Kearney v Bank of Scotland PLC & Anor (Approved)

Factual and Procedural Background

The Plaintiff was granted multiple loan facilities by Company A between 2003 and 2006, secured by a mortgage deed dated January 14, 2004. While some loans were repaid, the Plaintiff defaulted on others. On December 31, 2010, all assets and liabilities of Company A were transferred to Company B, who later registered the mortgage in the Land Registry in August 2013. On July 5, 2012, the Defendant was appointed receiver by Company B.

The Plaintiff and his spouse initiated multiple proceedings challenging the validity of the charges, the appointment of the receiver, and related matters. The first proceedings began in 2012 but were dismissed by the court on grounds of being frivolous and vexatious, with appeals refused by higher courts. Subsequent proceedings were taken by the Plaintiff’s spouse in 2017 and later discontinued. Further proceedings by the Plaintiff in late 2017 were also discontinued.

The current proceedings commenced in December 2017, with motions by the Defendants seeking dismissal on similar grounds. The High Court dismissed the claims as unsustainable and an abuse of process, applying the principle from Henderson v. Henderson to bar claims that could have been raised earlier. An Isaac Wunder order was imposed, restricting the Plaintiff from initiating further proceedings without court leave.

The Court of Appeal varied the Isaac Wunder order but maintained restrictions, remitting a single legal question to the High Court regarding the validity of the receiver’s appointment under clause 8.1 of the mortgage. Company B then framed a Special Case for the High Court’s determination, which was heard in December 2021.

During the hearing, the Plaintiff sought to raise a fresh point challenging the validity of a Deed of Novation dated August 7, 2020, which transferred the receiver appointment from one entity to another. This application was made despite the existing Isaac Wunder order and without joining the new parties affected by the novation.

Legal Issues Presented

1. Whether the appointment of the Defendant as receiver by deed dated July 5, 2012, was valid pursuant to clause 8.1 of the mortgage conferring power to appoint a "receiver and manager" over the secured property.
2. Whether the Plaintiff’s challenge to the validity of the August 7, 2020 Deed of Novation is permissible and valid in light of the Isaac Wunder order and the contractual provisions of the mortgage deed.

Arguments of the Parties

Appellant's Arguments

• The Plaintiff contended that the appointment of the receiver was invalid because the deed did not refer to the receiver as "receiver and manager" as required by the mortgage.
• The Plaintiff argued the August 2020 Deed of Novation was a breach of the mortgage deed, as Clause 24.4 requires any amendment, supplement, or novation to be agreed in writing by both the Mortgagor and the Bank, which did not occur.
• The Plaintiff maintained it was his right to challenge the validity of the novation, despite the Isaac Wunder order and prior novation in 2015.
• He submitted that the mortgage deeds in this case materially differed from those in the precedent cases relied upon by the Defendants, particularly concerning the capitalization of the word "receiver".

Defendants' Arguments

• The Defendants relied heavily on the Court of Appeal decision in Fennell v. Corrigan, arguing that the appointment of a "receiver" without the explicit term "and manager" was valid if the deed conferred management powers.
• They submitted that Clause 26.2 of the mortgage expressly permits the assignment or transfer of rights and obligations, including the appointment of a receiver, thus permitting the novations.
• The Defendants argued that the Plaintiff’s challenge to the August 2020 novation was impermissible as it involved parties not joined in the proceedings, and the Isaac Wunder order barred such challenges without court leave.
• They contended that the Plaintiff’s arguments were an abuse of process, vexatious, and that the Plaintiff had ample opportunity to raise these points earlier.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by considering the validity of the receiver’s appointment under clause 8.1 of the mortgage, focusing on whether the appointment as "receiver" without the explicit term "and manager" was effective. The court found the decision in Fennell v. Corrigan authoritative and binding, which held that where the deed confers powers of management, the appointment is valid regardless of the precise wording. The court rejected the Plaintiff’s argument that the difference in capitalization or wording of the mortgage deeds was material, considering it an artificial distinction.

Regarding the Plaintiff’s challenge to the August 2020 Deed of Novation, the court found multiple defects. First, the Plaintiff sought to impugn a deed involving non-parties who were not joined or notified, which would be unfair and procedurally improper. Second, Clause 24.4 of the mortgage requires amendments or novations to be agreed by both the Mortgagor and the Bank, but does not prohibit novations of other deeds such as the Receiver/Agency Agreements. Clause 26.2 expressly permits assignment or transfer of rights and obligations, including the appointment of a receiver, which had occurred.

The court held that the Plaintiff’s submissions misconstrued the contractual provisions and that the novation was valid. Furthermore, the Plaintiff’s failure to raise this point earlier, despite multiple opportunities and ongoing litigation since 2012, meant the claim was barred by the Henderson v. Henderson principle as an abuse of process. The court noted the Isaac Wunder order was in place precisely to prevent repetitive and vexatious litigation.

In balancing the Plaintiff’s right of access to the courts with the need to prevent misuse of process, the court found that the Plaintiff’s fresh point was frivolous, vexatious, and bound to fail. The court emphasized that the Plaintiff had been afforded ample opportunity to litigate his claims and the litigation history justified the continued restraining orders.

Holding and Implications

The court’s final decision is as follows:

(1) The appointment of the Defendant as receiver on July 5, 2012, was valid and effective pursuant to clause 8.1 of the mortgage, consistent with the principles established in Fennell v. Corrigan.

(2) The Plaintiff’s motion to vary the Isaac Wunder order to permit the challenge of the August 7, 2020 Deed of Novation is refused. The proposed challenge is frivolous, vexatious, and constitutes an abuse of process.

DISPOSED OF

The direct effect is that the Plaintiff is restrained from further challenging the validity of the receiver’s appointment or related novations without prior court leave. No new precedent beyond the application of existing principles was established. The decision reinforces the court’s commitment to preventing repetitive and groundless litigation while safeguarding fundamental property rights within the bounds of procedural fairness.