Banking Bulletin - January 2006

Mistaken release of charge

The bank's loan was secured on the defendant's property. A second loan from the bank, part of which was used to discharge the first loan, was later secured on the property. The bank mistakenly thought the security on the property was spent and released the title deeds to the defendant. The Land Registry, on instruction, released the charge certificate to the defendant who then sold the property and spent the proceeds of sale.

Realising its mistake, the bank sought repayment from the defendant. She argued she had relied on the bank's mistake, and that the bank was estopped from seeking repayment of the debt.

The sale and failure to repay the loan from the proceeds was held to be unlawful and the defendant's argument on estoppel was unpersuasive. It was difficult to see a detriment here – having received the full value of the property but without having repaid a legitimate mortgage debt. As the defendant had provided no consideration to the bank, it could not be said that the bank had released the defendant from the debt.

Bank of Scotland v Nassarpour

No 'bankruptcy exception'

The claimant was made bankrupt in 1988. In 1992, a charging order over the claimant's property was made in favour of the defendant trustee in bankruptcy. After an unexplained 12-year delay, the defendant sought an order for sale and directions as to the payment of the proceeds of sale. The claimant alleged the relief sought was barred under s.20 of the Limitation Act 1980. The defendant alleged the claim fell within the 'bankruptcy exception' to the ordinary application of limitation.

The court found that a chargee's right to receive the money accrued at the time the charge was made. The Charging Order is its own demand for payment. A claim to recover sums of money secured by a mortgage cannot be brought after the expiration of twelve years from the date on which the right to receive the money accrued (s.20).

The 'bankruptcy exception' operates only in respect of delayed claims against the estate of the bankrupt - i.e. held up by the fact of the bankruptcy - so that time stops to run. It does not operate for claims 'outside' the bankruptcy.

The rights here related to the claimant's interest in the property. The property was outside the estate as it was still vested in the claimant and not the defendant trustee. The defendant trustee's rights under the charge had been created in consequence of the bankruptcy, but were unaffected by it and were 'outside' it, subsisting even after the bankruptcy ended. The defendant should have brought his application earlier and was subject to the 12-year limitation period.

This is perhaps one of those occasions where justice may not have been seen to have been done. The claimant had received the benefit of living in the property and its substantial increase in value, whereas his creditors remained out of pocket. Although, that said, it is unclear why the trustee waited so long.

Doodes v Gotham and Perry

Third party debt orders and bankruptcy proceedings

Costs orders were made against the defendant arising out of her unsuccessful application to set aside a statutory demand. A deputy registrar made a third party debt order against her, part of which related to costs not incurred in the bankruptcy proceedings. Did the deputy registrar have the jurisdiction to make a third party debt order in insolvency proceedings?

Yes. The Civil Procedure Rules (CPR) apply to bankruptcy proceedings and the powers under the CPR can be exercised by a registrar in bankruptcy. The third party debt order related to insolvency proceedings before the High Court.

The CPR Practice Direction for insolvency contemplates that the court's normal remedies can be used to secure payment of moneys arising out of bankruptcy proceedings. The deputy registrar had jurisdiction to make the order in so far as it related to costs incurred in the insolvency proceedings. As to the part of the order that didn't so relate, the deputy registrar had determined he had jurisdiction and the claimant was entitled to rely on that jurisdiction.

Lynch Hall & Hornby v Thakerar

A six-year hurdle

This is a part of the Lloyds Names litigation.

The claimant obtained judgment against the defendant in the UK and sought to enforce it in Quebec where the defendant resided and had assets. The defendant argued in the Quebec proceedings that the judgment was no longer enforceable in the UK as more than six years had elapsed since it had been granted. Wishing to rely on the UK judgment, the claimant obtained leave to issue a writ of execution to demonstrate that the judgment was still enforceable.

The defendant appealed that order, contending it was unjust to make the order and there were inadequate grounds for obtaining leave more than six years after the date of judgment. He also argued that no explanation had been given for the delay between the defendant raising his limitation defence in the Quebec courts and the application for the writ of execution being made.

The court had to decide whether there were facts that took the case out of the general rule that execution would not be allowed after six years. The court would exercise its discretion to do justice between the parties, having regard to all the circumstances. There were facts that took this case out of the ordinary:

• The defendant had always known that the claimant intended to enforce its rights against him and was not prejudiced by the delay. The claimant had tried to have recognised and then enforce the many judgments it had obtained in many jurisdictions. It had tried to get the defendant to agree his liabilities before starting the Quebec proceedings;
• It was not correct that any period of unexplained delay would disentitle an applicant to relief. The short period of delay here related to the period of analysis and decision making after the defence had been received and, looked at overall, a period of delay of some six months did not disentitle the claimant from the relief sought; and
• Six years was not a limit, but simply a hurdle that could be jumped more than once! (Not a view usually shared by courts when looking at time limits for doing things!)

The facts here took the case out of the general rule. There had been no deliberate delay by the claimant who had acted appropriately and sufficiently promptly in seeking to enforce its judgment. The writ of execution was valid.

Society of Lloyd's v Longtin

Place for service

The claimant served proceedings on the defendant at his 'place of business,' which was a residential property owned by the defendant but rented out to tenants. Judgment in default was obtained.

It was only when an order for the sale of the property was served that the defendant became aware of the proceedings. The defendant applied to set the judgment aside on the basis that:

• He was being sued personally so should not have been served at a 'place of business;' and
• The property owned by him and let to tenants was not a 'place of business' as contemplated by the CPR rules on service.

The Court of Appeal held that the mere renting out of a property could not make the address a place of business nor could a property rented to tenants become a place of business simply because rent was regularly collected from the premises.

As a landlord, the defendant had very limited rights to enter the property. Permitting service of proceedings at such a property would be an extraordinary proposition. The rules on service should be interpreted and applied to obtain clarity, certainty and practicality, and allowing service in this manner would be contrary to that objective.

O'Hara & Anor v McDougal

Video it or pay the costs consequences

A possession order was obtained against the claimant. The claimant made an oral application for permission to appeal before the Court of Appeal. The claimant had public funding and she and her lawyer travelled a considerable distance to attend at court.

The appeal was unsuccessful but the Court of Appeal delivered a warning of general importance and application. It held that it was incumbent on legal advisors to reduce the costs of proceedings including, where appropriate and available, taking advantage of video conferencing facilities.

In every case involving applications to the Court of Appeal which were likely to last 30 minutes or less, consideration should be given to whether video conferencing facilities could be used to avoid the cost of attendance in person. The practice direction to CPR Part 32 and the Court of Appeal website set out the information and guidance to be considered when making that decision.

If the court considers that an oral hearing was not warranted, recoverable costs might be limited to the costs of conducting the hearing by video conference if these are likely to be less than the costs of attending at court. We have been warned!

Black v Pastouna