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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Ashe v National Westminster Bank Plc  EWHC 494 (Ch) (13 March 2007)
Cite as:  2 P & CR 27,  2 EGLR 137,  NPC 36,  12 EG 155,  EWHC 494 (Ch),  BPIR 988
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Strand, London, WC2A 2LL
B e f o r e :
(Sitting as a Deputy High Court Judge)
|- and -
|NATIONAL WESTMINSTER BANK PLC
Michael Bowmer (instructed by Addleshaw Goddard LLP) for the Defendant
Hearing date: 1 March 2007
Crown Copyright ©
RICHARD ARNOLD Q.C. :
"3. Section 103 of the Law of Property Act 1925 shall not apply to this Mortgage and the statutory power of sale and other powers shall be exercisable at any time after demand.
6. At any time after the power of sale has become exercisable the Bank or any Receiver appointed hereunder may enter and manage the Mortgaged Property or any part thereof…"
"Mr Babai has responded to our first letter. His letter in reply together with the enclosures is attached.
There does look to be a fair amount of equity in the property and possible [sic] three times the amount of the amount [sic] minimum payment acceptable to the Bank. I can see that there is an indication that litigation would not be considered but it would appear to be the only way that the Bank is going to make any recovery in the short-term. Unless Mr Babai gains employment (and there seems to have been little sign of him doing so in the past six years) he will not be able to obtain a further mortgage and the chances of there being any dealing in the property appears remote. As I say, possession would appear to be the only prospect that the Bank has of making a cash recovery in the foreseeable future.
Please let me have your instructions in due course."
"I received your letter and I was shocked. Approximately 10 years ago I lost everything and unfortunately I did not recover at all. I shall enclose all my details to you as I am on the dole as I do not have a job."
The letter enclosed a copy of a letter from Wellesley Jobcentre dated 9 August 1999 detailing the amount of Jobseeker's Allowance Mr Babai was entitled to.
"Our clients have provided us with a copy of your letter dated 15 February 2001 enclosing a formal demand in respect of a Legal Mortgage purportedly entered into by Mr Babai on 8 June 1989.
To enable us to consider our clients' position further, we would be grateful if you could provide use with the following documentation:
We would be grateful if you could confirm that you will refrain from taking any enforcement action until we have had the opportunity of considering these documents further with our clients."
"Unfortunately, we have been unable to take our client's instructions upon the information provided under cover of your letter of 15 March 2001 as our client has been in hospital since 17 March 2001. Our client has suffered double kidney failure and is seriously ill. As you may appreciate, it has not been possible to obtain any further instructions.
Accordingly, we would be grateful if you would put a hold on any further action you intend to commence which will enable us to properly assess our client's state of health and, hopefully, obtain further instructions."
"We understand that our client has now undergone further surgery but is still in hospital being monitored closely. We have been advised that she is currently in no position to provide instructions although we are hopeful that her condition will improve sufficiently to enable us to do so.
We will keep you fully advised as to her condition."
Relevant provisions of the Limitation Act 1980
15. Time limit for actions to recover land
(1) No action shall be brought by any person to recover any land after the expiration of twelve years from the date on which the right to action accrued to him or, if it first accrued to some person through whom he claims, to that person
(6) Part I of Schedule 1 to this Act contains provisions for determining the date of accrual of rights of action to recover land in the cases there mentioned.
17. Extinction of title to land after expiration of time limit
Subject to section 18 of this Act, at the expiration of the period prescribed by this Act for any person to bring an action to recover land (including a redemption action) the title of that person to the land shall be extinguished.
20. Time limit for actions to recover money secured on a mortgage or charge or to recover proceeds of the sale of land
(1) No action shall be brought to recover-
(a) any principal sum of money secured by a mortgage or other charge on property (whether real or personal); or
(b) proceeds of the sale of land;
after the expiration of twelve years from the date on which the right to receive the money accrued.
(4) Nothing in this section shall apply to a foreclosure action in respect of mortgaged land, but the provisions of this Act relating to actions to recover land shall apply to such an action.
