Bradford & Bingley Building Socieity v Harper, estate of

LADY JUSTICE ARDEN: This is an application by Mr Corbett Harper, who is the executor of Mr Victor Francis Harper, his late father. The application states that it is intended to apply to the court for an order that:

That application came before me as a matter of urgency earlier this week because the claimant was about to take possession of the property, having obtained a warrant for possession. This is the ruling which I then gave:

This action has a long history which I will attempt to summarise. Not all the documents are in the file we have been shown and, accordingly, while I have done my best to set out the history, I must apologise if I make any misstatement of fact. I do not think it will be material.

On 28 February 1989 Mr Victor Francis Harper, the deceased, obtained a mortgage of £150,000 over his home from Leamington Spa Building Society, which was a predecessor of the claimant Bradford & Bingley Building Society. Two years later he developed diabetes and lost a lower leg due to gangrene. He was unable to work and he fell into arrears. The Department of Social Security paid interest due on the principal sum but not on the arrears, and the arrears rose. In September 1995 the claimant commenced possession proceedings. The defendant's defence was struck out and the possession order was granted on 12 April 1996 by District Judge Levy. The possession order stated the court's decision that Mr Victor Francis Harper should give the building society possession of the premises with which we are concerned, namely Woodfield House, 35 Woodfield Road, Kings Heath, Birmingham B13 9UL, and there was no order as to costs. There was no order requiring the payment of any sum, although additional procedural directions were given.

Mr Victor Francis Harper sought to appeal the order striking out his defence but on 5 June 1996 he withdrew that application. On 6 June 1996 his Honour Judge Wilson-Mellor QC dismissed the appeal in the defendant's absence.

In 1996 Mr Victor Francis Harper realised that there was a possibility that fines or additional interest on the mortgage arrears had been added as well as interest charged on the arrears. He knew that the building societies ombudsman had ordered repayment of fines and interest in another case, and the ombudsman's decision called into question the legality of such fines. Mr Victor Francis Harper contacted the ombudsman and his local MP and correspondence ensued. Later the building society admitted that there had been errors in the preparation of the accounts and as a result in September 1997 Mr Victor Francis Harper applied for a rehearing or a leave to appeal against the decision of his Honour Judge Wilson-Mellor QC on 6 June 1996. That application was made to his Honour Judge Potter, sitting again in the Birmingham County Court, but on 20 January 1998 he dismissed Mr Victor Francis Harper's application.

Mr Victor Francis Harper sought permission from the Court of Appeal to appeal that order. On 19 June 1998 the Court of Appeal (Evans LJ and Hale J) granted permission to appeal on the basis that there was a real prospect of showing that the additional charges might be a penalty and as such unenforceable. They did so on the basis of a submission by Mrs Kennedy-MacGregor of counsel on behalf of Mr Victor Francis Harper that on the information available to counsel at that time either no arrears were owing at the time when the possession order was made, or alternatively the arrears would have been so small that an order for possession might not have been made, or might well have been suspended. That I think is a reference to section 36 of the Administration of Justice Act 1970.

So an appeal was launched with permission from this court. That appeal came before this court (Butler-Sloss LJ and Holman J) on 12 May 1999, when both parties were represented. As appears from the court's order, which is an order by consent, the matter was in fact compromised on that day. By consent, the court ordered that:

I would make the following observations as to those orders. Firstly, the schedule to this order contains an agreement between the parties as to what was the amount at that date owed to the claimant, and that figure is £182,000. Clause 1 of the schedule refers to a letter of 16 November 1998. I have not myself seen that letter or had my attention drawn to it for the purpose of this application, and clearly if the court were concerned with how the sum of £182,000 were established, it would need to see that letter.

Secondly, on clause 2 it is clear that what the parties agreed was that the society's agreement not to seek any further mortgage payments or to enforce the possession order would last only for the lifetime of the late Mr Victor Francis Harper; hence the words "for the remainder of the Defendant's life". That arrangement, therefore, would come to an end on Mr Victor Francis Harper's death, and interest would continue to accrue at the full rate.

Thirdly, it is quite clear that although the building society would during Mr Victor Francis Harper's lifetime accept the payments from the DSS as reducing the interest, interest was still to accrue, and that is why clause 3 provides that interest is to continue to accrue and establishes the rate from 1 May 1999.

Moreover, under clause 5 the society agreed not to enforce prior orders for costs and not to add costs to the mortgage debt at some later date, that is after May 1999, but as I see it that does not detract from the agreement in clause 1 that the mortgage debt was capitalised at that date at £182,000.

