Mortgage – Mortgage sale agreement – Assignment of rights – Claimant assignee alleging value of properties overstated – Claimant suing defendant valuer for damages – Whether defendant entitled to disclosure of documents – Whether claimant entitled to strike out parts of defence – Applications dismissed
The claimant was one of a group of companies that purchased portfolios of mortgages by two mortgage sale agreements (MSAs) from GMAC, the largest centralised mortgage lender in the UK until it ceased lending in 2008. As well as transferring the mortgages themselves, each MSA purported to assign GMAC’s rights to sue professional valuers who had advised GMAC in relation to individual mortgage transactions.
The claimant, suing as assignee, subsequently claimed damages from the defendant valuer alleging that its valuation reports on three domestic properties had overstated the true value of each property. In November 2012, the judge gave directions that subdivided the issues in the action and directed that there should be a separate trial of the assignment issues and the lending issues. The defendant alleged defects in the disclosure process, and sought specific disclosure of four categories of documents that it said were vital for completion of its expert evidence. Meanwhile, after the deadline for expert evidence passed, the claimant issued a cross-application to strike out the defendant’s defences of champerty and contributory negligence. In addition, the cross-application sought an order requiring service of the defendant’s expert report.
Held: The applications were dismissed.
(1) It was not open to the claimant to apply to strike out parts of the defence at this stage. The November 2012 order established a framework for determining the assignment and lending issues. It would have been open to the claimant to apply to apply to strike out parts of the defence as hopeless at that time and, although there was no inflexible rule, this was clearly a case where, if such an application were to be made, it should have been made early and before the procedural structure for the future conduct of the action had been settled. In those circumstances, it would be wrong in principle to entertain an application to strike out those parts of the defence that raised the issues of champerty or contributory negligence at this stage. The effect of such an application would be to advance a collateral attack upon the November 2012 order and the carefully constructed procedural directions for the determination of the lending and assignment issues. Even if the claimant’s application did not technically amount to a collateral attack, it would involve the disruption of the procedure directed by the court when both parties had taken significant steps towards the trial of the issues in March 2014.
(2) No useful purpose would be served by requiring the disclosure of correspondence between the claimant and GMAC in circumstances where there was no reason to doubt what the claimant’s solicitors told the defendant’s solicitors. It was regrettable that clear statements by one reputable firm of solicitors to another had not been accepted at face value where there had been no sensible reason to doubt them.
(3) The defendant’s claim for specific disclosure failed. The portfolios had been purchased at a discount from the value that they would have had if it had been assumed that all would perform satisfactorily. However, it was necessary for the defendant to show that information about individual allocations within the portfolios was likely to be relevant to the champerty defence it wished to establish. Although the court was not deciding on the merits of the defence, it could not ignore the fact that the sale and purchase of bundles of debts with ancillary rights with a view to enforcing them for the benefit and ultimate profit of the purchaser was well established as a form of commercial transaction that gave the assignee of the debts and ancillary rights a genuine commercial interest for the purposes of the law of champerty. The assignment of the right to sue the valuers was to provide protection against a prospective shortfall on the primary mortgage loan. It was therefore making good defects in the mortgage loan transaction, whether those defects had emerged before or after the assignment. That being the essential character of potential claims against valuers, nothing would be added to the argument on champerty by the disclosure of the individual prices allocated to particular mortgage loans given that, viewed overall, they had been sold by GMAC at a substantial discount. The suggestion that individual prIces might demonstrate that either no value had been attributed to the right to sue valuers or, conversely, that the allocated value was all to be attributed to the right to sue valuers was entirely speculative and nothing more than a fishing expedition: Camdex International v Bank of Zambia [1996] 3 WLR 759 considered.
(4) The defendant was five months out of time for exchange of its expert evidence. Given the failure of its application for specific disclosure, there was no good reason for its non-compliance.
Siobán Healy QC (instructed by Rosling King) appeared for the claimant; Andrew Walker QC and Richard Fowler (instructed by Reynolds Porter Chamberlain) appeared for the defendant.
Eileen O’Grady, barrister