EAGLE STAR INSURANCE COMPANY LTD v (1) NIGEL JOHN GREEN [2001] EWCA Civ 1389

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM SWANSEA COUNTY COURT
(HIS HONOUR JUDGE JONES)
[2001] EWCA Civ 1389Case No B2/2001/1503Venue Royal Courts of Justice, Strand, London WC2, Wednesday, 8th August 2001
Between
EAGLE STAR INSURANCE COMPANY LTDRespondent(1) NIGEL JOHN GREEN(2) YVONNE ELAINE CHALLISAppellants
Before
Lord Justice MummeryThe Applicant appeared in person.The Respondent did not attend and was unrepresentedDate 8 August 2001
[1]Wednesday, 8th August 2001 LORD JUSTICE MUMMERY: This is an application for permission to appeal. The application is made by Mr Nigel Green in person. He wishes to have permission to appeal against a decision of His Honour Judge Jones sitting in the Swansea County Court. He made an order on 15th June this year in the following terms. First, that Mr Green and Miss Yvonne Challis give possession of Clynmelyn Farm, Llanllwni, Pencader on 10th August 2001 to the claimant, the Eagle Star Insurance Company Limited; secondly, that they pay to Eagle Star the sum of £212,866.99, being the amount currently outstanding on the mortgage on 10th August. He also directed that, without prejudice to Eagle Star's right to add the costs to the security, there should be an order that Mr Green pays Eagle Star's costs of the proceedings, and the determination of the amount payable by them and/or the Legal Services Commission be adjourned until after the determination of any wasted costs application. Liberty to apply was given as to the basis of assessment.[2]On 27th June an application was issued by Mr Green for permission to appeal. Permission to appeal is required under Part 52 of the Civil Procedure Rules. This is a second tier-appeal. So in order to obtain permission Mr Green must satisfy the court that the appeal which he proposes to bring raises an important point of principle or practice or that there is some other compelling reason for granting permission to appeal.[3]The background to the case has to be explained before I can deal with Mr Green's submissions. Mr Green and Miss Challis bought Clynmelyn Farm ("the farm") from Mr and Mrs Baker in May 1988. I was informed that the purchase was initially financed by Barclays Bank, but there was a refinancing and remortgaging in November 1989 when money was borrowed totalling £127,000 from the Eagle Star Insurance Company. The mortgage deed is dated 8th November 1989. The parties to it are Mr Green and Miss Challis, named as the borrower, and Eagle Star as the lender. By Clause 4 of the mortgage deed it is provided that:
"A. The Borrower as Beneficial Owner hereby charges by way of legal mortgage ALL the property specified in the First Schedule hereto WITH the payment to the Lender of all the principal interest and other money payable under this Deed."
[4]The first schedule contains a description of the freehold farm, as described in the 1988 conveyance by the Bakers to Mr Green and Miss Challis. Clause 4B also provides:
"The Borrower as Beneficial Owner hereby assigns to the Lender ALL the Policy or Policies of Assurance specified in the Second Schedule hereto and all moneys to become payable under the same TO HOLD onto the Lender absolutely."
