The court considered the effect of the Limitation Acts on the rights of a secured creditor where there was an express shortfall provision in a mortgage deed. There was an express promise by a mortgagor to pay the difference on realisation of the security on personal property (a scrip certificate of bonds) between the proceeds of the realisation and the amount of the advance. The issue was whether the limitation period ran from the date of realisation of the security, which was within the limitation period, or from the earlier date when the principal sum became repayable.
Held: The court rejected the contention that the time only began to run when the security was sold and the actual amount payable was ascertained and that there was a separate claim on the express promise to pay the difference. The cause of action arose when the original mortgage debt became due and that the promise to pay the difference did not create a new debt. Lord Herschell LC: ‘I cannot say that the right of realisation gave a new, separate and independent cause of action, so that the statute did not begin to run until from that date. The truth is that the debt is one debt only. The second clause of the document did not create a new debt, but only prescribed what should be done in the event of realisation and what should be made of the money realised. The words gave the creditor no right which would not equally have existed without them.’ Lindley LJ: ‘ The promise to pay the deficiency does not create a new obligation to pay: it only applies the old obligation to a reduced sum. The realisation of the security does not add to the cause of action; the cause of action accrued long before.’
Lord Herschell LC, Lindley LJ
(1894) 3 Ch 290
England and Wales
Cited – Bristol and West plc v Bartlett and Another; Paragon Finance plc v Banks; Halifax plc v Grant CA 31-Jul-2002
The defendants resisted claims by lenders for the payment of mortgage debts. In each case the lender had exercised the power of sale before issuing proceedings for possession. The defendants queried the limitation period applicable.
Held: The . .
Cited – Wilkinson and Another v West Bromwich Building Society CA 30-Jul-2004
The Society had repossessed and sold the mortgagors’ house in 1990. It knew then that there was a shortfall, but took no further recovery proceedings until 2002. What was the date from which the relevant limitation period began to run? Though the . .
Lists of cited by and citing cases may be incomplete.
Updated: 17 September 2021; Ref: scu.183323