Royal Bank of Scotland Plc v Luwum

This is a renewed application for permission to appeal against the judgment of HHJ Ingles in the Nottingham County Court ordering the defendant Mr Luwum to give possession of premises known as 91 Holgate Road, The Meadows, Nottingham, to the claimant, Royal Bank of Scotland Plc.

The background to these proceedings can be described quite shortly. On 12 August 2003 Mr Luwum entered into an agreement with the Bank under which it agreed to make available to him an overdraft facility on his ‘One’ account in the sum of £68,000 secured by a mortgage on the property. A charge by way of legal mortgage was executed by Mr Luwum on the same day. The overdraft facility was subsequently increased to £72,000. The agreement between Mr Luwum and the Bank provided, among other things, that if he were to exceed the terms of the facility, or otherwise break its terms in any respect, the Bank should be entitled to demand repayment of the debt in full.

On 12 January 2006 the manager of the ‘One’account wrote to Mr Luwum demanding payment of the outstanding amount, which by then had risen to £73,355.41, on the grounds that he had exceeded his overdraft limit, as indeed he had. There is no dispute that he had done so and that the Bank was, on the face of it, entitled to call in the loan.

The Bank’s letter drew Mr Luwum’s attention to its right to enforce the mortgage by legal action if the debt were not paid in full. In the last two paragraphs of the letter it suggested that he contact a Mr David Le Page by telephone to discuss the position and warned him that if he failed to do so within twenty-eight days the matter would be referred to another office of the Bank to enable further action to be taken. The implication clearly was that, if Mr Luwum made proposals for repaying the loan which were acceptable to the Bank, repossession of the property might be avoided.

The Bank says, however, that Mr Luwum failed to repay the outstanding amount and that he made no, or no satisfactory, proposals for dealing with the debt. Accordingly, on 10 April 2006, it started proceedings in the county court seeking possession of the property. Mr Luwum contested the claim on the grounds that he had spoken to Mr Le Page who had agreed to withdraw the notice given in the letter of 12 January if he brought the amount of the overdraft back within the agreed limit within three months, which he duly did.

The Bank, as the judge found, took an over-relaxed attitude to this case, but eventually it filed a witness statement from Mr Le Page, who said that there was no record within the Bank’s systems of any conversation with Mr Luwum, much less of any agreement of the kind he alleged had been made. Mr Le Page said it was inconceivable that Mr Luwum could have contacted the Bank by telephone without there being a record of the fact. He also said that it was not possible for an employee to gain access to a customer’s account without leaving an electronic footprint. If all that is correct it would follow that the Bank would have known if an employee had examined the entries on Mr Luwum’s account and it should then have been possible to identify an enquiry from the customer which made such action necessary. The Bank also produced a print-out of its record of contacts with Mr Luwum which did not disclose any entry corresponding to the conversation which he said he had with Mr Le Page.

Although he had made a statement for use in the proceedings, Mr Le Page did not attend to give evidence and was therefore not available for cross-examination. Mr Luwum, on the other hand, did attend and give evidence; indeed, he conducted the case himself. His evidence is summarised in paragraph 26 of the judge’s judgment and it really comes to this: ‘I spoke to Mr Le Page as soon I received the letter of 12 January. I asked whether the department for Work and Pensions had been making payments into my account. He said “No” but that it was my responsibility to check. I offered to pay off the amount in excess of £72,000 within three months. He said that the account would be kept open for three months and that if I managed to get it down below £72,000 things would go back to normal. Otherwise the Bank would take legal action.’

The judge, as he said himself, found this a difficult case as he was dealing with conflicting evidence on a matter of central importance. In the end, however, he accepted that Mr Luwum had spoken to someone at the Bank after he received the letter of 12 January, despite the absence of any record of such a conversation within the Bank itself; but he was not satisfied that there had been an agreement on the part of the Bank to withdraw the demand or otherwise compromise its rights. He considered that the most that had been agreed was that if Mr Luwum brought the amount outstanding below £72,000 the Bank would reconsider its position. He was not satisfied that it had agreed to abandon or waive, even temporarily, its right to enforce the mortgage. He also considered that if Mr Luwum had been in any doubt about the Bank’s position, that doubt was resolved by its letter of 23 February 2006, in which a Mr Carter warned him that steps had been taken to recover the debt by litigation.

Mr Luwum complains that the judge’s findings should have led him to the conclusion not only that there was indeed a conversation between him and the Bank following the receipt of the letter of 12 January, but that it gave rise to an agreement of a kind that was sufficient to prevent the Bank from enforcing its rights for three months and, if Mr Luwum kept his side of it, thereafter. Unfortunately, as I have said, Mr Luwum failed to satisfy the judge that the conversation he had had with the Bank involved a clear undertaking on the part of the Bank that it would not enforce its rights, and in the absence of that finding his argument could not succeed.

Mr Luwum has pointed out in the course of his very able submissions this morning that Mr Le Page was not present in order to put the Bank’s side of the case and therefore that he was prevented from having the opportunity to cross-examine him. Furthermore, he points out that his own evidence, which the judge accepted in part, was quite specific about the nature of the conversation and he submits that the judge, on the basis of the material before him, ought to have been satisfied that it was correct and should have acted on that basis.

This is, as the judge said, not a straightforward case and it seems to me that in the light of the evidence which the judge records in his judgment it is arguable that he ought to have accepted Mr Luwum’s account and ought not to have been swayed by the absence of records held by the Bank, especially in a case where its principal witness did not attend for cross-examination to enable the matter to be investigated more closely. Although I do not think that the prospects of success on appeal are very strong, I am persuaded that this is a case in which Mr Luwum ought to have the opportunity to argue his case before the court and I therefore give him permission to appeal.