Bradford & Bingley Plc v Cutler

For limitation purposes, a payment by a third party to a debtor’s creditor can be treated as the debtor’s payment where the debtor authorised it, whether in advance or by ratification. In a statutory direct-payment scheme, the debtor’s application for benefits, together with provisions requiring the lender to apply the payment towards the mortgage-interest liability, can supply that authority. The debtor’s lack of control over the amount or method of payment does not prevent agency. The authority extends to the amount actually paid, even if later found to be an overpayment, subject to any statutory recovery. Such a payment therefore extends time under sections 29 and 30 of the Limitation Act 1980.

A building society predecessor lent money to the respondent secured on a mortgage. After the respondent became unemployed, the Benefits Agency paid mortgage-interest amounts directly to the lender under a statutory scheme. The lender later obtained possession and sold the property, leaving a shortfall.

The lender issued proceedings more than twelve years after the cause of action accrued, relying on a final payment of £79.63 made within twelve years of issuing the claim. District Judge Dancey held that the payment was made by an agent of the respondent for the purposes of sections 29 and 30 of the Limitation Act 1980, but rejected an alternative argument under section 29(5). The respondent appealed on agency and argued that the payment was an unauthorised overpayment. The central issue was whether the payment was made with the respondent’s authority and as his agent.

1. Appeal dismissed. Lord Justice Lloyd gave the reasons, with which Lord Justices Dyson and Buxton agreed.
2. As a matter of general agency law, payment by A to B’s creditor C discharges B’s debt only if made with B’s authority, given beforehand or by ratification. Sections 29 and 30 of the Limitation Act 1980 permit a payment for limitation purposes to be made through the debtor’s agent and to be made to the creditor or the creditor’s agent. It was unnecessary to decide whether the Benefits Agency was itself a person liable or accountable under section 29(5).
3. The statutory mortgage-interest scheme made direct payment to the qualifying lender part of the mechanism for discharging the borrower’s mortgage-interest liability. The borrower chose whether to apply for benefits. That choice supplied the necessary authority, even though the borrower could not control or alter the amount or manner of payment. The agency was limited to making the payment.
4. The authority extended to whatever amount the Benefits Agency calculated and actually paid. Although the £79.63 was an overpayment on the relevant interest calculation, it was paid in respect of mortgage interest and applied to the mortgage account. Subject to any statutory recovery process, no such process having been taken, it was paid with the respondent’s authority and accrued to the benefit of his liability.
5. Portman Building Society v Gallwey [1955] 1WLR 96 was distinguishable. That case concerned a purported agent whose statutory appointment was a nullity. The present scheme involved a genuine agency for the limited purpose of making the payment. The final payment therefore extended limitation time, and the alternative section 29(5) issue did not require determination.

• Court of Appeal (Civil Division) — [2008] EWCA Civ 74. Appeal dismissed.
• Bournemouth County Court (District Judge Dancey) — held that the payment extended time because it was made by an agent of the respondent under sections 29 and 30 of the Limitation Act 1980; rejected the alternative section 29(5) argument.