B2/2002/0624
Neutral Citation Number: [2002] EWCA Civ 912
IN THE SUPREME COURT OF JUDICATURE                               
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM SOUTHEND COUNTY COURT
(His Honour Judge Yelton)
								Royal Courts of Justice
								Strand
								London WC2

								Monday, 27th May 2002
B e f o r e:

LORD JUSTICE JONATHAN PARKER

LORD JUSTICE LONGMORE

- - - - - -

(1) KEITH GEOFFREY WHITEHEAD

(2) FIDELMA WHITEHEAD

Claimants/Applicants
- v -

HOUSEHOLD MORTGAGE CORPORATION PLC
Defendant/Respondent
- - - - - -
(Computer Aided Transcript of the Palantype Notes of
Smith Bernal Reporting Limited, 190 Fleet Street,
London EC4A 2AG
Tel: 0171 421 4040
Official Shorthand Writers to the Court)
- - - - - -

MR FRED BANNING (Instructed by Smithson Clarke, 31-39 High Bridge, Newcastle upon Tyne, NE1 1EW) appeared on behalf of the Applicants.

The Respondent did not appear and was unrepresented.

- - - - - -

J U D G M E N T
Monday, 27th May 2002 
1.	LORD JUSTICE JONATHAN PARKER: This is a renewed application by Mr and Mrs Keith Whitehead, the claimants in the proceedings, for permission to appeal against an order dated 11 March 2002 made by His Honour judge Yelton, sitting at Southend County Court. By that order, the judge dismissed the applicants' appeal against a decision of District Judge Chandler dated 14 January 2002. District Judge Chandler's order effectively determined the state of account between the applicants (as mortgagors of a residential property jointly owned by them at 110, Alexandra Road, Southend), and the respective mortgagees of that property. As the property had previously been sold, the order related to the proceeds of sale. The defendant in the proceedings is Household Mortgage Corporation Plc (“HMC”), the first mortgagee. 
2.	The background to the application is briefly as follows. On 17 May 1988 the applicants mortgaged the property to the predecessors of HMC as security for an advance of £90,492. The mortgage was in standard form and contained joint and several covenants by the applicants to repay the secured debt. From an early stage the applicants were in financial difficulties, and repayments under the mortgage fell into arrear. On 17 March 1992 an order for immediate possession was made at the suit of HMC. Subsequently, a large number of orders were made suspending the execution of the order for possession, on terms as to repayment of the arrears. 
3.	On 17 March 1994 Mr Whitehead proposed an individual voluntary arrangement (“IVA”). At that time, the secured debt under the HMC mortgage amounted to some £99,000, including arrears of interest. The property was currently valued at some £75,500. Thus, part of HMC's debt was unsecured. For the purposes of the IVA, HMC's claim for voting purposes was quantified at some £25,000. 
4.	On 27 April 1994 the IVA proposal was approved by a majority of creditors, pursuant to section 257 of the Insolvency Act 1986. The IVA was to last for five years. 
5.	Problems with repayments under the HMC mortgage continued, however, and a number of further orders were made suspending the execution of the warrant for possession. 
6.	In 1996 the supervisor of the IVA indicated that agreed payments under the IVA were not being made. In 1998, the supervisor suggested that Mr Whitehead make a final payment of £6,000 to complete the IVA. That was accepted and the payment was duly made. Thereafter, the supervisor invited HMC to state the amount in respect of which it would be making a claim under the IVA after taking into account the value of its security. In the event, HMC claimed for £37,109.05, and on or about 2 February 1999 HMC was paid a final dividend in respect of that claim, the dividend amounting to £1,874. 
7.	On 30 April 1999 the applicants made yet another application to suspend the execution of the order for possession. District Judge Skerratt ordered that the warrant be suspended on terms that the applicants paid the “current instalments” plus £1,500 within seven days, £750 within 28 days thereafter, and the balance of the arrears (which were recorded as standing at £4,766.50) at the rate of £100 per month. 
8.	By July 1999 all the arrears under the mortgage had been paid. However, shortly thereafter the applicants once again fell into arrear under the HMC mortgage and on 28 March 2000 HMC issued fresh possession proceedings. 
9.	The applicants, who had previously represented themselves, filed a Defence drafted by solicitors in which it was admitted that HMC was entitled to possession of the property, but it was asserted that the effect of HMC's acceptance of the dividend of £1,874 in February 1999 was to extinguish £37,109.05 of the debt secured by the HMC mortgage, and that an account of the sum due to HMC under the HMC mortgage should be taken on that basis. 
10.	On 16 August 2000 District Judge Chandler made an order for possession of the property, and on 13 January 2001 he directed that the Defence filed by the applicants should stand as a claim against HMC for an account. As mentioned earlier, the property had by that time been sold. Due to the increase in property values it was in the event sold for an amount sufficient to pay off the whole of HMC's claim. 
