Current account mortgage – Possession proceedings – Respondent bank granting overdraft limit secured by charge on appellant’s home – Limit exceeded — Bank becoming entitled to repayment of full amount – Demand for repayment – Subsequent telephone conversation – Whether bank estopped from bringing possession claim – Appeal allowed
In 2003, the appellant took out a current account mortgage with the respondent bank on terms that provided him with a £72,000 overdraft facility, which was secured by a legal charge against his house and repayable over 20 years. The conditions of the account entitled the respondent to demand immediate repayment of the full amount should the appellant exceed the agreed limit. The appellant was made redundant. He had difficulty meeting the repayments and exceeded his limit. In January 2006, the respondent wrote to him demanding repayment of the full amount and stating that the facility had been terminated. It further stated that if the amount remained unpaid or if a satisfactory repayment plan was not forthcoming, it would bring possession proceedings to enforce the charge. The appellant telephoned the respondent; he was told that if he brought the account back within the agreed limit the respondent would review the matter after three months. The appellant borrowed money from friends and family to enable him to do so but, in February 2006, the respondent informed him that the repayments were not satisfactory and that possession proceedings would be brought. Proceedings were issued in April 2006, at which time the account was within the £72,000 limit.
A possession order was made against the appellant at a brief hearing in his absence, but was subsequently set aside on the ground that the appellant was entitled to a proper hearing. He relied upon the telephone conversation with the respondent and contended that the respondent had invalidated its previous demand for full repayment and had barred itself from bringing possession proceedings. The judge found as a fact that a conversation had taken place, but that the respondent had done no more than promise that if the appellant could bring the account below the limit with a in three-month period, it would keep the matter under review; it had not agreed to compromise its legal rights and was entitled to bring possession proceedings. The judge therefore made a possession order. The appellant appealed.
Held: The appeal was allowed.
The most that the respondent had promised was that if the appellant made repayments to bring the account below the agreed limit, it would consider the position and review the matter after three months. It had said that it would review the position generally, but had not committed itself to any particular course of action. Even if the telephone conversation had been understood by the appellant as a promise on the part of the respondent to drop the matter and to reinstate the account if he could bring it within the limit, he had been disabused of any such understanding by the respondent’s subsequent letter informing him that it was to bring proceedings. None the less, the respondent had agreed in the telephone conversation to give the appellant a three-month amnesty, after which the position would be reviewed. Although that did not necessarily amount to a contract, it was a representation in reliance upon which the appellant had changed his position by borrowing money to make the repayments. The respondent was therefore estopped from bringing proceedings within the three-month period. It had acted prematurely in doing so, and at a time when the account was within the limit. Accordingly, the judge should have dismissed the possession proceedings.
The appellant appeared in person; Stephen Eyre (instructed by Shakespeare Putsman LLP, of Birmingham) appeared for the respondent.
Sally Dobson, barrister