National Westminster Bank Plc v Kitch
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SCHIEMANN,LORD JUSTICE PETER GIBSON,LORD JUSTICE SIMON BROWN |
| Judgment Date | 03 May 1996 |
| Judgment citation (vLex) | [1996] EWCA Civ J0503-9 |
| Docket Number | QBENI 95/0568/E |
| Court | Court of Appeal (Civil Division) |
| Date | 03 May 1996 |
[1996] EWCA Civ J0503-9
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ORDER OF MR JUSTICE CURTIS KT
Royal Courts of Justice
Strand
London WC2
Lord Justice Simon Brown
Lord Justice Peter Gibson
Lord Justice Schiemann
QBENI 95/0568/E
MR ROBERT DEACON (Instructed by Lucas & Co of Cowbridge, south Glamorgan) appeared on behalf of the Appellant.
MR MICHAEL LEREGO QC and MR PAUL GOTT (Instructed by Osborne Clarke of Bristol) appeared on behalf of the Respondent.
This case raises a question of some general importance in relation to actions by Banks against their customers for repayment of overdrafts given by the Banks. Many such loans are secured by a mortgage or charge. Often the bank starts proceedings for repayment of the overdraft which proceedings make no mention of the fact that the bank has the mortgage as security. The question which faced Curtis J, from whom this is an appeal, was this: is such an action a "mortgage action" to which the provisions of RSC Order 88 are applicable? Curtis J held that it was not. In so holding, he departed from a dictum of Donaldson J upon which various notes to the Order in the Supreme Court Practice are based. In my judgment Curtis J was right.
The factual background need not detain us long for we are not asked to concern ourselves with the merits. The Bank issued a writ out of the Bristol district registry of the QBD claiming sums allegedly due on two accounts which the customer had with the bank. The writ, which was endorsed with a statement of claim, makes no mention of any mortgage. The defence legal team deliberately decided to file no defence taking the view that this was a mortgage action which had been improperly commenced in the QBD. The Bank then, without first seeking the leave of the court, entered judgment in default of defence under Order 13 r11 whereupon the customer applied to set the judgment aside on the basis that it had been irregularly obtained.
The Customer's submissions
Mr Deacon, who appeared for the customer, relied on Order 88 r62 and on a note to that rule 3. In order to do so he had to persuade the court that this action was a mortgage action as defined in Order 88
r1(1) 4. His argument was simple. He pointed out 3 undisputed facts: —
1. the action was begun by a mortgagee
2. the action was one in which there was a claim for payment of monies
3. the payment of those monies was secured by the mortgage.
So he submitted that the action fell neatly within the definition in O 88 r1(a). Moreover he pointed to Midland Bank Ltd v Stamps [1978] 1WLR 635 where the foregoing three facts were equally present, where the statement of claim made no mention of any mortgage and where Donaldson J said at p638
"The bank is without doubt claiming payment of moneys secured by a mortgage of real property and the action is thus a mortgage action to which RSC Order 88 applies."
The Bank's submissions
Mr Lerego QC submitted
1. In cases where Order 88 r1(1)(b)-(g) have no application, r1(1)(a) only applies if the claim is described in the document originating the action as a claim for payment of monies secured by a mortgage (as defined in r2 5).
In my judgment that is a possible construction of the Order although the construction contended for by
The Defendant is equally possible.
2. No purpose is served by requiring a plaintiff who does not found his claim upon a mortgage to include in the originating process a statement as to the whereabouts of the mortgaged property (Rule 3(3) 6) or to exhibit a copy of the mortgage as part of his evidence and to produce the original (Rule 6(4) and 5(2) 7). Moreover, the particulars which are required by Rules 5(6) and (3) 8 are inappropriate to claims made on a current bank account. It would be highly unusual for the Rules to require the production of irrelevant material.
3. He drew attention to the legislative history and context of Order 88. Throughout the rules there are two variables in play—whether the case is heard by the QBD or by the Ch.D and whether the case is started by Writ or by originating summons. Two cases in the Court of Appeal in 1940 indicate the history of Order 88: Redditch Benefit Building Society v Roberts (1940) Chancery 415 and ( Temperance Permanent Building Society v Nevitt 1940 2 All ER 237. Those cases were decided shortly after the introduction into the Rules of the Supreme Court of Order 55, Rule 5A which is the predecessor of the present Order 88, Rule 1. The background and purpose of the changes introduced into the rules in 1936 as explained by the Court of Appeal were in summary —
(i) to cure an anomaly in that judgment for possession could automatically be obtained in the King's Bench Division in default of appearance to a writ whereas proceedings for possession in the Chancery Division were commenced by originating summons and judgment could only be obtained after a hearing before the Master.
(ii) the form of order for payment and possession in the Kings's Bench Division failed to indicate to the defendant mortgagor that upon payment he was, or might be, entitled to relief against the order for possession. This was a defect which it was wished to cure.
