Ashcroft v Bradford & Bingley Plc

In 1990 the appellant bought a house in Sheffield for £95,000. In order to buy it he borrowed £85,500 from the respondent building society, secured by a mortgage on the property, which the building society had had valued at £90,000.

The appellant failed to repay a penny of interest or capital. The respondent consequently in April 1991 obtained a possession order, suspended on terms which the appellant once more failed to meet. So the building society in July 1992 sold the house, realising £57,500, which it set off against the outstanding debt.

It was not for another 3 years, however, that any attempt was made to enforce the debt, which – after set-off – stood at £48,340. The building society in October 1995 wrote to the appellant asking for his proposals for payment. The appellant responded with expressions of indignation at the time it had taken the building society to make the demand, but finally, after further angry correspondence, agreed and actually began in October 2000 to make regular payments of £10 a month. These petered out in 2004, with the debt reduced by £530.

In dilatoriness, however, the Bradford and Bingley proved Mr Ashcroft’s equal. They failed to issue the present proceedings until August 2008. Mr Ashcroft then gratefully took the point that they were statute-barred. In the Sheffield County Court on 15 July 2009 Mr Recorder Oldham held that they were not, but gave Mr Ashcroft permission to appeal.

By s.20, the Limitation Act 1980 sets a time limit of 12 years on actions to recover mortgage loans, reckoned from “the date on which the right to receive the money accrued”. In the present case nothing turns on the choice of possible starting dates, since the claim was issued more than 12 years after the last of these, which was July 1992. By s.29(5), however, time starts running again from the date, if any, on which the debtor “acknowledges the claim or makes any payment in respect of it”. An effective acknowledgment is required by s.30 to be in writing and signed by the debtor.

Let me now go back to the point at which the appellant responded to the building society’s demand that he start paying them what he owed them. He had an entirely understandable concern at the shortfall between the building society’s own valuation in 1990 and the price they secured for the property only two years later, a shortfall of £32,500, well over one third. But on any possible view he still owed the building society money.

The recorder in his judgment ran in detail through the correspondence which had passed between the parties. By 1995 the appellant was represented by solicitors. The building society got him to complete an income and expenditure form and then went on writing to him as if he had not done so. He completed another one, and in August 1996 the correspondence went to sleep. It awoke in April 1999 with yet another demand for Mr Ashcroft to complete an income and expenditure form. Mr Ashcroft replied that he did not “under any circumstances identify with the said indebtedness”, which I take to mean that he still had no intention of paying.

Then in July 2000 new solicitors for the building society came on the scene. They demanded the completion of yet another income and expenditure form. On 20 July 2000 Mr Ashcroft completed and returned the form, indicating in the box marked “Offer of repayment” that he had no offer to make. But the building society’s solicitors did not give up. By a letter of 11 September they offered to accept £10 a month, subject to review after 6 months. They repeated the offer by a letter of 3 November, threatening proceedings in lieu, and in December 2000 the appellant began making payments. He had already written in August to offer such payments, but reserving his rights and “without prejudice to my position”. Following further correspondence, in April 2001 Mr Ashcroft completed yet another income and expenditure form which this time affirmatively offered to repay at the rate I have mentioned. The building society’s solicitors accepted, and for a little while, as I have recounted, payments continued to be made.

The correspondence continued thereafter, but its content matters only to the extent that it made clear the appellant’s continuing concern at the very large shortfall on sale which was responsible for much of the debt, raising his game as time went on by alleging that it involved fraud.

So the question is whether in the latter part of 2000 – that is, less than 12 years before the issue of this claim - the appellant had acknowledged or made any payment in respect of the mortgage debt.

The explanation given by the appellant for the payments he made was that his solicitor had advised him that it was “easier and cheaper … to pay £10 per month and continue to dispute liability rather than deal with the expense of litigation”. The recorder expressed puzzlement at why Mr Ashcroft would pay simply because he could not afford to fight. The reason seems to me, with respect, fairly obvious: £10 a month meant that it was going to take until 2402 to discharge the debt in full; it meant that by the time he reached 100 Mr Ashcroft would have paid off less than £6,000 – a very adequate recompense for any shortfall in the proceeds of sale. It is even possible ( though we do not have to decide this) that he would have had a binding compromise which would have blocked the present claim.

