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Case name Neutral citation Legal points Case summary Facts Held Comment Re Balendran (Unrep) Ch D 14 June 2017 Beneficial interests - finality of proceedings – civil restraint orders It was not open to a wife to assert an interest in property in her husband’s bankruptcy proceedings, that had already been decided against her in earlier mortgage possession proceedings. In 2008 a mortgagee obtained an order for possession of property occupied by H + W but registered in H’s name. W applied to set aside the order on the ground that she was the beneficial owner. Her application, and appeal, were dismissed, and the court made a limited civil restraint order against her. W subsequently applied to be joined into H’s bankruptcy proceedings in order to seek relief against the mortgagee on the basis of her alleged interest in the property. W’s application was refused. The issue about whether she had any interest in the property had already been determined against her and was either res judicata or barred by issue estoppel. The court made an extended civil restraint order. This is an unreported brief case summary, but it deals with a growing problem particularly involving litigants in person who do not understand (or ignore) the principle of finality in litigation. If you wish to assert a claim, or challenge an order, do it as early as possible, and if you are not satisfied with the decision, appeal it if you have grounds. Do not suffer a judgment against you and go on to make repeat applications. The court is increasingly resorting to civil restraint orders as a means of controlling vexatious litigation. For practice and procedure, see CPR 3.11 and CPR Practice Direction 3C.
Case name Neutral citation Legal points Case summary Facts Held Comment Ulster Bank Ltd v Esmaili [2017] NICh 14 Commercial loan facility – whether susceptible to challenge based on oral representation On the facts, a borrower who had obtained finance to purchase commercial premises, could not rely on an alleged oral representation that the bank would also provide development finance. In 2006 E obtained loan facilities to purchase commercial premises which he proposed to develop, secured by a number of legal charges. In 2011 E defaulted and the bank commenced proceedings for possession of the commercial premises. E defended the claim on the basis that the bank had agreed to provide further commercial development finance and asserted breach of contract, misrepresentation and estoppel. He also alleged an unfair relationship under s 140A Consumer Credit Act 1974. The bank also commenced separate proceedings for possession of one of the other secured properties, in which E’s sister claimed to be beneficially interested. There was no issue that the facility letters all provided that the loan was for the sole purpose of purchasing the premises. The principal issue was whether an oral representation was capable of giving rise to binding legal consequences between the parties. As to the law, applying Carlyle v Bank of Scotland [2015] UKSC 13, the court held that an oral representation was capable of giving rise to binding legal consequences. However, following a detailed review of the evidence, the court concluded that the bank had not made any representation about providing development finance, certainly not in sufficiently certain terms. There was no agreement as to the exact nature of the development, the cost of the development, the terms upon which any such development would be funded, including the period of any loan, the interest rates applicable or the security required. Nor, having regard to the personnel involved at the bank, would it have been likely that they would have been in a position to commit the bank to open-ended funding. Further, if E had truly believed that the purpose of the facility was not confined to the purchase but extended to the provision of development funding, he would not have signed the facility letter in the form presented to him. The facility letters were clear, and governed the relationship between the parties. As to s 140A CCA 1974, the relationship was not unfair. E, a graduate, presented himself as a high net worth property developer. He had access to professional advisers. He was involved in regular on-going meetings with the bank, and the terms on which he was borrowing money were clearly set out in the facility letters. In respect of the second action, the court determined that the bank had a valid third party legal charge, executed by E’s sister having taken independent legal advice. Borrowers occasionally seek to rely upon alleged oral representations made at the time they took out their loan, either to vary the terms of the loan, or to prevent enforcement. Although this case shows that the court will investigate credible allegations that may be capable of supporting cause of action for breach of contract, misrepresentation or estoppel, borrowers will be in some difficulty in avoiding the clear terms of the loan/security documentation. Borrowers also frequently resort to the unfair relationship provisions which, as its name suggests, usually requires some clear evidence of unfairness. In an arm’s length finance transaction between a high street lender and a sophisticated borrower with access to professional advice, this will rarely be the case. This is a decision of the High Court in Northern Ireland and is of persuasive authority only.
