Financial Services Matters – Autumn 2019


Banking and Finance Litigation – Autumn 2019
High Court rejects customer’s ‘unfair relationship’ claim In the recent case of Promontoria (Henrico) Ltd […]
High Court rejects customer’s ‘unfair relationship’ claim
In the recent case of Promontoria (Henrico) Ltd v Gurcharn Samra, the High Court has rejected unfair relationship allegations made by a customer against its bank and distressed debt creditor. Walker Morris highlights key takeaways for lenders.
FCA final rules could free ‘mortgage prisoners’
Louise Power summarises key points arising from the FCA’s new rules which pave the way for so-called “mortgage prisoners” to switch to a more affordable product.
Last year we reported on the plight of so-called “mortgage prisoners”. That is to say, customers trapped in expensive deals and unable to remortgage because of the tightening, in recent years, of affordability assessment criteria and/or because their “zombie banks” (or closed book lenders that subsist only on running down their existing accounts) no longer offer new products.
In October 2019 the FCA published new final rules and guidance which will allow lenders to conduct a more proportionate affordability for customers who are up-to-date with their existing mortgage and want to switch to a more affordable product without borrowing more (except to cover certain fees). The FCA has therefore paved the way for freeing these mortgage prisoners, albeit whether a lender lends to an eligible consumer remains a matter for the lender, depending on its own commercial and risk appetite.
The new rules apply with immediate effect and lenders can begin to apply the modified affordability assessment as soon as they are ready. There are some practical steps which lenders will need to take before doing so, including:
- Identifying and contacting customers about the new rules and explaining the changes and possibilities in a simple and engaging way. This includes customers of inactive lenders and firms not authorised for mortgage lending
- Implementing a strategy for assessing the eligibility of consumers. This might involve enabling consumers to identify themselves whether they might be eligible
- Reviewing and updating responsible lending policies to address how the new rules will be applied
- Implementing an appropriate internal switching policy. (Both the lending and switching policies must be approved by the firm’s governing body)
- Educating staff and other interested parties (such as intermediaries) about the new rules and the business’ strategies relating to/arising from them
- Informing customers who are subject to modified assessment criteria of the basis on which their affordability has been assessed, and providing to them additional disclosures about potential risks
- Adapting regulatory reporting processes and procedures to capture and submit to the FCA data on sales involving the modified affordability assessment.
A responsible lending implementation group, set up in August 2019 and including lenders and other industry representatives, is currently developing proposals for key messages to be included in consumer communications.
There are long-stop dates of 1 May 2020 and 1 September 2020 by which lenders must, respectively, have put in place their communication strategy and notified consumers of the new rules.
WM Comment
There can be no substitute for lenders familiarising themselves with the FCA’s new rules and guidance directly. However, if you would like any more detailed advice or assistance in relation to implementing any of the practical steps mentioned in this article, please do not hesitate to contact Louise Power or any member of Walker Morris’ Financial Services team.
Salutary lessons in possession proceedings: Beware informality in occupation arrangements and amending pleadings
Banking & Finance Litigation specialist Kate Hicks explains a recent beneficial ownership dispute which highlights salutary lessons for anyone involved in the possession process.
Why is this case of interest?
In any economic downturn people increasingly look to purchase, share, invest in and occupy properties in ever more wide-ranging and varying circumstances. As friendly or familial relationships and/or informal business arrangements come to an end or change over time – in particular where parties experience financial difficulties – the courts encounter increasing numbers of beneficial ownership disputes [1].
In the recent case of Kensington Mortgage Company Ltd v Mallon and Others [2], the High Court dismissed the occupiers’ appeal and upheld the County Court’s decision to grant the lender possession of the property. The occupiers, as second defendants to the action, raised arguments in relation to proprietary estoppel, mistake in title and constructive and resulting trusts.
This case is therefore of interest to lenders, their advisers and anyone involved in the possession process as it provides interesting analysis on a variety of circumstances in which occupiers may claim beneficial ownership and seek to challenge possession proceedings.
On a very practical level, the case also offers a useful insight into the court’s discretion to exercise its case management powers and highlights the importance of adhering strictly to the Civil Procedure Rules (CPR).
What are the key takeaways?
- Pursuant to the Practice Direction to CPR 16 8.2(4), details of any breach of trust on which a party wishes to rely must be set out in the particulars of claim. In addition the specific type of trust must be pleaded.
- Parties should not underestimate the importance of complying strictly with procedural rules and cannot assume that late amendments, however crucial to a case, will be allowed.
- Trusts can be established not only in familial situations but also in commercial situations.
