Ashe v National Westminster Bank Plc

For limitation purposes, a mortgagee’s right to possession accrues when the mortgagee becomes entitled to possession. The mortgagor need not occupy the land without the mortgagee’s consent. The limitation period therefore runs even while the mortgagor remains in possession and the mortgagee refrains from enforcement.

An acknowledgment under section 29(2) of the Limitation Act 1980 requires, viewed as a whole, an admission of the mortgagee’s title. A statement which merely explains the mortgagor’s circumstances or seeks time is insufficient. When the twelve-year period expires, sections 15 and 17 extinguish the mortgagee’s title to the land.

The claimant, trustee in bankruptcy of Djabar Babai, sought a declaration that National Westminster Bank plc’s legal mortgage over the property had been extinguished. The mortgage was executed in 1989. The Bank became entitled to possession no later than its formal demand of 4 June 1992, but did not enforce the security.

The Bank argued that limitation had not begun because the mortgagors were not in adverse possession, and alternatively that later correspondence acknowledged the Bank’s title and created a fresh accrual under section 29(2) of the Limitation Act 1980. The issues were whether the mortgagee’s right to possession had accrued and whether either letter constituted a sufficient acknowledgment.

1. The claim succeeded. The court granted a declaration that the Mortgage had been extinguished by sections 15 and 17 of the Limitation Act 1980.

2. A claim by a mortgagee for possession is an action to recover land under sections 15 and 38(1) and (7). Foreclosure is treated in the same way by section 20(4). A mortgagee ordinarily has a right to possession from the date of the mortgage, subject to any contractual qualification. Here, the Bank was entitled to possession no later than the formal demand of 4 June 1992.

3. Section 15(6) does not make Part I of Schedule I an exhaustive code. Paragraph 8 qualifies the preceding provisions, particularly paragraph 1, and a mortgagee’s claim does not fall within paragraph 8 as a freestanding requirement of adverse possession.

4. In any event, the expression adverse possession in paragraph 8(1) concerns whether time can run in favour of the person in possession. It does not require possession without the mortgagee’s consent. The mortgagor remains the owner in possession, and time runs from the date when the mortgagee becomes entitled to possession, whether or not the mortgagee makes an unequivocal demand or instead seeks repayment.

5. The same substantive test applies under section 29(2) as under section 29(5), adapted to the subject matter. The statement, read as a whole, must admit the title of the person with the right of action. The solicitor’s letter of 27 April 2001 did not acknowledge anything because instructions had not been obtained. Mr Babai’s letter of 25 September 1999 was ambiguous, did not refer to the Mortgage, and could at most have acknowledged the debt. Neither letter restarted limitation.