Limitation Act 1980 – Charging order – Enforcement – Charging order granted against property of appellant to secure judgment debt in favour of respondent – Charging order not enforced – Appellant applying to set aside order – Whether section 20(1) applying – Whether charging order ceasing to be enforceable after 12 years – Appeal dismissed
In 1990, the respondent brought proceedings against the appellant and her husband claiming £40,000 that was owed by them as guarantors of the debts of a company. The respondent obtained judgment in default in 1991 and was granted a charging order against a property owned by the appellant to secure payment of the judgment amount. No sums were paid in respect of the judgment or the charging order. In 1992, the respondent recovered one asset and the proceeds of sale were credited against the debt. However, the charging order was never enforced.
In 2007, the appellant applied to set aside the judgment and the charging order. That application was refused and a first appeal was also rejected. On a second appeal, the appellant contended that since the respondent had not taken steps to enforce the judgment or charging order for more than 12 years, the order was no longer enforceable under the Limitation Act 1980 and should therefore be set aside. She contended that the sum secured by the charging order fell within section 20(1) as a “principal sum of money secured by a mortgage or other charge on property”, to which the 12-year limitation period on recovery applied. The respondent argued that section 20(1) did not apply in the case of a charging order securing a judgment debt, as opposed to an ordinary mortgage or charge created by a consensual transaction, since judgment debts fell outside the scope of the 1980 Act and there was no statutory time limit on enforcing them, save that provided by section 24 in the exceptional case of an action on a judgment.
Held: The appeal was dismissed.
Section 20(1) did not apply to the enforcement of a charging order despite the lapse of more than 12 years since the making of that order. The wording of section 20(1) was precisely comparable with that of section 20(5) regarding interest, which it was established did not apply to limit recovery of arrears of interest upon the enforcement of a charging order: Ezekiel v Orakpo [1997] 1 WLR 340 affirmed and applied; Edmund v Waugh (1866) LR 1 Eq 418 considered. Section 20 did not apply to the making of a charging order to secure a judgment debt or to any of the normal steps taken by way of enforcement, including applications for possession and sale: Gotham v Doodes [2006] EWCA Civ 1080; [2007] 1 WLR 86 distinguished. Further, a charging order gave to the judgment creditor only the rights of an equitable chargee, which, unlike the position with regard to a legal mortgage, did not include a right to possession. Accordingly, the appellant had not been in adverse possession of the property, such that section 15 did not apply and the respondent’s title was not extinguished by section 17. It was not anomalous to find that the position of a holder of an equitable charge was less vulnerable to a limitation defence than that of the holder of a legal mortgage. The differences arose because of the different incidents of the respective rights. Moreover, it was not illogical for time limits to apply differently in the case of a charging order to enforce a judgment debt, since it was unnecessary to protect the debtor from stale claims given that the parties’ rights had already been established by court proceedings. Although the lapse of time might be relevant to the question of enforcement, the legislative policy was to rely upon the exercise of the court’s discretion rather than to use the 1980 Act.
Accordingly, since no provision in the 1980 Act affected the respondent’s enforcement of the charging order, the lapse of time was no bar to enforcement. Nor was it appropriate for the court make an order discharging the charging order, pursuant to its power under section 3(5) of the Charging Orders Act 1979, in circumstances where there was no statutory provision preventing the respondent from taking any steps to enforce the order in the future: National Westminster Bank v Ashe [2008] EWCA Civ 55; [2008] 1 EGLR 123 distinguished.
Daniel Stacey (instructed by Howes Percival LLP, of Milton Keynes) appeared for the appellant; Robert Howe QC and Robert Weekes (instructed by Addleshaw Goddard LLP, of Leeds) appeared for the respondent.
Sally Dobson, barrister
