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Litigation Delay Costs Mortgage Lender Its £1.4 Million Security

HouseFailing to respond swiftly to litigation can be extremely costly. One mortgage lender found that out when its £1.4 million legal charge over a residential property was effectively rendered worthless by its failure to file a legal document on time.

The house was lived in by a bankrupt businessman and his wife, both of whom were signatories to the mortgage. The company sought possession of the property in order to enforce its security. However, its claim was resisted by the wife, who lodged a counterclaim by which she sought declarations that the mortgage was either unenforceable or entirely void.

She argued that the company was not licensed by the Financial Conduct Authority to enter into regulated mortgage contracts and that the mortgage was in any event void, having been executed after a petition for her husband’s bankruptcy had been presented. She also submitted that the house was held in trust for the couple’s daughter and that she had been induced to sign the mortgage by undue influence.

The company did not file a defence to the wife’s counterclaim and, as a result, a judge dismissed its claim as against her and granted her the declaratory relief she sought. The company challenged that decision on numerous grounds, but the High Court found that the possession action had rightly been struck out.