West Bromwich Building Society v. Wilkinson & Anor

The House of Lords held that section 20 of the Limitation Act 1980 applies to claims for principal sums which were originally secured by mortgage even where the security has been realised before proceedings are commenced. The court treated limitation by reference to the cause of action sought to be enforced and concluded that a lender cannot defeat the running of time by exercising its power of sale. The mortgage deed in question was construed so that, on the listed events of default (including a written demand), the outstanding principal became due and payable; clause 5(c) was a deeming provision for purchasers rather than a substantive acceleration of the debt and clause 5(d) authorised the exercise of statutory powers on default. The appeal was dismissed.

This is an appeal by the West Bromwich Building Society against a decision that its claim for the shortfall on sale of mortgaged property was statute-barred. The society advanced £35,895 to the Wilkinsons in October 1988 secured by a legal charge. The borrowers defaulted almost immediately, the society obtained possession and sold the property in November 1990, realizing a shortfall. No further action was taken until a claim was issued in November 2002 for the shortfall with interest.

The central legal issues were:

• Whether section 20(1) of the Limitation Act 1980 (twelve years to recover a principal sum "secured by a mortgage") applies where the security has been realised before the action is brought.
• The proper construction of the mortgage deed, in particular whether on default the whole principal became due so that limitation began to run earlier (relevant also to section 8 for actions on a specialty).

The Court analysed the classification of causes of action under the Limitation Act and followed the reasoning in the Court of Appeal that section 20 applies where the cause of action when it arose was a claim to a debt secured on a mortgage; realisation of the security thereafter does not remove the operation of section 20. Turning to the particular deed, the court held that clause 5(c) was a deeming provision for purchasers under section 101 of the Law of Property Act 1925 and did not itself advance the parties' substantive repayment obligations. Clause 5(d), however, read with paragraph (i) (a written demand), required that the lender’s written demand would make the moneys "payable forthwith", and by implication the other events of default also made the principal due and payable. Applying that construction, limitation began to run well before the claim and the society’s action was statute-barred. The appeal was therefore dismissed.

Appeal dismissed. The House of Lords held that section 20 of the Limitation Act 1980 applies to a claim for principal money originally secured by mortgage even where the security had been realised before proceedings, and on construction of the mortgage deed an implied term made the outstanding principal payable on the specified events of default (including a written demand), so limitation had begun to run and the claim was statute-barred.

Appeal from the Court of Appeal, Civil Division: [2004] EWCA Civ 1063. The Court of Appeal had followed its prior decision in Bristol and West plc v Bartlett [2002] EWCA Civ 1181; [2003] 1 WLR 284.