(iii) even if the defendant was aware of this right, he had to take separate proceedings in the Chancery Division to establish or enforce that right, thereby producing the multiplicity of proceedings which it was the object of the Judicature Acts to avoid.
(iv) to enable judgment to be given for a monetary sum in mortgage proceedings by originating summons in the Chancery Division.
(v) to achieve uniformity in the treatment of mortgage actions whether begun by writ or originating summons.
4. He drew attention to the fact that Order 13 of the present rules also distinguishes between possession and money claims; under Rule 4(1) a plaintiff seeking a default judgment for possession must certify that he is not claiming relief specified in Order 88, Rule 1 but a plaintiff seeking a money judgment under Rules 1 and 2 does not have to do so.
5. Prior to the changes all money claims had to be made by writ. But following the changes, a mortgagee could make a claim for payment of money by originating summons, but, by the terms of Order 55 Rule 5A the summons had to specify that the plaintiff was claiming money secured by the mortgage. Unless it did so it was not a proper method of commencing proceedings to recover money and would not have been issued by the Court.
6. Although at first blush it seemed strange for the Rules to distinguish between simple money claims based on a mortgage and simple money claims not based on a mortgage and to prescribe the Chancery Division for the former even when there was no concurrent claim for possession, there was good reason for so doing. The law relating to mortgages is notoriously complex and there was much to be said for allocating claims for money under mortgage documentation to masters and judges familiar with this branch of the law. He drew our attention to Lord Macnaghten's statement in Samuel v Jarrah Timber & Wood Paving Corporation Ltd [1904] AC 323 at 326 that " No one … by the light of nature ever understood an English mortgage of real estate". These considerations are of no relevance to a case such as the present.
7.The construction contended for by the bank achieves consistency with the corresponding provision of the County Court Rules: see Order 6, Rule 5(1) 9.
None of this was disputed by Mr Deacon.
One is of course always hesitant before differing from Donaldson J. However, the issue which he had to decide in Midland Bank v Stamps was whether he had jurisdiction, notwithstanding the provisions of Order 88 to retain the action in the Commercial Court. He held that he had. He based his decision on a direction made by the Lord Chancellor under Section 57 of the Supreme Court of Judicature
(Consolidation) Act 1925 10 and upon the exercise of his discretion under Section 58 of the 1925 Act. I accept that whereas, if the decision of Curtis J is right, Donaldson J could have based his decision on a finding that he was not concerned with a mortgage action at all, he in fact said at page 638 —
"The bank is without doubt claiming payment of moneys secured by a mortgage of real property and the action is thus a mortgage action to which RSC Order 88 applies."
I consider the phraseology of Order 88, Rule 1 is capable of the construction contended for both by the appellant and by the respondent. While in no way criticising the result achieved by Donaldson J in Midland Bank v Stamps I disagree with the single sentence in that decision relied upon by the appellant and the editors of the White Book. That sentence was not necessary to the Judge's decision and it seems clear that Donaldson J was not treated to the careful analysis of the history of this Rule and the previous decisions concerning it which have been placed before the Court by the respondent. I accept the points made by Mr Lerego and Mr Deacon has not put before us any cogent policy reasons for construing the Rule in the manner for which he contends.
I confess I reached this conclusion with satisfaction. There seems to be no reason in principle why if a bank chooses not to rely on a mortgage in an action that action should be classified as a mortgage action. Most cases based upon or concerning the operation of ordinary bank accounts have been and are brought in the Queen's Bench Division. In complex cases they will be heard in the Commercial Court of that Division. The most appropriate place for...
To continue reading
Request your trial
-
Whistler International Ltd v Kawasaki Kisen Kaisha Ltd
... ... the early hours of 14 October 1939, in a storm, she had stranded on a bank outside St Nazaire. She was at the time under requisition by the British ... ...
-
Securum Finance Ltd v Ashton and another
...indistinguishable from) founded on the covenant in the legal charge. For the reasons explained by Lord Justice Schiemann in National Westminster Bank Plc v Kitch [1996] 1 WLR 1316 there are good reasons for choosing not to sue on the covenant in a mortgage when it is unnecessary to do so. 1......
-
Atkinson v Corbin and Armstrong
...is that subsequent claims must be brought within the limitation period.” 44 See references therein to the authorities National Westminster Bank Plc v. Kitch [1996] 1 WLR 1316; and Birkett v. James [1978] A.C. 297. 45 It is evident that there was acceptance of this principle by the plaintiff......
-
Lmchb Ltd v Buller Coal Ltd
...on the covenant in the legal charge. For the reasons explained by Lord Justice Schiemann in National Westminster Bank Plc v Kitch [1996] 1 WLR 1316 there are good reasons for choosing not to sue on the covenant in a mortgage when it is unnecessary to do so. Citing Contact Energy Ltd v Attor......