- No presumption of a resulting trust was found where there was an express (albeit oral) agreement between the parties.
- It is not only the type or existence of a trust which can impact upon beneficial ownership, but also (and perhaps of paramount importance) the timing as to when any trust arose.
- All parties should beware informal occupation arrangements.
What happened in the case?
Facts
Mr and Mrs Zaman were the occupiers of a property owned by their friends, Mr and Mrs Fadia. The Zamans agreed that they would make regular payments to the Fadias and the property would eventually be transferred into their names. Following payment of the full amount, however, it was agreed that the property would instead be transferred to a Mr Mallon, as a form of security for debt owing to him by the Zamans.
The transfer was agreed orally between Mr Zaman and Mr Mallon on the basis that once the Zamans’ debt was repaid, the property would be transferred to the Zamans. However, despite the debt being repaid, the transfer never took place.
In 2003 Mr Mallon obtained a buy-to-let mortgage over the property. Following a period of arrears, the lender issued possession proceedings against Mr Mallon, and also against the Zamans as second defendants to the action.
The Zamans initially argued that the oral agreement between themselves and Mr Mallon created a charge by legal mortgage, such that Mr Mallon should have been registered as a charge holder rather than as the proprietor of the property. The Zamans alleged that, on this basis, there was a mistake in the Register which should be rectified [3]. They also argued that any interest the lender may have in the property was secondary to their rights, by virtue of the doctrine of proprietary estoppel [4].
On the morning of the County Court hearing the Zamans attempted to either introduce a further pleading or to amend their existing pleadings to contend that “a constructive and/or resulting trust” existed in their favour over the property.
Possession proceedings
The judge noted that the Practice Direction to CPR 16 8.2(4) requires that details of any breach of trust on which a party wishes to rely must be set out in the particulars of claim and, crucially, that the specific type of trust must be pleaded. The judge therefore rejected their application for amendment and the lender was otherwise successful in obtaining an order for possession. The Zamans appealed.
The appeal was dismissed by the High Court. It decided that, the late amendment having been disregarded, there was no real question that Mr Mallon was rightfully registered as the proprietor of the property. He was therefore legally able to enter into a mortgage and, following the accrual of arrears, the lender could rightfully obtain possession.
Even though it was not necessary in these circumstances, the High Court went on to analyse the Zamans’ remaining arguments.
The High Court stated swiftly that the presumption of a resulting trust would not apply in the present case, as it would likely be rebutted by the terms of the oral agreement [5]. In relation to the possible existence of a constructive trust, the High Court concluded that it would not have come into existence until the debt was repaid to Mr Mallon in 2006. The mortgage was entered into in 2004 – before the formation of any trust. The lender therefore had a first ranking legal charge over the property and was entitled to seek possession in any event.
Similar principles were discussed in relation to a finding of proprietary estoppel. The crucial point made by the High Court judge was that the court would not grant proprietary estoppel retrospectively in order to allow any interest in the property owned by the Zamans to be registered in priority over the mortgage.
The High Court found that there was no mistake to be rectified on HM Register: “the disposition represented by the TR1 in the present case was neither void nor voidable… it embodied precisely what all concerned intended, namely to transfer title to Mr Mallon… the Judge was right to decide that there was no mistake in registering Mr Mallon as proprietor, and there was no ground for ordering the register to be rectified or altered” [6].
WM Comment and practical advice
When it comes to occupation of premises, the question often arises whether a party whose name is not on the deeds to a property nevertheless owns a share. Today the issue arises between couples whose relationships have ended, between friends, family members, business partners and others, who have shared living or working space on all sorts of informal, quasi-legal arrangements, perhaps with a view to stepping on to the property ladder, or getting a business off the ground. The recent case of Kensington v Mallon highlights that informal arrangements can have unexpected results.
The best advice is for parties to record their intentions at the outset of any such arrangement in writing – and ideally by way of a formal deed of trust. Remember the old adage: a stitch in time saves nine. In attempting to avoid any formal legal process or documentation, the Zamans and Mr Mallon ended up having the matter resolved via litigation. Apart from the fact that the Zamans ended up with no interest in the property, Mr Mallon also lost out to the extent that additional costs will inevitably have been added to his mortgage account, reducing the surplus (if any) which may have been awarded to him at the end of the day. From the lender’s perspective, whilst it did ultimately obtain possession and can pass on the costs of the litigation, it had to incur significant time and risk in getting to that point, which could have been avoided if arrangements had been properly documented by all parties throughout. Taking the time to seek specialist advice, and to investigate and document occupation arrangements as appropriate in formal, written contracts or deeds, can minimise the scope for dispute and/or can assist with the timely and cost-effective resolution of any disputes which do nevertheless arise.
