Yorkshire Bank Finance Ltd v Mulhall & Anor

The ordinary enforcement of a charging order securing a judgment debt is not barred merely because more than 12 years have elapsed. Such enforcement is outside section 20(1) of the Limitation Act 1980, just as section 20(5) does not prevent recovery of interest through enforcement of the security.

A charging order creates the statutory equivalent of an equitable charge. Its holder has no right to possession. Sections 15 and 17 therefore neither bar the creditor’s rights nor extinguish the charge. A proprietor seeking redemption must pay all principal and interest outstanding under the charge, irrespective of the limitation period in section 20.

The Bank obtained a default judgment against Mrs Mulhall under a guarantee in 1991 and secured the judgment by a charging order over her registered property. No payment was made, and the Bank took no subsequent enforcement step. In 2007 Mrs Mulhall applied to set aside both orders. Her challenge to the guarantee failed, and she alternatively contended that the charging order had become unenforceable through lapse of time.

A deputy district judge refused the application. His Honour Judge Grenfell dismissed Mrs Mulhall’s first appeal. On her further appeal, the central question was whether section 20(1) of the Limitation Act 1980 prevented enforcement of a charging order after more than 12 years and therefore justified its discharge under section 3(5) of the Charging Orders Act 1979.

1. Appeal dismissed. Section 20(1) of the Limitation Act 1980 did not bar the ordinary enforcement of the charging order. Section 24(1) was also inapplicable. The Bank consequently retained enforceable rights as a secured creditor, and there was no basis for discharging its security.

2. [1997] 1 WLR 340 was binding authority that enforcement of a charging order was unaffected by the limitation governing an action on a judgment. Its analysis of section 20(5), concerning interest, applied by analogy to the materially identical wording of section 20(1). It was not open to the court to treat that decision as per incuriam because the alleged distinction between mortgages and equitable charges had been considered in the authorities addressed there.

3. A charging order creates the statutory equivalent of an equitable charge. A proprietor who takes the initiative to redeem such a charge must pay all principal and interest outstanding, irrespective of the limitation period in section 20. There was no sound reason of principle or policy to distinguish legal and equitable mortgages and charges for that purpose.

4. The holder of a charging order has no right to possession. Sections 15 and 17 of the Limitation Act 1980 therefore cannot bar or extinguish that holder’s rights through the proprietor’s continued possession. This distinguished the position of a legal mortgagee whose right to possession and title could be affected after 12 years.

5. The anomalies produced by applying section 20(1) to ordinary charging orders supported the Bank’s position. Even if section 20 theoretically applied, it did not apply to the making of a charging order or to the normal enforcement steps of obtaining possession and sale. Etherton LJ considered that the difficulties also raised the wider question whether ordinary charging orders fell within section 20(1) at all. It was unnecessary to decide that question.

6. Lloyd LJ delivered the principal judgment. Etherton LJ agreed and added reasons concerning redemption and statutory construction. Sir Anthony May agreed with Lloyd LJ. The appeal was dismissed, permission to appeal to the House of Lords was refused, and the applications for a stay were refused.

1. Court of Appeal (Civil Division): The appeal was dismissed by [2008] EWCA Civ 1156. The Bank’s charging order remained enforceable.

2. High Court, Queen’s Bench Division: His Honour Judge Grenfell dismissed Mrs Mulhall’s appeal from the deputy district judge. No neutral citation is stated.

3. County court: Deputy District Judge Whitfield refused to set aside either the default judgment or the charging order.