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Case name Neutral citation Legal points Case summary Facts Held Comment Clydesdale Bank Plc v Gough [2017] EWHC 2230 (Ch) Mortgage enforcement - estoppel – representation – reliance - detriment The court dismissed the borrower’s defence of estoppel to try and prevent the lender from enforcing its securities. There was no representation, reliance or detriment and he had had ample opportunity to realise his assets himself. In 2012, Mr G, a farmer, moved his borrowing across from Barclays to Yorkshire Bank and obtained a number of loan and overdraft facilities subject to various securities over the farm, together with a personal guarantee from Mrs G. In 2014 the bank made formal demand from Mr G in the sum of £5.8M and Mrs G in the sum of £4.9M. They also appointed receivers, and in the present proceedings claimed an order that possession of the farm be delivered up to the receivers. Mr G defended the claim on the basis that the bank was estopped from enforcing its security by reason of an agreement allegedly reached with the bank’s agricultural business development managers that he would have the opportunity to reduce his indebtedness to a sustainable level by the sale of assets. Alternatively, he sought an order under s 36 Administration of Justice Act 1970 to enable him to sell parts of the farm in order to reduce his indebtedness, or to adjourn the proceedings in order to determine whether or not there were grounds for making an order under s 140B Consumer Credit Act 1974. Although one of the business development managers had acknowledged that he said that any assert sales would most likely be done on a consensual basis, he did not say that Mr G would have sole conduct. There was nothing in the contemporaneous documents to support Mr G’s claim and he had acknowledged in evidence that the bank was entitled to take possession. Overall, there was no clear and unequivocal promise by the bank that its strict legal rights would not be insisted upon. As to detriment and reliance, Mr G had no choice but to re-bank at the time did not do so in reliance on any alleged representations. Nor did he incur any detriment in doing so, in fact he obtained a benefit to the extent that he was able to keep the farm business going. In any event, the bank had been pro-active in encouraging Mr G to pursue asset sales and he accepted there was nothing to stop him from doing so, so that the bank had complied with the alleged representation anyway. The court was minded to grant the relief sought by the bank, subject to proof of the up to date balances. Although it was open to Mr G to make an application under s 36 AJA 1970 he was warned not to get his hopes up in the absence of fully worked out proposals which will discharge the sums due to the bank in relatively short order. The court would not adjourn the proceedings in order to consider whether to make an order under s 140B CCA 1974. The court had already refused an application made late in the day to amend the defence to rely on s 140A CCA 1974 (with permission to appeal having been refused). In any event, there was nothing improper in the way the bank behaved in exercising or enforcing its rights under the [lending facilities]. Mr G had, throughout, his own business and legal advisers. Allegations about representations by lending officials are easy to make but difficult to prove without reliable contemporaneous evidence, together with proof of reliance and detriment. Except in a clear case, most borrowers might be better off negotiating an orderly withdrawal and agreeing a sensible strategy to realise their assets in order to pay off their debts. The trial bundles ran to 12 lever arch files, most of which were not referred to (but were insisted upon by Mr G and his solicitors). Note to borrowers: this is not a good idea.
Case name Neutral citation Legal points Case summary Facts Held Comment Insol Funding Co Ltd v Cowlam [2017] EWHC 1822 (Ch) Equitable charge – settlement agreement with one beneficial co-owner – extent of interest – availability of equitable exoneration or equitable subrogation Where a beneficial co-owner compromised a claim which had been charged on the other co-owner’s interest, by agreeing to pay a sum of money and give security for the debt, it was not open to her to seek to deflect the settlement sum to the other co-owner on established principles of equitable exoneration or equitable subrogation. Mr C obtained funding from I to annul his bankruptcy, secured by a second charge over jointly owned property granted by Mr C and Ms C. Following default in repayment, I brought proceedings for possession. Ms C successfully raised a defence of undue influence so that the charge was only enforceable against Mr C’s share, and in subsequent proceedings, the court declared that his beneficial interest was subject to an equitable charge. I sought to enforce the equitable charge, which was worth £640,000. Ms C raised a Part 20 Claim to declare her beneficial interest and for equitable accounting but subsequently agreed terms with I resulting in a settlement agreement whereby she agreed to pay them £325,000 rising to £330,000 and that pending payment she would grant them an equitable charge over her interest. Following default in payment of the agreed sum, I applied for an order for sale. The court made an order but initially gave Ms C conduct of the sale. What remained in issue was the extent of Ms C’s beneficial interest and the extent to which she was entitled to be exonerated out of Mr C’s share first (or alternatively entitled to relief by way of equitable subrogation to I’s charge over Mr C’s interest). On the evidence, in the absence of an express declaration of trust as to the parties’ respective beneficial interests, the starting point where domestic property was purchased in joint names, applying Stack v Dowden [2007] 2 AC 432 and Jones v Kernott [2011] UKSC 53, was that equity followed the law, but there was a change of position as a result of an agreement reached between the parties that Mr C’s share would be 20% and Ms C’s 80%, and that Ms C acted in reliance to her detriment. There was no doubt that an equity of exoneration could arise where one beneficial co-owner charges his or her beneficial interest as security for the debts of the other beneficial co-owner, and that in such a case the charger is to be regarded as a guarantor or surety for the debt and can look to the debtor for indemnity or exoneration, and that further, such a right of indemnity or exoneration takes effect as a proprietary right over the interest of the debtor (Re Pittortou [1985] 1 All ER 285). But where, as here, Ms C had voluntarily elected to charge her interest in part satisfaction of monies secured also against Mr C’s interest, but without any arrangement having been made with Mr C, there was no proper basis on which the right to exoneration could arise. As to Ms C’s alternative claim based on equitable subrogation, applying Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221; Cheltenham & Gloucester Plc v Appleyard [2004] EWCA Civ 291 and Menelaou v Bank of Cyprus [2016] AC 176, the court should apply existing principles to the facts of this case, but that here, none of the usual situations applied. Ms C did not charge her interest as guarantor or surety. She acted in her own right, without reference to him. Here, Ms C had simply promised to pay a sum of money without any expectation of security. Although there was some flexibility in the availability of the remedy, it would not be possible to extend it to the facts of this case. Declarations accordingly This is a complicated case, procedurally, which probably turns on its own facts, but reflects the range of issues that arise where there is a dispute about the nature and extent of one beneficial co-owner’s interest, and the extent to which he/she can seek to deflect liability for any secured debts to the other co-owner. It is, perhaps, a little surprising that the long arm of equity did not extend any help to Ms C by way of exoneration for what was, ultimately, Mr C’s debt.
