was recently asked to consider a situation where an entity, who owned the whole
beneficial interest of a property under an unregistered Declaration of Trust,
received notice that a creditor of one of the other legal owners of the
property was going to register a charging order against the property.
charging order obtained over a property owned by more than one person takes
effect as an equitable charge over the debtor’s share in the beneficial
interest of the property (i.e. the equity).
the Hughmans case, a solicitor had obtained a charging order in respect
of unpaid fees and registered it against a property, the beneficial interest of
which was subject to a compromise agreement in previous litigation.
there are competing interests in registered land, which one takes priority is
determined by the date of creation of the interests with one exception - where
a “registrable disposition” (i.e. transaction) of a registered estate is made
for “valuable consideration”, registration of that interest means it jumps
forward and takes priority over any earlier unregistered interests.
High Court had to determine (amongst other things) whether the charging order
was a “registrable disposition for valuable consideration”. This question
had already been considered in United Bank of Kuwait Plc v Sahib  Ch107 in which the court concluded that as a debtor receives no consideration
from the creditor at the time a charging order is made, it is not a registrable
disposition for valuable consideration.
High Court agreed with the judge’s analysis in Sahib and said it was
unlikely that Parliament intended the Charging Order Act 1979 should give the
recipient of a charging order any priority over the holder of a beneficial
interest in the relevant property, even if that interest had not been protected
by registration. The Hughmans case went to the Court of Appeal who
upheld the decision (although the appeal did not challenge the “valuable
consideration” question which is of most interest to us).
referring the creditors to the above case, they promptly withdrew their
charging order application and my client was delighted.
by Clare Greig, Chartered Legal Executive