11.	HMC contends (a) that its acceptance of the dividend did not operate to extinguish any part of the secured debt in excess of the amount of the dividend (£1,874), and even if £37,109.05 of the debt was extinguished as against Mr Whitehead, it nevertheless remained enforceable against Mrs Whitehead, and (b) that in any event the applicants are estopped from raising the point, since they should have raised it when the matter first came before the court after HMC's acceptance of the dividend; that is to say on 30 April 1999. 
12.	District Judge Chandler held that it would be an abuse of process to permit the applicants to raise the claim of extinguishment, since they should have raised it in the earlier possession proceedings on 30 April 1999. The applicants appealed. His Honour Judge Yelton dismissed the appeal, making the order in respect of which the applicants now seek permission to appeal. The judge addressed not only the issue of estoppel, which the District Judge had decided in favour of HMC; he also addressed the substantive claim made by the applicants that HMC's acceptance of the dividend had extinguished the secured debt to the extent of the amount of HMC's claim in the IVA. On the latter point, the judge concluded that there was “no arguable claim which the Whiteheads could be prevented from bringing before the court”. On the estoppel issue, the judge held that the principles established in Henderson v Henderson (1843) 3 Hare 100 applied, and that the applicants were accordingly estopped from making such a claim. 
13.	The applicants' application for permission to appeal was dealt with by Peter Gibson LJ on the papers on 28 March 2002. Refusing permission, Peter Gibson LJ said: 
“I see much force in the criticism that the Judge was wrong on the effect of the IVA on that part of HMC's debt which it was treating as not covered by its security. An IVA operates as an accord and satisfaction and the dividend was paid to HMC in settlement of its claim which, it is properly arguable, was against both Defendants.
But I do not see how the fact that the Defendants in 1999 acted in person and did not understand the law can even arguably prevent the estoppel under the Henderson principle from arising. There can be no doubt but that they should have taken the point now taken on the IVA by way of defence to HMC's claim, but they did not. Johnson does not suggest otherwise. This does not raise an important point of principle or practice.” 
14.	As the last sentence of Peter Gibson's reasons for refusing permission to appeal indicates, the proposed appeal would be a second-tier appeal to which rule 52.13 of the Civil Procedure Rules applies. Accordingly, for the application to succeed the applicants must show that the proposed appeal raises an important point of principle or practice, or that there is some other compelling reason why the Court of Appeal should hear it.
15.	I respectfully agree with Peter Gibson LJ that it is properly arguable that the conclusion reached by the judge as to the effect of HMC's acceptance of the dividend was wrong in law. I do not, however, share his confidence that it is unarguable that an estoppel under the principles established in Henderson v Henderson does not arise on the facts of the instant case. True it is that the issue was not raised at the first opportunity, which occurred on 30 April 1999. Moreover the present proceedings are new possession proceedings, commenced in March 2000. On the other hand, there is a continuing issue as to the state of account between HMC and the applicants, as to which there had, prior to District Judge Chandler's order, been no final determination. The order dated 30 April 1999 was, so far as material, merely an order, made on the applicant's own application, suspending the warrant for possession on terms (terms which were, if the applicants are correct and are allowed to take the point, more onerous than they should have been). Nor, so far as I can see, is there any prejudice to HMC in allowing the point to be taken, beyond the prejudice resulting from not receiving a windfall. 
16.	In all the circumstances, I consider that it is at least arguable that the judge was wrong to conclude that the applicants are barred from taking the point as to extinguishment. Moreover, it does seem to me that an important point of principle or practice arises in relation to the application of the Henderson v Henderson principle in the context of a continuing issue as to the true state of account between mortgagor and mortgagee. It has been held in Sheffield City Council v Hopkins (reported in The Times on 23 July 2001) that a landlord can, on a subsequent application to suspend the execution of a warrant for possession, rely on matters which he did not rely on when he initially claimed possession from the tenant. It does not seem so very different to say that a mortgagor should be able, in an appropriate case, to rely on matters on which he did not originally rely when first seeking to have the execution of a warrant for possession suspended. 
17.	For those reasons I would grant permission to appeal in this case. 
18.	LORD JUSTICE LONGMORE: I agree. 
Order: Application allowed.