Case name Neutral citation Legal points Case summary Comment London Executive Aviation Ltd v Royal Bank of Scotland Plc [2017] EWHC 1037 (Ch) Admissibility of expert evidence on COBS rules This is not a mortgage case. It concerns the extent to which expert evidence is admissible on the question of misselling of financial products. It reviews the general principles in Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384 and Barings Plc v Coopers Lybrand (No. 2) [2001] Lloyd’s Rep Bank 85, and also two recent decisions in swaps cases, Battrick v Royal Bank of Scotland [2013] EWHC 4848 (QB) and St Dominic’s Ltd v Royal Bank of Scotland [2015] EWHC 3822 (Ch) (in which the court decided in the latter two cases, that it was appropriate to give permission for expert evidence). However, it also helpfully emphasises that the construction (interpretation) of relevant legal rules is a matter for the court, so that an expert’s opinion on the meaning of a COBS rule (FCA’s Conduct of Business Sourcebook) is inadmissible. Accordingly, the court concluded that there can be no question of expert evidence being needed to expand on the risks related to a product, and no need for expert evidence to explain the legal standards required by COBS. The causes of action relied upon by the claimant comprised deceit, breach of fiduciary duty and negligence. It is a matter for the judge whether such causes of action have been made out, and no expert can helpfully express a view on this. The court also had to bear in mind that under CPR 35, the court was required to restrict expert evidence to that which is reasonably required to resolve the proceedings, and this involved an assessment of the costs and delay involved. The significance of this decision is that the court is unlikely to grant permission to a party to rely on expert evidence as to the meaning and effect of either the Financial Services and Markets Act 2000, or the Mortgages and Home Finance: Conduct of Business Sourcebook.
Publication The Chancery Guide was updated on 12th September 2017 to reflect the introduction of the Business and Property Courts on 2nd October 2017. The Chancery Guide provides detailed guidance on how to bring cases in the Chancery Division, including mortgage claims. The Business and Property Courts have been created as a single umbrella for specialist jurisdictions across England and Wales and combine work formerly carried out in the Chancery Division, the Commercial Court, and the Technology and Construction Court. They now comprise ten separate specialist courts or lists and sub-lists, and operate from the Rolls Building in London, and five regional centres, Birmingham, Bristol, Cardiff, Leeds and Manchester. When issuing proceedings electronically, users will now be asked which list they would like their case assigned to from the following: (1) Admiralty (QBD), (2) Business List (ChD), comprising (a) Business, (b) Financial Services and Regulatory, (c) Pensions; (3) Commercial Court (QBD), comprising (a) Commercial Court, (b) Circuit Commercial Court (QBD) (formerly the Mercantile Court); (4) Competition List (ChD); (5) Financial List (financial disputes worth over £50m) (ChD/QBD); (6) Insolvency and Companies List (ChD); (7) Intellectual Property List (ChD), comprising (a) Intellectual Property, (b) Intellectual Property and Enterprise Court (IPEC), (c) Patents Court; (8) Property, Trusts and Probate List (ChD); (9) Revenue List; (10) Technology and Construction Court (QBD). Under para 29.2 of the Chancery Guide, mortgage claims in the High Court are assigned to the Chancery Division and will now be listed in the Property, Trusts and Probate List. The heading of the claim will be “IN THE HIGH COURT OF JUSTICE, BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES, PROPERTY TRUSTS AND PROBATE LIST (ChD)”. The Claim Number will be assigned a prefix “PT”. Remember however that the county court has jurisdiction to hear and determine most mortgage possession claims under CPR 55, and that it will only be in exceptional circumstances that a claimant can justify starting his claim in the High Court (see CPR 55.3 and CPR PD 55A).