[5]The second schedule sets out details of the policy which is assigned: its number, 1560545; its date being 15th October 1989; the insurance company is described as the lender; and Mr Green and Miss Challis as the borrower; and the amount assured and date or event upon which it is payable is given as £127,000 on 8th November 2014 or the earlier death of either borrower. The farm was unregistered land.[6]On 28th September 2000 Eagle Star took out a summons for possession against Mr Green and Miss Challis. They referred in their summons to the mortgage of 8th November 1989, described the farm which was charged by the mortgage, alleged that there had been arrears in relation to the mortgage, that a letter had been sent demanding repayment on 9th May 2000, and alleged that no repayment had been made in accordance with the demand.[7]On 3rd April 2001 in the Carmarthen County Court an order was made striking out defences in a defence served by Mr Green. Permission to appeal was granted by His Honour Judge Hickinbottom. That came before His Honour Judge Jones and led to the order, which Mr Green now wishes to appeal.[8]The main defence raised by Mr Green (and developed by him in his written and/oral arguments) is based on section 2 of the Law of Property Miscellaneous Provisions Act 1989. The other points he listed were these: proof of debt, validity of the mortgage, nonproduction of crucial documents and late production of bundle 3 (that is a bundle of documents produced by Eagle Star to His Honour Judge Jones). It became clear during the course of the argument, however, that the essential point which I have to consider on this application is whether there is a point of principle or practice on section 2 of the 1989 Act.[9]Mr Green has obviously done a lot of research and has put a lot of thought into this argument. I need to deal with it in some detail in order to do justice to his submissions. His point is this. The 1989 Act came into force before 8th November 1989. It came into force on 27th September, and so the changes in the law which it made would apply to this mortgage. He says an important change in law was made by section 2. Section 2 provides:
"(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each. (2) The terms may be incorporated in a document either by being set out in it or by reference to some other document. (3) The document incorporating the terms or, where contracts are exchanged, one of the documents incorporating them (but not necessarily the same one) must be signed by or on behalf of each party to the contract."
[10]He then refers to subsection (6), which provides that in this section "disposition" has the same meaning as in the Law of Property Act 1925. By section 205, which is the definition section of the Law of Property Act 1925, it is provided that "disposition, conveyance" and so on, has the corresponding meaning, and that would, in this case, include a transfer of an interest in land by way of security. That is in section 205(1)(ii), which provides:
"'Conveyance' includes a mortgage, charge, lease, assent, vesting declaration, vesting instrument, disclaimer, release and every other assurance of property or of an interest any instrument, except a will, 'convey' has a corresponding meaning; and 'disposition' conveyance and also a device, bequest, or an appointment of property contained in a will; 'dispose of' has a corresponding meaning."
[11]Thus, "disposition" includes a mortgage. Therefore, Mr Green submits, section 2 applies to a mortgage being a contract for the disposition of an interest in land. He supports that by reference to Quarrel v Beckford 1 Madd at 269. He refers to a passage at 278 where Sir Thomas Plumer V-C, asked this question: what is a mortgage? and gave this answer:
"Everybody knows, it consists of two things; it is a personal contract for a debt, secured by an estate, and, in equity, the estate is no more than a pledge or security for the debt; the debt is the principal - the estate is the accident."
[12]So, says Mr Green, section 2 requires the signature of all the parties to a mortgage, being a contract for the disposition of an interest in land. He says that if you look at this mortgage at the end where the signatures appear it will be seen (on page 50 of Volume 1 of the bundles of documents) that there are the signatures of himself and Miss Challis, but there is no signature on behalf of Eagle Star. So, he submits, the mortgage of 8th November 1989 does not comply with the requirements of section 2 of the 1989 Act, which by then had come into force. He made it clear that it is not disputed that he owes money to Eagle Star, but there is a dispute about the precise amount. He emphasised that he has been regularly paying monthly payments to Eagle Star, though he accepts there are arrears. He says that the effect of applying section 2 to the mortgage of 8th November 1988 is that it is unenforceable. That means that the Eagle Star company are not entitled to obtain the order for possession which it obtained from His Honour Judge Jones. He emphasised a number of times during his submissions that without the signature of someone on behalf of Eagle Star the mortgage is not a full and complete legal document and so they are not entitled to enforce the charging provisions in it against him.