Neutral Citation No:  NICA 11
Judgment: approved by the Court for handing down
(subject to editorial corrections)*
"35. - (1) Subject as otherwise provided in this or any other statutory provision, the Court of Appeal shall have jurisdiction to hear and determine in accordance with rules of court appeals from any judgment or order of the High Court or a judge thereof.
(2) No appeal to the Court of Appeal shall lie-
(g) without the leave of the judge or of the Court of Appeal, from any interlocutory order or judgment made or given by a judge of the High Court, except in the following cases namely:-
(4) Subject to subsection (3), any doubt which may arise as to what orders or judgments are final and what are interlocutory shall be determined by the Court of Appeal.
No special provision is made for proceedings under Order 88 of the Rules. Moreover there is no apparent reason in principle why a possession order should be categorised interlocutory. In Valentine, Civil Proceedings in the Supreme Court, it is stated at paragraph 11.00:
"An order is only final if made on an application which must determine the action however it is decided."
Judgment of McBride J
(a) Procedural irregularities in the proceedings before the Deputy Master.
(b) Insufficient evidence to support the claim.
(c) Lack of standing to bring the claim.
Having done so, the Judge continued:
"In addition to the grounds set out in the Notice of Appeal, Mr Herron has now raised an additional ground in his most recent affidavit filed on 20 March 2017 namely that the agreement was a secured credit agreement and in accordance with the EU Directive 85/577/EC he is entitled to and has cancelled the agreement."
"After the Bank closed its case, Mr Herron sought to file additional affidavit evidence .. which raised new points not made at the lower court or in his appeal notice. In the exercise of my discretion I granted [him] leave to file this additional evidence. After the hearing Mr Herron then supplemented his evidence by further correspondence to the Bank and court setting out details of a clerical error made in a Notice of Cancellation he had sent to the Bank."
In another passage one learns that the "Notice of Cancellation" upon which the Appellant was relying was dated 16 March 2017. Of this the Judge says the following:
"In the Notice of Cancellation Mr Herron states that he does not have funds to 'resolve the inequity' and further states the most he can reasonably afford to pay based on his current income is £200 per calendar month."
This was followed by a notification by the Appellant to the Bank on 27 March 2017 of "a clerical error" in the Notice dated 16 March 2017.
(i) The procedural irregularities ground was of no moment as the appeal was proceeding de novo.
(ii) The Appellant "did enter into and did sign the mortgage deed on 28 March 2008".
(iii) The mortgage " . is a valid agreement and he is therefore the person responsible for the mortgage debt and is subject to the terms of the mortgage".
(iv) There were certain identifiable errors in the evidence on behalf of the Bank: in particular, contrary to certain averments, a charge had been registered against the premises, there was a miscalculation in the arrears in the Bank's grounding affidavit and the loan had been securitised. The Judge expressed herself satisfied that the errors in the Bank's affidavits (a) were made innocently and (b) were not material to the issues to be determined.
(v) The Appellant was " in default of the terms of the mortgage agreement by reason of his default in payment of principal and instalments when due". The Judge considered this finding fortified by what is recorded in  above.
(vi) It was not for the Court to resolve any dispute about the actual amount due and owing: the Court was concerned only with the issue of whether the Bank was entitled to an order for possession.
(vii) The charge registered against the premises on 10 May 2010 did not prejudice the Bank's entitlement to possession, as its charge being dated 27 April 2009 ranked first in priority.
(viii) While the Bank was not a party to the mortgage deed, as a matter of law all rights and liabilities there under transferred to it, on 17 September 2007, by virtue of the HBOS Group Reorganisation Act 2006.
(ix) The Bank remained the legal owner of the charge at all times: the arrangement which it made in order to securitise the charge was an equitable assignment only.
(x) It followed that the Bank was entitled to register the charge in the Land Registry. Registration was conclusive evidence that the Bank was the registered owner thereof.
