A mortgagee may lose the right to rely upon the cross security provisions in its security documents where it obtains separate judgments against separate properties charged to it.
The defendants took out two loans with the Bank which were secured by separate all monies charges over two separate properties - a farmhouse and some cottages. The Bank obtained money judgments and warrants for possession in both cases in separate proceedings in which they did not refer to the security held over the second property.
The Bank later tried to obtain a charging order over one of the properties to secure the money judgment obtained in respect of the second loan on the basis of the all monies clause in the charge over the first property This charging order was given but subsequently set aside and the Bank appealed for the order to be reinstated.
The appeal was dismissed. The Bank had obtained a money judgment in respect of the mortgage due on the farmhouse in the amount that was due at that time. It had also obtained a separate money judgment in respect of the mortgage due on the cottages. As such, the Bank's causes of action for recovery of the loans and accrued interest had merged in the respective judgments and it was therefore prevented from now seeking to recover the balance of the amounts due under the cottages loan in any new proceedings.
Lenders will need to be careful when they enforce against one of a number of mortgaged properties to ensure that they do not lose the ability to later rely upon the all monies nature of a charge for balances outstanding.