National Westminster Bank plc v Skelton [1993] 1 WLR 72

Right to possession under mortgage cannot be set-off by counterclaim


The claimant bank sought repossession of the defendants’ dwelling house in terms of a legal mortgage. The mortgage in favour of the bank was as continuing security for the liabilities to the bank of a construction company.


At first instance, the bank was successful and the defendants appealed to the Court of Appeal. The defendants made a counterclaim which they said should be set-off against the claim for possession. They argued, inter alia, that the judge had wrongly held that they could not rely upon a set-off which was available to the construction company against the bank, without the company being a party to the proceedings.


The Court of Appeal confirmed that a borrower cannot normally resist a repossession claim by raising a counterclaim by way of set-off. The defendants could not therefore rely on a right of set-off which the company might be entitled to as against the bank. There were no grounds for withholding an immediate order for possession as there was no evidence that the defendant would be able to repay the debt within a reasonable timeframe. The Court relied on the line of existing authority which established that the existence of a counterclaim, even where it exceeds the amount of a mortgage debt, will not by itself defeat the right of possession of the lender. Slade L.J. noted that this principle was to be commended, as it would be abusive if a lender were to be denied his right to possession by ill-founded allegations. The defendants should have been aware that upon the execution of a legal charge by way of guarantee, they were exposed to an immediate risk of possession proceedings.

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