Neutral Citation
Number [2003] EWHC 2289 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal
Courts of Justice
Strand, London, WC2A 2LL
5th September 2003
Before:
-Between-
-and-
P Morgan
QC and M Rodger (Berger Oliver) for the claimants
L Wood (Darwin Gray) for the defendants
[1] The claimants are Thomas Cobbold, Patricia Cobbold and Rosemary Graham. They are residents of Newtown Common, Newbury. The defendant, Bakewell Management Limited ("Bakewell"), is the owner of the common. The claimants own or occupy properties abutting the common and they, or their predecessors, have for many years gained vehicular access from their properties to the highway, over tracks or roads crossing the common. They have not done so under any licence or authority from Bakewell or its predecessors, and some time ago Bakewell took the view that they and other residents doing likewise were not entitled so to use the common except on terms of payment to Bakewell of an appropriate fee. Not all the residents agreed to this, a stance which led to the commencement of an action in the Chancery Division by Bakewell against 47 residents (including the Cobbolds, but not Ms Graham) for a declaration that the defendants were not entitled to cross the common with motor vehicles, and an injunction restraining them from doing so. The title of that action is Bakewell Management Ltd v. Brandwood & Others. The defendants to it resisted the claim on the basis of an assertion that the long use by them and their predecessors of the common for vehicular access purposes was such as to entitle them to an easement of access either by prescription under the Prescription Act 1832 or by virtue of the doctrine of lost modern grant. Bakewell's answer to that assertion was that any such user was unlawful as involving a criminal infringement of s 193(4) of the Law of Property Act 1925 and that as a result no easement by prescription or under the doctrine of lost modern grant could be or had been established.
[2] The action was tried by Park J who, on 21 March 2002, held in favour of Bakewell, presumably regarding himself as bound by the decision of the Court of Appeal in Hanning v. Top Deck Travel Group Ltd (1993) 68 P&CR 14. He gave permission for the defendants to appeal to the Court of Appeal, but their appeal was dismissed by Ward, Arden LJJ and Sullivan J on 30 January 2003. They too followed the decision in Hanning but Ward LJ, who delivered the main judgment, also held that, quite apart from that decision, the defendants' case would anyway have failed as a matter of principle. The neutral citation of the judgment of the Court of Appeal is [2003] EWCA Civ 23 and the case is reported at [2003] 1 WLR 1429. The Court of Appeal refused the defendants leave to appeal to the House of Lords, but on 6 May 2003 the House gave leave to appeal. It is thought that the appeal may be heard in June or July 2004.
[3] The net result of that is that the claimants, and many other residents in a like position, have been declared by the Court of Appeal to have no right to use the common for vehicular access purposes, although those pursuing the appeal to the House of Lords hope that that battle will be decisive in their favour. If it is, the decision may establish a valuable precedent also for those residents who are not parties to that litigation.
[4] Little or nothing is certain in litigation, however, and the residents were provided with alternative relief to an otherwise unsatisfactory position by s 68 of the Countryside and Rights of Way Act 2002, which is headed "Vehicular access across common land etc" and provides in part as follows:
68. - (1) This section applies to a way which the owner or occupier (from time to time) of any premises has used as a means of access for vehicles to the premises, if that use of the way -
(a) was an offence under an enactment applying to the land crossed by the way, but
(b) would otherwise have been sufficient to create on or after the prescribed date, and to keep in existence, an easement giving a right of way for vehicles.
(2) Regulations may provide, as respects a way to which this section applies, for the creation in accordance with the regulations, on the application of the owner of the premises concerned and on compliance by him with prescribed requirements, of an easement subsisting at law for the benefit of the premises and giving a right of way of the vehicles over that way.
(3) An easement created in accordance with the regulations is subject to any enactment or rule of law which would apply to such an easement granted by the owner of the land.
[5] Sub-section (4) then goes on to deal with what the regulations may provide for. Regulations have been made under that section, namely the Vehicular Access Across Common and Other Land (England) Regs 2002, which came into force on 4 July 2002. They provide that an "owner" of land may, as respects a way to which s 68 applies, apply for the creation of an easement. They specify time limits within which an application must be made and enable the land owner to raise objections to it. Subject to that, however, the scheme of the regulations is that upon payment by the owner to the land owner of a sum of compensation determined in accordance with the regulations, an easement of way is created in favour of the owner.
[6] Regulations 11 and 12 deal with the calculation of the compensation. Regulation 13, headed "Payment of the compensation sum" provides as follows:
13. - (1) Where -
(a) the land owner has notified the applicant in accordance with regulation 7 or 9(3)(a);
(b) the applicant has notified the land owner in accordance with regulation 9(5); or
(c) any matters in dispute have been determined in accordance with regulation 10 or 12,
the applicant shall pay the compensation sum to the land owner.
