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Woodeson v Credit Suisse (UK) Limited [2018] EWCA Civ 1103 Mortgage litigation - claim for declaration as to entitlement to damages and set-off – limitation – summary judgment Santos-Albert v Ochi [2018] EWHC 1277 (Ch) Charging orders – scope of amendments allowed under the ‘slip rule’ Publication: Chancery Guide updated Publication: CML Guidance Note on Law of Property Act Receivers
Case name Neutral citation Legal points Case summary Facts Held Comment Woodeson v Credit Suisse (UK) Limited [2018] EWCA Civ 1103 Mortgage litigation - claim for declaration as to entitlement to damages and set-off – limitation – summary judgment A bank was entitled to summary judgment against borrowers on their claim for declarations as to their entitlement to set-off sums in respect of claims for damages. In 2008 W remortgaged their property to CS with a 5-year interest-only loan in a foreign currency (Swiss Francs) to obtain a lower interest rate. The exchange rates fell sharply and the deal proved to be disastrous with W unable to repay the loan after 5 years. In 2015 CS appointed receivers who subsequently obtained an order for possession. In the meantime, W commenced their present claim for declarations as to their entitlement to damages for misselling pursuant to s 138D FSMA 2000 and/or for negligence and/or deceit, and as to their entitlement to set-off the damages against the sums due under the loan. CS applied for summary judgment on the grounds (1) that the declarations were statute-barred, and (2) that they did not amount to a defence to CS’s right to recover the debt because W had contracted out of their right to set-off. At first instance the [Mercantile Court in Bristol [2016] EWHC 2775 (QB)] held that: (1) Insofar as the claims for breach of statutory duty, negligence and deceit were free-standing claims, they were statute-barred unless limitation was postponed under s 32 LA 1980, as to which W might have a claim which was arguably postponed until 2014. On this basis, subject to the anti-set-off provisions, CS was not entitled to summary judgment; and (2) Insofar as they were raised by way of equitable set-off, such a claim was either late (because the court had already made an order for possession without the point being raised) or was premature (because CS had not raised a money claim to which the defence would be applicable. As to the anti-set-off provisions, they could be relied on as part of the contractual arrangements unless they were unreasonable, as to which they arguably were. W appealed. The court should not entertain a claim for a declaration that a defendant owes a debt or is liable for damages in tort or contract if such a claim is made once the debt or damages claim is statute-barred: P & O Nedlloyd BV v Arab Metals Co [2005] 1 WLR 3733 applied. Such claims must be regarded as time-barred unless time can be extended as a result of deliberate concealment. Although it was argued that a mortgagor could seek an account of what is truly owing by way of mortgage debt, such a claim had not been made. Further, a mortgagor cannot unilaterally appropriate the amount of a cross-claim which is unliquidated and not admitted in the discharge of the mortgage debt. Even where the quantum of the claim exceeds the amount of the mortgage debt, the mortgagee cannot be restrained from exercising his right to take possession of, and sell, the mortgaged property (either by himself or by receivers): Spencer Day v Tiuta International [2014] EWCA Civ 1246 applied. This applies not only to claims for possession, but also cases where the lender has a money claim or to cases where the borrower sought an account of what was truly due to the lender after considering any cross-claims. Whilst this does not preclude a free-standing claim if it is not statute-barred, in the present case it is statute-barred unless time can be extended under s 32. On the evidence, there was no concealment of facts in relation to any negligent advice. The Claim Form was issued in February 2016. The unsuitability of the mortgage and its associated risks were apparent well before February 2010. The Spencer Day principle might well render any argument about the set-off clauses academic, but in any event, in the present case, the anti-set-off clauses were not unusual, and while they may operate harshly, they were not a penalty and did not operate as a clog on the equity of redemption. Appeal dismissed. The practical significance of this case is that it is not open to a mortgage borrower to suffer judgment for possession and then in separate proceedings seek a declaration as to his entitlement to set-off sums by way of damages claims, particularly where those claims were themselves statute-barred and could not be postponed because of concealment. There is quite a bit in the judgments of Longmore and Legatt LJJ about the Mobil Oil principle – Mobil Oil Co Ltd v Rawlinson [1981] P & CR 221, down to National Westminster Bank Plc v Skelton [1993] 1 WLR 72, Barclays Bank Plc v Tennet (unrep CA 6th June 1984) and Spencer Day v Tiuta International [2014] EWCA Civ 1246 that a claim for damages, even one which amounts to an equitable set-off, cannot be relied on to prevent the mortgage lender from taking possession and selling the mortgaged property and recovering the mortgage debt (without giving credit for the borrower’s claim) from the proceeds of sale. This is a consequence of the legal estate acquired by a legal mortgagee.
Publication The Chancery Guide was updated on 16th May 2018.