[1] For briefings on key prior beneficial ownership disputes, see Walker Morris’ earlier briefings: Wishart v Credit & Mercantile and Mortgage Express v Lambert
[2] [2019] EWHC 2512 (Ch)
[3] See our earlier briefings (accessible via this link) about what is a ‘mistake’ for the purposes of rectifying HM Land Register
[4] For a proprietary estoppel to arise, there has to have been a representation or promise made to the person claiming estoppel, which it is unconscionable to subsequently deny. Proprietary estoppel is an equitable remedy. Equitable remedies are underpinned by fundamental fairness and awarded by the court at its discretion.
[5] A resulting trust may be presumed to give effect to the implied intentions of parties where there is no express declaration of trust. The presumption of a resulting trust can therefore be displaced by the existence of any express terms. A constructive trust, on the other hand, is an equitable remedy which can be imposed by the court where, in terms of fundamental fairness, it would be unconscionable to deprive a beneficial owner of its interest.
[6] Ibid para 129

Regulatory – Autumn 2019
Regulatory Round-up The latest edition of our Regulatory Round-Up offers a succinct summary of current […]
Regulatory Round-up
The latest edition of our Regulatory Round-Up offers a succinct summary of current and future developments and news.

Housing, Property Law and Conveyancing – Autumn 2019
Market Matters In this regular feature, Banking & Finance Litigation Associate Abbie Swales provides an […]
Market Matters
In this regular feature, Banking & Finance Litigation Associate Abbie Swales provides an update and commentary on trends and issues in the UK property market.
Despite the continuing political and economic uncertainty due to the further delay of Brexit until January 2020, the housing market continues to show a degree of resilience with house prices largely staying flat throughout the second and third quarter of 2019. In October 2019 Halifax reported that average house prices fell slightly by 0.1% but that overall there was a modest annual rise of 0.9%.
Whilst Brexit doesn’t appear to be having an especially large impact on house prices, it does appear to be having an impact on the number of properties being placed on the market and subsequently bought. The RICS is reporting that Brexit uncertainty is causing both buyers and vendors to hesitate, resulting in a decrease in buyers’ enquiries of 15%. The RICS also notes that new instructions fell by 37%, the weakest since June 2016, although suggests that this is expected to stabilise within the next 12 months. In respect of the lettings market, the RICS notes that demand from tenants has risen firmly for the eighth month in a row and rent expectations for the next three months remain positive.
UK Finance research about mortgage lending in the Northern Powerhouse noted that the mortgage industry helped 84,900 first time buyers (FTB) in the North of England in 2018 – up 3% on the previous year and the highest level since 2006. In addition, it notes that there were 80,400 homemovers in the North of England in 2018 – up 1.1% on the previous year and the highest level since 2007. This contrasts with an overall decline in homemovers across the UK in 2018.
According to UK Finance’s latest figures on lending trends more generally across the UK, there were 33,300 new FTB mortgages completed in August 2019 – 2.1% fewer than in August 2018; and 33,610 homemover mortgages completed in August 2019 – 8.2% fewer than in August 2018. The average loan size in August 2019 was £175,289 for FTB’s (+4.86% since May 2019) and £232,556 (+6.07% since May 2019) for homemovers.
It is clear that political and economic uncertainty continue to have some impact on the market, in particular, the level of supply and demand within the market and the flatness of house prices. However, there does appear to be more positive trends in certain regions and specific market areas such as the rental market and second charge mortgages.
Electronic signatures and e-mail footers: Think before you send
Litigation and dispute resolution specialist provides practical advice arising from recent findings that electronic signatures and e-mail footers can constitute valid execution.
Consultation on new shared ownership model
The UK Government has stated that it is committed to helping people on to the property ladder and, to that end, it is considering a proposed new model for shared ownership. Karl Anders and Louise Power explain.

Colleagues and Community – Autumn 2019
From charity events to client training and more… our Colleagues and Community bulletin celebrates Walker […]
From charity events to client training and more… our Colleagues and Community bulletin celebrates Walker Morris’ achievements and investments, both in and out of the office
Charity of the Year
Walker Morris’ Head of Banking & Finance Litigation, Louise Power, is also the firm’s Head of Corporate Social Responsibility. Banking & Finance litigation specialist is Chair of the firm’s Charity Committee. Louise is proud to confirm that, last year, the firm raised £17,537 for the firm’s charity of the year, Sunshine and Smiles, a Leeds-based, parent-led charity providing support for children and young people who have Down Syndrome, and their families.