(2) The compensation sum shall be paid within two months of -
(a) the date of notification under regulation 7 or paragraph (3)(a) or (5) of regulation 9 as the case may be; or
(b) where a determination is made under regulation 10 or 12, the date of the determination or, if more than one such determination is made, the date of the last determination
(3) The land owner shall, within one month from the date of receipt of the compensation sum provide the applicant with a written receipt for that sum.
[7] Regulation 15, headed "Creation of the easement" provides as follows:
15. Upon payment of the compensation sum either -
(a) to the land owner in accordance with regulation 13; or
(b) into court in accordance with regulation 14
the easement shall be created.
[8] The claimants in the present action, which is a new action commenced on 8 August 2003 against Bakewell, of course hope that the appeal to the House of Lords will succeed. If it does, they (or at least Mr and Mrs Cobbold - Ms Graham is not an appellant in the House of Lords) will have established their right to the requisite easement by prescription or lost modern grant, and will have, or will have had, no need of recourse to the right, under s 68 to compel the creation in their favour of a statutory easement. If, however, the appeal fails, then s 68 is the only alternative machinery open to them under which they can compel the creation of the necessary easement. If for any reason s 68 is not available to them, or is not a route to which they elect to have recourse, then they might be able to negotiate an easement with Bakewell, but there can be no guarantee they could do so on acceptable terms, or on terms as favourable as those potentially available to them under s 68 and the regulations.
[9] In these circumstances, the claimants have found themselves faced with an unfortunate dilemma. That is because they will not know the outcome of the appeal to the House of Lords until, perhaps, the latter part of 2004, and they have been advised that if they want to invoke the right to claim the statutory easement under s 68 and the regulations, they had to make their applications to Bakewell by 3 July 2003. The claimants want, if they can have it, the best of both worlds and so, on 24 June 2003 they and 26 other residents did make applications to Bakewell for statutory easements. The applications were expressly stated to be without prejudice to the pending appeal to the House of Lords. Enjoyment of the best of both worlds means, in practical terms, that if they win in the House of Lords the claimants will not want to pay for a statutory easement; and, if they have already paid for one, they will want the return of their money. If, however, they lose in the House of Lords, they will be prepared, and indeed presumably more than willing, to pay for a statutory easement.
[10] The problem in achieving this ideal is, however, that once the compensation payable by a particular applicant has been agreed or determined, it is payable by that applicant within the two-month period prescribed by reg 13. The claimants are now hard up against that time limit, because on 14 July 2003 Bakewell gave notice to each of them under reg 7, accepting their application as a result of which the effect of reg 13 is that each claimant has until about 14 September 2003 to pay the relevant compensation. The compensation payable by Mr and Mrs Cobbold is £ 9,000 and the same amount is payable by Ms Graham.
[11] The claimants do not want to make these payments unconditionally. If they do, and the appeal to the House of Lords succeeds, then they are concerned that they will not be able to recover them. The evidence shows Bakewell to be insolvent on a balance sheet basis, with a net deficit of £4,067 as at 31 October 2001. Accordingly any payment of the £18,000 compensation payable by the claimants may well prove hereafter to be irrecoverable in fact. The purpose of this application is to ask the court to fashion, if it can, a means by which the claimants can pay the money to Bakewell and obtain a statutory easement in exchange, but be sure of recovering the money if the appeal to the House of Lords succeeds and shows that they did not need to acquire a statutory easement after all.
[12] The matter first came before me on 1 September, when Mr Morgan QC appeared for the claimants. Suffice it to say, that as a result of the discussion which then took place, Mr Morgan was disposed to recognise that, on the face of it, any payment under reg 13 is one which has to be paid to Bakewell unconditionally, although his position was that, one way or another, the payer would have a good arguable claim for a repayment of money so paid if the House of Lords were to allow the appeal.
On that basis, he acknowledged further that the only ground he could identify on which the court could make an order which would or might go some way to protecting the claimants' future claim to recover any money so paid was by way of recourse to its jurisdiction to grant freezing orders. He submitted that the evidence as to Bakewell's insolvency was such that there was a real risk that any money paid to it by the claimants would be dissipated by the time that they sought to recover it. He said, therefore, that the court could and should grant an appropriate freezing injunction.
