HSBC in mortgage arrears standoff

 

Major bank HSBC has landed in court once again over a dispute involving two mortgage loans.

HSBC Bank plc has battled in court against the defendants, James Edward Collinge and Leanne Mavis Kennedy in order to show that they are in default in regards to two mortgages. A warrant is being sought against them by the bank to gain possession of their property, Whitehill Cottage in Dumfriesshire.

It was found that from the 22nd May 2014, Mr Collinge and Mrs Kennedy owed £161,273.33 to the bank from the two mortgage accounts. The total amount owed “in terms of guarantees” was £240,627.87, resulting in the total debt adding up to £401,901.20. The bank is owed three personal guarantees by Mr Collinge at £36,000, £200,000 and £80,000, dated between 2005 and 2006, which secured debts of the firm, JEC Utility Limited.

JEC Utility Limited, however, collapsed into liquidation on the 22nd August 2007, which left a £187,277.02 shortfall for the bank. The bank ordered payment which was due, however no payment was made “in respect of the guarantees”.

A report that was issued on the 17th February this year showed that the present condition of the security subjects were valued at £310,000. The report also showed that the property was in a “poor state of repair” and “redevelopment of the property was not completed” to the legal standard. If the issues were to be solved, it was said the value could increase to £380,000.

On the 23rd May, the case was brought before the sheriff for an evidential hearing, where the appeal in question was taken.

In the most recent case, the solicitor for the defendants argued that “the valuation is not the actual sale price but a forecast, it might do better or worse, the proper question for the court was whether the proposal was reasonable.”

The solicitor also said the “lack of financial information is respectfully not significant,” asking the court to “defer extract for a period of six months.”

It was found that if the bank accepted the best proposal made by the Appellants, it would “still realise less than it could expect to on the sale of the Subjects.” However, the defendants failed to provide the bank with any information to “give it comfort” that they had a way to pay them back.

Therefore, it was stated that without that comfort, the bank could not accept the settlement proposals, because it would have caused “further delay and expense.”

The judge stated: “In my opinion, the sheriff exercised his discretion reasonably and I am not prepared to interfere with his decision”. He added that the defendants were not “in a position to fulfil their obligations within a reasonable time”, the sheriff had no evidence available in how the bank could fulfil the offers, and there was “no information to support the proposals made,” at that time.

Regarding the two offers made, the judge stated there was “no statement of assets” and no statement of income and expenditure and so it was not known how they would be funded, as well as “no assurance” to the bank they will be paid on the dates set out. He added that it would not be reasonable in these circumstances for the respondent to accept either of offers made, “They are wholly unsubstantiated."

HSBC won the claim.