Continuing our commitment to supporting the incredibly worthwhile causes which have either impacted directly on the lives of our colleagues or that they passionately support, we are delighted to announce that Walker Morris’ nominated charity for the coming year is mental health support network, Andys Man Club.
The firm already has a number of fun events planned to help raise funds for this important cause, including a Christmas Advent raffle, Christmas fair, a trainee challenge and the infamous Christmas Jumper day! Further charity and CSR events will also follow over the coming months.
Charity Bake-offs
Across the course of the Great British Bake Off, the Banking & Finance Litigation team and Recoveries took part in the Great Charity Bake Off. Each person picked a baker’s name from a hat. When their baker left they had to bring in a bake. Over £100.00 was raised across the challenge for the firm’s charity!
Client and colleague training
In line with the Banking & Finance Litigation team’s commitment to being the most regulatory-aware team in the industry, and to providing clients and, crucially, their customers, with the best possible service at all times, our specialist attended the UK Finance briefing on mortgages on 24 October and Rebecca Calland is shortly due to attend a course about vulnerable adults. Rebecca will share the valuable know-how gained, so that the whole of the team can benefit.
Talented young artists presented with prizes for the 25th anniversary Calendar Painting Competition
We presented 41 children and 8 schools with their prizes at our Children’s Charity Calendar Painting Competition on Saturday 16 November.
This was a very special presentation ceremony as not only was it the 25th anniversary Calendar but also the first presentation ceremony at our new office at 33 Wellington Street.
The winning paintings were chosen from over 2500 entries from schools across the Yorkshire and Humber regions. The 13 winners, one for each month of the year, plus the coveted front cover, were all presented with a hamper full of artists materials as well as a cheque for their school for £250. The 28 runners-up also received an art prize. Also, in a surprise coincidence, two of our runners-up were twins!
All proceeds of sale of the Calendars go to Martin House Hospice Care for Children and Young People. Martin House provides family-led care for babies, children and young people with life-shortening conditions across West, North and East Yorkshire, as well as supporting their families throughout the life of their child, and in bereavement
Calendars are now on sale for £6.00 with all monies raised going to Martin House. Please contact the Walker Morris Marketing Department tel: +44 (0)113 283 2500.
Winning artwork from Leeds Arts University students installed in law firm’s distinctive new client meeting rooms
The client meeting rooms in our new offices have been brought to life with the installation of 13 winning original works of art.
As part of our continued and long-standing investment in the arts, we launched an innovative competition, in partnership with Leeds Arts University, to commission 13 pieces of original artwork for our new offices.
Students from across the Leeds Arts University’s disciplines were challenged to design a piece of art with a ‘distinctive’ theme to reflect the Firm’s reputation as a distinctive commercial law firm.
In a surprise coincidence, Leeds Arts University student, Tamzin Jebson, whose artwork is installed across two walls in the Walker Morris Boardroom, was previously a winner in the Firm’s annual Children’s Charity Calendar Paining Competition.
Winning Leeds Arts University student, Tamzin won the 2009 Calendar Competition when she was just 7 years old! Tamzin is now studying for a Foundation Diploma in Art & Design at Leeds Arts University and has secured a place at Goldsmiths University of London.
Walker Morris has a long heritage of investing and celebrating the arts, often collaborating with artists, art schools and artistic young children in competitions to enable art to be more accessible to the broader community. The Firm’s arts projects range from its grass-roots annual Children’s Charity Calendar Competition, to sponsorship of national art exhibitions such as bringing the Turner exhibition to Yorkshire, supporting the inaugural exhibition at London’s Saatchi Gallery, Damian Hirst’s exhibition, ‘Artist Rooms’, at Leeds Art Gallery and Ashley Jackson’s ‘Framing the Landscape’ collection at the Mall Gallery in London to name but a few.
Wellbeing Week
Walker Morris recently had its first ever Wellbeing Week!
Organised by the Employee Forum, the week was packed with activities and interactive sessions to help continue our drive to improving employee wellbeing.
A variety of external companies were invited to come in and offer employees advice on a range of health and wellbeing as well as promoting an overall awareness of the various aspects of wellbeing including social, physical, community and environmental.
We had sessions from the WM Support Squad, L1 Performance gave a talk centred around nutrition, Snap Fitness offered Boditrax Consultations, there were free yoga sessions and a Q&A with Claire Dambawinna and the Leeds Physiotherapy Clinic held a number of body stability sessions. We also had Firehouse Fitness and the Crowne Plaza Spirit Healthclub offering discounts, a Leeds Canal lunchtime walk and Song Thai Massage also popped in!