despite knowing that Mr Marlow asserted that it had been entered into under duress) amounted to an affirmation. This was not something that was explored in any detail in the evidence, or submissions.

 

77.   Unfortunately, I was presented with very little evidence as to what transpired during the IVA, but it seems to me that there were 3 possibilities:

 

(i)                  The Supervisor rejected Mr Hardacre’s claim to be a creditor;

(ii)                The Supervisor accepted that Mr Hardacre had a debt, and elected to affirm the charge and treat him as a secured creditor rather than allowing Mr Hardacre to participate in the IVA; or

(iii)              The Supervisor accepted that Mr Hardacre had a debt, but sought to set aside the charge which would have entitled Mr Hardacre to participate in the IVA.

 

78.   There was no suggestion (by either side) that (iii) occurred. Ms Brown invites me to infer that (ii) occurred rather than (i). However, I do not consider that I am able to make that inference on the material before me. It rather seems from the letter of 10 February 2005 as though the debt might not have been accepted in the IVA, as the Supervisor says:

“ I would therefore advise you that we presently dispute both the claim by Mr Hardacre; the validity of the charge and (very late) registration thereof. ……[it] “will certainly not merely be accepted and will, in due course, be subject to dispute”.

 

79.   If Mr Hardacre’s claim was rejected, there would have been no reason for the IVA Supervisor to take any steps to get the charge removed. That would not have been his concern, unless it was proposed that the Cottage be sold in the IVA. Accordingly, I cannot infer that any sort of election was made in the IVA to treat the charge as valid rather than seeking to set it aside.

 

80.   As an aside, I should also mention that if the debt was rejected in the IVA, and that decision was not appealed, it is difficult to see how Mr Hardacre can now assert that he has a debt. I was not addressed in relation to that, and in the absence of any proper evidence as to what transpired or any submissions about it, it would not be proper for me to found my decision on this point. I therefore ignore it.

 

(c) Impossibility of “restitutio in integrum”

 

81.   The Respondent asserts that rescission should be refused because he (or Mr Hardacre’s creditors) cannot be placed in as good a position as before. Ms Brown put the case this way: if (as I have found) Mr Hardacre had not been able to terminate his retainer and been obliged to represent Mr Marlow at the trial, he would have done so – but he would have been able to sue for his fees immediately afterwards. Had the legal charge not existed, the Respondent would have sued for the fees. The Respondent cannot now sue for the fees because (a) there is a limitation bar; and (b) he has insufficient evidence to prosecute such a claim because Mr Hardacre has disappeared.

 

82.   The problem with that argument, as I see it, is that the existence of the legal charge did not preclude the Respondent from suing for the fees at all. If anything, it would have been easier for the Respondent to make out a money claim against Mr Marlow with it in place – because Mr Marlow would have been estopped by the deed from disputing the amount of the debt. The Respondent told me that he did nothing to enforce the charge because there was no equity in the Cottage – yet he did not sue Mr Marlow for the fees. It may be that he was precluded from doing so because of the IVA (or the rejection of the debt in the IVA), or it may be that having investigated Mr Marlow’s financial position he considered that it was not worth doing so. Either way, the position would have been no different had the charge not been in place.

 

83.   For the reasons that I have already given, I am not satisfied that it would be appropriate for me to infer that Mr Hardacre’s claim must have been admitted in the IVA and the charge affirmed. I am not therefore able to conclude that the Respondent was prejudiced because but for the charge he would have participated in the IVA and been paid something from it. There was simply no evidence to support that – and it was not how Ms Brown put the case.

 

84.   In the circumstances, I proceed on the basis that the Respondent was not deprived of any opportunity to sue for the fees by the existence of the charge. The Respondent was in exactly the position he would have been in had the charge (which he considered to be of no value) not been made.

 

85.   I bear in mind also that, although Ms Brown made this suggestion in closing, the Respondent, who gave evidence before me, did not suggest that if the charge had not been in place, he would have taken proceedings in order to obtain a charging order against the Cottage (or any other assets of Mr Marlow) to secure the position for the creditors if the asset increased in value in the future. I certainly cannot infer that this would have been the case. As a responsible trustee in bankruptcy, Mr Cullen would have had to bear in mind that:

(a) those proceedings would have to be funded somehow;

(b) it was likely that they would not be straight forward, for Mr Marlow had already indicated that he disputed the claim for fees;

(c) Mr Hardacre had been unable to satisfy the Solicitors Disciplinary Tribunal that he had kept appropriate accounting records relating to Mr Marlow’s matter so there would be some difficulties in proving the claim; and

(d) there was no immediate prospect of any equity deriving from the Cottage (or presumably, any other asset of Mr Marlow’s).

86.   It therefore seems to me that Mr Marlow need do nothing to put the Respondent back in the position he would have been if the transaction had never happened.

87.   I therefore conclude that none of the arguments which Mr Brown put forward justify my refusing relief to Mr Marlow. Accordingly, I accept his claim to rescission of the legal charge for duress, and will order the Land Registry to give effect to his application to remove the legal charge as if the Respondent’s objection had not been made.

 

 

 

 

 

 

Dated this 23 ^rd day of April 2014

 

 

 

By Order of The Tribunal