"I find this submission to be completely devoid of any merit because, firstly, the deed of mortgage does not fall within the scope of the EU Directive, which applies to contracts entered into 'away from the trader's premises'. This deed was entered into at business premises and therefore Mr Herron cannot avail of the provisions in the Directive. Secondly, it makes no sense in law or commerce that a person can take out a loan and then unilaterally cancel the agreement without repaying the loan. If such a right existed it would wreak havoc with the established patterns of commercial lending and it would prevent creditors lending money with consequent disastrous effect on business and commerce."
McBride J then expressed her omnibus conclusion in the following terms:
"The evidence in this case is overwhelming that the Bank advanced substantial monies to Mr Herron, secured by way of a charge on the premises. Under the mortgage agreement Mr Herron agreed to pay instalments when due and owing. Mr Herron did so until the summer of 2011. Since that time he has defaulted. Although he has made a number of sporadic payments, no payments have been made since August 2014. From that date Mr Herron has lived in the premises effectively rent free."
Having referred to certain figures the Judge then commented that the premises appeared to be in negative equity.
The mortgage evidentiary materials
(a) Mr Herron's name appears repeatedly throughout the document.
(b) The "estimated completion date" viz the date upon which the Appellant was hoping to secure the loan was 29 June 2007.
(c) The Appellant was applying to remortgage the premises.
(d) His "mortgage advisor" was identified as a named person of the company "Wisemove Mortgages", which had a specified financial services register number.
(e) The application form was clearly completed by the broker.
(f) The broker's fee for the services provided was specified as £300.
(g) The Appellant had been residing at the premises from 01 May 2006.
(h) The Appellant was applying for a loan of £320,000 for the threefold purpose of discharging his extant mortgage balance (£123,000), satisfying a divorce settlement (£67,000) and "debt consolidation" (£130,000).
(i) The loan term for which he was applying was one of 10 years and the "loan repayment type" sought was "interest only".
(j) The specified interest rate was 6.19%.
(k) The name and address of the Appellant's solicitor (Mr Annett) were specified, as were details of his bank and credit card.
The proceedings before this Court
(i) The rejection of the Appellant's case under the 1987 Directive and, specifically, the Judge's finding that the mortgage deed was entered into at business premises.
(ii) The Judge's finding that the Bank had sustained a loss as a result of the Appellant's failure to repay the stipulated instalments.
(iii) The Judge's assessment of the Bank's grounding affidavit.
(iv) The Judge's failure to consider the fairness of the terms of the mortgage agreement under EU Directive 93/13/EEC (the "1993 Directive").
The first ground of appeal: Directive 85/577/EEC ("the 1985 Directive")
"Whereas the special feature of contracts concluded away from the business premises of the trader is that as a rule it is the trader who initiates the contract negotiations, for which the consumer is unprepared or which he does not except; whereas the consumer is often unable to compare the quality and price of the offer with other offers; whereas this surprise element generally exists not only in contracts made at the doorstep but also in other forms of contract concluded by the trader away from his business premises;"
The solution proposed by the Directive was to confer on the consumer a "cooling off" period of at least 7 days " in order to enable him to assess the obligations arising under the contract".
"during an excursion organized by the trader away from his business premises, or during a visit by a trader.
(i) to the consumer's home or to that of another consumer,
(ii) to the consumer's place of work;
Where the visit does not take place at the express request of the customer."
By Article 3(2):
"This Directive shall not apply to:
(a) contracts for the construction sale and rental of immovable property or contracts concerning other rights relating to immovable property."
"' land mortgage' includes any security charged on land and in relation to Scotland includes any heritable security"
By Regulation 3(1):
"These Regulations apply to a contract, other than an excepted contract, for the supply by a trader of goods or services to a consumer which is made
(a) during an unsolicited visit by a trader
(i) to the consumer's home or to the home of another person; or
(ii) to the consumer's place of work;
(b) during a visit by a trader as mentioned in paragraph (a)(i) or (ii) above at the express request of the consumer where the goods or services to which the contract relates are other than those concerning which the consumer requested the visit of the trader, provided that when the visit was requested the consumer did not know, or could not reasonably have known, that the supply of those other goods or services formed part of the trader's business activities;
(c) after an offer was made by the consumer in respect of the supply by a trader of the goods or services in the circumstances mentioned in paragraph (a) or (b) above or (d) below; or
(d) during an excursion organised by the trader away from premises on which he is carrying on any business (whether on a permanent or temporary basis)."
