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Of bad banks behaving badly and public bodies


An intriguing mortgage possession County Court case featuring a ‘bad bank’. While the case itself turns on a failure by the bank to obtain relief from sanctions, it features an interesting line of argument that may well be raised again.

NRAM plc v X [Name redacted by request]. Central London County Court. 10 July 2015

Mrs X was the widow of Mr X. Mr X had had an interest only mortgage on the family home with Northern Rock. That mortgage had ended up with NRAM plc, the ‘bad bank’ formed after Northern Rock was taken into public ownership. Following the death of Mr X, Mrs X as executor kept paying the mortgage. There was no issue that there was plenty of equity in the property. NRAM took the view that the full mortgage fell payable on Mr X’s death (which it did) and began possession proceedings, seeking to evict Mrs X and children. NRAM refused point blank to transfer the mortgage to Mrs X, despite the mortgage having been paid, on time and in full by Mrs X for some 6 years by the time of this hearing. NRAM said the mortgage was ‘unaffordable’, without more, and would not change position.

Mrs X defended, in part, on the basis that NRAM was a public body, and so Convention rights were engaged. After assorted procedural failings, delays and faffing about by NRAM, Mrs X obtained an order for specific disclosure of ‘the terms and conditions of the government bailout of Northern Rock’. At a subsequent hearing, there was extended discussion of what this might include, with NRAM referring to “hundreds of documents” and “commercially sensitive documents”.

In the event, all that NRAM disclosed in response to the order, without a disclosure statement, was a 2009 European Commission ‘State Aid implemented by the UK for Northern Rock C 14/08’, an ‘analysis’ of state intervention into Northern Rock with a copy of the Northern Rock plc Transfer Order 2009/3226, and some print outs from NRAM’s website on the ‘conditions imposed by the government’ on bailing out the bank – e.g. ‘no new business’.

The Court was not impressed and struck out NRAM’s claim. NRAM applied for relief from sanction, arguing that:

“The imprecise wording of the unless order, incorporating that used in the Defendants’ application, was the primary reason for the Claimant’s default.”

(The wording referred to ‘terms and conditions of the bailout’, NRAM argued that this didn’t mean ‘all documents relating to the present extent of government control over lending undertaken by NRAM’, but had to admit that the hearing had made clear that ‘the purpose of this disclosure was to determine its alleged status as a public authority’.)

In arguing Denton, NRAM also pointed to further disclosure it had made (after being struck out):

  • • UKFI Investment Mandate – this sets out the scope of UKFI’s decision-making responsibilities with respect to loan arrangements and the extent to which that decision-making requires the prior approval of HM Treasury before being implemented;
  • UKFI Shareholder Relationship Framework Document – this sets out UKFI’s objectives and its relationship to HM Treasury;
  • Articles of association of NRAM plc – this includes information relevant to the Defence, such as the fact that the Claimant ‘must have regard to the objectives agreed from time to time with Her Majesty’s Treasury and UKFI including but not limited to those set out in the Relationship Framework Document between UKAR and UKFI’;
  • UKAR and UKFI Relationship Framework Document – this sets out how the day-to-day relationship between UKAR and UKFI (acting on behalf of HM Treasury) works in practice;
  • HMT and UKAR Accountability Framework Agreement – this contains information relevant to the Defence, such as the fact that ‘UKAR is now classified as a public sector body, in central government’ and that the CEO of UKAR ‘may be called to account for the performance of UKAR in Parliament’ and that ‘UKAR’s accounts are consolidated with HMT’s’; and
  • UKAR Group Companies Schedule of Matters Reserved for Decision of the Board or a Duly Authorised Committee of the Board – this sets out which matters affecting NRAM require approval from UKFI.

But this did not avail it. The breach was found to be serious – trial delayed and defence interfered with – and without good reason (after all at the previous hearing on the extent of disclosure, the Judge had observed ‘the Court is unlikely to order disclosure of hundreds of documents. But there must be some documents in whatever format they might be, which go to the level of and ongoing control, which are relevant as to whether the Claimant is a public body’. Belated disclosure after being struck out didn’t help). In all the circumstances of the case (the third Denton test), NRAM’s failings were such that the efficient progress of the case had been prevented, and the Claimant had sought to rely on a misinterpretation of the wording of a court order.


While the actual strike out and refusal of relief from sanction are on a relatively familiar Denton basis, the issue of NRAM (and other UKAR ‘bad banks’) being a public body is in interesting and potentially significant line of argument. I suspect it will not be long before it appears again.

And also what the hell well NRAM thinking? In every aspect of this case…

[Apparently NRAM have now applied to set aside the disclosure orders. This may be by way of appeal.]

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.


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