National Westminster Bank Plc v Skelton (Note)
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SLADE,MR JUSTICE ANTHONY LINCOLN |
| Judgment Date | 26 May 1989 |
| Judgment citation (vLex) | [1989] EWCA Civ J0526-3 |
| Docket Number | 89/0524 |
| Court | Court of Appeal (Civil Division) |
| Date | 26 May 1989 |
and
[1989] EWCA Civ J0526-3
Lord Justice Slade
and
Mr. Justice Anthony Lincoln
89/0524
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE WEST LONDON COUNTY COURT
HIS HONOUR JUDGE PHELAN
Royal Courts of Justice
MR. JONATHAN BROCK (instructed by Messrs Lock & Marlborough) appeared on behalf of the Appellants (Defendants).
MR. ANTHONY MANN (instructed by Messrs Wilde Sapte) appeared on behalf of the Respondent (Plaintiff).
This is an appeal by Mr. Robert Charles Skelton and Mrs. Wendy Linda Skelton, the defendants in a mortgagee's action, from a judgment given by His Honour Judge Phelan in the West London County Court on 14th December 1988. The proceedings arise out of a legal mortgage made on 25th October 1985 by the defendants in favour of National Westminster Bank plc ("the bank"). The bank was the plaintiff in the proceedings and is the respondent to this appeal.
By clause 1(a) of the mortgage, the defendants charged by way of legal mortgage the property, 4 Moorcroft Way, Pinner, which I understand to be their home:
"…as a continuing security to the Bank for the discharge on demand by the Bank on the Mortgagor of all present future actual and/or contingent liabilities of:-
LEAMINGTON CONSTRUCTION COMPANY LIMITED
(the Debtor) to the Bank whether on account of moneys advanced bills of exchange promissory notes guarantees indemnities interest commission banking charges and whether incurred solely severally and/or jointly and all legal and other expenses (on a full indemnity basis) howsoever incurred by the Bank in connection therewith…"
The mortgage included, inter alia, the following further provisions:
"3 Section 103 of the Law of Property Act 1925 shall not apply to this Mortgage and the statutory power of sale and other powers shall be exercisable at any time after demand.
6 At any time after the power of sale has become exercisable the Bank or any Receiver appointed hereunder may enter and manage the Mortgaged Property or any part thereof and provide such services and carry out such repairs and works of improvement reconstruction addition or completion (including the provision of plant equipment and furnishings) as deemed expedient.…"
On 9th February 1988 the bank issued proceedings seeking possession of the mortgage premises. In its particulars of claim it asserted that it had written to the two defendants respectively, formally calling up the mortgage on the property and requiring payment of the sum of £98,480.02 as the principal and interest calculated to that date. It asserted that the precise amount due and owing to it, inclusive of interest at the date of the apticulars of claim was £104,957 and that interest continued to accrue at present at a daily rate of £36.68. It further asserted, as I understand to be common ground, that the property is a dwelling house occupied by the defendants within the meaning of Part IV of the Administration of Justice Act 1970.
On 30th March 1988 the defendants filed a defence and counterclaim. The nature of the defence appears from paragraphs 4 to 12 thereof, which I should read:
"4. If, which is not admitted, the Defendants charged the property of the Plaintiff, such charge was to secure the indebtedness of Leamington Construction Limited ('The Company') to the Plaintiff.
5. [At] the material times, the Company was a customer of the Plaintiff bank and, in particular, the Company [had] an account with the Plaintiff at its Ickenham Road Corner branch, Ruislip Middlesex.
6. It was an implied term of the contract between the Plaintiff as banker and the Company as customer and/or the Plaintiff as banker owed a duty to the Company as customer not to disclose to any third party unless authorised so to do by the Company information as to the affairs of the Company which had been imparted by the Company to the Plaintiff in confidence.
7. In or around September 1986, a Mr David Buckby an employee of the Plaintiff and the Plaintiff's manager of the Ickenham Road Corner branch, in breach of the said implied term and in breach of the said duty, communicated to a Mr R Bailey an employee of the Company, information as to the financial position of the company so as to inform Mr Bailey or so as to give Mr Bailey the impression that the Company was in financial difficulties and further, Mr Buckby advised Mr. Bailey that Mr Bailey should cease his involvement with the Company.
