I have a previous listing here so I won't bore everyone again with the full facts. Basically, I have an unproven Shortfall of £45,000 which is Statute Barred as defined by Counsel. But I am informed that the interest part, a further £39,000 may not be as indicated by Lord Justice Mumby in the West Bromwich v Craig. I am told that the interest 6 year claim period re starts upon every month the mortgage payment is/was due. My argument is that once the Property has been repossed and sold the Mortgage contract is terminated and as such no monthly repayments of the original terms and conditions are due. If no monthly payments are due, the 6 years would run from Mortgage Termination/repossesion/sale of property. Can anyone throw any light on this? Thanks

-- Steve Pittaway (steve.pittaway@bigfoot.com), July 26, 2003

Answers

You say its statute barred by the CML, no such thing. 6 year code is voluntary and cannot be used as defence in a court as its just that, voluntary and nothing to do with the judge. Be very careful, only a court can statute bar a claim, not CML or any other non-legal body.

-- Neil (neilaw_uk@yahoo.co.uk), July 29, 2003.

or do you actually mean legal COUNSEL?

-- Neil (neilaw_uk@yahoo.co.uk), July 29, 2003.

Of course he means legal Counsel

If Steve had meant CML he would have referred to COUNCIL of Mortgage Lenders or the actual abbreviation!

Anyway Steve,

Have you heard this from a reliable source or is it the legal rep / debt collector for your shortfall lender? :-)

I think you mean West Brom v Crammer - Jan 2003 (I hope so and not a newer case as this will all be a waste of time otherwise)

What the case actually meant is that the lender was entitled to pay the repod house proceeds to the interest amount owed before capital was paid, unless of course their terms and conditions of the deed stated otherwise.

ie. Sale proceeds after voluntary or legal possession £100,000.00 Interest owed and costs for sale of property £62,000.00 Capital (amount borrowed) £120,000.00

the £100k pays the interest and costs owed first (as they DO only have 6 years under the Limitation Act to claim these so they collect them now rather than later) so you are left with only £38,000 to repay the capital borrowed of £120k!

Meaning they have 12 years from the 'cause of action' (see other parts of this site about this ) to pursue you for the outstanding capital balance of £82,000

Watch out for debt collectors and solicitors claiming balances which include interest from over 6 years ago (date of sale of property not cause of action). These wont stand up in court if you have not acknowledged within the 6 year period (unless a money judgement was obtained) - even if you have acknowledged after this time its time statute barred.

-- Who? (Who@dontwanttosay.com), July 29, 2003.

I am having a similar problem understanding the effect of s20(5) of the Limitation Act (as interpreted by the Bristol Case and the Crammer case) in relation to arrears of interest.

My fact situation is this: A loan was secured by a mortgage more than 12 years ago. The borrower defaulted. But NO ACTION to recover the loan has ever been taken. Now, the lender wants to sue for the interest. He is not suing for the principal because he understands that the claim is statute barred.

But, in relation to interest, he claims that the last 6 years' of interest is NOT statute barred, as the interest has accrued, or "become due", each month since default. In other words, out of the last 12 years, the lender argues only the first 6 years' of interest are barred, the last 6 years are not barred.

I have received similar advice as Steve: that the 6-year claim period relating to interest starts every month that the interest payment becomes due, meaning the last 6 years' of interest are not barred. But this advice is from a lender, not a lawyer.

My argument, again like Steve, is that the interest "became due" -- or, in other words, the cause of action accrued -- ON DEFAULT more than 12 years ago, meaning that ALL the interest is now statute barred, not just the last 6 years' worth.

Is there any authority on point? Or is it an open question? What legal arguments could be raised in favour of my interpretation? For example, isn't the Bristol interpretation of the Limitation Act in relation to the principal consistent with my interpretation relating to interest (ie the relevant date when "payment becomes due" is the date of default, not the date on which monthly interest payments have since become due)? Isn't my interpretation more consistent with the intention of the Limitation Act that a lender who has sat on his hands for 6 years cannot now say he wants the interest after all? Any ideas?

Cheers

Troy

-- Troy Simpson (troy.simpson@bigpond.com), November 14, 2003.

Troy,

Have you seen my posting under "skipton...can anyone help,mortgage shortfall(interest)- May 27 2003" ?

Mark.

-- M Amos (idgroms@hotmail.com), November 14, 2003.

Troy,

Further to your above posting, here is a solicitor's view:

The general rule is that once a principal debt is statute barred, so is any interest that relates to it (Elder v Northcott [1930] 2Ch 422, Ch D). There are exceptions to this - one relates to action taken on a judgment, e.g. bankruptcy. In this situation, the judgment debt can be statute barred yet interest that relates to it recoverable if it accrued within the last 6 years (s24(2)LA '80). Another exception relates to contracts of guarantee which guarantee repayment of the principal debt and also specifically guarantee interest and charges. In this situation, a claim against the guarantor for repayment of the principal debt can be statute barred with interest that accrued within the last 6 years recoverable (Parr's Banking Co v Yates [1898] 2 Q.B. 460, CA).

I don't know of any other exceptions.

I agree entirely with the point that a separate limitation period of 6 years starts to run from the date of each accrual of interest, but this is subject to the general rule in Northcott. Even if interest accrued last week, it is not recoverable if the principal debt is statute barred. I don't think this is a controversial view, but would like to know the source of any advice to the contrary and the authority for it. I will need some convincing that this view is not correct.

-- M Amos (idgroms@hotmail.com), November 14, 2003.

– I would comment that the courts today are required to be flexible in their approach to how they interpret the new Civil Procedure Rules. Even before the introduction of the CPR, the courts were prepared to prevent abuse of their process where there had been an inordinate delay even if the limitation period had not expired. I would further suggest that your lender has been guilty of an inordinate and inexcusable delay in bringing any action against yourself, then again it would much depend on the judge of the day.

-- jes (jiexu@btinternet.com), November 15, 2003.