The Courts Discretion to Stay Proceedings in Accordance with Section 86 (3) of the Judicature (NI) Act 1978

April 3, 2017

The Court of Appeal has recently ruled in the case of Barclays Bank trading as The Woolwich v Cregan Boyd and Paula Boyd as to the extent of the Courts discretion to stay proceedings under Section 86 (3) of the Judicature (NI) Act 1978.

Section 86 (3) of the Judicature (NI) Act 1978 states as follows:-

Without prejudice to any powers exercisable by it, a Court, acting on equitable grounds may stay any proceedings or the execution of any of its processes subject to conditions as it thinks fit”.

FACTS

In July 2000 the Appellants purchased a property with funding from the Bank for £120,000.00. A further £90,000.00 was loaned at a later date to allow for construction work on the property.

Prior to entering into the above mortgage, the Bank obtained a valuation report consisting of four pages. The fourth page had a section entitled “Structural Movement” which described evidence of significant differential movement both internally and externally at the property.  The report also suggested an engineer’s report should be sought. The Appellants argued that they never received the fourth page of the report from the Bank and if they had they would not have purchased the property.

In December 2006 the Appellants re-mortgaged for £247,500.00 and were also given a current account facility of up to £100,000.00. The Appellants were unable to keep up payments under the mortgage and a Suspended Order for Possession was obtained by the Bank in June 2010, as the Borrowers had come to a repayment arrangement with the Bank.  The arrangement failed and an Order for Possession with liberty to enforce was granted in June 2014.

The Appellants sought to appeal the decision of the Master as they argued that they only received the fourth page of the Valuation Report in 2012 and therefore felt that there was gross negligence by the Bank and the Surveyor in relation to the valuation. The Bank argued that in 2004 the Appellants had disclosed a report which made reference to movement on the property.

PROCEEDINGS BEFORE THE TRIAL JUDGE

The Appellants sought relief under Section 36 of the Administration of Justice Act 1970, which allows the Court to stay proceedings if it is likely that the Borrower can within a reasonable period pay any sums due under the mortgage. They further sought relief under Section 86 of the Judicature (NI) Act 1978 as the Appellants were seeking to sue a subsidiary of  the Bank for negligence, which if successful, would put them in a position to deal with the arrears.

The Bank argued that there was no prospect of the arrears being repaid within a reasonable time and that the Court could not exercise its discretion in relation to Section 86, as the action the Appellant wished to pursue was hopelessly weak.

The Trial Judge accepted that Section 86 could be invoked for the purposes of protecting legal and equitable rights which existed or may be shown to exist.

As to the extent of the discretion, the Trial Judge recognised the basic principal that the mortgagee is entitled to possession when the mortgagor is in default, but considered that discretion to stay proceedings may be used in rare and compelling circumstances including those where a mortgagor has a clear and strong case against either the mortgagee or a third party, which made it likely that the mortgagor would recover more compensation than the sums overdue to the mortgagee within a reasonable period of time.

The Trial Judge declined to exercise his Section 86 discretion as he felt that the Appellants’ claim for negligence struggled to get over the hurdle of limitation. The Appellant accepted that primary limitation had expired but issued their Writ for negligence on the basis of date of knowledge of the defects, which they are argued was 20 March 2012 being the date that they received the fourth page of the valuation report.

The Bank argued that the Appellants had knowledge of the issues well in advance of the date in March 2012. The Trial Judge agreed and accepted that there was little chance of repayment in a reasonable time given the significant limitation issues that needed to be overcome and therefore granted the Possession Order.

APPEAL

On appeal of the Trial Judge’s decision, the Appellants raised a number of new issues focused mainly on alleged fraud and mis-representation by the Bank. Their criticisms of the Trial Judge related to his evaluation of the discretion available to him rather than his approach to the nature of the discretion available to him.

It was held that the new points argued by the Appellants were available to be argued in the original hearing, and could be argued at any hearing with regards to their negligence claim, if they got over the preliminary issue of limitation. The Court of Appeal considered that the new facts explored by the Appellants would not have materially affected the approach of the Trial Judge in reaching his decision.  The Trial Judge’s decision was therefore upheld.

CONCLUSION

The Court of Appeals decision upheld the Trial Judge’s earlier ruling that the Courts may be reluctant to invoke their discretion under Section 86(3) of the Judicature (NI) Act 1978, and will only do so in rare and compelling circumstances.

This article has been produced for general information purposes and further advice should be sought from a professional advisor.

Should you have queries about the content of this article, please do not hesitate to contact Christopher McCluskey, Solicitor at Cleaver Fulton Rankin.

E: c.mccluskey@cfrlaw.co.uk         T: 02890271385