England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
APPLICATION FOR PERMISSION TO APPEAL
AND A STAY OF EXECUTION WITH APPEAL
TO FOLLOW IF GRANTED

		Royal Courts of Justice Strand London WC2 Thursday, 5th July 2001

1. LORD JUSTICE ROBERT WALKER: This is an application by Dr Daniel Groves and Mrs Leera Groves for permission to appeal (with appeal to follow if permission is granted) from an order of Mr Justice Neuberger made on 27th June 2001. Dr and Mrs Groves have been represented this morning by Mrs Groves who has appeared in person and addressed us with great dignity and some skill. On the same day as the judge made his order Dr and Mrs Groves made this application for permission to appeal and Lord Justice Chadwick adjourned it to be heard on notice. He felt unable to deal with the application in any other way because he had not at that stage been provided with a copy of the judge's order or any note of his judgment.
2. This is a mortgagee's possession action and, like many such actions, it has a long and sad history. Dr and Mrs Groves bought The Lodge, Clayhill, Enfield ("the property") in 1987 for £250,000. It is a freehold house, now in a poor state of repair but standing in a good position in over an acre of garden. Dr and Mrs Groves paid a deposit of £62,500 and obtained a mortgage loan of £187,000 from National Home Loans which, I think, is the trading name of Paragon Finance Plc. A sum of about £290,000 was due on that security at 31st March 2000 and the current figure seems to be in the region of £300,000.
3. In December 1998 Dr and Mrs Groves negotiated a loan of £160,000 from Allied Irish Bank ("AIB"), or possibly another company in that group, to be secured by a second charge on the property. That charge - executed on 19th December 1998 - was in standard form for a bank's charge to secure payment on demand of money owing on any account. The purpose of the loan was to finance a restaurant business owned, or part-owned, by Mrs Groves.
4. Unfortunately, that business did not prosper. It was sold at a loss and part of the AIB bank loan was paid off out of the proceeds but a substantial sum remained owing attracting interest at 4½ per cent over the Finance Houses Association base rate.
5. A worse misfortune followed. In 1990 Dr Groves (who was then a medical practitioner in his mid-fifties) had serious cardiac trouble from which he has never made a full recovery. In 1992 he had to retire. This, inevitably, has had a very serious effect on his and his wife's ability to keep down interest on their substantial borrowings, quite apart from reducing the principal sums due. The first charge to National Home Loans has been kept within some bounds, if that is the correct expression, largely by social security benefits. The total indebtedness of AIB has grown inexorably to over £400,000. In the meantime Dr and Mrs Groves have continued to reside at the property and have seen to the upbringing of their three children, the youngest of whom is now 18 or 19 years.
6. At the time of Dr Groves' enforced retirement AIB made a concession to the borrowers. This is recorded in a relatively informal letter dated 22nd September 1992 which Mrs Groves has told us was negotiated in the kitchen of the property. It is signed by an employee in AIB's insolvency and debt recovery department and the material part is as follows:

"We are prepared to accept one payment of £200 commencing 30th September for two months, increasing to £250 per month for the next ten months. These repayments will be reviewed on a yearly basis with the first review being September 1993. This arrangement is accepted to clear the amount of £25,000 in full and final settlement of the above debt. This agreement is subject to you making regular monthly payments to the account and if there is a default in payments, we will be looking to recover our full balance.

This agreement is also subject to retaining our second charge over your private dwelling house. If the property should be sold at any time in the future and if there is any equity remaining after payment of the first mortgage, we will, of course, be entitled to such sums."

7. There is evidence that Dr and Mrs Groves were unable to keep to even these comparatively modest payments.
8. On 24th April 1997 AIB Group (UK) (which was either AIB under a new name or another group company) assigned the benefit of AIB security to Rees Investments Ltd ("Rees Investments"). This is a Jersey company which seems to have acquired a block of AIB securities under some sort of package deal.
9. On 18th September 1997 a company called Global Financial Recovery Ltd, apparently acting on behalf of Rees Investments, indicated that it would accept £30 per month "on the express basis that payments were made on time each month". Rees Investments' case, put forward in several witness statements of Mr Jonathan Clegg, a solicitor acting for Rees Investments, was that these payments were not regularly made. On 10th October 2000 Rees Investments issued proceedings in the Chancery Division for possession of the property and for a money judgment. The sum claimed at that stage was about £373,000.
10. Various figures were mentioned in evidence for the value of the property. The Master seems to have accepted that even in its present poor state of repair it would fetch at least £400,000. The highest figure mentioned in the papers is £500,000. This morning Mrs Groves has mentioned a figure of £450,000 as a likely sale price.
11. The matter came before Master Price on 1st February 2001. He made an order for possession by 31st May 2001 and for payment of a sum of just over £400,000, but neither part of the order was to be enforced -

"if before that date [that is 31st May 2001] the defendants pay the arrears due under the mortgage to the Claimant under the arrangement with Allied Irish recorded in a letter dated 22nd September 1992."

