Mortgage “get out of jail free” card getting short shrift from the courts

20 Mar 2017

Every once in a while, no doubt prompted by extravagant claims on internet forums, borrowers go to court arguing that their mortgage contracts are void because they do not comply with certain formal requirements. Many such claims are now being pursued but all are likely to be without merit. A recent example serves as a stark illustration of how badly these claims can go down.

The claimants were litigants in person, a Mr. and Mrs. Campbell. In 2002, they took out a mortgage with The Woolwich (part of Barclays), and were sent a deed of mortgage which they duly signed. As is not unusual, this document was not signed by Barclays.

All was well until January 2016, when the Campbells stopped making repayments on their mortgage, and started a claim seeking a declaration that their mortgage was void. They also sought rectification of the register to remove the charge on their property. The argument raised was that section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 requires a contract “for the sale or disposition of an interest in land” to be signed by both parties. There was no document signed by both parties here, and accordingly (they said) no valid mortgage.

This argument, although superficially attractive, has a fatal flaw. The deed that the Campbells signed is not a contract “for the disposition of an interest in land” at all. Section 2 applies only to contracts for disposition at some future time, for example a sale contract to be completed a week later. The deed is no such thing; it is itself the instrument effecting that disposition. It is the mortgage, and is valid as long as it is properly executed by the disposing party (section 1 of the LPMPA 1989).

This distinction has been drawn repeatedly by the courts, most recently by the Court of Appeal in Rollerteam and another v. Riley and another [2016] EWCA 1291. In light of this, it is hardly surprising that the court was unimpressed by the Campbells’ arguments. The claim was struck out at first instance, and permission to appeal was refused by His Honour Judge Bailey, sitting at Central London. The result is less interesting than the comments and concerns expressed by the judge about the argument generally.

The court was aware of a recent spate of similar claims (indeed it was the second time in the same week that Hardwicke had defended one and the judge had dealt with a similar appeal the previous week) all raising very similar points in very similar language. They were categorised by the judge as “absolutely hopeless” and a “waste of everyone’s time”. He accepted Barclays’s submissions that the argument was based on a “fundamental misunderstanding” of section 2; indeed, he said that that was putting the matter “rather politely.” The learned judge also expressed concern that parties who are otherwise able to pay their mortgage are being tempted into stopping payments, putting themselves at risk of possession proceedings being brought against them and possibly then finding themselves in a position where they are unable to pay off the accumulated arrears.

The courts, then, are treating this particular argument with very little sympathy. This is unsurprising; the claimants have typically received large sums of money under the mortgage, so trying to avoid the bank’s security and stop payments puts them in a rather unattractive position.

There is one further sting in the tail; any costs associated with the proceedings can normally be added to the mortgage account under the terms of the mortgage. Such costs will not, in the first instance, be subject to any assessment; the borrower will simply be charged in full the costs incurred by the bank. So not only do such claims waste court time, they can also prove to be a very expensive mistake for the borrowers themselves.


By P.J Kirby QC, who acted for Barclays, and Simon Kerry, pupil barrister, Hardwicke.


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