[2025] EWHC 908 (Ch)

Fecha: 17-Abr-2025

Ms Lawrence‘s Application

Ms Lawrence‘s Application

Application to strike out the claim

63.

The primary basis on which Ms Lawrence seeks to strike out the claim is that HNW has no standing to bring the claim because HNW has no enforceable rights against Ms Lawence under the Charge and the Loan Agreement.

64.

This argument which, is not advanced in the Defence, is based on the judgment dated 7 August 2024 of his Honour Judge Dight CBE in proceedings in the Central London County Court brought by HNW against Derek Keith Mark (“HNW v Mark”).

65.

The claim in HNW v Mark was similar to the claim in these proceedings in that HNW was seeking possession of a residential property in reliance on a first charge and a loan agreement which were on materially the same terms as the Loan Agreement and the Charge in the present case. The lender under the loan agreement was identified, as in the present case, only as “1” and HNW was described as the Security Agent. Clause 26.7 of the loan agreement was in the same terms as the corresponding clause in the present case, that is to say:

“the borrower and lender agree that while HNW Lending Limited is not a party to this
loan agreement, HNW Lending Limited may take the benefit of and specifically enforce each expressed term of this loan agreement and any term implied under it,
pursuant to the Contracts (Rights of Third Parties) Act 1999.”

66.

HHJ Dight commented on the description of HNW as a “security agent” in the following passage:

69.

The reference to the claimant as a security agent causes difficulty. The defendant submits that the expression security agent is not a term of art in English law and that the precise nature of the alleged role is not defined in the Loan Agreement, although reference must be made to clause 13 of the Loan Agreement, which I will turn to in due course. The defendant says this is not like the situation that arises when loans and associated security are securitised for administrative purposes, where the legal title to the debt and the security remains with the original lender, as described by Jonathan Parker LJ in Paragon Finance Ltd v Pender [2005] 1WLR 3412 at 13 and 14. The defendant further argues that it would have been be possible to structure arrangements as between the claimant and the true lender so as to give the claimant the right at law to recover the loan and enforce the Charge but that the parties in this case have failed to do so. It is said that there could have been a legal assignment of the debt and a charge by the lender to the claimant. There could have been a trust whereby bare legal title to the debt and the Charge stayed with or was moved to the claimant. Or there could have been an equitable assignment of the debt and Charge. However none of those things have happened in this case. Therefore the Loan Agreement, it is said, is not an agreement to which the claimant is party or pursuant to which the claimant has a right, a debt, and in respect of which the claimant has a cause of action.

67.

It was submitted on behalf of Mr Mark that, as HNW was not the lender or a party to the loan agreement in that case, it had no free-standing cause of action to bring the claim for possession or for repayment of the loan: HNW was a party to the charge and registered as the proprietor of the charge but the covenant to pay was given to the lender and not to HNW.

68.

After referring to the terms of the loan agreement and charge, HHJ Dight held as follows:

76.

My conclusion on this issue is as follows: the Loan Agreement was made between the claimant and 1, albeit that 1 acts through its agent, the claimant. The contract specifically provides that the claimant is acting as the agent for 1, and as clause 26.7 recognises, is not a party to the agreement. Therefore, it seems to me that the starting point is that the contract is that of the principal, not the agent and that it is prima facia the principal who is entitled to enforce the contract, not the agent. However, if, on a proper construction of the Loan Agreement the claimant has, in effect, contracted personally whether alone or jointly with the principal, to advance monies to the defendant and be entitled recover them then it seems to me that the claimant would be entitled to sue on the Loan Agreement. I ask myself whether the claimant is a contracting party. It is plain to me, however, that the claimant is not a contracting party and clause 26.7 expressly says so. The claimant has no obligations under the contract. The claimant has purportedly limited rights.

…

79.

At no point has the claimant had its own cause of action against the defendant. The cause of action on the proper construction of these documents has always been the lender s cause of action, and the lender’s cause of action has to be brought through proceedings in the lender s name. Had there been an assignment of the cause of action to the claimant, albeit on trust for the lender, then the claim could have been brought in the claimant’s name. But it is not asserted that that is the case. It does not seem to me that clause 13 takes the matter any further. Nor do the provisions in clauses 14, 15 and 18 make any difference.

80.

The provision on which the claimant really stakes its right to bring the claim are to be found in sub-clause 26.7 and the reference in that sub-clause to the Contract (Rights of Third Parties) Act 1999. It said that this is the gateway to the enforcement of the Loan Agreement by the claimant. Under the Contract (Rights of Third Parties) Act 1999 a third party is able to acquire and enforce the rights under a contract if and to the extent that the parties to the contract intend that should be the case. The difficulty in the application of that principle in the present case is that under the Loan Agreement, the defendant does not owe any obligations to the claimant, nor is the claimant expressed to benefit from the Loan Agreement. All the relevant obligations, as I have already said, were owed by the defendant to 1, and all the benefits under the Loan Agreement are intended to be for 1 rather than the claimant and therefore there is nothing which, in my judgment, the claimant could enforce under the 1999 Act.

81.

The Act is intended typically, for a case where A and B agree to enter into a contract for the benefit of C, who is not a party to the contract, but in their contract A and B agree that C can enforce a claim to that benefit, pursuant to the Act of 1999. This is the opposite factual scenario; this is a case where the claimant has no cause of action because it has been expressly retained by 1. Therefore there is no benefit to be enforced by the claimant, no cause of action in its own name which it can rely on. For all those reasons, therefore, I have come to the conclusion that whatever the position of 1 may have been, the claimant has no cause of action under the Loan Agreement and cannot enforce it.