29. Fresh accrual of action on acknowledgment or part payment.
(1) Subsections (2) and (3) below apply where any right of action (including a foreclosure action) to recover land or an advowson or any right of a mortgagee of personal property to being a foreclosure in respect of the property has accrued.
(2) If the person in possession of the land, benefice or personal property in question acknowledges the title of the person to whom the right of action has accrued –
(a) the right shall be treated as having accrued on and not before the date of the acknowledgment;
(5) Subject to subsection (6) below, where any right of action has accrued to recover-
(a) any debt or other liquidated pecuniary claim; or
(b) any claim to the personal estate of a deceased person or to any share or interest in any such estate;
and the person liable or accountable for the claim acknowledges the claim or makes any payment in respect of it the right shall be treated as having accrued on and not before the date of the acknowledgment or payment.
30. Formal provisions as to acknowledgments and part payments
(1) To be effective for the purposes of section 29 of this Act, an acknowledgment must be in writing and signed by the person making it.
(2) For the purposes of section 29, any acknowledgement or payment-
(a) may be made by the agent of the person by whom it is required to be made under that section; and
(b) shall be made to the person, or to the agent of the person, whose title or claim is being acknowledged or, as the case may be, in respect of whose claim the payment is being made.
(1) In this Act, unless the context otherwise requires-
"land" includes corporeal hereditaments, tithes and rentcharges and any legal or equitable estate or interest therein but except as provided above in this definition does not include any incorporeal hereditament;
(7) References in this Act to a right of action to recover land shall include references to a right to enter into possession of the land or, in the case of rentcharges and tithes, to distrain for arrears of rent or tithe, and references to the bringing of such an action shall include references to the making of such an entry or distress.
Accrual of rights of action in case of present interests in land
1. Where the person bringing an action to recover land, or some person through whom he claims, has been in possession of the land, and has while entitled to the land been disposed or discontinued his possession, the right of action shall be treated as having accrued on the date of the dispossession or discontinuance.
Right of action not to accrue or continue unless there is adverse possession
8.(1) No right of action to recover land shall be treated as accruing unless the land is in the possession of some person in whose favour the period of limitation can run (referred to below in this paragraph as "adverse possession"); and where under the preceding provisions of this Schedule any such right of action is treated as accruing on a certain date and no person is in adverse possession on that date, the right of action shall not be treated as accruing unless and until adverse possession is taken of the land.
(4) For the purpose of determining whether a person occupying any land is in adverse possession of the land it shall not be assumed by implication of law that his occupation is by permission of the person entitled to the land merely by virtue of the fact that his occupation is not inconsistent with the latter's present or future enjoyment of the land.
This provision shall not be taken as prejudicing a finding to the effect that a person's occupation of land is by implied permission of the person entitled to the land in any case where such a finding is justified on the actual facts of the case.
The Claimant's claim
Construction of section 15(6)
The meaning of "adverse possession"
" From 1833 onwards, therefore, old notions of adverse possession, disseisin or ouster from possession should not have formed part of judicial decisions. From 1833 onwards the only question was whether the squatter had been in possession in the ordinary sense of the word. That is still the law, as Slade J rightly said [in Powell v McFarlane (1977) 38 P & CPR 452]. After 1833 the phrase 'adverse possession' did not appear in the statutes until, to my mind unfortunately, it was reintroduced by the Limitation Act 1939, section 10 of which is in virtually the same words as para 8(1) of Schedule 1 to the 1980 Act. In my judgment the references to 'adverse possession' in the 1939 and 1980 Acts did not reintroduce by a side wind after over 100 years the old notions of adverse possession in force before 1833. Paragraph 8(1) of Schedule 1 to the 1980 Act defines what is meant by adverse possession in that paragraph as being the case where land is in the possession of a person in whose favour time 'can run'. It is directed not to the nature of the possession but to the capacity of the squatter. Thus a trustee who is unable to acquire a title by lapse of time against the trust estate (see section 21) is not in adverse possession for the purposes of paragraph 8. Although it is convenient to refer to possession by a squatter without the consent of the true owner as being 'adverse possession' the convenience of this must not be allowed to reintroduce by the back door that which for so long has not formed part of the law.