So that was the position in 1999. Sadly, on 15 March 2001 Mr Victor Francis Harper died. As I have explained, Mr Victor Corbett Harper, who now makes this application, is the executor of Mr Victor Francis Harper deceased, although probate was only granted on 13 December 2002.

In the meantime, following the death of Mr Victor Francis Harper, Mr Victor Corbett Harper made an application in the Birmingham County Court to set aside the order of 12 May 1999 on the grounds that it was made as a result of false accounting and misleading information. That matter came before District Judge Asokan, when Mr Victor Corbett Harper appeared in person. That application was made in the possession proceedings and the district judge held that there was no jurisdiction in that court to set aside the order made by the Court of Appeal. There was a further application before the district judge with which we are not concerned, to hold the claimant's solicitors liable in contempt. I need not deal with that matter.

I will pass on, therefore, to the application to appeal from the district judge's order in relation to the dismissal of the application to set aside the Court of Appeal's order. That application came before his Honour Judge McKenna on 3 December 2002 and he refused it. Mr Harper then applied to this court and was not permitted, I think, to enter a further application for permission to appeal because the order of the county court had been to refuse permission to appeal and this court has no jurisdiction to entertain an application against such an order. It was in those circumstances that Mr Harper made the application which I read at the outset of this judgment.

In support of his application, he has filed a substantial witness statement and a file containing exhibits. One of those exhibits is a letter dated 1 August 2000 from Messrs Fosters, solicitors of Norwich, to the Legal Services Commission, in which reference is made to a counsel's opinion which this court has not seen in whole. The letter states:

I have already referred to the basis on which, when I dealt with this matter on paper, I stood it over until today. The argument which Mr Harper has helpfully made this morning has, I think, underscored that if this application is to proceed there must be careful investigation of facts. As I see it, for the reasons that I gave on paper on 20 January, the decision of the court in Wood v Gahlings is not in point where there is such an investigation to take place.

Mr Harper has taken the court to another authority of this court, namely the decision in James v Williams (20 October 2000, Peter Gibson, Mummery and Latham LJJ) in which an application was made to the court on the basis that the claimant had at trial lied to the judge or misled the judge, and that that may have been material to the disposition of a previous appeal to the Court of Appeal. That then was a case where the question of an untruth arose out of evidence given at trial. This court in fact dismissed the application to it to reconsider the appeal. The material point is that Peter Gibson LJ held that it had to be shown that the fraud materially contributed to the decision sought to be set aside.

As regards jurisdiction, Peter Gibson LJ, with whom the other members of the court agreed, was prepared to assume that the court had jurisdiction to entertain the application, though without deciding the point. The decision in that case is not an authority for the proposition that this court is bound to accept that it has jurisdiction, and thus I am not dissuaded from the view which I expressed on paper. Mr Harper has, of course, also relied on the point made by Peter Gibson LJ and submits that in the present case the fraud materially contributed to the decision sought to be set aside. But that is something which has to be shown in any case where it is sought to set aside an order of the court on the ground of fraud and moreover it does not, of course, directly address which court is the appropriate court.

So, as I see it, this court cannot entertain the present application and it is misconceived. If Mr Harper wishes to proceed with an application that a prior order of the court was made as a result of false evidence forming the basis of the evidence which the court considered, it would be necessary to start a completely separate action and he would then have to make an application in the Birmingham County Court to stay the warrant for possession on the basis that he had a good claim in those proceedings.

Obviously the court has heard some submissions from Mr Harper as to the basis on which he says that the calculation of the mortgage debt in 1999 was incorrect. He accepts that interest continued to accrue, although it was not demanded from his father in his lifetime, and he accepts that the building society was entitled to receive the housing benefit. No payments have been made to the building society since, as I understand it, the death of the late Mr Harper when those payments would have ceased.

The claim is quantified, in terms of the fines, at £30,000, but Mr Harper would have to recognise, if he started any fresh proceedings, that he has not yet explained, and would have to explain to any court, the basis on which a reduction was made from the original amount claimed as the mortgage debt -- as I understand it £201,000 back in 1996 -- on which interest would continue to accrue, and the sum of £182,000 which was the compromised figure in 1999. He would have to show that that did not make full allowance for the fines and penalties. He has been unable to explain that point to us this morning.

What, however, Mr Harper has submitted is that he has a cross-claim against the building society for damages and also that he has a potential misselling claim which might lead to an award of damages from the financial ombudsman, to whom he made an application on 5 December 2001. The difficulty about both those matters is that they are totally unquantified and if the court was going to be satisfied that the warrant for possession should be stayed on the basis of those cross claims, it would have to be satisfied that those amounts were potentially substantial and that there was a prospect of them becoming payable quite soon.