12. Apart from any question of jurisdiction, the terms of that order are open to criticism. Mr Justice Neuberger did criticise it in his judgment in that it did not quantify the arrears or even make clear whether the arrears under the arrangement were to include any element of interest on unpaid instalments of £200 or £250, some of which had been unpaid for a long time. If interest was to be included and if it was to be calculated at the rate provided for under the original charge, the total sum amounted, on Mr Clegg's calculation, to about £36,770; if not, the requisite sum was £22,605. In the event, nothing was paid by the date mentioned in the order, that is 31st May 2001.
13. Master Price made his order in reliance on Section 36 of the Administration of Justice Act 1970 as extended by Section 8 of the Adminstration of Justice Act 1973. On 13th March 2001 Mr Justice Hart gave Rees Investments permission to appeal (which had been refused by Master Price) against the Master's suspension of the order for possession. Mr Justice Hart observed on that occasion that it was strongly arguable that that was wrong.
14. On 1st June 2001 (with no payment having been made and Rees Investments' appeal still unheard) Master Bowman gave permission for the order for possession to be enforced and a warrant of possession was granted on 11th June.
15. On or about 15th June solicitors then acting for Dr and Mrs Groves made an application to the Chancery Division for an extension of the time limit - that is 31st May 2001 - specified in the order of Master Price. The application was made with a statement of truth signed by a partner in the firm then acting for Dr and Mrs Groves. The signature of the partner is illegible but the statement of truth stated that Rees Investments' solicitor had accepted that £22,605 was the sum due. It seems very doubtful whether that statement, verified by a solicitor's signature, was true although it may be that the solicitor in question honestly believed it was true. Deputy Master Rhys refused to grant an extension. The borrower, faced with imminent eviction, wished to appeal from his refusal to grant an extension of time. That was the background to the appeal by Rees Investments coming before Mr Justice Neuberger on 26th June 2001.
16. Dr and Mrs Groves (appearing through Mrs Groves as a litigant in person) said that they wished to appeal the order made a few days before by Deputy Master Rhys. Counsel then appearing for Rees Investments, Mr Bruce, indicated that his client did not wish to pursue its appeal because the warrant for possession was about to be executed and once it had been executed there would be no further question of relief being granted.
17. In the event, Mr Justice Neuberger took the course most favourable to the borrowers, that is, he adjourned the matter for one day and heard both appeals together on the following day, 27th June. The judge gave a full and careful judgment although it appears that there were some points which he did not address. In particular, he did not address the implications of the letter of 22nd September 1992, having in its last paragraph made plain that the second charge was to remain in force notwithstanding the release of the borrowers from personal liability if they performed the terms set out in that letter.
18. The judge allowed the appeal of Rees Investments so far as it related to whether Master Price had jurisdiction to make the order which he did. The judge said that if the Master had had jurisdiction to make that order it would have been a proper exercise of his discretion which ought not to be disturbed. The judge also dismissed the borrowers' appeal, again on the basis that there was no fault to be found with the exercise of discretion by Deputy Master Rhys.
19. In concluding that Rees Investments' appeal should be allowed, Mr Justice Neuberger rejected various arguments put forward by the appellant but held, following authority, that Section 8 of the Administration of Justice Act 1973 does not apply to a charge to secure an overdraft or a similar liability in respect of which there can be no deferment until there has been a demand making the monies due. This morning Mrs Groves has pointed out that the loan by AIB was not, in her view, an overdraft. She saw it - no doubt, correctly - as the loan of a specific sum for a specific purpose, the whole of which was drawn down in a day. Nevertheless, it is plain that the mortgage security, that is the second charge dated 19th December 1988, was in standard form and covered all liability to the bank on any account. Section 8 of the 1973 Act refers to a situation where a mortgagor "is entitled or is to be permitted to pay the principal sum secured by instalments or otherwise to defer payment of it in whole or in part".
20. The judge concluded that that did not apply to the AIB charge either before or after the letter of 22nd September 1992, although he was not impressed by the argument that that letter had no contractual force, being a mere unilateral act of forbearance (and, for that reason, not within Section 8). When I say the judge was not impressed by it, he regarded it as one which was not particulary meritorious but he recognised that it might have legal force. In the end he did not base his decision on that point at all.
21. This morning Mrs Groves has made her application for permission to appeal to this court. An appeal to the Court of Appeal would be a second tier appeal and, by the mandatory provision of Section 55 of the Access to Justice Act 1999, a second appeal is permissible only if it would raise an important point of principle or practice or for some other compelling reason.
22. In allowing the appeal of Rees Investments from Master Price, Mr Justice Neuberger was following authority which binds the court in the form of the decision in Habib Bank v Taylor [1982] 1 WLR 1218. That decision may perhaps be regarded as quite a technical decision. It is not easily understood even by a Chancery lawyer, let alone by a litigant in person. Nevertheless, the decision has stood for 20 years, and Parliament has not sought to interfere further in the protection afforded to mortgagees. It is a decision that binds this court. In dismissing the borrowers' appeal from Deputy Master Rhys, the judge was properly refusing to interfere with the deputy master's exercise of discretion. Mrs Groves has suggested to us that the deputy master was not aware of the offer to pay off the sum of £22,000 odd which I have mentioned. However, it is apparent that that matter was before him because it formed the very basis of the application form filled out by the solicitors then acting for Dr and Mrs Groves.
23. It is always sad when a family has to leave its home because of financial misfortune especially when one or more of those involved are getting on in years and in poor health. However, it seems that to me a further appeal would not be justified under Section 55 of the Access to Justice Act 1999. I do not think it would have any real prospect of success.
24. I must therefore dismiss this application for permission to appeal and lift the stay on the execution so as to enable possession at an early date. The precise date can be discussed shortly.
25. LORD JUSTICE RIX: I agree.
Order: Application dismissed