Herron v Bank of Scotland Plc

Factual and Procedural Background

By originating summons dated 27 July 2012 under Order 88 of the Rules of the Court of Judicature (NI) 1980, Company A sought an order against the Appellant for possession of a dwelling house occupied by the Appellant. By order of the Deputy Master dated 23 October 2015, Company A was granted the relief sought. The Appellant appealed, but the appeal was dismissed by Madam Justice [Last Name] on 30 May 2017. The case before this Court concerns the Appellant’s further challenge to that dismissal.

The Court considered whether the Appellant’s recourse should be treated as an application for leave to appeal or a substantive appeal, concluding that the latter was appropriate given the nature of the possession order and relevant statutory provisions.

Legal Issues Presented

1. Whether the appeal should be treated as a substantive appeal rather than an application for leave to appeal under section 35 of the Judicature (NI) Act 1978.
2. Whether the mortgage deed falls within the scope of the EU Directive 85/577/EEC (the "1985 Directive") concerning contracts concluded away from business premises.
3. Whether the Appellant had standing and whether there was sufficient evidence to support Company A’s claim for possession.
4. Whether the Judge erred in assessing the fairness of the mortgage terms under EU Directive 93/13/EEC (the "1993 Directive").
5. Whether Company A complied with procedural requirements as set out in Swift First Limited v McCourt and Santander (UK) Plc v Carlin and Hughes regarding affidavit evidence in possession claims.

Arguments of the Parties

Appellant's Arguments

• There were procedural irregularities in the proceedings before the Deputy Master.
• The evidence was insufficient to support the claim for possession.
• The Bank lacked standing to bring the claim.
• The mortgage agreement was a secured credit agreement subject to the 1985 Directive, entitling the Appellant to cancel the agreement.
• The Judge improperly rejected the application of the 1985 Directive and failed to consider the fairness of the mortgage terms under the 1993 Directive.
• Company A failed to comply with the procedural requirements for affidavit evidence as established in Swift First Limited v McCourt and Santander (UK) Plc v Carlin and Hughes.
• The Appellant challenged the legal ownership of the mortgage loan and the adequacy of the Bank’s affidavit evidence.
• The Appellant contended that Company A had not demonstrated that it sustained a loss due to his default, relying on economic theories of credit creation.

Company A's Arguments

• The possession order was properly granted and the appeal before the High Court was correctly dismissed.
• The mortgage deed does not fall within the scope of the 1985 Directive as it relates to immovable property and was executed at business premises.
• The procedural irregularities alleged were irrelevant as the appeal was a rehearing de novo.
• The Bank had legal ownership of the charge and was entitled to possession; all rights and liabilities under the mortgage deed transferred to it by statute.
• The errors in affidavit evidence were innocent and immaterial to the entitlement to possession.
• The Bank complied with discovery and affidavit requirements sufficiently, and the Appellant had opportunity to cross-examine witnesses.
• The financial loss was established by the Appellant’s default in repayment; the economic theories cited by the Appellant did not affect the legal entitlement to possession.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Swift First Limited v McCourt [2012] NICH 33	Best practice for affidavit evidence in possession claims, requiring senior officers to swear affidavits with full particulars of title and securitisation.	The Court found Company A failed to comply with the procedural requirements set out in Swift First, notably in affidavit preparation and discovery, constituting a serious breach.
Santander (UK) Plc v Carlin and Hughes [2013] NICH 14	Endorsement of Swift First approach and criticism of failure to file proper affidavits and comply with court directions.	The Court noted Company A’s failure to comply with these principles and directions, which undermined the procedural integrity of the case.
Heaney v McEvoy [2018] NICA 4	Principles of appellate review on rehearing, including deference to trial judge’s findings of fact unless clearly wrong.	The Court applied these principles in reviewing the Judge’s findings, finding no basis to overturn factual conclusions.
DB v Chief Constable [2017] UKSC 7	Appellate court’s approach to reviewing factual findings based on affidavits and documents.	Cited to support the principle of appellate deference to trial judge’s factual findings.
In Re Williamson [2008] NICA 52	Procedural rules on cross-examination and subpoena of witnesses in civil proceedings.	Referenced in relation to the Appellant’s application to cross-examine Company A’s deponents, which was resisted.
Briggs v Gleeds [2014] EWHC 1178 (Ch)	Legal effect of defective execution of charges and distinction between legal and equitable mortgages.	The Court noted that the Judge did not find any defect in attestation of the Appellant’s signature on the mortgage deed, rendering the issue irrelevant.
Bank of Scotland v Waugh [2014] EWHC 2117 (Ch)	Effectiveness of equitable mortgages and requirements for valid execution.	Discussed in relation to the legal status of the mortgage deed and registration of charges.
Heininger v Bayerisch Vereinsbank (Case C-481/99)	Interpretation of the scope of the 1985 Directive and Consumer Credit Directive regarding secured credit agreements.	The Court rejected the Appellant’s reliance on this decision, finding the mortgage deed was a contract relating to immovable property and outside the 1985 Directive’s scope.