 Many of the difficulties with these sections which I will have to consider are due to a conscious or subconscious feeling that in order for a squatter to gain title by lapse of time he has to act adversely to the paper title owner. It is said that he has to 'oust' the true owner in order to dispossess him; that he has to intend to exclude the whole world including the true owner; that the squatter's use of the land has to be inconsistent with any present or future use by the true owner. In my judgment much confusion and complication would be avoided if reference to adverse possession were to be avoided so far as possible and effect given to the clear words of the Acts. The question is simply whether the defendant squatter has dispossessed the paper owner by going into ordinary possession of the land for the requisite period without the consent of the owner.
 It is clearly established that the taking or continuation of possession by a squatter with the actual consent of the paper title owner does not constitute dispossession or possession by the squatter for the purposes of the Act. Beyond that, as Slade J said, the words possess and dispossess are to be given their ordinary meaning."
"(1) a sufficient degree of physical custody and control ('factual possession'); (2) an intention to exercise such custody and control on one's own behalf and for one's own benefit ('intention to possess')."
"It is hard to see how the intentions of the paper title owner (unless known to the squatter) can affect the intention of the squatter to possess the land. … In any event Parliament (on the advice of the Law Reform Committee) has intervened to reverse the principle of implied licence: see the 1980 Act, Schedule I, paragraph 8(4)."
"21-036 (b) Mortgagee's right to enforce the mortgage. The mortgagee's rights to foreclose, to sue for possession, and to sue for the principal all become barred 12 years from the day when repayment became due under the mortgage; and his title is then extinguished. But time begins to run afresh if the mortgagor makes any written acknowledgment or if he or the person in possession of the land makes any payment of interest of capital which complies with the Act."
"(2) Claims by a mortgagee or chargee
(a) Claims to enforce a mortgage or charge over land
4.160 Under the present law, no claim may be brought to recover any principal sum of money secured by a mortgage or charge over land after the expiry of twelve years from the date on which the right to recover the money accrues. A claim to recover arrears of interest payable in respect of any sum of money secured by a mortgage or charge over land, or to recover damages in respect of such arrears, is subject to a limitation period of six years from the date on which the interest becomes due. Foreclosure claims are treated as claims to recover land, and are subject to a limitation period of twelve years from the date on which the right of action accrues to the claimant, or a person through whom he claims. Similarly, clams for possession of land are claims to recover land, and are subject to a limitation period of twelve years from the date on which the right of action accrues to the claimant, or a person through whom he claims."
A footnote to the last sentence states that "Generally, the mortgage's right to possession accrues immediately the mortgage is executed", but "where the mortgage provides for quiet enjoyment by the mortgagor until default, the mortgagee's right to possession accrues on the date of default", citing the authorities referred to in paragraph 34 above.
"Mortgagors in possession
14.12 Where a mortgagor is in possession, the right of the mortgagee to recover possession or to foreclose remain subject to the provisions of the Limitation Act 1980. The reason for this is simple. A mortgagee has two sets of remedies, its personal remedies against the mortgagor for the moneys due under the mortgage, and its remedies against the property to enforce its security. In essence, the assertion of the mortgagee's proprietary rights is linked to its personal remedies to recover the moneys that are secured by the charge. Once the latter are barred then so too are the former. As a mortgage is no more than a security for moneys owed, it would be very strange if, after the mortgagee's directs of enforcement were time-barred, it could still enforce them against the property. The present law achieves the necessary linkage between the mortgagee's personal and proprietary rights and may be summarised as follows.
14.13 Under the Limitation Act, a 12 year limitation period applies to the mortgagee's rights to recover the moneys due under the mortgage, to possession and to foreclose. The right of action accrues-
(1) as regards the right to possession, on the date of the mortgage [I would interpolate that this is not necessarily correct for the reason given in paragraph 34 above];
(2) as regards the rights to recover the moneys due under the mortgage and to foreclose, on the date when the right to receive the money accrued, which will be the legal date for redemption.
However, in relation to each of these limitation periods, if (as normally happens) the mortgagor pays any instalments under the mortgage, the 12 year period runs afresh from that payment. It follows that, in the typical case where the mortgagor pays instalments, the limitation period will run from the date of the last instalment that he or she has paid."
