Whitehead & Anor v Household Mortgage Corporation Plc

On a second-tier appeal, permission should be granted where the proposed appeal raises an important point of principle or practice, or where another compelling reason justifies hearing it. The Henderson v Henderson principle does not necessarily bar a mortgagor from raising a point about the true state of account in later possession proceedings, particularly where the account has not been finally determined and the mortgagee suffers no relevant prejudice. It is properly arguable that an insolvency dividend accepted by a mortgagee may affect the secured debt, but the court did not finally decide that substantive issue.

The applicants were mortgagors whose residential property had been mortgaged to Household Mortgage Corporation Plc. Following an individual voluntary arrangement, the mortgagee received a dividend in respect of part of its claim. The applicants later contended that acceptance of the dividend had extinguished part of the secured debt.

A District Judge held that raising the point would be an abuse of process. His Honour Judge Yelton dismissed the appeal, applying the principles in Henderson v Henderson. The applicants renewed their application for permission to bring a second-tier appeal. The central questions were whether the substantive point was arguable and whether the proposed appeal raised an important point of principle or practice.

1. Permission granted. The application concerned a second-tier appeal governed by rule 52.13 of the Civil Procedure Rules 1998. The applicants had to show an important point of principle or practice, or some other compelling reason for the Court of Appeal to hear the appeal.

2. The court agreed that the effect of the mortgagee’s acceptance of the insolvency dividend on the secured debt was properly arguable. The court therefore did not finally determine whether the dividend extinguished part of the debt or whether any such effect operated differently against the two mortgagors.

3. The court was not persuaded that the estoppel issue was unarguable. Although the applicants had not raised the point when they first sought suspension of the possession warrant, there remained a continuing issue concerning the true state of account between mortgagor and mortgagee. The earlier order had merely suspended execution on terms and had not finally determined that account.

4. Application of the Henderson v Henderson principle in that context raised an important point of principle or practice. The absence of prejudice to the mortgagee, apart from loss of a possible windfall, was also material.

5. The court considered the analogy with Sheffield City Council v Hopkins, where a landlord could rely on matters not relied upon when possession was initially sought. A mortgagor might similarly be able, in an appropriate case, to rely on matters not originally raised when seeking suspension of execution.

Lord Justice Longmore agreed with Lord Justice Jonathan Parker. The application was allowed.

• Court of Appeal (Civil Division): on 27 May 2002, the renewed application for permission to appeal was allowed.
• Southend County Court: His Honour Judge Yelton dismissed the applicants’ appeal against the District Judge’s decision.
• District Judge Chandler: held that it would be an abuse of process to permit the applicants to raise the extinguishment claim.