Neutral Citation Number: [2018] EWCA Civ 1103
Case No: A3/2017/0105
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
BRISTOL DISTRICT REGISTRY
MERCANTILE COURT
HIS HONOUR JUDGE HAVELOCK-ALLAN QC (Sitting as a Deputy High Court Judge)
[2016] EWHC 2775 (QB)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 17/05/2018
Before:

THE RIGHT HONOURABLE LORD JUSTICE LONGMORE
and
THE RIGHT HONOURABLE LORD JUSTICE LEGGATT
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Between:

	1) CHARLES WOODESON
2) CHRISTINE WOODESON	Claimants/Appellants	
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	CREDIT SUISSE (UK) LIMITED	Defendant/Respondent	

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Mr Guy Adams (instructed by Capital Law LLP) for the Appellants
Mr Christopher Boardman (instructed by Charles Russell Speechlys LLP) for the Respondent

Hearing dates: 9th & 10 May 2018
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Judgment Approved
See: Order at bottom of this judgment.
Lord Justice Longmore: 
Introduction
1.	This appeal from HHJ Havelock-Allan sitting in the Mercantile Court in Bristol challenges his decision to grant the defendant bank summary judgment in respect of certain of the claimants’ claims.  The result of the judgment is that the claimants can pursue a claim in deceit and contend that such claim is neither time-barred nor precluded by anti-set off provisions in their contract with the bank.  No other claim is permissible.  That is because it is arguable that the time for a deceit claim (as opposed to claims for negligent advice or breach of statutory duty) is extended pursuant to section 32 of the Limitation Act 1980 (“the 1980 Act”) and that the anti-set off provisions may be unreasonable clauses within the relevant statutory provisions, on which the bank may not rely.
The Facts
2.	I can take these from the judge’s full and careful judgment.  The claimants, Mr and Mrs Woodeson, were the owners of a property called Cabbage Hall Farm, Sprigs Holly Lane in Oxfordshire which they purchased sometime in 1996.  They re-mortgaged the property with the defendant (“the bank”) in January 2008.  Their previous mortgage was a fixed rate interest-only deal with Cheltenham & Gloucester.  That loan was for £400,000 and the fixed rate was due to expire around July 2007.  The claimants began to explore re-mortgage possibilities early in 2007.  The property was by then worth around £1.5 million, so there was scope to increase their borrowing but sterling mortgage rates were high.  A friend suggested that they consider re-mortgaging in a foreign currency with a lower interest rate.  He introduced them to an employee of the bank called Amrit Uppal.
3.	Mr Uppal provided some information about foreign currency loans and a meeting followed on 5th June 2007.  This led to Mr Uppal sending the claimants some documentation which comprised an Acceptance Booklet, Security Agreement and Tax Documents.  The claimants partially completed the blank sections and returned the documents to the bank on 15th June 2007 with a request that Mr Uppal should fill in the remaining sections.  Next, the claimants signed a Mortgage Application Form on 24th July 2007 in which they sought, by way of re-mortgage, an interest-only Swiss franc loan in an unspecified amount for a term of 5 years.
4.	In the event the sum which the claimants borrowed was far greater than was necessary to replace the amount outstanding under the mortgage with Cheltenham & Gloucester which, by the autumn of 2007, was just under £300,000.  The claimants entered into a revolving credit facility with the bank on 17th September 2007 in a sum of 2,089,319.21 Swiss francs.  This was approximately equivalent to £880,000.  The re-mortgage was completed on or about 7th January 2008.  The claimants drew down the greater part of the facility amount, redeemed the charge in favour of Cheltenham & Gloucester, and used the surplus money to invest in sterling deposits within an AIG Instant Access Bond.  This was what is commonly called a “carry trade”.  The interest rate on Swiss francs was much lower than that on sterling at the beginning of 2008.  The claimants’ aim was to capture the interest rate difference between sterling and Swiss francs, while at the same time benefitting from a mortgage which was cheap to service.
5.	This deal proved to be disastrous when the Bank of England Base Rate fell sharply between October 2008 and March 2009 and the exchange rate of sterling to the Swiss franc declined in similar fashion.  In January 2008, the exchange rate was 2.15 Swiss francs to £1.  By the end of December the exchange rate was 1.55 Swiss francs.  It declined further to 1.45 Swiss francs in 2010.  When the borrowing became repayable at the end of the 5 year term, the claimants failed to repay it.  The bank extended the maturity date to 31st March 2013 and then to 31st March 2014.  It agreed not to enforce its rights until the end of September 2014.  Eventually, on 7th September 2015, the bank appointed receivers over Cabbage Hall Farm (“the property”). 
6.	The receivers issued proceedings for possession in the County Court at High Wycombe on 16th November 2015.  The claimants commenced the present action on 18th February 2016 as a form of counter-attack.  It was intended to dissuade the County Court from granting possession of the property.  It was not successful.  The District Judge made a possession order on 29th March 2016.  The claimants appealed.  The appeal was heard by His Honour Judge Charles Harris QC in the County Court at Oxford on 13th June and judgment was reserved.  At the time of hearing of the bank’s application in the instant proceedings, judgment on the appeal was still pending.  It was handed down on 9th September.  The appeal was dismissed and a stay of the possession order was refused.  Permission was sought to appeal to this court but was refused on the papers by Henderson LJ and, on oral renewal, by Asplin LJ.  We were told that the Supreme Court is currently considering an application for permission to appeal.
7.	The claimants’ claim in this action is for:-
1)	a declaration that they are entitled in equity to a set-off against the sums due from them to the defendant under a mortgage of the property the sums due upon their cross-claims for damages pursuant to section 138D Financial Services and Markets Act 2000 and/or for negligence and/or for deceit;
2)	a declaration as to the sums of damages to which they are entitled on their cross-claims;
3)	a declaration as to the sums which are due under the mortgage after giving credit for the sums due upon such cross-claims; and/or insofar as may be necessary
4)	a declaration as to their entitlement to the proceeds of any sale of Cabbage Hall Farm; and
5)	further or other relief.
