Legal charge – Security for loan – Demand for repayment – Claim for principal and interest – Claimant mortgagee conceding proprietary claim for possession time-barred – Whether claim for principal and interest surviving in respect of annual periodic repayments falling due under terms of charge deed – Claim dismissed
In the late 1980s and early 1990s, the first defendant represented the UK interests of the claimant Swiss company. In 1990, the claimant made a loan of £200,000 to the defendants secured by a charge over their home. The charge deed provided for interest to be added quarterly on 25 March, 24 June, 29 September and 25 December of each year. Repayments of capital and interest were to be made by annual instalments, by deduction from sums due from the claimant to the first defendant pursuant to their business relationship. The claimant was further entitled to demand the repayment of the entire sum on giving six months’ written notice expiring on any of the quarterly interest days. In late 1991, the relationship between the parties broke down and the claimant sought the repayment of the loan, making a demand for such on 29 March 1994. Matters lapsed until the claimant issued two claims, in 2006 and 2007 respectively, the first for the repayment of an instalment from 1994 and the second for possession of the property and the repayment of all instalments from 1993 to 2002.
The defendants contended that the claims were statute-barred under the Limitation Act 1980 because more than 12 years had elapsed since the 1994 demand. The claimant conceded that the charge was extinguished but maintained that its money claim was not. It argued that the 1994 demand notice had not started time running since it had been invalid for failure to comply strictly with the deed, having failed to specify the quarter day upon which the notice expired. It further submitted that even if the 1994 demand in respect of the entire principal and interest had been valid, a separate obligation arose under the charge to make annual periodic repayments, such that the limitation period in respect of each year’s payment ran only from the date upon which that payment fell due. On that basis, it argued that the claim for the principal and interest in respect of the annual instalments from October 1994 onwards had survived the extinguishment of the charge.
Held: The preliminary issue was determined in favour of the defendants.
In construing the 1994 notice, the question was how a reasonable recipient would have been understood it: Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 EGLR 57; [1997] 24 EG 122; [1997] 25 EG 138 applied. In determining that matter, it was not appropriate to make an artificial distinction between the form and the content of the notice. The claimant’s 1994 notice had clearly referred to the relevant clause of the charge deed as requiring six months’ notice expiring on any of the quarterly interest days. The only such day that fell on the 29th of the month was that in September. It had been clear from the context that the 1994 notice required the repayment of the whole of the principal and interest due under the charge to the claimant by no later than six months from 29 March 1994, namely by 29 September 1994. Any reasonable recipient of the notice would have so understood it; no other expiry date was possible. Accordingly, the notice did not have to state the precise date upon which the six months’ notice would expire, and the 1994 notice was valid.
For the purposes of the 1980 Act, time ran from the date upon which the cause of action accrued. The cause of action accrued immediately upon the execution of a legal mortgage because the mortgage carried with it the right to possession. However, the running of the statutory limitation period was interrupted by part payment, and the earliest date from which time could start to run was the date of the first failure to make a payment. The service of a valid demand notice in March 1994 had rendered the defendants liable to repay the entirety of the principal and interest due under the charge. Accordingly, the claimant’s proprietary and money claims had been time-barred by September 2006 at the latest. The mortgagee’s proprietary rights and its right to sue for the principal sum were linked, such that when one remedy was time-barred so was the other. Since no claim had been issued until after September 2006, the claimant could not recover the principal and interest from the defendants: Ashe v National Westminster Bank plc [2007] EWHC 494 (Ch); [2007] 2 EGLR 137; [2008] EWCA Civ 55; [2008] 1 EGLR 123 applied.
David Taylor (instructed by Hacking Ashton LLP, of Newcastle under Lyme) appeared for the claimant; Gary Blaker (instructed by Tinsdills, of Hanley) appeared for the first defendant; Jonathan McNae (instructed by Lichfield Reynolds, of Meir) appeared for the second defendant.
Sally Dobson, barrister