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Looking ahead: How lenders can combat wrongful repossession claims

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04/03/2019

A number of claims seen recently by Walker Morris’ Banking & Finance Litigation lawyers seem to herald the emergence of what are being termed ‘wrongful repossession’ claims – potentially the next flood of mortgage claims that lenders will have to face. Sandip Singh and James Taylor explain how Walker Morris has successfully countered such claims and offers practical advice for lender services clients.

Why do lenders need to be concerned?

With the PPI deadline looming, some claims management companies and other legal services providers are casting around for a new income stream. Claims encountered recently by Walker Morris’ Banking & Finance Litigation lawyers seem to suggest that the sharp increase in repossessions that followed the 2008 financial crisis may prove fertile ground for what are being termed ‘wrongful repossession’ claims.

No doubt prompted by a television and internet advertising campaign by ME Group trading as Mortgage Claims and by a recent Sky news article, some ex-borrowers are challenging possession proceedings that were resolved a number of years ago, alleging various complaints ranging from excessive or wrongful mortgage account calculations, to mis-selling of mortgages and/or general breaches of contract or statutory duty.

However, Walker Morris is pleased to report that, in a number of cases conducted to date, including what must be some of the first cases of this type to be judicially determined, the law is coming down on the side of the lenders.

Banking & Finance Litigation specialists Sandip Singh and James Taylor explain.

What are ‘wrongful repossession’ claims?

Wrongful repossession claims are claims, made by former borrowers whose properties have been repossessed, that defects with, say:

  • the mortgage sale process;
  • the mortgage account calculation (whether in terms of interest rates or calculations, arrears calculations, the application/calculation of fees and charges, for example);
  • the arrears claim and repossession process; and/or
  • the performance of the lenders’ (or their representatives’) contractual or statutory duties

caused the borrowers to wrongfully suffer loss.

How can lenders combat claims?

Fortunately for lenders [1], the law provides a number of legal and tactical arguments that lenders can deploy to defend and counter wrongful repossession claims.

Res judicata is the fundamental legal and public interest principle which states that there should be finality to litigation and that defendants should not face repeated litigation in respect of the same set of circumstances.

The courts also have the power, under rule 3.4 (2) (b) of the Civil Procedure Rules, to strike out claims which amount to an abuse of process. Although there is no specific definition of ‘abuse of process’ in this context, it is clear that this covers (non-exhaustively) re-litigation situations, advancing a case or issue that is inconsistent with an earlier judgment [2], and advancing claims or arguments that could and should have been made in earlier proceedings [3].

Both res judicata and the rules against abuse of process are very powerful arguments for defending (potentially summarily) or striking-out wrongful repossession claims.  That is because such claims invariably re-litigate facts, issues, calculations or legal causes of action that have already been the subject of judicial determination; and/or they raise claims or arguments that could and should have been raised in the original possession proceedings.

Another effective tactic can be for lenders to challenge the quantum of a wrongful repossession claim and the claimant’s ‘expert’ evidence in support.

Generally, wrongful repossession claims are advanced and quantified on the basis of the claimant’s/claimant’s expert’s reconstitution of the mortgage account in such a way so as to produce a different retrospective account balance. The claimant/claimant’s expert then contends that, on the basis of that retrospective balance, the claimant was never in arrears at all, or was not in arrears to the level which the lender claimed, at the time of the original possession proceedings.

In one such case which Walker Morris has recently defended at trial on behalf of a lender, the court found that reconstituting the mortgage account in this way amounts to mere manipulation of a spreadsheet, which does not suffice as ‘expert evidence’ in support of a wrongful repossession claim.

In another case which Walker Morris recently defended on behalf of a lender [4], the judge commented, when giving reasons for the refusal of the claim, that if the claimant’s challenge to the original repossession were to be upheld, thousands of similar judgments made every year in mortgage possession cases would also be capable of challenge.  That would fly in the face of the practical convention that the courts should avoid ‘opening the floodgates’ to any flow of claims where that would be contrary to public policy and to the efficiency and efficacy of the court process overall.

WM Comment

Res judicata, the rules against abuse of process and the courts’ policy not to open ‘the floodgates’ exist for the protection of all. The certainty and finality of litigation; the authority and supremacy of a judgment of the court; and the cost-efficiency of the court process for individual parties and for the public as a whole all depend upon these important principles.

Lenders can take comfort from that, and from Walker Morris’ experiences to date, that the courts are unlikely to entertain wrongful repossession claims in all but the most exceptional of cases.

Lenders should also note that there can be significant time, cost and reputational savings for defendants who act quickly to summarily counter or strike-out any such unmeritorious or vexatious claims or repeated litigation.

For more information on the Azhar case, and why it is likely to be important authority for lenders, please see our separate, more detailed, briefing.

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[1] and perhaps unfortunately for claims managers or lawyers whose ‘no win, no fee’ business models depend on the successful outcome of such claims
[2] This abuse of process is known as ‘collateral attack’
[3] This is known as the rule in Henderson v Henderson (1843) 3 Hare 100
[4] Mohammed Azhar v Accord Mortgages Limited, Bradford County Court, 7 December 2018.  For more information on the Azhar case, and why it is likely to be important authority for lenders, please see our separate, more detailed, briefing.

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