Regulation 3(2)(a)(i) provides:
"For the purposes of this regulation an excepted contract means
(a) any contract
(i) for the sale or other disposition of land, or for a lease or land mortgage;"
In passing, the current measure of domestic law, namely the Cancellation of Contracts made in a Customer's Home or Place of Work Regulation 2008, has no application in the present case given its operative date of 01 October 2008.
The second ground of appeal: The Judge's improper finding that the Bank had sustained a loss
The third ground of appeal: the Judge's inadequate assessment of the Bank's affidavit evidence
" Generally an appeal is by way of rehearing. The rehearing is conducted by way of review of the trial, including any documentary evidence, and the trial testimony is not re-heard. In most appeals the hearing consists entirely of submissions by the parties and questions put to the parties by the judges. New evidence is not generally admissible unless it can be shown that it is relevant and that the evidence could not with reasonable diligence have been brought before the original trial.
 The Court of Appeal is entitled to review findings of fact as well as of law but the burden of proof is on the appellant to show that the trial judge's decision of fact is wrong. On a review of findings made by a judge at first instance, the rationale for deference to the original finder of fact is not limited to the superiority of the trial judge's position to make determinations of credibility. The first instance hearing on the merits should be the main event rather than a try-out on the road to an appeal.
 Even where factual findings and the inferences drawn from them are made on the basis of affidavit evidence and contemporaneous documents without oral testimony, the first instance judgment provides a template and the assessment of the factual issues by an appellate court can be a very different exercise. Impressions formed by a judge approaching the matter for the first time may be more reliable than the concentration on the appellate challenge to factual findings. Reticence on the part of the appellate court, although perhaps not as strong where no oral evidence has been given, remains cogent (see DB v Chief Constable  UKSC 7).
 Those principles are clearly of material significance in this case. The trial judge had the advantage of hearing the oral evidence of the appellants on the Tomlin Order issue. He considered the appellants to be both unreliable historians eager to mould the facts to their objective as opposed to telling the unvarnished truth. He gave examples in respect of the Order that they said the Court of Appeal had made and the alleged admission by their former solicitor that he was guilty of misrepresentation. There is no indication that the judge did not take all the circumstances surrounding the evidence into account, that he misapprehended the evidence or that he had drawn an inference which there was no evidence to support. In light of the judge's conclusions we see no basis upon which we could interfere with his refusal to set aside the Tomlin Order."
"Neither the preamble to nor the provisions of the Consumer Credit Directive contain anything to show that the Community legislature intended, in adopting it, to limit the scope of the Doorstep Selling Directive in order to exclude secured-credit agreements from the specific protection provided by that Directive."
Ground Four: Unfair Contract Terms
"A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.
2. A term shall always be regarded as not individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term, particularly in the context of a pre-formulated standard contract.
The fact that certain aspects of a term or one specific term have been individually negotiated shall not exclude the application of this Article to the rest of a contract if an overall assessment of the contract indicates that it is nevertheless a pre-formulated standard contract.
Where any seller or supplier claims that a standard term has been individually negotiated, the burden of proof in this respect shall be incumbent on him."
"Without prejudice to Article 7, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.
2. Assessment of the unfair nature of the terms shall relate neither to the definition of the main subject matter of the contract nor to the adequacy of the price and remuneration, on the one hand, as against the services or goods supplies in exchange, on the other, in so far as these terms are in plain intelligible language."
"In the case of contracts where all or certain terms offered to the consumer are in writing, these terms must always be drafted in plain, intelligible language. Where there is doubt about the meaning of a term, the interpretation most favourable to the consumer shall prevail. This rule on interpretation shall not apply in the context of the procedures laid down in Article 7 (2)."
5(1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.
(2) A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term.
(3) Notwithstanding that a specific term or certain aspects of it in a contract has been individually negotiated, these Regulations shall apply to the rest of a contract if an overall assessment of it indicates that it is a pre-formulated standard contract.