Mr Harper has two additional points. He says that the legal costs of the possession proceedings were added into the mortgage debt and of course he is correct to say that the order of 1999 provided that the court should make no order as to costs and the mortgagee agreed not to add any costs which had already been ordered in its favour at some future time. However, he would have to face the fact that what was agreed in 1999 was that the principal amount of the mortgage debt was then £182,000 and of course if that included some costs, that would have then formed part of that agreement.

His other additional point relates to the interest since his father's death. He suggests (though not, I think, very strongly) that he might have an argument that interest was not payable at the full contractual rate since his father's death. As I see it, that argument is untenable on the terms of the order because, as I have pointed out, clause 2 of the order only applies during his late father's lifetime.

All in all, if Mr Harper were minded to start a fresh action, he would have to show that there was a real prospect of his succeeding in showing that the sum which was quantified as a debt and then agreed was the result of some misrepresentation to his father which vitiated the compromise agreement made in 1999. That would be, as I see it, the lowest starting-point, the minimum he would have to show. He would have to explain when it was that he discovered that full allowance had not been made for the matters which he says it ought to have been made. He has, therefore, a very, very difficult course if he were minded to start fresh proceedings.

Mr Harper has also made some further additional points to us. First, he submits that the signature on the application for the warrant for possession did not comply with section 20(1) of the Solicitors Act 1974 (though he has not actually shown us the authority in writing so that we can examine it). That matter is not before this court but it does not seem to me that that is really the substance of the point that he would wish to pursue. He also submits that he was not duly served in accordance with the Civil Procedure Rules 19.3.3. Of course, he was fully aware of the proceedings and thus little purpose is served by pursuing that point.

However, I would underscore what Peter Gibson LJ said in James v Williams, namely that a misstatement to the court was a very serious matter. Indeed, Peter Gibson LJ used the expression "deplorable", with which I would wholly agree, and he added:

I come back to the point that the application to this court is misconceived. There would have to be a fresh action, as to which there would be numerous difficulties, and then Mr Harper would have to make an application to the Birmingham County Court in the possession proceedings to obtain a further stay.

In my judgment this court cannot entertain the application and cannot therefore grant the stay in terms of the application sought. However, as I see it, the building society ought to allow a little time to enable Mr Harper to consider the position. He has said to us that he would need seven days to vacate. For my own part, I would not be happy to say in this judgment that the building society should not enforce for seven days, but it seems to me they should not enforce before the opening of business on Tuesday morning, giving Mr Harper all day Monday, if he were to need it, to make any application to the court which he considers appropriate or, alternatively, to remove the possessions which are dear to him from his residence.

LORD JUSTICE SIMON BROWN: In 1989 the applicant's late father mortgaged his house. On 12 April 1996 the respondent building society obtained from the district judge an order that father should give up possession of the property by 7 June 1996. An appeal against that order was dismissed by the circuit judge on 6 June 1996. It was dealt with in father's absence, the appeal in fact having been withdrawn the previous day. An application for that appeal to be reheard was subsequently dismissed by a different circuit judge on 20 January 1998.

On 19 June 1998 this court (Evans LJ and Hale J) granted father permission to appeal. This was on the basis that the applicant was saying that the building society had been improperly imposing fines and other such charges. Let me read just the last two paragraphs of Evans LJ's short judgment:

The application to set aside the consent order has already, I may observe, been refused by the district judge on 24 May 2002 and on appeal by the circuit judge on 3 December 2002. In my judgment no precedent comes near to supporting such an application in this court. The applicant seeks to rely in particular upon two unreported decisions of the Court of Appeal, respectively in Wood v Gahlings (transcript 4 November 1996) and James v Williams (transcript 2 October 2000). In Lord Woolf's judgment in the first of those cases, one may note, there is reference at page 4 to:

Neither of those cases, to my mind, provides any support for the view that a consent order made in the circumstances which I have outlined here can then properly be challenged in this court on the basis and in the manner in which the applicant now contemplates -- largely, I may add, by reference to selected excerpts from solicitors' letters and counsel's opinions which he has received in the past.

For these reasons, which in large part I think mirror those already given more fully by Lady Justice Arden, I too would dismiss this application as misconceived.

I would add for my part that Mr Harper should now regard this decision as the end of the road. We cannot, of course, prevent his attempting to apply to the county court (subject, of course, to the Grepe v Loam order which I understand was made against him by Judge McKenna on 3 December 2002) but for my part I would discourage him from doing so.

I agree with my Lady, however, that the building society should now be directed not to enforce this order until Tuesday of next week, giving the applicant accordingly the opportunity that he has requested to make arrangements for his dog and his possessions at those premises.