Limitation Act 1980 : LUSENET : Repossession : One Thread


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Headnote 100044201 - Mortgages - Banking and Financial Services - Limitation - Sale of mortgaged properties by mortgagee in possession - Mortgagor claimed that sales were at undervalue and that mortgagee had wrongly paid proceeds to another chargee - Whether undervalue claim statute-barred - Limitation Act 1980 ss 2, 8, 36 - Raja v Lloyds TSB Bank plc - Chancery Division - Mr M Tugendhat QC (sitting as a Deputy High Court Judge) - 19.04.00


The claimant, R, owned four properties charged to the defendant bank and subject to further charges. In 1987 the bank demanded repayment of facilities granted to R and when R failed to pay obtained possession orders in respect of the properties. Three of the properties were sold in 1989, 1990 and 1991. R issued proceedings in 1997 on the basis that the proceeds of sale should have discharged his indebtedness leaving a surplus. Further the sales were at undervalues. The bank's case was that it had credited R with the proceeds of sale to the extent to which its charges had priority and that R remained substantially indebted to the bank. That indebtedness was the subject of a counterclaim. The master struck out the statement of claim and R appealed.


(1) Whether the claim for damages arising out of the alleged sale at an undervalue was statute-barred.

(2) Whether the bank misapplied the proceeds of sale by paying the subsequent chargee.

HELD (dismissing the appeal)

(1) A mortgage by deed was a specialty under s 8 of the Limitation Act 1980 but the duty on a mortgagee to obtain a proper price did not arise under the deeds of charge but in equity (Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295, Medforth v Blake [1999] 3 WLR 922; NLC 299059007). The period of limitation was not therefore 12 years under s 8. The claim for damages for breach of the duty in equity corresponded with the remedy for breach of a duty of care in tort. The court would therefore apply the six year limitation period in tort under s 2 by analogy under s 36 of the 1980 Act (Coulthard v Disco Mix Club Ltd [1999] 2 All ER 457; NLC 299033503 and Companhia de Seguros Imperio v Heath (REBX) Ltd [1999] 1 All ER (Comm) 750; NLC 299035601 followed). Accordingly the undervalue claim was statute-barred.

(2) There was no authority for the proposition that a mortgagee was bound to recover all that he was owed out of the proceeds of sale before paying them over to the encumbrancer next in order, or that he owed a duty not to disadvantage the mortgagor. Section 105 of the Law of Property Act 1925 created a trust over the proceeds of sale but did not oblige a mortgagee to exhaust his remedies against the proceeds of sale.

Stephen Barbour, Barrister


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-- Ali (, May 12, 2000


Could the person who posted this please please explain it so that we mere mortals can understand it? Thanks.

-- Eleanor Scott (, July 13, 2000.

Could someone tell me if Mr M Tugenhadt the judge in the above case, is in any way conected to Lord Tugenhadt, the Chairman of Abbey National??

-- jacky jones (, September 03, 2000.

I found this post using a google search and thought I would post an explanation if anyone is still interested:

There are really two things being discussed in the case.

The first is to do with limitation. In English law there is a time limit on the bringing of most civil actions. For example if I suffer injury in a car accident then, barring various special cases, I have 3 years to sue or I am out of time.

Now when a mortgage lender (mortgagee) takes possession of property and excercises its power of sale to make good arrears on the mortgage it has a duty (but not a very strong duty) to make sure the sale is not at an undervalue. So it can't just sell it to whatever it can get off a tramp in the street.

The question is: how long after the sale do you get to sue? The answer is 6 years.

A mortgage has to be made in a special legal document called a deed. For historical reasons I won't go into you can sue on an agreement made in a deed for 12 years (its what is called "a specialty", like realty and personalty). The court said that the duty not to sell at an undervalue didn't come out of the deed, which only provides that a certain sum is due etc etc, but out of a more general jurisdiction of the court called equity. This (by analogy with other kinds of action) would have a time limit of 6 years.

Hope that is clear.

The other question was: when selling a repossessed property, do I take all the money owed to me out of it, or just that amount that was mortgaged? There might be a sequence of mortgages or other charges on a property and if I took all I was owed it would be unfair to later chargees, so the court held the bank was right just to take what it was owed under the mortgage.

Well, I hope someone appreciates that.

-- Francis Davey (, April 02, 2003.


I think all clarifications are appreciated, thanks.


-- M Amos (, April 02, 2003.


I definitely appreciated that explanation. Thanks!

-- Isabel Urzaiz (, September 25, 2004.

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