This being the bald state of fact, the question is whether the law undermines it. For the appellant, Mr Lakin submits, in an elegant skeleton argument, that since – according to Chitty (13th ed §28-096) – part payment is “merely a species of acknowledgment”, all the historic finesses and complications of the law of acknowledgment attend it. These include the proposition, derived from the decision of Kerr J in Surrendra Overseas Ltd v Government of Sri Lanka [1977] 2 All ER 481, that where it has been made clear that part of the claim is disputed, any acknowledgment relates only to the undisputed balance.

There are in my view two short answers to this argument.

One is that, albeit part payment can be intelligibly regarded as a sub-species of acknowledgment, it is explicitly separated from acknowledgment and given equal status to it by s.29(5) of the Limitation Act. There is accordingly no call to re-analyse part payment or to gloss it in terms of acknowledgment: it is a freestanding mechanism for the computation of time.

Assuming that this is wrong, and assuming that the passage from Surrendra bears the significance which Mr Lakin attributes to it, time will have begun running again in December 2000 in respect of as much of the debt as was unaffected by the sale at an (unquantified) undervalue. Mr Lakin submits that in this situation there can be no acknowledgment in law, since what has to be acknowledged is the actual debt claimed.

For this proposition he relies on a passage in Halsbury’s Laws (5th ed, vol 68, §1205):

“The payment must be ‘in respect of’ the debt or claim. The debtor’s express declarations at the time of payment are conclusive …”

Pausing here the authority cited, Baildon v Walton (1847) 1 Exch. 617, does not appear to bear out the text. At 632 Wilde CJ is recorded as saying that if the debtor’s payments had been accompanied by an assertion as to what debt they were appropriated to, “they would have been qualified by it”. Absent this, what the payments were for was a question of fact. And the passage from Halsbury’s Laws continues:

“… although the claimant must in all cases give some evidence that the payment relied on was made in respect of some debt, the circumstances attending the payment, even without any direct evidence, may be such as to render it improbable that the payment could be made for any other purpose. When once it is established that the payment was made in respect of some debt and that no other debt than the one sued for then existed, the inference may be drawn that the payment was in respect of the debt sued for.”

I do not find it helpful to pursue the argument of Ms Candlin for the building society that filling in the income and expenditure forms was a further acknowledgment of indebtedness; or therefore to evaluate Mr Lakin’s response that the only purpose was to show the building society that it was wasting its time. The only debt to which the series of monthly payments from 2000 onwards was referable was the mortgage debt to which this claim relates: no evidence has been given of any other debt owed to the claimant by the defendant.

It follows that there had been both acknowledgment and part payment (though proof of the latter would have been sufficient) within the 12 years before the issue of these proceedings. In my judgment it does not matter how much the claimed undervalue was, because the purpose of s.29(5) is not to fix any particular sum: it is to enlarge the time for bringing proceedings in which that issue can be litigated if the defendant raises it. Those proceedings are these proceedings, and in them, as it happens, sale at an undervalue has not been pleaded. If the claimed undervalue had been such as to extinguish the mortgage debt, it might have been factually arguable that the only purpose of the £10 payments was to get the building society off the defendant’s back; but Mr Ashcroft never advanced a valuation of his own either in negotiation or at trial, and the contention has no reality.

These are the reasons for which, as we indicated at the conclusion of argument, this appeal was dismissed. It follows that the recorder came to the right conclusion.

I agree.

I also agree. The decision of Kerr J in Surrendra Overseas Ltd v Government of Sri Lanka on which so much reliance has been placed is authority for the proposition that where a payment is clearly referable to an admitted part of the debt it operates as an acknowledgement of that liability and nothing more. But as Sedley LJ has explained in his judgment, the basis of the challenge to the mortgage debt in this case was never articulated and ultimately was not pursued.

Although the decision of this court in Dungate v Dungate [1965] 1 WLR 1477 appears to confirm that the court can take into account extrinsic evidence in determining whether the payment made was referable to the whole sum due or only part of it, those uncertainties were in fact resolved in this case by the absence of any pleaded defence or counterclaim based on a sale at an undervalue. In these circumstances, the payments made can only be referable to the whole debt.