Practice and procedure – Abuse of process – Mortgage – Respondent lender obtaining order for possession of appellants’ property on grounds of failure to repay mortgage loan – Appellants applying unsuccessfully to set aside possession order – Respondent obtaining warrant for possession – Appellants then bringing new action claiming mortgage unenforceable under Financial Services and Markets Act 2000 – Whether new action properly struck out as an abuse of process – Appeal dismissed
In November 2010, the respondent lent £630,000 to the appellants by way of a mortgage secured by a legal charge over their property. The mortgage was a short-term bridging loan to refinance the appellants’ existing debts; the loan was for a term of six months, at the end of which the full loan amount, plus interest, became due.
The appellants failed to repay the loan. The respondent then obtained a possession in respect of the property, which was not to be enforced until the end of January 2012 on condition that the appellants paid £12,000 per month to the respondent for the following three months. The appellants made those payments but large sums remained outstanding. The appellants applied unsuccessfully to set aside the possession order on the grounds of an alleged sub-charge preventing the respondent from exercising its rights. The deputy district judge made an order permitting the warrant for possession and the appellants’ appeal against that order was dismissed by a judge on terms. In late October 2013, the respondent duly issued a warrant and secured an eviction appointment for the beginning of November.
The appellants thereupon issued their own proceedings, contending that the mortgage was unenforceable under section 26 of the Financial Services and Markets Act 2000 as a regulated mortgage contract into which the respondent was not authorised to enter. The respondent’s application to strike out the claim was allowed by a district judge, who held that: (i) the claim was not barred by either cause of action estoppel or issue estoppel, neither of which could prevail against section 26 of the 2000 Act; but (ii) it was an abuse of process to seek to litigate the questions arising out of the 2000 Act at that late stage, more than two years after the making of the original possession order. That order was upheld by a High Court judge and the appellants appealed.
The appellants contended that the public policy of preventing unauthorised lenders from relying on unenforceable agreements, as embodied in the 2000 Act, was an expression of parliamentary will which should prevail over the judge-made principles of abuse of process.
Held: The appeal was dismissed.
The appellants’ claim was an abuse of process, contrary to the principle that litigants should, in general, bring forward all their claims in one proceeding rather than successively in order to avoid a defendant being doubly harassed by the litigation: Henderson v Henderson (1843) 3 Hare 100 and Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46; [2014] AC 160 applied.
While issue estoppel could not be set up against statutory provisions enacted for the protection of certain vulnerable categories of person, or for the protection of others who engaged in dealings with such persons, it did not follow that the respondent could not rely on the modern principles of abuse of process. Those principles were quite different from the somewhat technical doctrines of cause of action estoppel and issue estoppel and required a broader merits-based approach, involving a multi-factorial evaluation and taking into account the public and private interests involved as well as all the facts of the case: Johnson v Gore Wood & Co [2002] 2 AC 1; [2000] PLSCS 292 applied. On that approach, it might be important to distinguish between transactions which were rendered illegal by statute and others which were merely rendered unenforceable. There might also be distinctions between degrees of unenforceability: while a blanket unenforceability might be equivalent to a prohibition, the unenforceability under the 2000 Act was more nuanced. It was relevant that, under section 28(3) of the 2000 Act, an agreement could be enforced if the court was satisfied that it was just and equitable in the circumstances of the case; moreover, by section 28(7), unenforceability depended on the borrowers’ election not to perform the agreement and was conditional on the return of any money lent. There was thus no reason why the Henderson principle should not apply and every reason why it should, provided it was approached in the appropriate, broad merits-based way: Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 distinguished.
It followed that the 2000 Act could not be a “trump card” or dictate the result of the abuse of process application. It was all a matter of evaluation. The appeal court, on well recognised principle, would refrain from interfering with the decision of the first instance judge unless he had taken into account immaterial factors, omitted to take account of material factors, erred in principle or come to a conclusion that was impermissible or not open to him: Aldi Stores Ltd v WSP Group plc [2007] EWCA Civ 1260; [2008] 1 WLR 748 applied.
The judge had not fallen into any such error in the instant case. In reaching his decision to strike out the claim, he had properly taken into account the following factors: (i) the proceedings were a clear collateral attack on the previous decision in the possession proceedings; (ii) the proceedings amounted to unjust harassment of the respondent given that the possession order had been obtained more than two years ago and the issue raised in the appellants’ claim could have been raised in those earlier proceedings; (iii) the appellants had given no explanation of why they had not raised the issue in the earlier proceedings; (iv) the respondent was prejudiced by the delay in raising the issue, including by the fact that the property might now be in negative equity; (v) the claim had been brought without any notice to the respondent; (vi) the appellants had not paid the costs awarded against them in the earlier proceedings; (vii) the court’s resources had already been extensively used in a dispute between the parties; and (viii) overall, the appellants were seeking to gain a tactical advantage.
Mark Warwick QC and Pepin Aslett (instructed by Abbey Solicitors Ltd, of Manchester) appeared for the appellants; Stephen Jourdan QC (instructed by Powells Law, of Weston-Super-Mare) appeared for the respondent.
Sally Dobson, barrister
Click here to read the transcript of Dickinson and another v UK Acorn Finance Ltd
