Wilkinson & Anor v West Bromwich Building Society

In a mortgage shortfall claim, the absence of an express covenant to repay the whole advance does not prevent the court implying one where the deed and circumstances require it. Default under an instalment arrangement may make the balance immediately due. The mortgage debt remains one debt, enforceable through cumulative proprietary and personal remedies. Sale of the security does not create a new shortfall debt or restart limitation. Under sections 8 and 20 of the Limitation Act 1980, the 12-year period runs from accrual of the right to receive the secured principal. That may occur on default, before sale and before the exact shortfall is ascertained.

Mr and Mrs Wilkinson granted the Society a legal charge over their house securing a mortgage advance. They defaulted on the instalments, the Society obtained possession, and the house was sold, leaving a shortfall. The Society issued proceedings more than 12 years after the last instalment payment but shortly before 12 years from the sale.

A District Judge dismissed the Society’s summary-judgment application. HHJ Crawford Lindsay QC allowed the Society’s appeal and entered judgment for the shortfall. The Court of Appeal considered when the repayment obligation and cause of action accrued, whether the shortfall remained subject to the mortgage limitation provisions in the Limitation Act 1980, and the Society’s cross-appeal concerning interest.

Lord Justice Mummery gave the principal judgment. Lord Justice Jonathan Parker and Lord Justice Dyson agreed.

1. Disposition. The appeal was allowed and the Society’s shortfall claim was statute barred. The cross-appeal on interest was dismissed.
2. Construction of the legal charge. Although the deed contained no express covenant to repay the whole balance on default, its terms and surrounding circumstances required an implied covenant to repay the advance. It also contained an implied term that the Society would not enforce repayment of the balance while the agreed instalments were paid. Default made the whole balance immediately repayable. The instalment provision was not the exclusive method of repayment.
3. Nature of the debt. The balance remained one mortgage debt, recoverable through cumulative and concurrent proprietary and personal remedies. The sale of the mortgaged property did not create a new debt or separate cause of action for the shortfall. The reasoning in Sutton v Sutton (1882) 22 Ch D 511, Re McHenry [1894] 3 Ch 290, Fearnside v Flint (1882) 22 Ch D 579, Bristol and West plc v Bartlett [2003] 1 WLR 284 and Scottish Equitable plc v Thompson [2003] HLR 48 supported that conclusion.
4. Limitation. The implied covenant was an action upon a specialty under section 8 of the Limitation Act 1980, attracting the 12-year period. Section 20 applied because the principal sum was secured by a mortgage when the right to receive it accrued. Later sale of the property did not disapply section 20. The right to receive the balance accrued on default, and ascertainment of the precise shortfall could await the sale. Since the last instalment was paid on 31 July 1989 and proceedings began on 12 November 2002, the claim was barred.
5. Interest. It was unnecessary to express a concluded view on the Society’s entitlement to interest for the whole period after sale. The court would not interfere with the lower court’s discretion under section 35A of the Supreme Court Act 1981.

• Court of Appeal (Civil Division) — [2004] EWCA Civ 1063: allowed the Wilkinsons’ appeal, dismissed the Society’s cross-appeal, and held the shortfall claim statute barred.
• Central London County Court — HHJ Crawford Lindsay QC allowed the Society’s appeal from the District Judge and entered summary judgment for the shortfall, interest and costs.
• District Judge Wigfield — dismissed the Society’s application for summary judgment under Part 24.2(a) of the Civil Procedure Rules 1998.