[13] I heard certain preliminary submissions from Miss Wood in response to that, her position being that there was no justification for the grant of such an injunction. I declined, however, to deal with the matter at that stage, since there was no application for a conventional form of freezing order before the court or any evidence on affidavit supporting it. I adjourned the matter until 4 September so as to enable the claimants to formulate the precise nature of the case they wanted to make, and support it by proper evidence.
[14] The result has been the production of an amended claim form and an amended application notice. The claim form asks for certain declarations against Bakewell, which I need not detail, since it is not suggested that I should make any such declarations on this application. It also asks for two alternative heads of relief directed at protecting for future recovery any payments the claimants make to Bakewell for the purpose of acquiring a statutory easement. The first proceeds on the basis that any payment to Bakewell should be regarded as being on the terms of a trust, the terms of that trust being (1) if the appeal to the House of Lords fails, the money will belong and will always have belonged to Bakewell, but (2) if it succeeds, it will belong and will always have belonged to the payer. There is no question of Bakewell agreeing to the imposition on it of any such trust, and so the claimants' submission is that the court should impose that trust on Bakewell. If it does, then the first head of protection which the claimants ask the court to provide is founded on the proposition that the payers will have a sufficient beneficial interest in the money they pay to justify an injunction preserving that interest until after the disposal of the appeal in the House of Lords. That is not in the nature of a freezing injunction, it is an injunction directed at protecting a proprietary interest. The alternative head of protection suggested is a straightforward freezing order. The amended application notice seeks interim relief under both heads in the alternative.
[15] On the adjourned hearing on 4 September, Mr Martin Rodger, Mr Morgan's junior, appeared for the claimants in place of Mr Morgan, who had unavoidable commitments elsewhere, and relied on the trust argument as the claimants' primary case. If there is any basis for it, then of course it offers a better route for the claimants than a freezing order since it would lead to an unqualified tying up of any payments made to Bakewell until after the outcome of the appeal to the House of Lords.
[16] In my view, however, the argument is an impossible one. The suggested trust is said to be in the nature of the type of purpose trust which was the subject of the well-known decision of the House of Lords in Barclays Bank Ltd v. Quistclose Investments Ltd [1970] AC 567, [1968] 3 All ER 651, but it does not appear to me to come even close to being a trust of that nature. First, the terms of the suggested trust identify no relevant purpose to which the money is to be exclusively applied. All that they do is suggest trusts on which Bakewell should be required to hold any money so paid, namely for one or other, of Bakewell or the claimants, depending on the outcome of the appeal. Secondly, I can identify no basis on which the suggested trust can be said to arise. If Bakewell were to agree to hold the money on such trusts, then there would be no problem. But it has not so agreed, nor is it prepared to. Its stance is that, if the claimants want a statutory easement, they must pay it the compensation to which it is entitled under the regulations, and any money so paid will then become its money and the claimants will have no continuing proprietary interest in it. Bakewell is not compelling any such payment and the claimants are not obliged to pay Bakewell a penny if they do not want to. However, they do want to, because it will buy them the certainty of obtaining an easement, whereas there can be no certainty that their appeal will succeed.
[17] In those circumstances, if the claimants do pay the money to Bakewell for the easement, there is no recognised basis that I can see on which any money so paid will become trust money in Bakewell's hands. The suggestion in the amended claim form is that the court can somehow "impose" such a trust on Bakewell in respect of any payments so made. In my judgment it cannot. Any such trust would appear to be in the nature of a remedial constructive trust, but the problem with that is that English law, at any rate as applied in this jurisdiction, does not at present recognise any power in the courts to create such trusts (Westdeutsche Landesbank Girozentrale v. Islington London Borough Council [1996] AC 669, per Lord Browne-Wilkinson at 916G-H; and Re Polly Peck International plc (in administration) (No 2) [1998] 3 All ER 812). In short, I can identify no jurisdiction on the basis of which I could impose on Bakewell the type of trust which Mr Rodger proposes; and, that being so, I can see no basis on which his trust argument can succeed. I therefore decline to purport to impose any such trust or, as follows, to grant an interim injunction directed at protecting the claimants' interests under it.
[18] Mr Rodger's alternative argument is that he says that this is a case in which the jurisdiction to grant a freezing injunction is satisfied. He says that the claimants have a good arguable case in the House of Lords for a reversal of the adverse decisions below. He says the state of Bakewell's solvency, or lack of it, is such that, absent a freezing injunction, it is likely that by the time, if ever, the claimants come to seek to recover their £18,000, it will have been dissipated.