(4) It shall be for any seller or supplier who claims that a term was individually negotiated to show that it was.
(5) Schedule 2 to these Regulations contains an indicative and non-exhaustive list of the terms which may be regarded as unfair.
Assessment of Unfair Terms
6(1) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.
(2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate
(a) to the definition of the main subject matter of the contract, or
(b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.
7(1) A seller or supplier shall ensure that any written term of a contract is expressed in plain, intelligible language.
(2) If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer shall prevail but this rule shall not apply in proceedings brought under regulation 12.
Effect of Unfair Term
8(1) An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.
(2) The contract shall continue to bind the parties if it is capable of continuing in existence without the unfair term. "
The Fifth Ground of Appeal
"The Defendant's central complaint has been that the Plaintiff did not have legal ownership (or any ownership) of the Charge and/or of the loan. This is a claim which is being increasingly made primarily by personal litigants where a mortgage or charge, particularly a sub-prime mortgage or charge, is in arrears. Investigation of this issue can result in a disproportionate expenditure of both time and money. Accordingly, when considering the conduct of any further claims where the central issue is whether or not the financial institution has the locus standi to obtain an Order for Possession, it is suggested the following course should be adopted after lists of documents have been exchanged by both sides. Firstly, there should be an inspection of those documents in the list of each party. Secondly, the solicitor acting for the financial institution should warn the proposed deponent on behalf of the financial institution of the serious consequences he or she bears personally, and the consequences for his or her employer, if he or she swears an affidavit that is false in any respect. Thirdly, the solicitor should confirm to the court that the deponent has been so advised before the affidavit is sworn. Fourthly, the deponent on behalf of the financial institution should then swear the affidavit dealing with the plaintiff's title to seek an Order for Possession."
"Further, Cahal Maurice Carvill does not indicate that he has been informed of the serious consequences that he bears personally, and the consequences to his employer, if he swears an affidavit that is false in any respect .
His testimony therefore appears to be inconsistent with Court guidance on the swearing of affidavits in actions for possession, as laid out in [Swift Advances Plc and Santander (UK) Plc] .."
(i) In his order dated 23 July 2014 the Chancery Master ordered that the Bank -
" do within 28 days from this day file and serve an affidavit by a senior officer in accordance with the procedure set forth in paragraph 42 of . Swift Advances Plc v McCourt exhibiting with full particulars the securitisation relation to the Plaintiff's charge, exhibiting copies of all relevant documentation and "
(ii) By an affidavit sworn on 02 October 2014 Ian Stewart, the "Head of Secured Mortgages" of the Lloyds Banking Group, purported to comply with the Master's Order. He averred in :
"I have reviewed the decision of Swift v McCourt which I have marked A in the bundle
Whilst not accepting that the Plaintiff does not have title, or that the Defendant has done anything which satisfies the burden of proof in this regard, I beg leave to refer to [various specified documents]"
Notably, the judgment in Swift First is exhibited to Mr Stewart's affidavit. We shall say much about this affidavit infra.
(iii) The Appellant's response was speedy: in one of his many affidavits, this one sworn on 31 October 2014, he highlighted that Mr Stewart's affidavit was not in compliance with the Master's Order.
(iv) Next one Catherine Yeates, a solicitor in the firm representing the Bank, swore an affidavit (on 09 March 2015) in purported compliance with the Master's further Order requiring discovery on oath of all documents bearing on the Bank's appointment of Hagan solicitors in the transaction under scrutiny.
(v) This was followed by the second affidavit of Mr Carvill, a solicitor employed in the firm previously representing the Bank and the deponent of the affidavit grounding the possession proceedings, correcting some of the figures specified in his first affidavit.
(vi) In a further affidavit sworn on 22 May 2015 the Appellant, inter alia, protested that the affidavit of Ms Yeates was not in conformity with the Swift First requirements.
(vii) In yet another affidavit, sworn on 26 June 2015, the Appellant observed that Mr Stewart's aforementioned affidavit was similarly non-compliant with Swift First.
(viii) Next, having initiated his appeal against the Deputy Master's Order for possession, the Appellant highlighted this issue once again in an affidavit sworn on 04 December 2015.