Court's Reasoning and Analysis

The Court began by clarifying that the appeal was substantive rather than an application for leave, as possession orders under Order 88 are not interlocutory. It then examined the Appellant’s grounds of appeal as condensed by the trial Judge, including procedural irregularities, insufficient evidence, and lack of standing, concluding these were without merit.

The Court analyzed the applicability of EU Directive 85/577/EEC ("the 1985 Directive") and its domestic transposition, determining that the mortgage deed was a contract relating to immovable property and thus excluded from the Directive’s protections. The Court found no evidence that the mortgage was executed at prohibited locations such as the Appellant’s home or workplace, supporting the Judge’s finding that the deed was executed at business premises.

The Court reviewed the trial Judge’s findings regarding the validity of the mortgage, the Appellant’s default, and the Bank’s entitlement to possession, affirming that errors in the Bank’s affidavits were innocent and immaterial. It upheld the Judge’s rejection of the Appellant’s late submission based on the 1985 Directive as legally untenable.

Regarding the Appellant’s argument on unfair contract terms under EU Directive 93/13/EEC and the 1999 Regulations, the Court noted that no such claim was made at first instance and found no substance in raising it at appeal. The Court found no unfairness in the mortgage terms, including interest provisions.

The Court devoted considerable attention to the procedural ground concerning the Bank’s failure to comply with the discovery order and affidavit standards established in Swift First Limited v McCourt and Santander (UK) Plc v Carlin and Hughes. It found the Bank’s affidavits deficient, including non-compliance with the Master’s Order, improper inclusion of legal argument in affidavits, failure to exhibit relevant securitisation documents properly, and wasting court time resisting evidence being given by video link.

Despite these procedural failings, the Court concluded that the substantive entitlement to possession was established and that the Appellant’s contentions regarding financial loss and securitisation were speculative and lacked merit. The Court emphasized the importance of compliance with affidavit preparation rules but did not find the procedural breaches sufficient to overturn the possession order.

The Court also considered related legal issues concerning the validity of the mortgage deed’s execution and registration, ultimately upholding the Judge’s findings that the mortgage was validly executed and registered, and that the Bank held legal title to the charge.

Holding and Implications

The Court DISMISSED THE APPEAL for the reasons given.

The direct effect of this decision is that the possession order granted to Company A stands, and the Appellant remains liable under the mortgage agreement. The Court did not establish any new precedent but reaffirmed established principles regarding the nature of possession appeals, the scope of consumer protection directives in mortgage contexts, and the procedural requirements for affidavit evidence in possession proceedings. The decision underscores the necessity for financial institutions to comply scrupulously with court orders and best practices in affidavit preparation, though procedural failings alone will not necessarily defeat substantive entitlement.