[19] As to whether the claimants can be said at present to have a good arguable case to recover any money they pay over, there was a considerable difference between counsel. It might well be arguable that success by the claimants in the House of Lords would serve to undermine the condition in s 68(1)(a) of the 2000 Act for the grant to the claimants of the statutory easements, and so enable it to be said that the money had been paid on the basis of a mistake of law. But, if so, the claimants are fully aware that that may be the outcome and they know that any payments they make may later be shown to be made on a mistaken basis. Indeed, the irony of the situation is that it is the claimants themselves who are determined to show, if they can, that the payments they are so keen to make will have been paid on a mistaken basis. In those circumstances, it seems to me to be clear that they will be making the payments with their eyes wide open to the uncertain basis on which they make them. I cannot see that they could subsequently have any claim in restitution to recover them (see Kleinwort Benson Ltd v. Lincoln City Council [1999] 2 AC 349 at 363B-C, per Lord Browne-Wilkinson). Nor does it appear to me that it could be said that the money would have been paid for a total failure of consideration. As matters stand at the moment, the claimants' use of the common for vehicular access purposes is unlawful and can be restrained. The acquisition of a statutory easement will render their activities lawful. In addition, the reason why the claimants want the statutory easement is that they recognise that they may lose in the House of Lords, so that it will buy them certainty whereas otherwise they face uncertainty, and at probably a lesser price than if they had to negotiate an arms-length deal with Bakewell after losing their appeal.
[20] I am, therefore, far from persuaded that the claimants can be said to have a good arguable case for recovery if they succeed in the House of Lords. As Miss Wood submits with some force, nor can I be satisfied that they even have a good arguable case for success in the House of Lords, since the giving of leave to appeal carries with it no implication that the appeal is likely to succeed.
[21] Mr Rodger's main point on this was, however, that he said that, if the claimants do succeed in the House, then the House could itself order Bakewell to repay the money paid to it for the statutory easement on the basis that a successful appellant is entitled to compel the respondent to restore all benefits gained through the reversed judgment. I do not question that principle, which is well-established. But I do question whether the payment of money to Bakewell for a statutory easement could be regarded as the type of benefit to which the principle applies. That payment will not have been one which the claimants were ordered to pay as a result of their failures in the courts below. It is one they will have chosen to pay voluntarily in order to buy certainty.
[22] Of course, all these points were directed to whether the claimants would have a good arguable claim to recover the payments if hereafter their appeal succeeds. Miss Wood argued that they anyway had to go further and show that they would have a good arguable claim immediately after the payment is made. She says they cannot do that, since the claim can only be made once the outcome of the appeal is known. Mr Rodger disagreed with that analysis and said the claimants' case is that they have a present good arguable claim in the House of Lords and that therefore they have a present claim of sufficient quality to justify the protection of a freezing order.
[23] I do not propose to express views on this last part of the debate, but will simply say that I was not persuaded that, if the appeal were to be allowed, the claimants would have by any means a clear case for the recovery of the payments. I do not, however, decide that they would have no case. In my view, however, in so far as these things are capable of measurement, I would assess it as a weak case, falling short of being a good arguable one.
[24] This does not assist the claim for a freezing injunction, but that claim also faces a further difficulty, namely proof of a real risk of dissipation of assets in the meantime. Given the state of Bakewell's finances, it is quite likely that £18,000 will no longer be sitting in its bank account when the claimants come to seek its recovery. But if and to the extent it is not, it does not follow that it will have been dissipated in the sense in which that word is used in the freezing injunction jurisdiction. That jurisdiction was not developed as a means of giving a claimant security for his claim. It is simply directed at protecting claimants against the improper actions of a defendant in so dealing with his assets as deliberately to frustrate a judgment the claimant may ultimately obtain. In so far as directed at corporate defendants, a freezing injunction is not intended to prevent perfectly proper dealings in the ordinary course of business, even if the effect of those dealings may mean that any judgment ultimately obtained will not be satisfied.
[25] For that reason, it is essential in any application for a freezing injunction to adduce evidence sufficient to show, or justify the inference of, a real risk of an improper dealing with assets so as to frustrate any ultimate judgment. This is, in my view, well established and is, for example, illustrated by the decision of the Court of Appeal, to which Miss Wood referred me, in Mediterranean Feeders LP v. Berndt Meyering Schiffarts (5 June 1997, unreported). The problem in this case, however, as Mr Rodger accepted, is that there is no evidence of any risk of impropriety by Bakewell in the manner in which it may deal with any money paid to it; and no evidence, therefore, of any risk of dissipation in the sense relevant for the freezing injunction jurisdiction.
[26] In those circumstances, I am not satisfied the claimants have made out a case which justifies the grant of a freezing injunction, and I refuse their application for one. The result is that I dismiss the claimants' application.