Yorkshire Bank Finance Ltd v Mulhall and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Etherton |
| Judgment Date | 24 October 2008 |
| Neutral Citation | [2008] EWCA Civ 1156 |
| Docket Number | Case No: A2 2008/0850 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 October 2008 |
[2008] EWCA Civ 1156
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LEEDS DISTRICT REGISTRY
HIS HONOUR JUDGE GRENFELL
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Anthony May, President Of The Queen's Bench Division
Lord Justice Lloyd and
Lord Justice Etherton
Case No: A2 2008/0850
Dan Stacey (instructed by Howes Percival LLP) for the Appellant
Robert Howe Q.C. and Robert Weekes (instructed by Addleshaw Goddard LLP)
for the Respondent
Hearing date: 13 October 2008
This appeal raises the question of the application of the Limitation Act 1980 where a creditor has the benefit of a judgment against the debtor, supported by a charging order, but has not taken steps to enforce the judgment or the charging order for more than 12 years. Is the debtor entitled to have the charging order set aside on the basis that it can no longer be enforced?
In May 1990 Mrs Mulhall, the Appellant, joined with her husband in guaranteeing the payment of sums owed by Oak House Holdings Ltd to the Respondent, Yorkshire Bank Finance Ltd (“the Bank”). The company defaulted and in March 1991 the Bank demanded payment by Mrs Mulhall of just over £40,000 under the guarantee. Immediately afterwards the Bank issued proceedings against her and her husband. The Bank obtained judgment in default in April 1991, in the case of Mrs Mulhall for the sum of £40,590.29 and some costs. The Bank then applied for a charging order, in respect, among other things, of Mrs Mulhall's interest in a property, Southfield, Ferry Lane, Bishopthorpe, York, of which she is the registered proprietor. A charging order nisi was made on 25 April 1991 and in due course a charging order absolute on 25 June 1991. No sums have been paid in respect of the judgment or the charging order, though the Bank was able to recover one asset in about 1992 which was realised and the net proceeds credited to the debtor's account. No doubt the charging order is protected by a suitable entry against the title to the property at HM Land Registry.
The next relevant event occurred in January 2007, when Mrs Mulhall applied to set aside the judgment and the charging order against her. She contended that she had never signed a guarantee, so that the judgment had been obtained on a false basis. It took the Bank a long time to respond effectively, but eventually it was able to produce a copy of the guarantee. On this basis Deputy District Judge Whitfield, before whom Mrs Mulhall's application came on 19 September 2007, was satisfied that the judgment ought not to be set aside. In the alternative she argued that the charging order should be set aside because of the Bank's failure to take any steps to enforce it since 1991. The Deputy District Judge refused that application as well.
Mrs Mulhall appealed against that order. The appeal came before His Honour Judge Grenfell sitting as a judge of the Queen's Bench Division in Leeds, on 8 February 2008, by which time Mrs Mulhall had the benefit of representation by Mr Dan Stacey of Counsel instructed by Messrs Howes Percival, as she had before us. In his reserved judgment delivered on 19 March 2008 the judge dismissed Mrs Mulhall's appeal. Permission to appeal was given by Lord Justice Mummery.
The argument before us ranged wide, with citation of successive versions of the legislation governing limitation of actions, reports of several committees which have considered the position in that respect over the years, and decided cases from 1843 to 2008. We were much assisted by Mr Stacey's written and oral arguments and by those of Mr Robert Howe Q.C., leading Mr Robert Weekes, for the Bank.
The starting point is the relevant legislation now in force. I must refer to some provisions of the Charging Orders Act 1979. Section 1(1) is as follows:
“Where, under a judgment or order of the High Court or a county court, a person (the “debtor”) is required to pay a sum of money to another person (the “creditor”) then, for the purpose of enforcing that judgment or order, the appropriate court may make an order in accordance with the provisions of this Act imposing on any such property of the debtor as may be specified in the order a charge for securing the payment of any money due or to become due under the judgment or order.”
Such an order is called a charging order. Its effect is provided for by section 3(4):
“Subject to the provisions of this Act, a charge imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor by writing under his hand.”
Section 3(5) gives the court power to make the order sought by Mrs Mulhall:
“The court by which a charging order was made may at any time, on the application of the debtor or of any person interested in any property to which the order relates, make an order discharging or varying the charging order.”
The ground on which Mrs Mulhall contends that the charging order should be discharged is that it is no longer enforceable, and the Bank has no continuing right under it, by reason of the lapse of time with no enforcement, and no acknowledgement or part payment, in the meantime. This turns on the Limitation Act 1980. I will need to refer to several provisions of that Act.
Those most directly relevant are section 20(1) and (5) and section 24(1) and (2). Section 20(1) and (5) are as follows:
“(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.
…
(5) Subject to subsections (6) and (7) below, no action to recover arrears of interest payable in respect of any sum of money secured by a mortgage or other charge or payable in respect of proceeds of the sale of land, or to recover damages in respect of such arrears shall be brought after the expiration of six years from the date on which the interest became due.”
Section 24 is as follows:
“(1) An action shall not be brought upon any judgment after the expiration of six years from the date on which the judgment became enforceable.
(2) No arrears of interest in respect of any judgment debt shall be recovered after the expiration of six years from the date on which the interest became due.”
We were also shown some earlier provisions of the Act. Section 15(1) is as follows:
“(1) No action shall be brought by any person to recover any land after the expiration of twelve years from the date on which the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person.”
Section 16 precludes a redemption action by a mortgagor if the mortgagee has been in possession of the land for 12 years. Section 17 extinguishes the title to land where these time limits have expired:
“Subject to [an irrelevant provision] at the expiration of the period prescribed by this Act for any person to bring an action to recover land (including a redemption action) the title of that person to the land shall be extinguished.”
Under a modern legal mortgage or (which is the same thing in effect) a charge by way of legal mortgage, the mortgagee has a right to possession of the mortgaged property. On that basis it was held in National Westminster Bank v Ashe [2008] EWCA Civ 55 that where the mortgagor had been in possession of the mortgaged property for 12 years without any payment or acknowledgement of the mortgage debt, the mortgagee's right to possession of the land was barred under section 15 and its title to the mortgaged property was also extinguished by section 17. I do not need to go into the detail of the arguments relevant to the debate in that case. The case is not of direct relevance to the present because it is clear that a charging order gives to the judgment creditor only the rights of an equitable chargee, which do not include a right to possession.
Mr Stacey's argument is based on section 20(1). He contends that the Bank could not now take any steps to recover the sum secured by the charging order, because it is “a principal sum of money secured by a mortgage or other charge on property”, the right to receive which accrued more than 12 years before Mrs Mulhall's application. On that basis he argues that the charging order cannot now be enforced, and that it should therefore be discharged.
Mr Howe argued, both on principle and on authority, that this section does not apply so as to extinguish his client's rights under the charging order. He pointed out that, unlike the position under an ordinary mortgage or charge created by a consensual transaction, the sum for which the charging order provides security is a judgment debt, which necessarily predated the charging order. Moreover judgment debts are governed by separate provisions of the 1980 Act, namely section 24 quoted above. Only in the exceptional case of an action on a judgment is there any statutory time limit on enforcing a judgment debt. Otherwise, and apart from the separate provision as to interest in section 24(2), judgment debts are outside the scope of the limitation legislation. There are constraints on enforcement by writ of execution after six years: see RSC Order 46 rule 2(1)(a) in Schedule 1 to the Civil Procedure Rules, and remedies...
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