I’ve got to admit it, I’ve fallen for HHJ Behrens. I’ve no knowledge of him, have never appeared before him, and have only read his written words, but he just seems to be that type of property lawyer who is also human. He is developing something of an expertise in sale and rentback transactions, for which I have a degree of empathy for him as well as have considerable interest in. He did the re North East Property Buyers litigation, which we noted and commented on. I think HHJ Behrens was spot-on – it’s for the Supreme Court to interfere with the basic principles adumbrated in Abbey National BS v Cann (they should; it’s the antithesis of HHJ Behrens: property law without a heart, but then it’s well-known that I’m a softie as well as [apparently] a leftie liberal etc).
Anyway, cut to the chase, HHJ Behrens again is the judge in Purdie and Bellwood v Miller, in the Newcastle Upon Tyne county court but he’s sitting there as a High court judge, I think. We have the solicitor for Ms Miller, Diane Hall, to thank for the transcript in this case. It is of an altogether different hue from the deep property law of the NEPB litigation; the arguments for Ms Miller are essentially seeking to unravel the contractual foundations of the agreement between herself and Purdie/Bellwood. And they do so successfully, so for anybody interested (or obsessed like me) with this area of litigation, it is useful. Somewhat unusually it also has to be said, Purdie was found to be an honest witness, who had continued to pay the mortgage on the property, and his evidence was preferred on three points of factual dispute at the trial.
So, the transaction was this. Ms Miller couldn’t afford to pay her mortgage and ran up a couple of months’ arrears. She found Purdie/Bellwood, trading as Dolphin Finance on that powerfully inadequate tool: the internet. They agreed to a sale and rent back arrangement. This was Dolphin’s first such arrangement and they “tailor made” it for Ms Miller. In essence, Dolphin agreed to buy the property at market value (£82.5k); they would repay the mortgage and arrears; they would install full central heating in the property and redecorate it; they would pay all legal costs and pay Ms Miller £4k on completion; Ms Miller would get a three year AST at a below market rent of £228 which Ms Miller could afford, with an option to repurchase at the end of the three year period (having read the customer service agreement, I wasn’t entirely sure about the certainty of that term, but pass over that point) with a “gifted deposit” from Dolphin.
In a different document, Dolphin put: “We charge a £4,000 mortgage packaging fee payable to ACM Mortgage packaging [another of Purdie/Bellwood’s companies], plus an additional fee of approximately £41,000 for property related costs”. The £4k was to be repaid if Ms Miller decided not to exercise the option to purchase. The £41k (which morphed into £41,200) was to be held in Dolphin’s bank account to cover the (undefined) deposit, all legal costs and other disbursements for property related maintenance. Purdie and his dad (who appears also separately be involved in sale and rentback) were arrested by the cops. That put paid to the partnership between Purdie and Bellwood, and they divided the assets of the partnership between them including the bank account (oops)
The matter proceeded to completion, Ms Miller being referred to a firm of solicitors who acted for her on the transaction (loosely speaking, as their initial letter “contained no advice about the nature of and effect of the transaction”, which seems odd to me, and the completion statement was, as HHJ Behrens noted, incorrect in three respects). Most documents seem to have been prepared by Mr Purdie on the instructions of Ms Miller and sent to those solicitors. The matter proceeded to completion. The central heating was subsequently installed, although the allegation was that it had not been done properly (Category 1 and 2 hazards were found at the property) together with other defects. After a kerfuffle, Ms Miller signed the tenancy agreement.
Subsequently, Ms Miller only paid one month of rent. The first year’s rent was taken from the completion proceeds (and Ms Miller’s argument that this was supposed to be a rent free period was found against her). The claim began as a simple possession claim on the basis of Grounds 8, 10, 11, but it was obviously more complicated than that. Mr Purdie represented himself and Ms Miller was represented by counsel. Her arguments were based on three grounds: misrepresentation; unconscionable bargain; breach of contract. the misrepresentation line never got off the ground – it was clear that Purdie/Bellwood had properly explained the transactions to her and, as the sale had been at a market value, the unconscionable bargain line was never a runner.
It’s the breach of contract point which was, however successful. first, as Ms Miller was not in a position at the end of the three years, she was entitled to the £4k payment to ACM Mortgage Packaging back. As they say on that annoying ad, “simples”. But what of the £41,200 retained for “property related costs”. In HHJ Behrens view, it was implicit in the arrangement that if Ms Miller did not exercise her option, the balance would be repaid to her, so he implied a term to that effect on ordinary contractual principles. Further, Ms Miller was entitled to an account of what happened to that money; Mr Purdie, on the back foot, was only able to provide one bill for £1800 for the central heating, and the heart of HHJ Behrens assessed that he had probably spent around £3k (if he had spent more, “he has only himself to blame for not keeping proper accounts”). Dolphin had failed to keep the money in their bank account, so a breach of contract arose when it was distributed between Purdie and Bellwood. Ms Miller was, therefore, entitled to £38,200, which was set off against the rent arrears, meaning that, in the absence of arrears, Ground 8 wasn’t a runner.
The sting in the tail was that Purdie brought the proceedings and was invited by HHJ Behrens to file a statement saying that Bellwood consented to the claim but he did not do so. It was not necessary to express a view on the point, but HHJ Behrens’ view was that the lack of authorisation would have proved to be fatal to the claim.