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Miscellaneous

Various miscellaneous points on mortgage possession claims are dealt with on this page.


Clearance of arrears under suspended order

Adjourn generally

Bradford & Bingley plc v Harris
6 November 2003, HHJ Grenfell, Leeds County Court.

The correct practice to adopt following clearance of arrears under a suspended order for possession is to adjourn the proceedings and reinstate them in the event of subsequent default (Greyhound Guaranty v Caulfield (1981) CLY 1808 (Leeds County Court) and Halifax plc v Taffs (1999) CLY 4385 (CA) applied). This avoids the need to re-issue proceedings and incur further court fees.


Extending time to appeal

I-Group 2 v Chaudhury
6 April 2005
Ch D Pumfrey J

The court dismissed a lenders application for possession in respect of minor alleged arrears on a small second mortgage. The lender appealed. Its appeal notice was filed 8 days out of time. The judge refused permission to extend time.

On appeal, it was held that the judge had failed to have regard to the factors in CPR 3.9 (factors court will consider on an application for relief from sanctions). The judge should have considered the position on its merits. In addition the delay had not added to the emotional pressure on the borrower caused by the proceedings. The court would extend time.

Comment: One often wonders why there are time limits in the rules if the issue is ultimately one for the discretion of the court having regard to all the circumstances. Interestingly, one of those circumstances under CPR 3.9(1)(h) is the effect which the failure to comply had on each party and here the judge appears to have considered the effect of emotional pressure on the borrower.


Right to sue for possession following securitisation; implied term not to vary rates; extortionate credit bargain

Paragon Finance Plc v Pender
[2005] EWCA Civ 760

The mortgage possession proceedings were fairly unremarkable save that the lender, Paragon Finance plc had sold a batch of mortgages, including the borrowers to a special purpose vehicle (SPV) by way of mortgage securitisation. There were three issues in the case. The borrower claimed that:
  • Paragon had no title to sue since by virtue of the securitisation process, the right to take possession proceedings was vested in the SPV (the title to sue issue).
  • They were not in default under the legal charge but that Paragon had been in breach of an implied obligation not to vary the rates of interest improperly or capriciously (the implied obligation issue), and
  • The legal charge was an extortionate credit bargain because Paragons power to vary the interest rate had been fettered by the successive administration agreements with the SPV which they had failed to disclose.
On each of the issues the CA held as follows:

Right to use: All that the SPV acquired under an uncompleted agreement to transfer the legal charge was an equity in the mortgage. Paragon remained the legal owner and as registered proprietor of its charge had all the powers of a legal chargee including the right to possession. Nor was it necessary to join in SPV as an additional party, in fact SPV had expressly authorised Paragon to exercise rights on its behalf. Insofar as s 114 Law of Property Act 1925 applied at all, a contrary intention had been expressed.

Implied obligation issue: There was an express power to vary interest rates and it was accepted this was subject to an implied obligation arising out of Paragon Finance v Nash and Staunton [2002] 1 WLR 685 that the power to vary interest rates should not be exercised dishonestly, for an improper purpose, capriciously, arbitrarily or in a way which no reasonable mortgagee acting reasonably would do. However, there was no evidence that Paragon had embarked on a policy of raising rates improperly with a view to forcing borrowers to redeem.

Extortionate credit bargain point: Compared to Broadwick Financial Services v Spencer [2002] EWCA Civ 35, there was no evidence that as at the date of the legal charge, Paragon had a policy of operating the power to vary interest rates so as to contravene ordinary principles of fair dealing, nor was there any failure to disclose the securitisation arrangements or that its effect might qualify the power to vary interest rates. The rates of interest were not grossly exorbitant. Overall therefore the credit bargain was not extortionate for the purposes of s 138 Consumer Credit Act 1974.


Sub-charge

Credit & Mercantile plc v Marks
[2004] EWCA Civ 568

In an unusual case, involving a charge to C and a sub-charge by C to another bank S, it was held that the mere existence of the sub-charge did not divest C of its rights, including the right to take possession, under the principal charge.


Varying order

Re Barnes
[2004] All ER (D) 397 (Mar).

The court has no jurisdiction to vary an order suspending execution of a warrant of possession (and presumably also an order for possession) on terms as to payment of a reasonable sum off arrears together with the current monthly instalment by virtue of an increase in the current monthly instalment as a result of an increase in the lenders variable rate of interest and the addition of costs to the balance owed.


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