8. As a consequence of the matters set out in paragraph 7 thereof, Mr Bailey:-
9. By reason of the matters aforesaid, the Company lost stock machinery equipment and profit as aforesaid and in January 1987 was compulsorily wound up.
10. The damages recoverable by the Company from the Plaintiff when set off against any sums otherwise due from the company to the Plaintiff extinguished the same so that there is no sum remaining due from the Company to the Plaintiff.
11. By reason of the matters aforesaid, any charge over the property in favour of the Plaintiff has been discharged alternatively the Defendants are entitled to redeem the same.
12. By reason of the matters aforesaid, the Plaintiff is not entitled to alternative, ought not to be granted the relief sought herein".
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(1) Removed from the premises at Frome Wiltshire which were occupied by the Company, timber and a stock of knobs knockers laminated boards wax and stainers screws nails and fittings and other stock which was the property of the Company;
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(2) Removed from the said premises at Frome machinery and equipment which included two single-phrase radio arm saws, one three-phase radio arm saw, one green mortiser (free standing), one plane and thicknesser, one bench saw, a selection of hand tools and drills, two hand planes, one rooter and two free standing rooters, two jigsaws, one blue compressor and other equipment, the property of the Company;
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(3) Began to trade in a business which was similar to the business carried on by the Company at the said premises in Frome and in competition therewith;
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(4) [Induced] employees of the Company to determine their employment with the Company and to become employees of Mr Bailey.
There followed a counterclaim in which the defendants repeated their defence and sought:
"Insofar as the same may be necessary, an order for redemption of any charge over the property in favour of the Plaintiff, on such terms (if any) as may be just;…"
On 20th June 1988 the bank filed a reply and defence to counterclaim, which it subsequently amended on 6th December 1988.
Meantime, however, on 31st October 1988, the bank (perhaps not as promptly as it should have done) had given notice of an application pursuant to Order 13, rule 5 of the County Court Rules 1981 seeking the following relief:
"(1) Paragraphs 7 to 12 of the Defence and as repeated in the Counterclaim be struck out;
(2) The Plaintiffs have leave to enter judgment against the Defendants herein;…"
The relevant provisions of Order 13, rule 5 are as follows:
"(1) The court may at any stage of the proceedings in an action order the whole or any part of any pleading to be struck out or amended on the ground that—
and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be".
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(a) it discloses no reasonable cause of action or defence, as the case may be;…
The learned judge concluded that paragraphs 7 to 12 of the defence disclosed no reasonable defence as a matter of law. He had before him an affidavit sworn on behalf of the bank deposing to the indebtedness of the defendants alleged in the particulars of claim, the notice requiring payment and the other matters alleged in the bank's pleading. By his order of 14th December 1988 he accordingly ordered that the defendants deliver to the bank on or before 10th January 1989 possession of the property and, that paragraphs 7 to 12 inclusive of the defence be struck out. On 6th January 1989 His Honour Judge Head granted the defendants leave to appeal from the order and a stay of execution pending appeal.
Neither of the counsel who have appeared before us appeared in the court below and we can only guess at the course which the hearing then took. However, it would appear that the matter may have been argued before Judge Phelan much less fully than it has been argued in this court. A number of matters have been canvassed extensively in argument on this appeal which are not expressly referred to in the judge's judgment at all. I mention, for example, the principles governing a mortgagee's right to take possession of the mortgaged property; the construction of this particular mortgage; the relevance, if any, of the fact that this was a mortgage by way of guarantee; and section 36 of the Administration of Justice Act 1970.
In the course of a very brief ex tempore judgment acceding to the bank's application, the judge apparently regarded the all important proposition, conclusive of the case, as being:
"…a mortgagor cannot appropriate a counterclaim, even if admitted, in discharge of the debt"
As authority for this proposition he cited three cases, namely: Samuel Keller (Holdings) Ltd. v. Martins Bank Ltd. [1971] 1 W.L.R. 43; Mobil Oil Co. Ltd. V. Rawlinson [1981] E.G. 260; and Citibank Trust Ltd. v. Ayivor [1987] 1 W.L.R. 1157.
In the Samuel Keller case, which Judge Phelan described as "the major case", Russell L.J. at p.51 expressly approved a passage from the judgment of Megarry J. in the court below, in the course of which it was said:
"…A doctrine of the discharge of a mortgage debt by the existence...
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