Case name Neutral citation Legal points Case summary Facts Held Comment Bank of Scotland v Herron [2017] NICh 15 Order for possession – lender’s title – group re-organisation - securitisation – entitlement to cancel under EC Directive 87/577/ECC A borrower’s appeal against an order for possession in which he had taken various points, including a challenge to the lender’s title based on group re-organisation and securitisation, and a claim that he had cancelled his mortgage under an EC Directive, were dismissed In 2008 H (a litigant in person) charged his property to the bank as security for a 10-year interest only loan. H was represented by solicitors, and the charge was duly registered at the Land Registry. H defaulted and in 2012 the bank commenced proceedings for possession. There was a complicated procedural history, but in 2015, the Deputy Master made an order for possession. H appealed, relying on 11 grounds of appeal which involved (1) procedural irregularity in the court below; (2) lack of evidence to support the bank’s claim; and (3) that the bank had no standing to bring the claim. As to (1), procedural irregularity, the appeal was dealt with by way of re-hearing, so the point was avoided. As to (2), lack of evidence, H’s case was vague and unparticularised. He had never denied entering into the legal charge. The evidence of the attesting solicitor was not required. Although there had been a number of errors in the bank’s affidavits, they were made innocently and were not material to the issues to be determined. Although there was an issue about the actual amount due, the bank’s claim was for possession and H was plainly in default. As to (3), that the bank had no standing, the original lending had been by Birmingham Midshires, a division of Halifax Plc, and pursuant to s 12 HBOS Group Re-organisation Act 2006, the bank was now entitled to exercise the rights of Halifax Plc. Although the mortgage account had securitised by way of equitable assignment to another company in 2008, legal title remained with the bank (Paragon Finance v Pender [2005] 1 WLR 3412 considered) but in any event had been re-assigned back to the bank in 2011. Accordingly, the bank remained the legal owner of the charge, and registration in its name is conclusive. Finally, H raised the novel point that in accordance with EU Directive 87/577/ECC, he had served the bank with Notice of Cancellation of the Charge in 2009, but this was devoid of any merit (a) because the mortgage did not fall within the scope of the Directive, and (b) because it was not open to H to unilaterally cancel the mortgage without repaying the loan. Appeal dismissed. Lenders, and their solicitors, will be all too well aware of the need to avoid, and close down, spurious issues before they grow legs and run to trial. Seemingly innocuous errors in witness statements are a fertile ground for objection by suspicious borrowers who convince themselves that their lender is up to no good. And the added issue here of mortgage securitisation as well as group re-structuring needed to be resolved as quickly and clearly as possible. Overall, best advice when dealing with difficult and vexatious opponents is to keep it simple. Note that courts do not, generally, like novel points. The idea that a borrower could elect to cancel his mortgage and walk away with £320,000 was never going to be a particularly attractive argument, and met with this response “If such a right existed it would wreak havoc with the established patterns of commercial lending and would prevent creditors lending money with consequent disastrous effect on business and commerce”. Patently bad points are susceptible to strike out under CPR 3.4. This is a decision of the High Court in Northern Ireland and is of persuasive authority only.
Note Consultation Exercise following Cardiff CC v Lee On 29 June 2017 the Civil Procedure Rule Committee published a Consultation Exercise seeking views on whether the civil procedure rules and forms should be amended in light of the Court of Appeal judgment ion Cardiff County Council v Lee [2016] EWCA Civ 1034. LegalMortgage published a summary of the decision in the October 2016 Monthly Update, and followed this up with a special case note in November 2016. In summary, this was a public sector residential landlord and tenant case in which the court suspended an order for possession on terms that the tenant comply with the obligations in his tenancy agreement concerning behaviour. Upon default the Court of Appeal said that the landlord needed to apply on notice for permission to issue a warrant under CPR 83.2(3)(e) and should not have simply issued an N325 Request for Warrant of Possession of Land under CPR 83.26(2) (although given that the tenant had had his application to stay the warrant heard by a District Judge, he had not been prejudiced by the use of the wrong application, which could be cured under CPR 3.10). We said at the time that there was probably little doubt that the Court of Appeal did not intend to extend the requirement for an application for permission to issue a warrant in straightforward cases of non-payment by mortgagors under suspended orders, but that as a result of the judgment, the position remained in some doubt. Our advice was that until he position had been clarified, lenders should continue to use Form N325 in simple cases of breach of suspended orders on the usual terms as to payment of money. If the court refuses to issue, there are probably two options (1) refer it on to a District Judge to be considered on paper, specifically pointing out that the lender had certified non-payment in the N325 and/or (2) apply for permission to issue the warrant under CPR 83.2(3)(e) by Application Notice in Form N244 with evidence of non-payment, and initially at least ask for this to be dealt with on paper by the District Judge (the Court of Appeal decision did not actually stipulate that an application under CPR 83.2(3)(e) had to be on notice). ***** The Consultation Document contains a review of the decision and the background to CPR 83 (Writs and Warrants) and then seeks the views of respondents to a series of questions – essentially whether there should be a requirement for permission in all instances of breach of a suspended order, and if so, how this should be dealt with, and whether there should be any difference in the approach taken in the High Court and County Court. There is a form of response document. Responses should be lodged by Wed 30 August 2017.