UTLC LC-2022-000705 - [2023] UKUT 141 (LC)

The Judge summarised the cases of the parties in the FTT at Paragraphs 3.1 and 3.2. It is easiest simply to set out this summary:

“3 .1. Very briefly summarised, the case advanced on behalf of the Applicant before me was as follows:

3.1.1.

Mr Calif did not sign the Payment Agreement and did not authorise it to be signed. He had no knowledge of it and, hence, the Applicant is not bound by it. For that reason alone, the restriction should be cancelled.

3.1.2.

Even if the Applicant is bound by the Payment Agreement, there has been no relevant disposition triggering any obligation to pay under the agreement which has now expired; and

3.1.3.

Even if an obligation to pay has arisen, it is not the function of a restriction to secure payment under the agreement and the restriction should be discharged in accordance with its terms even if there has been a failure to pay under it or any other material breach of the agreement.

3.2.

The Respondent contended:

3.2.1.

That Mr Ori Calif had signed the Payment Agreement;

3.2.2.

If he did not, that Mr Amitai had the Applicant's authority either by way of delegation or as an alternate director to bind the Applicant;

3.2.3.

The obligation to pay under the Payment Agreement has been triggered by the Applicant's grant of the Charge to Perly Capital which was a disposal of the Property for the purposes of the Payment Agreement; and

3.2.4.

Once the obligation to pay has been triggered the restriction ought not to be cancelled unless and until the obligations the performance of which it was intended to protect have been discharged.”

In terms of witnesses the Judge heard oral evidence from Mr Calif, from the Respondent, and from Ms Louise Floate, an expert in the field of handwriting and document examination instructed by the Appellant.

So far as the evidence of Mr Calif and Ms Floate was concerned, the Judge expressed the following assessment, at Paragraphs 4.6 and 4.7:

“4.6.

On balance, however, I was left with the impression, despite the Respondent's very able cross examination of Mr Calif, that I could trust the evidence which he gave me.

4.7.

I am fortified in that conclusion by the evidence of Ms Floate as to the authenticity of Mr Califs signature of the Payment Agreement. It was her clear conclusion having considered the expanded sample of signatures provided by Mr Calif that there was strong evidence to support the conclusion that Mr Calif did not signed either the TR l or the Payment Agreement. Despite his failure to mention it in his initial application to HM Land Registry to remove the restriction, which I accept was for the reasons he gave, it has been his consistent position since that he did not sign those documents and that he had no knowledge of the Payment Agreement. I did not feel that the Respondent's cogent criticisms of some of the sample signatures provided by Mr Calif undermined Ms Floate's conclusions.”

This resulted in the following, key finding of fact by the Judge, at Paragraph 4.8:

“4.8.

I therefore conclude, in relation to the primary factual question which I need to determine, that Mr Calif did not sign the Payment Agreement.”

The Judge thus found that Mr Calif did not sign the Payment Agreement. It will be noted that the Judge also recorded the evidence of Mr Calif, supported by Ms Floate, that Mr Calif did not sign the TR1. The Judge does not appear to have made a distinct finding that Mr Calif did not sign the TR1, although this may be said to follow from what the Judge said, at Paragraphs 4.6 - 4.8. For the purposes of the Appeal, the critical point was that the purported signature of Mr Calif in his capacity as a director of the Appellant, which appeared on the Appellant’s counterpart of the Payment Agreement, was a forgery.

The Judge then went on to consider, in Paragraph 4.9, whether it could be said that Mr Calif authorised Mr Amitai to sign the Payment Agreement on the basis that it was in fact Mr Calif who was signing. The Judge rejected this possibility. This left what the Judge identified as one final relevant question, in Paragraph 4.10, in the following terms:

“4.10.The final relevant question is whether, by its admitted instruction of Fladgate to act for it and to have conduct of the transaction in question, the Applicant company can be said now to be estopped from asserting that the Payment Agreement was not duly executed and is consequently not binding upon it. This is principally a matter of law which I shall consider below. However, it is relevant to note that, although I saw no documents to this effect, there was no suggestion that it was anyone other than Fladgate which exchanged the executed Surrender and Payment Agreement with Child & Child on 8th April 2015.”