[13]Mr Green referred to some passages in the report of the Law Commission which led to the bill enacted in the 1989 Act. He referred to passages in the Law Commission Paper No.164, in particular 4.5, 4.6 and 4.8. He also referred to a number of authorities. I think the most important of these (because it was concerned with a mortgage, while the other cases he referred to concerned contracts for the sale of land) was United Bank of Kuwait Plc v Sahib [1997] Ch at 107. I have been supplied with a copy in [1996] 3 All ER 251. That is an important case. It decided that the requirements contained in section 2 of the 1989 Act to the effect that a contract for the sale or other disposition in land must be in writing in a single document incorporating all the terms and signed by the parties, abolished the rule that a mere deposit of title deeds relating to property by way of security created a mortgage or charge. Following the 1989 Act the rule had changed. There had to be a written document, not merely a deposit of title deeds by way of security in order to create a mortgage or charge.[14]Mr Green relied on that for the proposition that the same should apply to this case because there was, in this case, within the mortgage deed a contract by him in the form of the covenant to repay. There were also contractual provisions or covenants by Eagle Star. So, he said, if the mortgage in United Bank of Kuwait v Sahib was governed by section 2 of the 1989 Act, so should this mortgage with similar results for its enforceability.[15]In my judgment this argument does not stand any real prospect of success. This is not a case of a contract: it is a case of a deed. If we were simply dealing with a contract to create a mortgage then Mr Green would be right. But in this case he and Miss Challis have actually executed a deed. It is clear from the provisions of the 1989 Act itself that a distinction is drawn between the formal requirements affecting the execution of deeds and the formal requirements governing contracts. Section 1 makes alterations to the law about the execution of deeds. For example, they are no longer required to be written on any particular kind of substance and a seal is not required for the valid execution of an instrument as a deed by an individual. There are a number of detailed provisions in section 1 relating to deeds. Section 2 does not apply to deeds; it applies to contracts. It may be a contract for the sale of land, it may be a contract for some other kind of disposition of an interest in land, one other kind of disposition being a transfer by way of security over what is commonly called a mortgage or charge.[16]In this case, as Mr Green points out, there is no preceding contract for the creation of the mortgage in issue. He draws the conclusion from that that the contract must be in the deed. In my judgment that is a misunderstanding. A deed is a different kind of instrument from an ordinary contract; and it is not a requirement of the execution of a deed that it should comply with the requirements of section 2 of the 1989 Act. That is clear. Section 1 refers throughout to deeds, section 2 refers throughout to contracts, clearly recognising that they are two different legal concepts.[17]In my judgment the case in United Bank of Kuwait v Sahib does not help Mr Green, because that was a case where there was no deed, unlike this case. There was in that case a purely informal equitable mortgage by deposit of title deeds. That had no effect because, as a contract, it was required to comply with section 2 and it did not comply. In my judgment His Honour Judge Jones was right to reject the submission that Mr Green made on the effect of section 2. Having referred to the point that it was unarguable, he said:
"Section two applies to a contract for the sale of an interest in land or a contract for some other disposition in relation to land. A contract to create a mortgage would obviously have to comply with section two and if it did not then it would not be a valid contract. However, in this case there was no contract for the mortgage, there was simply the execution of the mortgage deed. That mortgage deed is a mortgage deed. It is not a contract to create a mortgage. I need really say no more than that about it."
[18]He went on to refer to United Bank of Kuwait v Sahib , and correctly concluded that it did not assist Mr Green's case, as it was only concerned with the creation of an equitable charge and there was no deed in that case. I agree with the reasons given by His Honour Judge Jones. It follows that this point would not succeed on an appeal and therefore there is no point in my granting permission to appeal on that point.[19]I should mention that Mr Green's researches unearthed a number of other cases which are set out in his bundle of authorities. In particular McCausland and Another v Duncan Lawrie Ltd and Another , a [1996] decision in the Court of Appeal. He has also referred to Dean v Allin & Watts (a Firm) which has not been fully reported, but there is a transcript of the Court of Appeal's decision of 23rd May 2001. In my view those cases really add nothing to what is said in United Bank of Kuwait v Sahib , nor does the case of Commission for the New Towns v Cooper , to which he has found a reference on the internet. Again that simply referred to the requirements of section 2 in connection with an offer of acceptance in the course of correspondence. It was not concerned with the case of a deed.[20]There are a number of other points that Mr Green raises in support of his application for permission, but I need not deal with them. He raised a point as to whether the Human Rights Act prevented the making of a possession order as to whether the arrears claimed were excessive. The view that I have reached is that his core point on section 2 rests on a misunderstanding of the difference between a deed and a contract; and for the reasons which I have given there is no point of principle or practice raised by the application. I will therefore refuse permission. (Application refused; no order for costs).

Cited in 1 later judgment