Mr & MRS WILKINSON and WEST BROMWICH BUILDING SOCIETY
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lord Justice Jonathan Parker,Lord Justice Dyson |
| Judgment Date | 30 July 2004 |
| Neutral Citation | [2004] EWCA Civ 1063 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B2/2003/2123 |
| Date | 30 July 2004 |
[2004] EWCA Civ 1063
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HHJ CRAWFORD LINDSAY QC
CENTRAL LONDON COUNTY COURT
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Mummery
Lord Justice Jonathan Parker and
Lord Justice Dyson
Case No: B2/2003/2123
(Case Number CL 211028)
MR NIGEL MEARES (instructed by Peter H Rollin) for the Appellant
MR JOHN McGHEE QC & MISS S TOZER (instructed by Rosling King) for the Respondent
Introduction
This appeal is about the application of the Limitation Act 1980 (the 1980 Act) to proceedings brought by the West Bromwich Building Society (the Society) in the county court to recover the balance of an advance made on mortgage, plus interest. The Society is attempting to pursue a personal claim against the mortgagors in order to recover the amount of the deficit or shortfall, which occurred when the Society sold the mortgagors' house, over which it had a legal charge securing repayment of the advance.
Two recent decisions of this court have dealt with shortfall claims in the context of the effect of the 1980 Act on the exercise of the cumulative and concurrently exercisable proprietary and personal rights and remedies of a mortgagee. Situations like the present usually arise from a calamitous combination of high borrowing levels by homeowners, rising interest rates charged by lending institutions and volatile housing markets, such as occurred in the late 1980's and early 1990's and have affected the parties in this case. Experience shows that, for a variety of reasons, it can take many years for mortgagees to work their way through all of the rights and remedies available to them for the recovery of the advance.
This court ruled on the interpretation and interrelation of s8 ("Time limit for actions on a specialty") and s20 ("Time limit for actions to recover money secured by a mortgage or charge") of the 1980 Act in Bristol and West plc v. Bartlett [2003] 1 WLR 284 and Scottish Equitable plc v. Thompson [2003] HLR 48.
It was held in Bartlett that, where the mortgagee has sold the mortgaged property, but the proceeds of sale are insufficient to cover the balance of the advance still owing, 12 years is the relevant limitation period applicable to a personal action by the mortgagee on an express covenant by the mortgagors in the mortgage deed to repay the advance on the mortgagors' failure to keep up agreed instalment payments. That is the result of reading ss8 and 20(1) together and applying them to actions against the mortgagors to recover the balance of the principal sum.
In this case the Society sold the mortgagors' house many years ago (1990) . It knew then that there was a shortfall, but it did not take any further recovery proceedings until recently (2002) . The crucial issue is the date from which the relevant limitation period began to run. It is not easy. Although the mortgage deed expressly provides for the payment of monthly instalments, it does not include any express covenant by the mortgagors to repay the whole of the balance of the advance on a specified date or in a specified event, such as default in the payment of the instalments. The surprising omission (which led Jonathan Parker LJ to comment in the course of argument that the Society should consider tearing up this particular form of mortgage deed) has given rise to some difficult questions on the construction of the mortgage deed, the extent to which personal repayment obligations, which were not expressed, should be implied, either by way of covenant or contract, and the construction and application of ss5, 8 and 20 of the 1980 Act.
Summary of Parties' Positions
The mortgagors (Mr & Mrs Wilkinson) contend that time began to run from the date of the last repayment of the monthly instalments towards the discharge of the mortgage debt (31 July 1989) . That was more than 12 years before the date on which the Society began its action against them personally for the recovery of the shortfall (12 November 2002) .
The primary contention of the Society is that the realisation of its security by the exercise of its power of sale over the house did not affect the continuing liability of Mr & Mrs Wilkinson, under the express covenant in the legal charge, to make monthly repayments of the advance to the Society until the Society was repaid in full. The Society has still not been repaid in full. The limitation period in respect of each covenanted instalment only starts to run against the Society from the date on which each monthly instalment becomes due. It is contended that the Society is entitled to recover all the past instalments, which should have been paid, but were not paid, by the Wilkinsons during the 12 year period preceding the commencement of the action; and that it is entitled to payment of future instalments until repayment of the advance has been completed.
