Credit and Mercantile Plc v Marks
| Jurisdiction | England & Wales |
| Judge | Lord Justice Clarke |
| Judgment Date | 13 May 2004 |
| Neutral Citation | [2004] EWCA Civ 568 |
| Docket Number | Case No: B2/2003/2759 |
| Date | 13 May 2004 |
| Court | Court of Appeal (Civil Division) |
[2004] EWCA Civ 568
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE SLOUGH COUNTY COURT
Mr Recorder Chapman
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Clarke
Lord Justice Dyson and
Lord Justice Wall
Case No: B2/2003/2759
Miss Katherine Olley (instructed by Shah Solicitors) for the Appellant
Mr Geraint Jones QC and Mr Philip Rainey (instructed by Glovers Solicitors) for the Respondent
Introduction
This is the judgment of the court in an appeal from part of an order made by Mr Recorder Chapman in the Slough County Court (sitting at Uxbridge) on 17 December 2003. The action arises out of a mortgage on Home Farm House, Hockley Lane, Stoke Poges, where the appellant lives with her husband and three children. She acquired the house with the assistance of a loan of £1,305,000 from the respondent which was secured by a first mortgage on the property dated 5 August 2002. Unfortunately she subsequently fell into arrears and on 18 November 2002 and 30 January 2003 the respondent served formal demands upon her for immediate repayment of the monies due under the loan.
On 12 February 2003 the respondent issued a claim for possession of the property, which was listed for hearing on 31 March 2003. At that application the appellant was represented by her husband, to whom she had granted a power of attorney in respect of dealings concerning Home Farm. An order for possession was made. No steps were immediately taken to appeal against or otherwise challenge that order. However, on 31 July 2003, shortly after taking legal advice for the first time, the appellant made an application to the court for various directions. On 17 September it was ordered that the application notice of 31 July be treated as an application for permission to appeal and that the application should in any event be heard by a circuit judge. The application finally came before Mr Recorder Chapman on 17 December.
Three points which had been taken on behalf of the appellant were considered by the recorder at that hearing as follows:
i) that the effect of a sub-charge granted by the respondent to the Bank of Scotland was that the respondent had no right of possession so that the order for possession was either made without jurisdiction and should be set aside on that ground or was wrong in law and should be set aside by way of appeal;
ii) that the amount of interest recoverable by the respondent was considerably less than that claimed because the rate of interest provided in the facility letter was so excessive that the agreement amounted to an extortionate credit bargain and because the variable facility fee in the facility letter amounted to an unlawful penalty; and
iii) that the appellant would shortly be able to redeem the charge so that possession should be suspended under section 36 of the Administration of Justice Act 1970.
In this appeal we are concerned with only the first of those points. The recorder said that the second point essentially raised questions of quantum, and that, since at the possession hearing on 31 March the money claims had been adjourned generally, the appropriate course was to give directions as to the issues relevant to the money claims to include those in point two. As to the third point, the recorder held that he could not be satisfied that the whole of the debt, even if substantially reduced to take account of the appellant's case on the money issues, would be discharged within a reasonable period. He accordingly dismissed the application under section 36 and refused permission to appeal and no application to appeal in that regard has been made to this court.
That leaves the first point. The recorder granted the appellant permission to appeal against the order for possession made on 31 March 2003 but, after considering the point in a careful and impressive judgment to which we wish to pay tribute, he dismissed the appeal. On 2 March 2004 Jonathan Parker LJ granted permission to appeal to this court limited to what may be called the sub-charge point, which we will consider by reference first to the contractual documents and then to the relevant statutory provisions, the authorities (so far as they assist) and the text books.
The contractual documents
The facility letter and the charge
There are two relevant contractual documents as between the appellant and the respondent, the facility letter dated 29 July 2002 from the respondent to the appellant and the legal charge dated 5 August 2002. The facility letter sets out the terms on which the respondent was willing to lend the sum of £1,305,000 to the appellant, who accepted its terms by signing a copy of the letter. The purpose of the loan was to assist her to acquire the property and to provide time "to resolve planning opportunities". The loan was repayable on demand and the facility was expressed to be for the minimum period of six months from drawdown. The security was to be a first legal charge on Home Farm. The letter contained detailed provisions on a number of matters including charges and deductions.
It is perhaps only necessary to refer to paragraphs 2 and 3 of schedule 2 to the letter. They provide, so far as relevant, as follows:
"2. Repayment on Default
The security as provided for in the Offer Letter shall become enforceable and the facility together with charges thereon and all other monies due under the Facility and Security Documents shall become immediately due and payable upon demand by us at any time following the occurrence of any of the following events
2.1 If you make a default in repayment or payment to any monies due to us from you under this Facility or the Security Documents.
