NRAM Ltd v Evans & Anor

The realisation or discharge of mortgage security does not extinguish the debtor’s personal liability for any unpaid part of the debt. Sale proceeds reduce the debt, but any shortfall remains payable. A conventional order requiring payment of assessed costs creates personal liability unless expressly limited to recovery from security. A limitation period runs from accrual of the right to receive money, not from creation of the mortgage. A stay application cannot be used to re-litigate an issue already decided by a costs master; the proper route is an appeal. The application was dismissed.

The Respondent’s predecessor made a loan secured by a mortgage over the Appellants’ home. After the mortgage was removed from the register, the High Court ordered its re-registration. The Court of Appeal dismissed the Appellants’ appeal and ordered them to pay 95% of the Respondent’s appeal costs: [2017] EWCA Civ 1013; [2018] 1 WLR 639.

The property was later sold, the mortgage was discharged and the sale proceeds were paid to the Respondent. The Appellants applied for a permanent stay of the costs order and repayment of £30,000 paid on account. They argued that discharge of the mortgage discharged their personal liability and that the costs liability was time-barred. Master Haworth rejected the same mortgage-liability argument. The central issues were the effect of mortgage redemption, the applicable limitation period and whether the renewed application was procedurally abusive.

The application for a stay of execution and repayment of the payment on account was dismissed.

1. There is a fundamental distinction between a personal obligation to pay a debt and security given for that obligation. Realisation of the security and payment of the net sale proceeds reduce the debt, but do not release the debtor from personal liability for any unpaid balance. The court relied on the restatement of that principle in Bristol and West plc v Bartlett [2002] EWCA Civ 1181, [2003] 1 WLR 284 (para [19]).

2. The Costs Order was an entirely conventional order requiring the Appellants to pay 95% of the Respondent’s appeal costs, assessed on the standard basis. It imposed personal liability. Express words would have been required to confine recovery to the mortgage security or sale proceeds. The Respondent’s earlier reliance on contractual mortgage rights did not alter the effect of the later court order (paras [20]-[21]).

3. The limitation argument failed. Section 20(1) of the Limitation Act 1980 runs from the date on which the right to receive the money accrued, not from creation of the mortgage. That date could not precede the Costs Order and would probably be the date on which the costs assessment became binding. Neither the assumed 12-year period under section 20 nor the possible six-year period under section 24 had expired (paras [22]-[23]).

4. The present application repeated the argument rejected by Master Haworth. The proper way to challenge that decision was to seek permission to appeal to the High Court, rather than apply to the Court of Appeal for a permanent stay. The merits nevertheless provided a sufficient basis for dismissal (paras [24]-[25]).

5. The proper forum for any temporary stay of the assessment would have been the Master or the High Court. If a temporary stay had been justified on its merits, the court would not have refused it solely on procedural grounds. No arguable basis for the relief sought was established (para [26]).

• Court of Appeal (Civil Division): The renewed application for a stay of the costs order and repayment of £30,000 was dismissed.
• Court of Appeal (Civil Division): The earlier appeal against the High Court order was dismissed and the Appellants were ordered to pay 95% of the Respondent’s appeal costs: [2017] EWCA Civ 1013; [2018] 1 WLR 639.
• High Court of Justice, Chancery Division: HH Judge Jarman QC ordered re-registration of the mortgage on 29 May 2015.