The Society's alternative case is that time did not start to run against it until the amount of the shortfall was actually ascertained. That occurred when it sold the house (14 November 1990) . The sale of the house triggered an implied term that only then did the whole of the balance of the advance become due to the Society. That sum was not "secured by a mortgage on property" within s20(1) of the 1980 Act, as the property had been sold and so was not subject to the prohibition in that section on actions for the principal sum more than 12 years after the right to receive the sum has accrued to the Society. The action for the recovery of the shortfall was started just two days before the expiration of the 12-year period running from the sale date and is not therefore statute barred.
The Facts
Mr Mark Wilkinson and his wife Lynne, the appellants, were the owners of 5, The Terrace, Scole, Norfolk (the house), subject to a Legal Charge dated 26 October 1988 in favour of the respondent Society. The amount of the advance was £34,895.16. The monthly repayments were initially £484.23, but were subject to adjustment.
In January 1989 the Wilkinsons fell into arrears with the monthly repayments. The Society took the usual steps to enforce its security. On 25 July 1989 it obtained an order for possession of the house. It appears from evidence filed in these proceedings that the amount of the arrears at that point was £43,648.44. 31 July 1989 was the last date on which the Wilkinsons made an instalment payment to the Society. On 9 October 1989 the Society took possession of the house. On 14 November 1990 the house was sold for £34,000. The proceeds of sale were credited to the Wilkinsons' mortgage account and used to reduce the sum due under, and secured by, the charge in accordance with s105 of the Law of Property Act 1925. There still remained owing to the Society the sum of £23,921.92, which it claimed with interest at 8% from 15 November 1990.
However, it was not until 12 November 2002 that the Society issued its claim form "for the recovery of the sum of £24,010.12 (later amended to £23,921.92) together with interest and costs in respect of monies outstanding under a Legal Charge dated 26th October 1988." It was seeking to enforce its personal remedy against the Wilkinsons for recovery of the balance of the advance due to it. The Amended Particulars of Claim referred to the default in maintaining payments due, the proceedings for possession and the sale of the house, leaving a deficit due of the sum claimed, together with interest. No particulars were given of monthly payments due, but unpaid.
In their Defence the Wilkinsons pleaded that the Society's cause of action accrued when they defaulted in paying the instalments. As that occurred more than 12 years before the commencement of proceedings, the claim was statute barred. No other defence was pleaded. The limitation issue fell to be determined when the Society applied on 24 January 2003 for summary judgment under Part 24.2(a) CPR.
The parties agreed in the court below that (a) the relevant provisions of the 1980 Act are sections 8 and 20 and (b) the length of the applicable limitation period is 12 years. Section 5 should also be mentioned.
Section 8 of the 1980 Act contains the general rule for actions upon a specialty. An action to enforce an express or implied covenant in a mortgage deed is an action upon a specialty.
"(1) An action upon a specialty shall not be brought after the expiration of twelve years from the date on which the cause of action accrued.
(2) Subsection (1) above shall not affect any action for which a shorter period of limitation is prescribed by any other provision of this Act."
Under s5 a claim founded on simple contract shall not be brought after the expiration of 6 years from the date on which the cause of action accrued.
Under s5 and s8 the relevant questions are: (a) what is the Society's cause of action in these proceedings; and (b) when did it accrue?
Section 20(1) of the 1980 Act restricts the right to bring proceedings to recover money "secured by a mortgage on property." It contains a prohibition on the bringing of an action to recover the principal sum of money secured by a mortgage on property after the expiration of the specified 12 year period:
"(1) No action shall be brought to recover-
(a) any principal sum of money secured by a mortgage or other charge on property (whether real or personal) ; or
(b) proceeds of the sale of land;
after the expiration of twelve years from the date on which the right to receive the money accrued."
Under section 20 the...
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