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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Lloyds TSB Bank Plc v Shorney & Anor [2001] EWCA Civ 1161 (20 July 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/1161.html Cite as: [2001] NPC 121, [2002] 1 FCR 673, [2002] Fam Law 18, [2002] 1 FLR 81, [2001] EWCA Civ 1161 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM TAUNTON COUNTY COURT
SITTING AT THE LAW COURTS BRISTOL
His Honour Judge Weeks QC
Strand, London, WC2A 2LL Friday 20th July 2001 |
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B e f o r e :
LORD JUSTICE LATHAM
and
MR JUSTICE ASTILL
____________________
Lloyds TSB Bank plc |
Claimant/ Appellant |
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- and - |
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Shorney & anr |
Defendant/ Respondent |
____________________
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Peter Knox (instructed by Freemans, London for the Respondent)
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Crown Copyright ©
LORD JUSTICE WALLER:
Introduction
The Facts
"1. In consideration of the Bank making or continuing advances and/or granting or continuing banking accommodation or facilities or giving time or releasing any security or releasing any party from any obligation in respect of advances accommodation or facilities to:
James Herbert Shorney of Lyddons Mead, Nailsbourne, Taunton (hereinafter called "the Customer") or others the Mortgagor as beneficial owner charges by way of legal mortgage subject to any prior charges or mortgages mentioned in the schedule hereto (hereinafter called "the prior mortgages") and to the principal money interest and other money thereby secured the property specified above together with all buildings and fixtures thereon with payment to the Bank on demand of
A. (a) all money and liabilities (including further advances made hereafter by the Bank and secured directly or indirectly by this mortgage) whether certain or contingent which now are or at any time hereafter may be due owing or incurred from or by the Customer to the Bank anywhere on any current or other account or in any manner whatsoever whether as principal or surety and whether alone or jointly with any other person firm or corporation and in whatever style name or form including:
(i) . . . . .
(ii) . . . .
(b) . . . .
(c) . . . .
PROVIDED that this mortgage may be determined by notice of discontinuance given in writing by the Mortgagor or by the personal representatives of the Mortgagor to the Bank but the giving of such notice of discontinuance shall not affect the amount recoverable under this mortgage at the date of receipt by the Bank of the notice.
B.… PROVIDED that the total amount recoverable by the Bank from the Mortgagor under this Mortgage shall not exceed the sum of ONE HUNDRED AND FIFTY THOUSAND POUNDS (£150,000).
16. The Bank may without any consent from the Mortgagor and without affecting this mortgage renew vary increase or determine any advances accommodation or facilities given or to be given to the Customer or any other person and agree with the Customer or any such person as to the application thereof hold renew modify or release or abstain from taking perfecting or enforcing any security or guarantee or right now or hereafter held from or against the Customer or any other person in respect of any liability hereby secured and grant time or indulgence to or compound with the Customer or any other person and this mortgage shall not be affected or discharged by anything which would not have affected or discharged it if the Mortgagor had been a principal debtor to the Bank.
21. Until all money and liabilities and other sums due owing or incurred by the Customer to the Bank shall have been paid or discharged in full notwithstanding payment in whole or in part of any sum recoverable from the Mortgagor hereunder or any purported release or cancellation hereof the Mortgagor shall not by virtue of any such payment or by any other means or any other ground (save as hereinafter provided):
(a) claim any set-off or counter-claim against the Customer in respect of any liability on the part of the Mortgagor to the Customer
(b) make or enforce any claim or right against the Customer or prove in competition with the Bank whether in respect of any payment by the Mortgagor hereunder or in respect of any money including proceeds of realization of the mortgaged premises and any chattels hereby charged retained or applied by the Bank hereunder or otherwise
(c) be entitled to claim or have the benefit of any set-off counter-claim or proof against dividend composition or payment by the Customer or the Customer's estate
(d) be entitled to claim or have the benefit of any security or guarantee now or hereafter held by the Bank for any money or liabilities or other sums due or incurred by the Customer to the Bank or to have any share therein
(e) claim or enforce any right of contribution against any surety."