82.

So far as the Charge is concerned, the arguments are slightly different but I am of the view that the Charge, for similar reasons as I have given in respect of the Loan Agreement, cannot be enforced by the claimant because the covenant to pay was not given to the claimant and the Charge was not granted to the claimant. It just so happens that the claimant is a part to the Charge itself but, on the construction of the Charge, in my judgment, the claimant has no right to enforce it. The most powerful countervailing argument is that the claimant has, by virtue of being registered at HM Land Registry as the sole proprietor of the Charge, a proprietary interest in the property, as mortgagee and that as a legal mortgagee, it is entitled to possession as soon as the ink was dry on the mortgage.

83.

There are two answers to that. First, having regard to clause 9, the right to possession only accrues when demand for repayment has been made, not on execution of the Charge. Secondly, it cannot be right, in my judgment, where enforcement of a charge is sought in respect of a debt which cannot be collected by the chargee, to grant a possession order: the charge is not security for anything on those facts.

84.

I would, therefore, on the basis of my conclusions in respect of issue 1 alone, dismiss the claim.

69.

In the present case, it was submitted on behalf of HNW that HHJ Dight’s analysis of Clause 26.7 was wrong in that he failed to give due weight to section 1(1)(a) of the 1999 Act and that I should not follow his decision.

70.

Section 1 of the 1999 Act provides as follows:

Right of third party to enforce contractual term

(1)

Subject to the provisions of this Act, a person who is not a party to a contract (a “third party”) may in his own right enforce a term of the contract if—

(a)the contract expressly provides that he may, or

(b)subject to subsection (2), the term purports to confer a benefit on him.

(2)

Subsection (1)(b) does not apply if on a proper construction of the contract it appears that the parties did not intend the term to be enforceable by the third party.

(3)

The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract is entered into.

(4)

This section does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract.

(5)

For the purpose of exercising his right to enforce a term of the contract, there shall be available to the third party any remedy that would have been available to him in an action for breach of contract if he had been a party to the contract (and the rules relating to damages, injunctions, specific performance and other relief shall apply accordingly).

71.

Clause 26.7 appears to have been drafted with the 1999 Act in mind and with the intention of conferring on HNW equivalent rights to those of the lender, enabling HNW to enforce obligations owed to and benefitting the lender. There is a dearth of case law on the scope of section 1(1). The example given in Chitty on Contracts (35^th Edition) of a situation where a third party may enforce a term of the contract pursuant to section 1(1))(a) (“if the contract expressly provides that he may”) is materially different from what the parties appear to have had in mind in the present case. In Chitty’s example, which is similar to the example given by HHJ Dight at paragarph 81 of his judgment quoted above, one contracting party (A) promises to the other (B) to pay £1,000 to a third party (C) and the contract goes on to provide that C is to be entitled to enforce the term containing this promise. Under this example, the term enforced by C consists of a term benefitting C rather than an obligation owed to and benefiting one of the contracting parties, A or B. On the facts of the present case, in contrast, there was no promise made by Ms Lawrence to the lender to pay anything to, or otherwise benefit, HNW.

72.

In my judgment, contrary to what Chitty’s example might suggest, section 1(1)(a) is not limited to the enforcement by a third party of a term purporting to benefit the third party, since this type of term is specifically addressed in section 1(1)(b). It is sufficient that the contract expressly provides that the third party may enforce the term. That is what Clause 26.7 does in relation to all the express and implied terms of the Loan Agreement. Alternatively Clause 26.7 is effective pursuant to section 1(1)(b) to confer on HNW the benefit of the covenants and rights of enforcement owed to the lender because that is also what Clause 26.7 purports to do. HHJ Dight said “ …. nor is the claimant expressed to benefit from the Loan Agreement”. Clause 26.7 does, however, expressly provides that “HNW Lending Limited may take the benefit of and specifically enforce each expressed term of this loan agreement and any term implied under it”.

73.

Construing Clause 26.7 as legally effective accords with the principle that the courts should endeavour, if possible to give effect to the parties’ contractual provisions rather than treating any part of them as otiose; see Lewison: The Interpretation of Contracts 8^th Edition paragraph 7.26.

74.

Turning to the Charge, HHJ Dight’s view that the Charge was ineffective was based on his conclusion that HNW had no right to enforce the provisions of the Loan Agreement. He noted that, as the registered proprietor of the Charge, HNW is deemed to have the legal estate vested in it pursuant to section 58 of the Land Registration Act 2002 but he considered that it cannot be right for enforcement of a charge to be sought in respect of a debt which cannot be collected by the chargee. In my view, HNW is entitled to enforce the repayment provisions in the Loan Agreement pursuant to both Clause 26.7 and Clauses 13.3.5 and 14.1 of the Loan Agreement. What is secured under the Charge is the money, liabilities and obligations owed to the lender but HNW is entitled to enforce those liabilities and obligations.

75.

It follows that, in my judgment, HNW does have title to sue on the Loan Agreement and the Charge and the claim should not be struck out.

76.

Given that, with no disrespect to HHJ Dight, I have reached a different conclusion to him on the question of the enforceability of the Loan Agreement and the Charge, I propose, subject to the observations of the parties, to give permission to Ms Lawrence to appeal to the Court of Appeal on this issue and to stay enforcement of HNW’s claim in the meantime.