Following a review of the law, the Judge then came to his conclusions on the question of whether the Appellant was bound by the Payment Agreement, notwithstanding the forgery of Mr Calif’s signature. The Judge identified what were essentially two questions in this respect. The first question was whether Mr Amitai or Fladgate had, in their dealings with the Respondent and his solicitors, acted in such a way, with the ostensible authority of the Appellant, as to cause the Appellant to be bound by the Payment Agreement. The second question, if this had not occurred, was whether the Respondent could rely upon Section 44(5) of the Companies Act 2006, to get to the same result.

The Judge expressed his conclusions on these two questions in the following terms, at Paragraphs 5.14 and 5.15:

“5.14.

So, here, it seems to me that Fladgate, by exchanging the ostensibly executed copy of the Payment Agreement, represented on behalf of the Applicant and with its ostensible (if not actual) authority that it had been validly executed on behalf of its client. That the documents which they sent to the Respondent were the Applicant's deeds, not forged nullities. After all, it is impossible to think that Fladgate would have exchanged the documents on any other basis than that it believed them to be genuine. What else then could the Respondent and his solicitors reasonably have concluded upon receiving the signed copy of the Payment Agreement from Fladgate?

5.15.

If I am wrong in that, I nevertheless conclude that it is the effect of s. 44(5), because the Respondent is a bona fide purchaser for value and because the Payment Agreement purports to have been validly executed by the Applicant, that it is to be deemed to be so for the reasons given by Davis J at § §98-102.”

Accordingly, the Judge concluded that the Appellant was bound by the Payment Agreement. This left the question of whether the Restriction should be cancelled, pursuant to Rule 97(2) of the Land Registration Rules 2003. This in turn engaged the question of whether it could be said that the Restriction was no longer required, within the meaning of Rule 97(2). This in turn engaged the argument of the Appellant that, pursuant to Clause 6.4, the Respondent was subject to a contractual obligation to procure the removal of the Restriction or to assist the Appellant in the removal of the Restriction. The Judge did not accept this argument. He expressed his decision on this argument in the following terms, at Paragraph 6.5:

“6.5.

This seems an extraordinary submission to me. It requires an acceptance that it was the intention of the parties that even though:

6.5.1.

the obligation to pay which it was the primary purpose of the agreement to create had arisen;

6.5.2.

had not been satisfied so that the Applicant was in breach of its obligations under the agreement; and

6.5.3.

the Applicant had expressed its intention not to remedy its breach,

the Court, Registrar or Tribunal would nevertheless be required as a matter of contract, unconditionally, to make an order which might very well allow the Applicant to escape its obligation to pay the Respondent. I do not believe that was the intention of the parties. It seems plain to me: i) that no injunction or order would be made in the Applicant's favour such circumstances in the exercise of the Court's discretion; and ii) as the Respondent contends, that the opening words of clause 3.3 expressly exclude the obligation to remove the restriction if the terms of the agreement have not been complied with.”

As I read this Paragraph, what the Judge decided was that in circumstances where the obligation to make to the Payment pursuant to Clause 3.2 had been triggered, the obligation upon the Respondent to remove or assist in the removal of the Restriction could not arise, until the Payment was actually made, to GPS or the Respondent, by the Appellant.

As the Judge noted, this led on to the question of whether the obligation upon the Appellant to make the Payment had been triggered. This turned on whether the creation of the Charge qualified as a Disposal (a disposal within the meaning of Clause 3.2). The Judge concluded that the creation of the Charge had qualified as a Disposal, thereby triggering the obligation upon the Appellant to make the Payment.

The overall conclusion of the Judge was therefore that the Restriction was still required, given his conclusions that the obligation to make the Payment had arisen, but had not been complied with. By the Order the Judge directed the Chief Land Registrar to cancel the Application. By a separate order the Judge ordered the Appellant to pay the Respondent’s costs of the reference to the FTT, to be subject to a detailed assessment, if not agreed.