(ix) The Appellant did likewise in yet another affidavit sworn on 16 September 2016.
(x) The riposte to the latter took the form of a skeleton argument composed by counsel for the Bank, dated 22 September 2016, containing the passage " . as has been pointed out to the Appellant on numerous occasions his remedy was to enforce the order if he did not believe it had not been complied with he did not." The reference here is to the Order of the Chancery Master dated 23 July 2014 noted at (i) above.
"It is therefore denied that Swift v McCourt was not followed. But even if it wasn't the mischief behind the [Swift direction] has been satisfied. The Respondent proved its legal right to enforce the loan."
(i) Part of Mr Stewart's oral evidence to the Master was that questions concerning the "origination" of mortgage loan accounts were "outside of [his] own personal remit with the bank."
(ii) The Appellant's case has been that in the absence of records relating to the actual price at which the loan account was supposedly sold and repurchased via the securitisation process, the Bank has not demonstrated that it sustained a loss. McBride J's finding to the contrary was "founded on a misapprehension of banking practice".
(iii) In support of his case on this discrete issue, the Appellant was relying on an article written by Professor Richard Werner which contains the following passage:
"Thus it can now be said with confidence for the first time possibly in the 5,000 years history of banking that it has been empirically demonstrated that each individual bank creates credit and money out of nothing when it extends what is called a 'bank loan'. The bank does not loan any existing money, but instead creates new money."
The author's theory is based upon the suggestion that the loan is affected by crediting the borrower's account with a phantom deposit (the "credit creation theory") and not by transferring money from other accounts, internal or external. This article, it appears, is the sole foundation of the Appellant's "no loss" argument rejected by the Judge. The Appellant acknowledges that this argument did not feature either orally or in writing before the Judge and, indeed, the Professor's article was evidently not in the trial bundle.
(iv) The aforementioned established banking practice is further confirmed by a Bank of England 2014 publication which states:
"When a bank makes a loan to one of its customers it simply credits the customer's account with a higher deposit balance. At that instant, new money is created."
(v) The documents discovered by the Bank did not include "copies or originals of executed documents in respect of the securitisation or sale of the account in question". This, the Appellant suggests, exposes a failure to comply with the discovery order of 23 July 2014. Quite the contrary: the documents in question, he submits, " . were neither signed nor dated and showed evidence of having been altered".
(vi) In particular, the documents discovered contained nothing evidencing the "alleged repurchase or transfer back to the [Bank] of the specific account in question".
"Legal title to the charge the subject of this action remained at all times vested in Halifax Plc until 17 September 2007 .."
This averment was the subject of certain manuscript alterations and interlineations which (a) are unclear and (b) were not initialled by the solicitor before whom the affidavit was (apparently) sworn.
"I am able to make this affidavit from facts within my knowledge, information and belief and from information provided to me by the Plaintiff."
(i) The Swift First requirements in every case to which they apply are to be observed. They are not optional. They express best practice in this sphere of litigation.
(ii) Self-evidently compliance with the Swift First requirements assumes added importance when the duty to do so is specifically enshrined in an order of the Court.
(iii) The present case illustrates the regrettably widespread malaise of a disturbingly widespread failure on the part of practitioners to appreciate and give effect to Order 41 of the Rules and Practice Direction 05/2005 "Preparation of Affidavits and Exhibits".
(iv) The practice of affidavit evidence being provided by the solicitors representing financial institutions in this field appears relatively entrenched. The Court considers this practice inappropriate. Solicitors, self-evidently, do not have first hand knowledge of the facts upon which repossession claims are pursued. Affidavits should be sworn by suitably senior and knowledgeable officials of the institutions concerned deposing to facts within their own knowledge and, where appropriate, containing statements of information and belief complying strictly with Order 41, Rule 5. This will apply unless there is some compelling reason to do otherwise. In this way in those cases where oral evidence is required the witness will be a person who can deal knowledgeably with the factual issues under scrutiny: in short, a real witness.
We are bound to observe finally that the Bank's failure in the present case to comply with the Master's Order for specific discovery was not less than egregious.