Wilkinson v West Bromwich Building Society (2004)
For the purposes of the Limitation Act 1980 s.8, the date at which a building society's right to recover the shortfall of a mortgage advance from the mortgagors accrued was the date when the mortgagors defaulted in the monthly instalment payments.
The appellant mortgagors (W) appealed against a summary judgment ordering W to pay to the respondent building society (B) the balance of an advance made on a mortgage, the judge having found that there was an implied term that the whole sum had become due to B at the date of the sale of W's house by B which meant that the action was not statute barred under the Limitation Act 1980. B cross appealed against a decision allowing them to recover only three years' interest. W owned a property secured by a legal charge in favour of B. W fell into arrears with the monthly payment instalments and in 1989 B obtained an order for possession of the property. The property was sold in November 1990. The proceeds of sale were credited to W's mortgage account. However, the sum of £23,921 remained owing to B but B did not take any further recovery proceedings against W until 2002. Despite the mortgage deed expressly providing for the payment of monthly instalments, it did not include any express covenant by W to repay the whole of the balance of the advance on a specified date or in a specified event, such as default of payment of the instalments, which raised questions in respect of the construction of the mortgage deed and the extent to which personal repayment obligations which were not expressed should be implied either by covenant or contract, and the construction and application of s.5, s.8 and s.20 of the 1980 Act. Advancing the same arguments submitted in the lower instance hearing, W contended that time had began to run from the last repayment of the monthly instalments towards the discharge of the mortgage debt, that is July 1989. That was more than 12 years before the date on which B had commenced its action against them personally for the recovery of the shortfall in November 2002. B maintained that the realisation of its security by exercising its power of sale over the house did not affect W's continuing liability, under the express covenant in the legal charge, to make monthly repayments of the advance to B, until B was repaid in full. The limitation period in respect of each covenanted instalment only started to run against B from the date on which each monthly instalment became due and thus B was entitled to recover all the past instalments which should have been paid, but were not paid by W during the 12 year period preceding the commencement of the action. Alternatively, B argued that time did not start to run against it until the amount of the shortfall was actually decided. That occurred when B sold the house in November 1990 and the sale triggered an implied term that only then did the whole balance of the advance become due to B. That sum was not secured by a mortgage on property within s.20(1) of the Act as the property had been sold and so was not subject to the prohibition in that section on actions for the principal sum more than 12 years after the right to receive the sum had accrued to B. The action for the recovery of the shortfall was started two days before the expiration of the 12 year period running from the sale date so was not statute barred.
W's obligation to repay the balance of the advance to B was one debt recoverable by B exercising its cumulative and concurrent rights and remedies against the property and by personal action against W based on covenant or simple contract. B's cause of action against W in its action to recover the shortfall was based on an implied covenant by W in the legal charge to repay the sum advanced by B. That cause of action was "upon a specialty" within s.8, which provided for a 12 year limitation period. That cause of action was also within s.20 as the shortfall sum which B sought to recover in the action was part of the advance "secured by a mortgage on property" within s.20(1)(a) at the date when the cause of action accrued to B. B's right to receive the full amount of the balance accrued to B when W defaulted in the instalment payments and B's rights and remedies for the recovery of the balance of the advance became exercisable. The effect of the combined reading of s.20(1)(a) and s.8 of the 1980 Act was to prohibit the action by B to recover the shortfall, as before the commencement of the action in November 2002, more than 12 years had expired from July 1989, that being the date on which W last made an instalment payment and the date on which the "right to receive" the money claimed in the action accrued to B. In the light of the authorities and applying the 1980 Act to the legal charge in the instant case, the claim by B for the outstanding sum due was statue barred. More than 12 years had elapsed from the accrual of the right of B to receive the balance of the mortgage debt secured by the legal charge and the commencement of the proceedings, Sutton v Sutton (1882) 22 Ch D 511, Re McHenry  3 Ch 290, Bristol and West plc v Bartlett & anr; Paragon Finance plc v Banks; Halifax plc v Grant (2002) EWCA Civ 1181, (2002) 33 EG 97 (CS) and Scottish Equiptable v Thompson (2003) 07 EG 137 (CS) applied.
Appeal allowed, cross-appeal dismissed.
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30 Jul 2004
Court of Appeal
Mummery LJ, Jonathan Parker LJ, Dyson LJ
LTL 30/7/2004;  EWCA Civ 1063
John McGhee QC