A footnote to the penultimate sentence states:
"The mortgagor is in adverse possession for the purposes of the Limitation Act 1980, because the land subject to the charge is in the possession of 'some person in whose favour the period of limitation can run': see Schedule I, Part I, para 8(1). The mortgagor does not in any sense have to be a 'trespasser' for these purposes."
"The right to take possession
26-24 The right to take possession is a 'right of action to recover land' as that expression is defined in the Limitation Act 1980, s 38(7). It is accordingly subject to the 12-year time limit imposed by the Limitation Act 1980, s 15(1)….
26-25 Mortgagors normally remain in possession after the grant of the mortgage. It might be thought that the possession of a mortgagor, which is by virtue of the mortgagor's equity of redemption, and with the implicit assent of the mortgagee, was not adverse under the Limitation Act 1980, Sch. I, para 8. While the mortgagor remains in possession he is, substantially, the owner of the land and the mortgagee is a mere encumbrancer. The mortgagor's status while in possession is sui generis….
26-27 That was the position before the Real Property Limitation Act 1833. Under the old law, the possession of a mortgagor was not adverse unless the jury, from renunciation by the mortgagor, or some other circumstances, were induced to find the fact of adverse possession.
26-28 The courts held, however, that the Real Property Limitation Act 1833 has changed the position, and that time did run against a mortgagee where no payment of principal or interest is made for the limitation period. It is now clearly established that time for recovering possession will run against a mortgagee where a mortgagor or prior mortgagee is in possession and no payments are made under the mortgage.
26-29 The courts have, then, treated a mortgagor, who is in lawful possession with the assent of the mortgagee, as being a person in whose favour the period of limitation can run, and so in 'adverse possession' for the purposes of the Limitation Act 1980, Sch. I, para 8. Unlike the position of a mortgagee in possession or an oral periodic tenant in possession, this is not by virtue of an express statutory provision directing that time should run in favour of the mortgagor in possession. Rather, it is the result of decisions by the courts, treating the possession of a mortgagor as adverse. That approach conflicts with the principle also developed by courts that a gratuitous licensee allowed into possession by the true owner is not in adverse possession. However, the treatment of both mortgagors and licensees is very well established by authority at the level of the Court of Appeal, and could only be changed by a decision of the House of Lords or legislation."
Period of limitation
26.40 Section 15(1) of the Limitation Act 1980 provides that no claim shall be brought by any person to recover land after the expiration of 12 years from the date on which the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person. By s 38(7), a right of action to recover land includes a right to enter into possession of land. Accordingly the right of a mortgagee to enter upon the mortgaged land or to bring a claim for possession will be barred 12 years after the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person.
Date from which time runs
26.41 Since a legal mortgagee prima facie has a right of entry on the execution of the mortgage, time prima facie begins to run from the execution of the mortgage. However, the mortgage's right to possession will frequently be qualified. Thus there may be a provision that the mortgage shall be not be called in until the expiration of a given term and that until default in payment it shall be lawful for the mortgagor peaceably to enjoy and receive the rents. This amounts to a re-demise by the mortgagee to the mortgagor during the term fixed. In that case, the mortgagee's right to possession arises upon default in payment on the date fixed for payment and time will begin to run from the date of default...."
"In this case it is admitted and established that those claiming under the mortgage to Pain never, during any part of the statutory period, received any principal or interest, and that no acknowledgment was given by the mortgagor. That being so, not only was the mortgage's remedy against the land extinguished, but the charge itself was extinguished. Those claming under the mortgage of 1874 have, therefore, no right to the land, and cannot set up the mortgage, or any title under it, in priority to the Plaintiff.
It has been suggested that the statutory period did not so operate because there was a prior outstanding legal mortgage which was in existence until 1886. But the mortgagees under that mortgage were never in possession of the land. The mortgagor was, throughout the statutory period, in possession of the mortgaged property, and throughout this period the equitable mortgagee could have taken proceedings to enforce his right to the land, For instance he could have brought a foreclosure action. That is an action for the recovery of land… Therefore, as between the mortgagor and those claiming under the mortgage of 1874, the statutory period began to run from the day fixed by that deed for the redemption of the property, and on the expiration of twelve years from that date the mortgagee under that deed, who up to the end of that time could have taken proceedings, was barred, not only as to his remedy, but as to his right to land, and his charge was gone."
