IN THE SUPREME COURT OF JUDICATURE No LTA 96/6906/C

APPLICATION FOR LEAVE TO APPEAL

Royal Courts of Justice

Strand

London WC2

Thursday, 16th October 1997

B e f o r e:

LORD JUSTICE KENNEDY

LORD JUSTICE MORRITT

BRADFORD & BINGLEY

- v -

DR MANCHANDA

and

MANCHANDA

(Computer Aided Transcript of the Palantype Notes of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

The Applicant Dr Manchanda appeared in person on behalf of the Applicants

MR E NOURSE (Instructed by Wright Hassell of Leamington) appeared on behalf of the Respondent

J U D G M E N T

(As Approved by the Court)

(Crown Copyright)

LORD JUSTICE KENNEDY: I will ask Lord Justice Morritt to give the first judgment.

LORD JUSTICE MORRITT: On 29th April 1996 Deputy District Judge Appleman gave judgment for the plaintiffs, Bradford & Bingley Building Society, against the defendant Dr Manchanda and his wife for the sum of £190,752.81, being the balance due under the mortgage after giving credit for the proceeds of sale of the security for that debt. Dr Manchanda had applied for an adjournment from the district judge which had been refused. He appealed that decision to His Honour Judge Rountree, sitting in Willesden County Court. That came before the judge on 24th July 1996 and his appeal was dismissed.

This is an application by Dr Manchanda for leave to appeal from that decision of Judge Rountree.

In brief, the facts are as follows. On 25th August 1990 Dr and Mrs Manchanda charged Brook House, London Road, Sunningdale, Berkshire to the building society to secure the sum of £329,375 odd. The

amount of that loan was some 85% of the valuation of the property

as it then stood. The building society required a mortgage indemnity policy to be taken out as part of the terms of the loan. That policy, in substance, guaranteed payment to the building society of a proportion of the outstanding debt which was defined as being the amount due under the mortgage less the proceeds of sale of any sale by the mortgagee pursuant to its powers of sale. Default quickly occurred and a suspended possession order was made in January 1994 which was executed on 14th March 1994. The building society, then in possession of the property, sought to sell it. They obtained advice as to value from Hamptons on 23rd March 1994 who indicated that, in their view, the property as it stood had no value, and from Tufnells on 21st March 1994 who indicated a value of £200,000. They also obtained advice from structural engineers. The property was then marketed in April 1994 at £210,000. Three bids were obtained. One was from John Ingram Builders for the sum of £220,000; another was from Dr Manchanda under a different name of £225,000; and a third was from Nation Crest Builders Ltd for £232,300. In accordance with the advice they obtained from Hamptons in May 1994 the building society sold the property to Nation Crest Builders for the sum offered of £232,300. This, therefore, gave rise to a substantial credit in the mortgage account of Dr and Mrs Manchanda with the building society, but it left an unpaid balance.

It was in respect of that balance that the building society instituted further proceedings on 7th November 1995. They sought repayment of £173,260, later corrected to £172,835. That claim included, if I may put it that way, the gross unpaid balance and included the sums that they had in fact been repaid under the mortgage indemnity policy. That was the sum of £25,635 odd. The claim was included by the building society against Dr and Mrs Manchanda on the basis that the insurers had asked the building society to recover it on their behalf pursuant to the right of subrogation that the insurers would have against the building society.

In November 1995, shortly after those proceedings had been instituted, Dr Manchanda obtained certificates from Dr Khan and Dr Ahmed as to his medical condition. On 21st November 1995, notwithstanding, he filed a defence claiming that the property had been sold at an undervalue and that credit should have been, but had not been, given for the amount received by the building society under the mortgage indemnity policy. In addition, in his defence he claimed that he was suffering from such physical and mental illness as prevented him from instructing solicitors, obtaining legal advice or defending himself.

