Midland Bank plc v McGrath

Mortgagor defaulting in loan repayment — Mortgagee claiming possession — Cross-claim against mortgagee — Whether mortgagor afforded defence by way of equitable set-off — Order for possession granted — High Court refusing mortgagor leave to appeal — Whether legal claim to possession could be defeated by any cross-claim — Leave to appeal refusedThe defendant purchased Fulwood Park Hotel, 49 Watling Street Road, Fulwood, Preston, Lancashire. The property was purchased and improvements and refurbishment carried out with the assistance of loans from Midland Bank plc. A legal charge over the property dated March 20 1989 was registered in favour of the bank. The defendant had been a member of Preston Borough Council and in 1991 an investigation was undertaken by police into alleged town hall corrupt land deals. He alleged that this had been prompted by the provision of allegedly false and inaccurate information by the bank to the police. The defendant expressed his intention to commence proceedings against the bank for alleged breach of contract, negligence and conspiracy. The defendant fell behind with repayments of the bank loans and the bank obtained a possession order on January 10 1996 on the basis that the defendant had no arguable defence. The defendant applied for leave to appeal against that order. He contended that the bank should not be entitled to enforce its legal charge because it was its own alleged misconduct towards the defendant which had caused his inability to service his debts. Held The application was refused. 1. The bank’s claim was for possession, not payment. The general rule established by longstanding authority was that except in so far as his rights were limited by contract or statute, a mortgagee by way of legal charge was entitled to seek possession of the mortgaged property at any time after the mortgage was executed: see National Westminster Bank plc v Skelton (Note) [1993] 1 WLR 72. 2. Contract and statute apart, a legal mortgagee’s right to possession of the mortgaged property could not be defeated by a cross-claim on the part of the mortgagor, even if it was both liquidated and admitted and even if it exceeded the amount of the mortgage arrears: see Ashley Guarantee plc v Zacaria [1993] 1 WLR 62. 3. The court was bound by those two decisions of the Court of Appeal and it followed that, as a matter of law, the bank was entitled to succeed in its action for possession notwithstanding the counter allegations by the defendant, however serious, sound or unsound. There was no scope for an appeal and there would be no purpose in giving leave. The defendant appeared in person; Juliet May (instructed by Eversheds) appeared for the bank.