The High Court handed down judgment on 26 February 2025, rejecting a claim for rectification of a transfer which allegedly failed to record an oral agreement as to the beneficial ownership of a property in Suman Bhaitia v Christopher Purkiss and another [2025] EWHC 359 (Ch)
In February 2022, the Insolvency and Companies Court found Mr Deepak Bhatia liable for misfeasance and fraudulent trading under sections 212 and 213 of the Insolvency Act 1986 in respect of his business with JD Group Limited, which had entered liquidation. The judgment debt of £3.4million, entered against Mr Bhatia, was secured against 9 Harwell Close (the Property) pursuant to an interim charging order.
The Property was jointly registered in the names of both Mr Bhatia and his mother, Mrs Suman Bhatia. They became registered as beneficial joint owners of the Property in 2007, following a transfer with a purchase price of £2.5million (the Transfer).
Following the interim charging order placed on the Property by the Court, both Mrs and Mr Bhatia claimed that the Transfer contained a mistake which did not accurately record an agreement made between them in the 12 months prior to completion. This agreement, according to the Bhatias, was that Mrs Bhatia was to be the sole beneficial owner of the Property, with Mr Bhatia's's name being on the title only to allow him to be jointly responsible for the mortgage, as Mrs Bhatia did not have the means to remortgage alone.
Fast forward to 2023 and Mrs Bhatia issued a claim against the liquidator of Mr Bhatia's's company JD Group Limited, Mr Purkiss. The claim sought an order that the Transfer be rectified to give effect to the agreement that she and her son were holding the Property on trust for Mrs Bhatia alone.
Mr Purkiss issued a claim against Mrs Bhatia for an order for possession and sale upon the interim charging order becoming final. At the same time, an order for possession was granted to a legal mortgagee, The Mortgage Business, as the 15-year mortgage term on the Property had expired in 2022 without repayment.
Rectification as an equitable remedy
Mrs Bhatia had the burden of proving some outward expression of agreement between her and her son that demonstrated that the Transfer should be rectified to accord with what she and her son had intended it to say. Mrs Bhatia's claim was based on the following:
- The purchase price and costs of purchase had come from many sources, including Mr Bhatia's companies and mortgage loans. Mrs Bhatia claimed that, aside from the £275,000 she paid in three cheques from her personal bank account, any purchase monies over and above those borrowed from The Mortgage Business were received from her son's companies in satisfaction of repayments of earlier, substantial loans she had lent to his company;
- Mr Bhatia's payment of the mortgage instalments and utilities at the Property for 15 years was representative of the scale of the debt owed to his mother;
- Mr Bhatia had not lived at the Property since its purchase in 2007;
- Both Mr and Mrs Bhatia had signed the Transfer without reading it and the solicitor had mistakenly ticked the box confirming joint beneficial ownership without instructions.
Mr Purkiss's case was simple – Mrs Bhatia's claim was implausible. There was no documentation supporting the alleged oral agreement and the loans Mrs Bhatia claimed were being repaid by Mr Bhatia paying the mortgage were, at best, exaggerated and, at worst, mistermed. The fact that Mr Bhatia had waited until draft judgments against him were circulated to claim that he had no beneficial interest in the Property was, according to Mr Purkiss, not just a coincidence and the delay only assisted Mr Purkiss's equitable defence of delay, i.e. the doctrine of laches.
Judgment
The Court found no contemporary evidence supporting the existence of an oral agreement between the Bhatias in the mid-200s, and any documentation that was disclosed was instead inconsistent with Mrs Bhatia's claims. Combined with the fact that such an agreement would have been commercially detrimental to Mr Bhatia (making him personally responsible for his company's alleged loans at an interest rate of 32.4%) and that it was hard to believe that Mr Bhatia resided in a staffroom on an industrial estate as opposed to at the Property for at least 12 years, as was contended, the Court dismissed Mrs Bhatia's claim for rectification. Mr Purkiss's application for enforcement of the charging order by an order for sale of the Property succeeded, subject to separate issues with The Mortgage Business's possession order.
Although the findings in this case were unsurprising, it acts as a good reminder that physical circumstances of a contemporaneous common intention needed for a rectification claim must match the alleged mental circumstances to successfully displace the natural presumption that a legal document is an accurate record. It was not enough for Mrs Bhatia to claim incomplete or mistaken legal documents demonstrated that an oral agreement must have existed – the disputed (and "self-serving" as stated by the Court) facts of Mr Bhatia's financial contributions and residence over the years meant that, on the balance of probabilities, the Court found that the Bhatias did not reach an oral agreement in respect of the Property's beneficial ownership that contradicted the legal documents entered into at that time.
The age-old lesson? Read your contracts before signing and put any oral agreements in writing!
