The case of Alliance & Leicester PLC v Slayford [2001] 33 H.L.R. 66 is an important topic for law students studying the financial aspects of property law. It examines how lenders can enforce security against property while balancing the rights of the creditor and the protection of the debtor. This case is particularly important for those studying the intersection of insolvency and property rights.

  • In the case of Alliance Leicester Plc v Slayford [2001] 33 H.L.R. 66, it was held that it was not an abuse of process to use the Insolvency Act as an alternate remedy to obtain an order for sale when a claimant is unable to obtain a possession order.

Facts of the Case Alliance Leicester Plc v Slayford

  • On 6th November 1987, C lent D1 £20,000 on the security of his property.
  • On 3rd November, D2 (not married to D1 but in occupation of the property) consented in writing not to assert any right or interest against C.
  • On 8th December, D1 charged to C by a Legal Charge the entire legal and beneficial interest in the property.
  • D1 became unemployed and by 5th June 1991 was in severe arrears. C commenced possession proceedings against D1.
  • On 7th August, D2 applied to be joined as a party to the proceedings, claiming she made contributions entitling her to proprietary interest.
  • D2 argued she did not understand the nature and effect of her previous consent, and as such was not subject to the Legal Charge.
  • On 15th July 1996, the judge held that D2 had an equitable interest and refused the possession against her.
  • On 2nd February 1998, C applied to claim arrears under the Legal Charge, which would lead D1 to declare bankruptcy and result in an order for sale of the property.
  • D1 and D2 successfully applied to strike out the amended application as an abuse of process. C applied for the right to appeal.

Issues in Alliance Leicester Plc v Slayford

  • Was C prevented from seeking an alternate remedy that would result in D’s bankruptcy, which would defeat D2’s equitable interest?

Held by the Court of Appeal (Civil Division)

  • Finding for C, that they could pursue an alternative remedy. It was not an abuse of process for C to apply for a money judgment as an unsecured creditor. Although both D1 and D2 would be displaced, this had to be weighed against the size of the arrears and the fact they had lived in the property for a long time without paying towards the arrears.

Peter Gibson L.J.

  • D2 in her poor health deserves sympathy, and I accept under the Civil Procedure Rules it is important that parties to litigation should keep within the established time limits. But the courts have to consider the overriding objective, and even large institutions like banks are entitled to fair treatment.
  • D1 and D2 have not claimed to have suffered prejudice due to the time C took to send notice of litigation. It would be wholly disproportionate to deny C leave to appeal for the short delay of notice.
  • The money claim is a separate action from the possession order, even if D1 and D2 are liable to lose their home if the former succeeds. C’s delay in bringing action has been entirely beneficial to D, who have enjoyed the property without payment.
  • “C was not precluded from bringing subsequent proceedings for a money judgment merely because it had not sought and obtained such judgment in the possession proceedings as originally constituted. As every textbook on real property or mortgages makes clear, a mortgagee has a number of remedies all designed to enforce payment of what is due to him under the mortgage, which may be pursued concurrently as soon as the mortgagor is in default or successively, until payment in full is recovered or the mortgagee acts in a way which amounts to an election. Thus, if the mortgagor chooses to sue the mortgagor on his personal covenant and obtains a money judgment, abandons his security and brings bankruptcy proceedings, he cannot thereafter exercise remedies as a secured creditor” [20].
  • It would not help any party if mortgagors had to pursue all possible claims at one and the same time. Mortgagors usually go for possession initially, and only pursue other remedies later if they have to.
  • The judge thought it plain that C’s pursuit of a money claim with intention to bankrupt D1 was an attempt to ‘achieve by the back door what could not achieved by the back door.’ But the reality is D2’s equitable interest is untouched by the money claim and is not denied any defence available to her in bankruptcy proceedings.

Significance of the Case in Legal Development

This case has had a substantial impact on the enforcement of security and the rights of secured creditors:

  1. Four-Maids Ltd v Dudley Marshall (Properties) Ltd [1957]: Similar principles on the rights of secured creditors to pursue various remedies.
  2. Cityland & Property (Holdings) Ltd v Dabrah [1968]: Addresses the precedence of secured creditors in insolvency situations.
  3. Re Charge Card Services Ltd [1987]: Further explores the relationship between insolvency law and property rights.

Exam Questions and Answers

Below, you will find answers to questions that are most commonly asked based on this case.

What are the limitations of creditor remedies when dealing with secured assets in a residential context?

Under current UK law, the limitations on creditor remedies when dealing with secured assets in residential contexts are primarily governed by the Mortgage Repossessions (Protection of Tenants etc.) Act 2010. This act provides protections for tenants in mortgaged properties, ensuring they receive adequate notice before eviction. Additionally, the Consumer Credit Act 1974 requires lenders to consider fair and reasonable actions before taking possession, emphasizing the need to explore all alternative solutions.

How has this case influenced subsequent legislation regarding the protection of home occupiers against secured creditors?

The principles from Alliance & Leicester PLC v Slayford have influenced legislation such as the Homeowner Mortgage Support Scheme and the Mortgage Pre-Action Protocol, which aim to protect homeowners facing financial difficulties from quick foreclosure and promote cooperation between lenders and borrowers to find viable solutions.

What precedents did this case set for future disputes involving bankruptcy and secured lending?

This case has set important precedents in handling disputes involving bankruptcy and secured lending, particularly emphasizing the need for clear delineation of creditor rights and protections for debtors. It underscores the principle that while creditors have rights to recover debts, these must be balanced against the rights of debtors, influencing subsequent cases and legislative adjustments aimed at ensuring fair treatment in insolvency proceedings.