In January 1996 the building society applied for final judgment under County Court Rules, Ord.9r.14, for the unpaid balance of the mortgage debt. The hearing of that application was due to take place on 11th March and was postponed in the light of a letter from Dr Manchanda dated 20th February, indicating that he would not be well and was not able to defend himself. Accordingly, on 18th April solicitors, by then acting for Dr Manchanda, applied for a

further adjournment of the hearing by then fixed for 29th April. They filed a notice of change to indicate that they were acting on his behalf and they also instructed counsel to appear on his behalf at the hearing on 19th April. At that hearing a certificate was produced from Dr Khan dated 20th April 1996. It is addressed to whom it may concern and confirms that he Dr Manchanda had been Dr Khan's patient since 1993. It states:

"In November 1995 he started suffering from severe depression requiring admission. He was admitted to the Royal Masonic Hospital for 10 weeks and besides various anti-depressant treatments he was given 6 courses of ECT. The after effects of the ECT were severe with impairment of his memory and other symptoms.

He also suffers from arthritis, asthma and hypertension. Presently he is on anti-hypertensive, anti-asthmatic and anti-depressive treatment.

In my earnest opinion he should not be subject to further mental pressure including court appearances otherwise the slow improvement which is happening in his mental state will deteriorate further."

Added in manuscript Dr Khan said:

"He is not fit for 3 months."

When the matter came before the district judge on 29th April 1996

he refused the adjournment sought. In the notes of the hearing before him it is indicated that Mr Adoko appeared for Dr Manchanda and applied for an adjournment, relying for that purpose on an affidavit in support dated 23rd April 1996. That affidavit had exhibited to it the medical certificate to which I have referred. The deputy district judge also referred to the notice of acting that had to be filed by the solicitors and referred to the letter from Dr Khan. On the application for the adjournment the deputy district judge is reported as having said:

"Why merely postpone the inevitable? Nothing to show me that the male Defendant is so ill as not to be able to instruct Solicitors. None of the grounds of the Defence set out in manuscript Defence and/or suggested in the Affidavit are tenable."

He proceeded to deal with those two defences on their merits.

Dr Manchanda then appealed the decision of the deputy district judge not to grant an adjournment to the judge. That came before His Honour Judge Rountree and he dismissed it. The note of his judgment indicates that (page 131):

"Dr Manchanda asked for an adjournment today to prepare his case. He says he cannot get legal aid and therefore he is not able to present his case and evidence as well as he would wish.

It is fair to point out that the decision of the District Judge was 29th April, 1996 and it is this which is being appealed. The Defendant has had three months to prepare his evidence and matters on which he wishes to rely.

His Appeal is out of time but I have accepted that the Defendant was at the time of the Notice of Appeal being filed without representation and I have therefore allowed it.

The Defendant has not had the support of a Solicitor or Barrister but it is to be noted that on 29th April there was an affidavit by a person purporting to be a barrister. That affidavit purported to make a number of points regarding the Defendant's defence in this case.

It seems Dr Manchanda has had all the time in the world to prepare for today, his own appeal. He says he is ill. One is sympathetic, but I can find no excuse why all matters for appeal have not been prepared and the real truth is that no further evidence has or could have come in. This cannot be a defence."

Dr Manchanda then applied for leave to appeal and has since then produced further medical evidence as to his inability to conduct proceedings in court. His application first came before this court two weeks ago on an ex parte basis. It was then adjourned so that

the building society could be represented and deal with some of the points which, in the absence of such help from the building

society, had troubled the court. Today Mr Nourse has appeared on behalf of the building society at short notice and given us such help as he is able. The first, and the only, real point to be dealt with is whether there is an arguable case that the judge should have allowed Dr Manchanda's appeal from the deputy district judge's decision not to grant an adjournment. Given that Dr Manchanda had filed a defence back in November 1995, and given that he was represented by solicitors and counsel appearing before the deputy district judge, it seems to me that the deputy district judge was fully entitled to take the view that he did that as a matter of his discretion he would refuse any further adjournment,

one already having been granted.