"… the right of action is to be deemed to have accrued when [the second mortgagee] became entitled to possession or receipt of the rents and profits; and that, as has been held in many cases, is when his estate became absolute at law, namely, at the time fixed for payment of the mortgage money, after which the mortgagor has only an equity of redemption."
"[The mortgagee's] summons was dismissed with costs, and against that there was no appeal. It proceeded on the footing that under s. 34 of the Real Property Limitation Act 1833, as amended by the Act of 1874, the title of the mortgagees against the mortgaged property, of which this fund in Court was part, was extinguished at the end of twelve years. That was decided, and that is not open to appeal, and in saying that I do not wish to suggest that I have any doubt as to the propriety of that decision. … Warrington J seems to have thought that this case was governed by the principle of In re Lloyd, and that, although it might be that no action on the covenant could be maintained, yet when the mortgagors asked for payment out the mortgagees were entitled to say, 'You cannot apply to a Court of Equity for payment out of this fund unless you do equity'. There was, however, this difference at the outset between the two cases which does not appear to have been present to the mind of Warrington J, viz, that in In re Lloyd the title of the mortgagees was not extinguished whereas in this case it was. The suggestion that a mortgagee whose title to the mortgaged property is extinguished can have any right to say as against the mortgagor, 'Give me part of this property, to which I have no title except under the extinguished mortgage', is really a proposition which I think does not require many words to refute."
"Sec. 1 of the Real Property Limitation Act, 1874, provides no person shall bring an action to recover any land but within twelve years next after the time at which the right to bring such action shall have accrued to him.
The action in the present case is an action of foreclosure, and the effect of the judgment when obtained is finally to deprive the mortgagor of the right which he has in equity to redeem his property on payment notwithstanding that the period fixed for this by the mortgage has expired. The right to bring this action accrues at the expiration of the last-mentioned period. In the present case there is no such period, for the money is payable in demand, and the right accrued immediately on the execution of the deed.
Prima facie, then, an action could not be brought more than twelve years after that date, but the period is lengthened in the cases to which they are applicable by the provisions which make acknowledgment or payment the starting point of the period of limitation."
"It is, I think, quite plain that by virtue of the Real Property Limitation Act 1833, s. 34, and the Real Property Limitation Act 1874, s. 1, on the expiration of 12 years from 1921 the mortgagee, the defendant, ceased to have any estate or interest whatsoever in the land. In my judgment, it is plain on the authorities that, even had there been an acknowledgment of any kind since that date, it would not have been sufficient to restore to the mortgagee the estate or interest which she had as a mortgagee under the mortgage, but in that letter there is not any sort of acknowledgment at all."
"[Counsel for the plaintiff] says it does not matter, though it be a fact, that the first mortgagees might make a title absolute under the Statute of Limitations. They have not chosen to do, but they have chosen to exercise their powers of sale as mortgagees, and, therefore, they must be taken to be mortgagees for all purposes. The usual result ensues he says…
It is necessary, in order to test that contention to see what is the position under the statutes of a mortgage who, having been in possession for twelve years, has given no acknowledgment to anybody in respect of the property. That depends on the Limitation Act, 1939 [ss. 12 and 16] … Therefore the position here is that in the year 1945 the period of twelve years had expired and the title of the persons whose interest it was to redeem was extinguished.
The plaintiff, therefore, as second mortgagee, from that date on had no right, title or interest in the land….
In my judgment the answer to this summons depends on who is the person entitled to the mortgaged property, and, whoever else may be, I cannot see how the plaintiff can possibly say that it is he, because under ss. 12 and 16 of the Limitation Act, 1939, all his title has been extinguished and he has no interest in the property."
