Paragon Mortgages Ltd v McEwan-Peters & Anor

Promissory estoppel requires a clear and unequivocal promise, reliance on that promise, and an alteration of position or detriment. A statement that enforcement will follow if arrears exceed a specified period does not necessarily promise that enforcement will not occur before that period. The alleged assurance must also identify the relevant accounts, the number of accounts affected and the scope of the proposed restraint. Further advances may fall within an existing guarantee where the contractual documents expressly provide for that result. A wide anti-release clause may preserve a surety’s liability despite dealings with the secured property. Under section 140(a) of the Consumer Credit Act 1974, enforcement may be considered unfair, but ordinary on-demand mortgage enforcement was not unfair on the facts.

Paragon provided substantial buy-to-let mortgage finance to the defendants’ property business. The defendants alleged that Paragon had assured them that it would not enforce the mortgages or guarantees unless arrears exceeded three months. They relied on that alleged promise as an equitable estoppel defence to claims under guarantees and personal mortgages.

The defendants also disputed liability for further advances, alleged that transfers of secured properties released the guarantees, challenged guarantees where their dates did not coincide with the mortgages, and alleged an unfair relationship under section 140(a) of the Consumer Credit Act 1974. The court also considered whether the personal mortgages were enforceable on demand.

1. Promissory estoppel. The estoppel defence failed. The alleged assurance was not proved. The contemporary documents did not support it, and the surrounding probabilities favoured Paragon’s evidence. A statement that enforcement would occur if arrears exceeded three months was materially different from an unequivocal promise not to enforce while arrears remained below three months.
2. Even if an assurance had been given, it lacked the necessary clarity. It was unclear which accounts had to exceed three months’ arrears, how many mortgages had to be affected, whether a demand constituted enforcement, and whether cancellation of standing orders altered the position. The defendants also failed to establish reliance, alteration of position or detriment. Earlier demands, the appointment of receivers and the administration order were not challenged at the time.
3. Further advances. The further advances were covered by the existing security and guarantees. The acceptances expressly provided that the existing mortgage payments would include the further loan and that the existing guarantee would cover the advance.
4. Guarantees and security. The guarantees contained a wide anti-release clause covering dealings with the company, enforcement or non-enforcement of security, and termination or modification of the charge. Transfers of the properties were made subject to the charges. They therefore did not discharge the guarantees, cause foreclosure or extinguish the equity of redemption.
5. Synchronicity. No estoppel arose from differences between the dates of guarantees and mortgages. Paragon had not proceeded on a mutual understanding that every disparity would be ignored. Amalgamated Property Co v Texas Bank [1982] 1 QB 84 did not establish a different result on these facts.
6. Unfair relationship and on-demand terms. Guarantees were not credit agreements for the purposes of section 140(a), consistently with Paragon Mortgages Ltd v Hyah. The personal mortgage demands were not unfair. The on-demand term was clear, commonplace, repeatedly used in earlier transactions, and available for consideration by the defendants and their solicitors. The defendants were bound by it.