Chess Pieces
wig and book pic
Case name Neutral citation Legal points Case summary Facts Held Comment Bhardwaj v Royal Bank of Scotland Plc [2017] EWHC 340 (Ch) Compromise - mortgages – certainty of terms – date for repayment – s 2 LP(MP)A 1989 The court dismissed an appeal against a judge’s refusal to set aside a settlement agreement which involved the grant of new mortgage facilities despite not stipulating dates for repayment on the basis that it could be inferred the parties intended to utilise the same term dates as their existing facilities. The appeal court refused to allow the appellant to rely on a new point, not argued below, to the effect that such an agreement was in breach of s 2 Law of Property (Miscellaneous Provisions) Act 1989 B had 3 x convertible currency interest-only mortgages with fixed repayment dates secured on two properties. The bank converted the loans to Sterling, with a consequential increase in cost. B brought proceedings against the bank challenging the bank’s entitlement to convert the loans. The proceedings were compromised at mediation with the bank granting fresh facilities, and a settlement agreement was entered into. The court subsequently made an order by consent dismissing the proceedings. B subsequently brought proceedings for a declaration as to the proper construction of the settlement agreement, contending that the agreement was void because it did not expressly stipulate the term of the new facilities. The court concluded that B was bound by the agreement and that it was not void for uncertainty – the term being coterminous with the term of the previous facilities. B appealed, and took a new point, that the agreement was void for non-compliance with s 2 Law of Property (Miscellaneous Provisions) Act 1989 since under s 2(1) it did not include in writing all the terms that had been agreed, including the term of the new facilities. Although the settlement agreement did not mention the dates upon which the new facilities were to be repayable, as a matter of contractual interpretation (applying Arnold v Britton [2015] AC 1619 and Marks and Spencer v BNP Parisbas [2016] AC 742) it was clear that the intention of the parties was that the new facilities would have the same repayment dates as the existing facilities. As to the s 2 point, the court was critical of the appellant for not raising this in the court below. Since it also involved findings of fact and investigation into claims of rectification and estoppel it would not be in accordance with the overriding objective to remit the case to trial (Prudential Assurance v HMRC [2016] EWCA Civ 376 per Lewison LJ, and Crane v Sky-in-Home Ltd [2008] EWCA Civ 978 per Arden LJ, applied). Appeal dismissed. The section 2 point would have been quite interesting, and practitioners often forget the requirement to have a s 2 compliant compromise agreement in cases which involve the sale or other disposition of an interest in land. Best practice would have been to specifically incorporate all agreed terms or, use a ‘catch-all’ phrase such as ‘all other terms as per the existing facilities’.
Case name Neutral citation Legal points Case summary Facts Held Comment Barclays Bank Plc v Boyd [2017] NICA 14 Possession - s 36 AJA 1970 – stay or suspension – separate claim for damages The court dismissed an appeal against the judge’s refusal to stay execution of an order for possession pending a separate claim for damages. In 2000 B purchased a property subject to a mortgage from the bank. The bank obtained a standard valuation report. The fourth page identified certain structural issues but nonetheless concluded that the property provided good security for the loan. In 2006 B obtained increased facilities which included a loan and current account. Following default in payment, the bank commenced possession proceedings which were initially suspended on terms as to payment. Following further default, the bank was given permission to enforce. B appealed, contending that the bank had been guilty of negligence in lending to them in the light of the valuation report, contending that they had not seen the fourth page at the time, but had they done so, they would not have purchased the property in view of the structural problems. They issued separate proceedings for damages against the bank, the valuers, and various other parties and on their appeal sought a stay of execution pending the resolution of their claims. The judge concluded that B faced real difficulties on limitation. He also concluded that B was unable to afford the pay the current monthly instalments and a reasonable sum off the arrears, and made an order or possession. B appealed (out of time) contending that the fresh mortgage arrangements in 2006 were null and void – that the failure by the bank to disclose the full valuation report meant that there was inequality of bargaining power. B took a number of other points as well. There was no criticism as to the discretion available to the judge; simply whether he should have exercised his discretion differently. The new points could have been argued before him, but would not have materially affected the approach he took. Appeal dismissed. This is a reminder to borrowers to bring all their arguments on one go. Whilst there is authority that a court may suspend an order for possession or stay execution, under s 36 Administration of Justice Act 1970, pending the outcome of a separate claim in damages, the court will need to be persuaded (a) of the merits of the claim; (b) when it will be concluded; and (c) how much is likely to be recovered. The court will also need to weigh the merits and value of the claim against the risk of negative equity, although this might be deflected to an extent by an order requiring the borrower to pay some or all of the accruing interest in the meantime. The prospects of successfully suing the lender (as opposed to the valuer) in negligence, seems somewhat remote, quite apart from the limitation issues. Note that this is a decision of the Court of Appeal in Northern Ireland, and is of persuasive
Case name Neutral citation Legal points Case summary Facts Held Comment Chambers v Rushmon Ltd [2017] EWHC 124 (Ch) Injunction to restrain enforcement of mortgage – principles to be applied The court dismissed an application for an injunction to restrain a mortgagee from enforcing its mortgage on the basis that it had not made out a serious issue to be tried (and would have failed on other grounds as well). An unincorporated association (sports and social club) compromised litigation against the defendant housebuilder who was interested in a proposed redevelopment of the club’s premises pursuant to an option agreement, by entering into fresh agreements including a loan agreement and mortgage. The club subsequently sought an injunction to restrain the defendant from enforcing the mortgage, contending that the club had been prevented from repaying the sums due under the loan agreement whilst the defendant was in breach of the option agreement (including an obligation under clause 3.2 to use its reasonable endeavours to obtain planning permission). The application for an interim injunction fell to be determined in accordance with American Cyanamid principles. The club had not made out a seriously arguable case. There was nothing in the option agreement which made enforcement of the security subject to the fulfilment of the obligation in clause 3.2, and in any event, the obligation in clause 3.2 was not a continuing one. Further, damages would be an adequate remedy (notwithstanding that they were not claimed), and even if they were not, the balance of convenience would lie against the grant of an injunction. Application dismissed. It is quite rare for a party to apply for an injunction to restrain a mortgagee from enforcing its security (any substantive points usually being deployed by way of defence in the mortgage proceedings) and this case demonstrates some of the obvious pitfalls, applying standard American Cyanamid principles (which govern the grant of interim injunctions).