Court ruling clarifies property law complexities

On 8 April 2025, the High Court of Justice delivered a significant judgment in the case of Jeffrey Orchard & Anor v Daljit Dhillon, addressing an appeal by Mr and Mrs Orchard against a prior ruling. This earlier decision, made by His Honour Judge Duddridge in July 2024, ordered the Orchards to vacate their property at 56a Claudian Way, Grays, RM16 4QD, and to pay £97,000 in unpaid rent owed to Ms Dhillon.

The legal battle traces back to the Orchards' financial troubles that led them to enter a sale and rent back (SRB) agreement with Red 2 Black Ltd (R2BL), a company co-founded by Ms Dhillon’s former husband. Initially, the Orchards owned the property and, under the SRB arrangement, they were allowed to remain as tenants despite the title transferring to R2BL. The appeal raised claims of fraudulent misrepresentation in the SRB agreement and contended that R2BL was operating without the necessary authorisation under the Financial Services and Markets Act 2000 (FSMA).

Mr Justice Miles meticulously reviewed the complex evidentiary landscape as part of his judgment. The focal issue was whether Ms Dhillon had engaged in unauthorised business activities under FSMA after 2013, which would affect the enforceability of the SRB agreement. Given the legal framework, it was argued that properties transferred under contracts made in violation of the general prohibition could be reclaimed by the innocent party.

Judge Miles established that, while R2BL's authorisation was lacking, Ms Dhillon’s actions since acquiring the property did not equate to conducting business in violation of the FSMA. Therefore, the appeal against her was ultimately dismissed due to insufficient grounds. During the ruling, Judge Miles remarked on the intricate interplay of property law, underscoring that it is essential to consider the equitable rights of the parties involved, particularly with regard to unpaid rents and obligations stemming from the FSMA.

While the appeal was dismissed, it did not escape Judge Miles’s notice that there were substantial concerns surrounding the original agreement, particularly regarding R2BL’s operations. The judgment encapsulates the necessity of adhering strictly to regulatory standards in property transactions involving rental agreements. The court encouraged both parties to explore alternative dispute resolution methods to attain a mutually agreeable settlement, reflecting a preference for resolving disputes outside traditional litigation avenues. Further hearings are expected to address additional issues that may emerge from this ruling.

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