When the matter came before Judge Rountree the judge was asked by Dr Manchanda for a further adjournment on the footing that Dr Manchanda was not in receipt of legal aid and, for that reason, had not been able to present his defence. It seems to me that

therefore the judge was entitled, within his discretion, to refuse the adjournment that Dr Manchanda sought on that occasion.

On that limited basis I would not grant leave to Dr Manchanda.

But it would be wrong to part with this application without considering in greater detail the merits of the defence as indicated both in his original manuscript defence and in that provided by counsel instructed on his behalf in April 1996.

The first point is whether the property had been sold at an

undervalue such that the mortgagees are liable to account to him for a higher price which they could, and should, have obtained. For my part I can see no merit in that defence at all. The building society acted throughout on the advice of qualified estate agents and valuers, both as to the way the property should be marketed and as to the price which they should seek to obtain. When the offers were obtained further advice was sought as to whether the highest of those offers should be accepted and they were advised that it should be. The point is clearly made by reference to one passage in the advice of Hamptons in March 1995 where they said:

"In its present poor condition, Brook House is considered to be unmortgageable. As a result demand is likely to be restricted and it may only be of interest to builders who would be prepared to carry out the necessary repairs and sell it on at a profit. Builders might, however, be more interested in obtaining Planning Permission for new dwellings on the site."

That passage, it seems to me, also deals conclusively with the point that Dr Manchanda raised in a written submission he put in two weeks ago to the effect that there is some form of conspiracy

between the estate agents and the bidders whereby offers were only

invited from developers rather than from persons who might wish to live in the house and, presumptively therefore, prepared to pay more for it.

For my part, I can see no merit in that suggested defence.

The second suggested defence was in relation to the amount received by the building society - £36,000 odd - under the mortgage indemnity policy. A similar point came before Waller J, as he then was, in Woolwich Building Society v Brown (13th December 1995). In that case the submission had been made, as it has in this, that the mortgagor was entitled to be given credit for the proceeds of sale of the mortgage protection policy. Waller J came to the conclusion that that could not be so because the policy in that case gave express rights of subrogation to the insurer to the rights of the mortgagee exercisable against the mortgagor. No such rights were given by the policy in this case. But the second ground of the decision of Waller J seems to me to be equally apt, and that originated in a judgment of Staughton LJ in a different case. It was to the effect that it would be inconceivable that a policy of insurance should inure for the benefit of a debtor and be payable on the debtor's own default. It would be quite contrary to the commercial realities of such a policy therefore that the debtor should have any interest in it. The fact is that Dr Manchanda was not a party to the policy and there was no indication in any of the documentation that anybody intended that he or his wife should have any interest in it.

Accordingly, I see no merit in that defence either.

The third point which concerned the court when the matter came before us two weeks ago was the fact that the particulars of claim seeking recovery of the unsecured balance of the mortgage debt did not comply with the provisions of County Court Rules Ord.6,r.5. It was suggested by Mr Nourse that that rule does not apply because the property which is to be recovered is not a debt secured by a mortgage because the underlying security has been sold. The point, and substance of the point, is that if the rule did apply it would be necessary for the rate of interest payable on the debt to be specified in the particulars of claim. That rate of interest, in the absence of an unusual coincidence, would be different from the 8% sought by the particulars of the claim under Section 69 of the County Courts Act. That problem has been obviated by the undertaking given by counsel for the building society that the building society will not seek to enforce the judgment insofar as it relates to unpaid interest accruing on the amount of the unpaid balance for which they sought judgment in the first place, namely £172,000 odd. Given the existence of that undertaking, there is no longer any merit in the point on the County Court Rules either.

For these reasons, namely lack of merit in any possible appeal and the fact that the appeal against the refusal of an adjournment was hopeless, I would dismiss this application.

LORD JUSTICE KENNEDY: I agree.

Order: Application dismissed