Mortgagor falling into arrears – Mortgagee commencing possession proceedings – Mortgagor’s wife successfully defending possession proceedings on ground of undue influence – Mortgagee amending proceedings to claim monetary judgment in respect of arrears – Whether amendment abuse of process – Judge striking out amendment – Appeal allowed
In November 1987 the claimant bank lent £20,000 to the first defendant (S) on the security of 13 Highbury Terrace, Halstead, Essex, to enable him to purchase his first wife’s interest in the property. It was a condition of the loan that the property was in S’s sole name. The second defendant (T), who was not yet married to S but was also in occupation of the property, agreed in writing that the rights she had, or might acquire, in the property would be subject to the rights, interests and remedies of the bank as mortgagee. She also undertook not to assert against the bank any right or interest over the property. In December 1987, by a legal charge, S charged to the bank the entire legal and beneficial interest in the property as security for all moneys owing by S to the bank.
By June 1991, S was £3,300 in arrears. The bank commenced proceedings against S, pleading the arrears but claiming only possession of the property. The judge held that: T had an equitable interest in the property; S had misled her over the consent she signed; and she had not received adequate advice in signing the consent, which was to her disadvantage. Upon that basis, he held that her interest was not postponed to the bank’s legal charge and refused the application for possession against her.
In February 1998 the bank successfully sought leave to amend its particulars of claim to seek a monetary judgment in respect of the substantial arrears owed by S to the bank. The defendants applied for the amended particulars of claim to be struck out as an abuse of process. The judge allowed the application, taking the view that the pursuit by the bank of a money claim against S, with a view to bankrupting him and thereby obliging S to surrender the property, was an impermissible attempt to achieve by the back door what could not be achieved by the front door, and that it flouted the refusal to grant the possession order. The bank appealed.
Held: The bank’s appeal was allowed.
It was not an abuse of process for a mortgagee, which had been met with a successful defence, such as the O’Brien-type defence taken by the wife of the mortgagor, merely to choose to pursue its remedies against the mortgagor by suing on the personal covenant, with a view, as an unsecured creditor, to bankrupting him. This was so even though it might lead to an application by the trustee in bankruptcy for the sale of the property in which the wife had an equitable interest: Zandfarid v Bank of Credit & Commerce International SA (in liquidation) [1996] 1 WLR 1420; Barclays Bank plc v O’Brien [1994] AC 180 and Bradford & Bingley Building Society v Seddon [1999] 1 WLR 1482 considered.
Ali Malek QC and Andrew Harper (instructed by the solicitor to Alliance & Leicester plc) appeared for the appellant; Andrew Marsden (instructed by Whiskers, of Harlow) appeared for the respondents.
Thomas Elliott, barrister