…
3. Assignment
You hereby agree that we have the right [to] cede assign sub-mortgage or transfer this debt and its securities to any of our subsidiary companies associates bankers or assigns."
The legal charge contains a covenant to pay in clause 1. It also contains familiar provisions which it is not necessary to set out, except perhaps for part of clause 5 which includes the following:
"5. Enforcement
5.1 This Legal Charge shall become enforceable:
5.1.1 if any of the monies obligations and liabilities secured by this Legal Charge shall not be paid or discharged by the Borrower in accordance with clause 1; or …
5.2 Section 103 of the Law of Property Act 1925 shall not apply and the statutory power of sale and all other powers under that or any other Act as varied or extended by this Legal Charge shall arise on and be exercisable at any time after the Lender shall have demanded the payment or discharge by the Borrower of all or any of the monies obligations and liabilities secured by this Legal Charge."
It is not as we understand it in dispute that under the terms of the facility letter and the charge the respondent has a right to go into possession if any of the monies due under them is not paid by the appellant. The general principle is that stated by Harman J in Four-Maids Ltd v Dudley Marshall (Properties) Ltd [1957] 1 Ch 317 at 320, namely that a mortgagee may go into possession before the ink is dry on the mortgage unless there is something in the contract, express or by implication, whereby he has contracted himself out of that right. Again as Harman J put it, he has the right because he has a legal term of years in the property or its statutory equivalent. It is a common law right which is preserved (but not created) by section 95(4) of the Law of Property Act 1925.
Although it is not necessary finally so to decide for the purposes of this appeal, it seems reasonably clear to us that there is something in the contract here, either expressly or by necessary implication, which would prevent the respondent from taking possession of the property before the legal charge became enforceable under clause 5, namely the combined effect of paragraph 2 of schedule 2 to the facility letter and of clause 5 of the charge. In any event, there can be no doubt that once the charge became enforceable, as for example by a failure to pay monies due under it, on the true construction of the facility letter and the charge, the respondent had a right of possession of the property.
That conclusion is not, as we understand it, in dispute if attention is focused only on those documents. Nor could it be. The question is whether the position is different by reason of the existence and/or terms of the sub-charge, to which we now turn.
The sub-charge
The sub-charge was executed on the same day as the legal charge, namely 5 August 2002. In it the "Borrower" is defined as the respondent and "the Bank" as the Bank of Scotland. We will refer to the Bank of Scotland as "the Bank" or as "the sub-chargee". The "Property" is defined as Home Farm and "the other assets under clause 3" and "Principal Charge" is defined as the legal charge between the respondent and the appellant "and the principal money secured by that charge and all interest due on it or to become due and the benefit of all securities for the payment of it". We shall refer to the charge between the appellant and the respondent as "the principal charge".
By clause 2 of the sub-charge, the respondent agreed to pay the Bank "the Debt" when the Bank"demands in writing". By clause 1.1, "Debt" is given the same meaning as in the "Bank's Commercial Charge Conditions (1995 Edition)" most of which were, by clause 5 of the sub-charge, made applicable to the sub-charge. It is in our opinion important to identify the nature of the respondent's obligations which...
To continue reading
Request your trial
-
Paragon Finance Plc v Pender and Another
...114 of the Law of Property Act 1925 is misplaced. In support of this last submission he relies on the decision of this court in Credit & Mercantile plc v. Marks [2004] 3 WLR 489 (" Marks"). 95 In Marks there was a registered charge and a registered sub-charge. The mortgagor fell into arrear......
-
Meretz Investments NV v ACP Ltd
...114 is completely ousted in the case of a registered charge. 359 Mr Morgan next relied on the decision of the Court of Appeal in Credit & Mercantile plc v. Marks [2005] Ch 81. In that case, Clarke LJ, giving the judgment of the court said: "In a recent case, Paragon Finance Plc v Pender [20......
-
Thomas Morrin v Michael Condon and Ronald Weisz
...in its favour. Counsel for the defendants referred the court to the decision of the Court of Appeal of England and Wales in Credit and Mercantile plc v. Marks [2004] EWCA Civ 568. He submits that this case is authority for the proposition that the granting of a sub-charge does not divest t......
-
The Serious Fraud Office v Hotel Portfolio II UK Ltd ((in Liquidation)) and Others
...acquisition … of a particular asset … is sufficiently clearly proved” (p.217). Henry LJ agreed with both judgments. 29 In Shalson v Russo [2005] Ch 81, [141], in a brief passage, Rimer J expressed his preference for Dillon LJ's view, in a passage which suggests that what is required to per......