Equitable estoppel - Contract - Claimant company providing mortgage funds to company owned by first defendant

Paragon Mortgages Ltd v McEwan-Peters and another: Queen's Bench Division, Commercial Court (Mr Justice David Steel): 3 October 2011

The claimant company was part of a group of companies which specialised in providing mortgage funds to professional investor landlords in the ‘buy-to-let’ market. The defendants were husband and wife. The defendants, initially as a partnership and later through a number of companies, operated a substantial business purchasing and then letting out residential properties, particularly to university students.

The business was primarily financed by mortgage loans from the claimant. By 2007, some 200 properties had been acquired, mostly in the Leeds area. At the peak of the borrowings, the overall debt to the claimant was about £32m, although that was reduced somewhat to about £27m. The instant action concerned two claims which had initially been advanced against the first defendant alone, namely: (i) a claim for £3,198,061, as of 23 November 2011, under ten guarantees given by the first defendant in respect of mortgage loans made to RMP Properties (Leeds) Ltd (RMPL), one of the defendant's companies; and (ii) a claim for £3,654,482, as of 23 November 2011, in respect of 14 mortgage loans (12 being original loans and two being further advances) made to the defendants.

As regards those claims, the primary contention of the first defendant was that the claimant was estopped from making a demand when less than three months' arrears were outstanding.

The court ruled: The submission that the first defendant could rely on any equitable estoppel in regard to the claims pursued by the claimant would be rejected. On the evidence, no assurance had been given that the claimant had promised not to enforce its legal rights under the mortgages and the guarantees unless the arrears had amounted to three months. There was nothing in the contemporary documentation to support it. The most that could be said was that the claimant had made it clear that if the arrears had exceeded three months, enforcement would occur. That was quite a different matter from undertaking not to take enforcement action if the arrears had been less than three months.

Further, even if any such assurances had been given as pleaded or as described by the first defendant, it was a long way short of being clear and unequivocal. Furthermore, any promise had been merely suspensive. Moreover, none of the steps taken by the claimant had been met with any contemporary challenge or any complaint from the first defendant which further undermined any cases that reliance had been placed on any promise not to enforce in regard to the accounts as they had then stood (see [36]-[40] of the judgment).

Hugh Jackson (instructed by Gordon Solicitors) for the claimant. Lisa Linklater (instructed by 3 Volution LLP) for the first defendant.