"Section 4 of the Act of 1939 seems at first sight unsuitable to apply to an action by a mortgagee for possession, because the mortgagee always has the right to go into possession at any moment, and in a sense, therefore, that right first accrued when the mortgage was made. So long, however, as the mortgagor paid the interest that prevented the statute from running, and the right of action would be deemed to have accrued when payment was due, but was not made, that was November 1, 1940. As there has been no payment for 12 years from that time, unless there has been an acknowledgment in the meantime, section 4 applies after the expiration of the 12 years from the date on which the right of action accrued.
The question is, therefore, has there been an acknowledgment?"
"In my judgment, on the second mortgagee's right against the mortgagors becoming statute barred, the second mortgagee lost all estate and interest in the mortgaged property. He could no longer foreclose as against the mortgagor; he could no longer sue for possession, and a result of the provisions of section 16 … his estate in the land had come to an end."
"What I draw from these authorities, and from the ordinary meaning of 'acknowledges the claim' is that the debtor must acknowledge his indebtedness and legal liability to pay the claim in question. There is now no need to go further to seek for any implied promise to pay it. That artificiality has been swept away. But, taking the debtor's statement as a whole, as it must be, he can only be held to have acknowledged the claim if he has in effect admitted his legal liability to pay that which the plaintiff seeks to recover. … In effect, 'acknowledges the claim' means that the statement in question must be an acknowledgement of that indebtedness which the plaintiff seeks to recover notwithstanding the expiry of the period of limitation.
In my judgment this analysis is supported by three considerations. First, I think that the statement relief upon as an acknowledgment must be taken as a whole; the creditor is not entitled to pick out parts and ignore others. Secondly, I think that an acknowledgment of indebtedness is the ordinary meaning of 'acknowledges the claim' and that the pre-1939 authorities do no preclude [sic] any other conclusion. Thirdly, I think that this construction of the statute is in accordance with good sense and justice."
"16-60 In construing correspondence relating to mortgages, the courts have treated any letter which does not deny the existence of the mortgage as implicitly acknowledging its existence. Thus in Trulock v Robey, a letter from a mortgagee expressing his willingness to settle was held to be an acknowledgement. And in Stansfield v Hobson, the mortgagor's solicitor wrote to the mortgagee in possession asking when the mortgagee would see him on the mortgagor's claims. The mortgagee wrote back, stating:
'I do not see the use of meeting either here or at Manchester, unless some party is ready with the money to pay me off.'
The Lords Justices held that that was a sufficient acknowledgement to start the limitation period running afresh from the date of the letter.
16-61 In Wright v Pepin, Harman J held that a letter written by a mortgagor's solicitor had acknowledged the mortgage. The letter was in reply to correspondence from the mortgagee's solicitors, asking for information about what was happening to the mortgaged property, which had almost been destroyed in the war, stating that the mortgagee wanted the mortgage paid off, and threatening proceedings. The letter from the solicitor for the mortgagor, Mrs Pepin, stated:
'I understand that Mrs Pepin will shortly be making a appointment to see you with regard to her accounts with you for some time past. She has several questions which she wishes to raise. Steps are being taken to rebuild 101, Mountview Road. Plans have been prepared and submitted to the local authority, and as soon as the work is in hand I will let you know, when Mrs Pepin's position can again be reviewed.'
Harman J held that letter was an acknowledgment of the mortgagee's title. He said:
'Her solicitors was approached by the mortgagees' solicitors, the time not having then run, and under pressure from them Mrs Pepin's solicitor, as she is well authorised to do, says "Please hold your hand until the property has been re-built, and then Mrs Pepin's position can be reviewed." What is that but an acknowledgment in respect of the property and a request for forbearance?'."
"All that is necessary for an acknowledgement to take the case out of the statute is that the debtor should recognise the existence of the debt…"
"An acknowledgment must contain a sufficiently clear admission of the title or claim being acknowledged."
"… it would seem to be a very clear case, and it so appeared to the county court judge. If a man makes an offer to purchase freehold property, even though the offer be subject to contract, he is quite clearly saying that as between himself and the person to whom he makes the offer he realises that the latter has a better title, and that would seem to be the plainest possible form of acknowledgment."
Application to the present case