"We hereby undertake to pay to Lloyds Bank such sum as is necessary to discharge the indebtedness of Mr and Mrs Shorney to Lloyds Bank from the monies recovered by Mr and Mrs Shorney as damages or otherwise from an action in the Bristol Mercantile court between Thornmills Limited and Mr and Mrs Shorney and Christies."
"Every person who, being surety for the debt or duty of another, or being liable with another for any debt or duty, shall pay such debt or perform such duty, shall be entitled to have assigned to him, or to a trustee for him, every judgment, specialty, or other security which shall be held by the creditor in respect of such debt or duty, whether such judgment, specialty, or other security shall or shall not be deemed at law to have been satisfied by the payment of the debt or performance of the duty, and such person shall be entitled to stand in the place of the creditor, and to use all the remedies, and, if need be, and upon a proper indemnity, to use the name of the creditor, in any action or other proceeding, at law or in equity, in order to obtain from the principal debtor, or any co-surety, co-contractor, or co-debtor, as the case may be, indemnification for the advances made and loss sustained by the person who shall have so paid such debt or performed such duty, and such payment or performance so made by such surety shall not be pleadable in bar of any action or other proceeding by him,: Provided always; that no co-surety, co-contractor, or co-debtor shall be entitled to recover from any other co-surety, co-contractor, or co-debtor, by the means aforesaid, more than the just proportion to which, as between those parties themselves, such last-mentioned person shall be justly liable."
Issue in broad terms
Mr Knox's arguments
Mr Pymont QC's arguments
". . . and this mortgage shall not be affected or discharged by anything which would not have affected or discharged it if the Mortgagor had been a principal debtor to the Bank."
"all ... liabilities incurred by the customer to the Bank shall have been paid or discharged in full … the mortgagor shall not … make any claim in competition with the Bank ... or be entitled to … have the benefit of any security … held by the Bank for any monies or liabilities ... incurred by the customer to the Bank …."
Discussion
"The Bank may without any consent from the Mortgagor and without affecting this mortgage renew vary increase or determine any advances accommodation or facilities given or to be given to the Customer or any other person … "
Authorities
(1) "Equity intervenes to protect the guarantor. To protect the guarantor's right to pay the guaranteed debt and after paying it to sue the principal debtor in the name of the creditor, a guarantor is discharged if the creditor without his consent, either releases the principal debtor or enters into a binding arrangement with him to give him time without reserving his rights against the guarantor." (This must mean the rights "against" the guarantor. As the note indicates the principle had been "established for a long time" beginning with Rees v Berrington (1795) 2 Ves 540, an authority relied on by Mr Knox.) (See Halsbury's Laws Volume 20 paragraph 304).(2) "To protect the guarantor's right on paying the guaranteed debt to have the benefit of all the securities which the creditor had, a guarantor is discharged if the creditor without the guarantor's consent fails to make that security properly available to the guarantor." (See Halsbury's Laws Volume 20 the same paragraph)
(3) The creditor cannot increase the liability of the guarantor under the underlying transaction or vary the underlying contract in a way which prejudices the position of the guarantor without the consent of the guarantor. (See the same paragraph)
(4) The terms of the guarantee may contain provisions which allow the creditor to act in a way which would otherwise release the guarantor in equity and or which alter the position that the guarantor might otherwise have in equity. (See Halsbury's Laws Volume 20 paragraph 306).
"The creditor is under a duty to the surety to disclose to the surety contractual arrangements made between the principal debtor and the creditor which both, (a) make the terms of the principal contract something different from those which the surety might naturally expect and, (b) materially affect the degree of the surety's responsibility."
Conclusion
LORD JUSTICE LATHAM: I agree.
MR JUSTICE ASTILL: I also agree.