Mortgage — Default — Claim for sums outstanding following sale of property — Whether claim time-barred — Date when right to receive money accruing — Section 20(1) of Limitation Act 1980 — Construction of mortgage deed — Appeal dismissed
The respondents defaulted on a mortgage secured on their property. The appellant mortgagee obtained an order for possession and sold the property, but the sale proceeds were insufficient to clear the outstanding sum. The appellant took no further action for more than 12 years; only then did it serve the respondents with a claim for the shortfall, plus interest.
The respondents contended that the claim was time-barred under section 20(1) of the Limitation Act 1980, it being an action to recover money secured by a mortgage brought after the expiry of 12 years from the date upon which the right to receive the money had accrued. They submitted that the appellant’s claim had accrued on the date upon which they had defaulted on the repayments. The appellant contended that this was not so under the terms of the particular mortgage, which made no provision for the entire outstanding sum to become repayable on default. It argued that, as a result, the only claim that was available to it was for each monthly payment when it fell due. Clause 5(d) of the mortgage deed listed the circumstances in which the mortgagee’s statutory powers became exercisable, including: “(i) on the giving to the borrower of notice in writing requiring payment forthwith of the moneys hereby secured”; and “(ii) if default shall have been made for one calendar month in the payment of some repayment… hereby secured”. However, it made no mention of the entire advance becoming repayable under the same circumstances.
The issues were whether: (i) section 20 applied where an advance was originally secured by a mortgage, but where the security had been realised or released prior to proceedings being commenced; and (ii) as a matter of construction of the particular mortgage deed, the appellant had, on default by the respondents, obtained a cause of action or right to receive the outstanding capital. The Court of Appeal held that section 20 applied and that the claim was time-barred. The appellant appealed.
Held: The appeal was dismissed.
1. The claim was governed by section 20. English law attributed periods of limitation by reference to the cause of action that the claimant sought to enforce, suggesting that, ordinarily, time would run from the moment at which the cause of action had arisen. If, therefore, the cause of action, when it arose, was a claim to a debt secured on a mortgage, section 20 would not cease to apply if the security were subsequently realised: Bristol & West plc v Bartlett [2002] EWCA Civ 1181; [2003] 1 EGLR 85; [2003] 01 EG 69 approved.
2. Mortgage deeds were not subject to artificial rules of construction, so had to be construed in the same way as any other conveyancing document. Clause 5(d), in setting out a list of events following which the power of sale could be exercised, implied that, until such an event occurred, the money was not repayable. The natural reading of para (i) was that the money did become repayable, and the power of sale did become exercisable, on the making of a written demand for repayment. By parity of reasoning, the same consequences followed from the other events of default listed in clause 5(d). It followed that the appellant’s claim had arisen more than 12 years before the action was brought and the claim was accordingly time-barred.
John Jarvis QC and Stephanie Tozer (instructed by Rosling King) appeared for the appellant; Derek Wood QC and Nigel Meares (instructed by Peter Rolling, of Diss) appeared for the respondents.
Sally Dobson, barrister