8.	The claimants blame the bank for mis-selling the Swiss franc facility.  In the particulars of claim, they claimed damages from the bank for negligence, breach of statutory duty and deceit.
9.	The claim in negligence was based on the assertion that Mr Uppal did more than simply provide information.  It is alleged that he gave positive advice about the transaction which included recommending the Swiss franc as the preferable foreign currency and telling the claimants at the meeting on 5th June 2007 that the 1% cost of hedging the transaction would be approximately equal to the expected fluctuation in the sterling/Swiss franc exchange rate over the 5 year term.  The claimants also say they were not fairly warned of the downside risk if the Swiss franc/sterling exchange rate moved against them.
10.	The deceit claim arises from documents which the bank disclosed in December 2014 pursuant to a Subject Access Request from the claimants under the Data Protection Act 1998.  Amongst them was an internal document, dated 20th July 2007, entitled “Scripted questions (Regulated mortgage contracts)”.  Another was a copy of the Credit Application Form which Mr Uppal completed on or about 8th August 2007.  The bank had a procedure which its employees were obliged to follow in non-advised mortgage transactions.  They were only permitted to ask the customer scripted (i.e. prescribed) questions so as to ensure that they did not cross the line between providing information and giving advice.  Despite the fact that Mr Uppal crossed the box marked “Credit Facility only” rather than the box marked “Advisory Service” in the Acceptance Booklet which the claimants sent back to him, the claimants say that they were never asked any of the scripted questions and that the answers recorded by Mr Uppal in the scripted questions document are largely fictitious.  The claimants also say that most of the information in the Credit Application Form about their personal circumstances is pure invention, or at the very least is completely mistaken.  They point to the fact that in the Credit Application Form, Mr Uppal recorded the transaction as “Advised, Committed, Secured” and stated that he had fully explained the risk of the claimants having no currency hedging and thus the potential impact on their debt if the exchange rate moved adversely.
11.	The claim in deceit is put this way in the particulars of claim:-
“36. Further given Mr Uppal’s assessment of the risks in the Credit Application and the fact that he stated in that document that he had advised Mr and Mrs Woodeson as to such risks and that they fully appreciated them, when he had not in fact done so, it should be inferred that (a) the representation he made to Mr Woodeson at the meeting on 5th June 2007 that the 1% cost of a hedge equated to approximately the expected fluctuation over the term was not his honestly held opinion; and/or (b) was deliberately misleading as to the extent of the exchange rate risks; and/or (c) if such opinion was honestly held at the time Mr Uppal dishonestly failed to correct his earlier advice or representations after he had appreciated the extent of the risk; and/or (d) Mr Uppal dishonestly failed to discharge the duty that had arisen in the circumstances to fairly and honestly advise Mr and Mrs Woodeson as to the risks.”
12.	As against this the bank relies on the fact that the claimants signed the Acceptance Booklet saying they wanted “Credit Facility only” rather than “Advisory Service” and that, when they also signed a Key Facts Illustration, they expressly acknowledged that the bank had not recommended any particular mortgage to them.  The bank insists that a fair and balanced warning of the risks was given to the claimants in writing and that in any case Mr Woodeson would have understood the essential features of the transaction because he was astute about business and financial matters.  The bank accepts that Mrs Woodeson had no financial expertise but points to the fact that she says in her witness statement that she relied on her husband.  Moreover the bank stresses that neither claimant has mentioned that they received legal advice from a firm of solicitors independent of the bank before entering into the credit facility and the mortgage or that they were in possession of copies of the bank’s Private Banking Terms and the bank’s General Terms and Conditions of Regulated Mortgage Lending Version No. 3 (“the Mortgage Terms”) over 5 months before the transactions took effect.
13.	The judge correctly said that he was not concerned with the underlying merits, save to the extent they arose in the context of the reasonableness of the “no set-off” clauses on which the bank relies, or arose under section 32 of the Limitation Act 1980 on which the claimants rely if necessary.  He began by assuming that the allegations of breach of statutory duty and negligence, and even the claim in deceit were arguable to the standard of a real prospect of success.
14.	The bank’s application for summary judgment was brought on two grounds: (1) that the claims on which the declarations are founded are statute-barred and liable to be defeated by a plea of limitation; and (2) that the claims afford no defence to any claim the bank may have to recover the debt on which the possession proceedings are based because the claimants contracted out of the right of set-off.
The judgment
15.	The judge held that insofar as claims for negligence, breach of statutory duty and deceit underlay the claims for declaration, the claims for declarations were based on free standing claims and were time-barred unless limitation was postponed under section 32 of the 1980 Act.  Insofar as they could be raised by way of equitable set-off they could, in theory, be utilised by way of defence to claims brought by the bank.  That opportunity had either passed, since HHJ Harris had already given judgment for possession and refused a stay of execution (and, as we now know, this court has refused permission to appeal) without any such defence having been raised or was premature because no monetary claim has yet been raised by the bank to which such defences would be applicable.
16.	As far as possible postponement pursuant to section 32 of the 1980 Act was concerned, the judge held that there was no deliberate concealment of facts constituting negligence or breach of statutory duty but (1) that he could “just see” that the claimants may not have been able to appreciate that they had a claim in deceit until they had seen the internal documentation of the bank revealed as a consequence of the Subject Access Request and (2) that the accrual of the cause of action in deceit was therefore arguably postponed until December 2014.  This was why he decided that the bank was not, subject to anti-set off provisions, entitled to summary judgment in respect of the deceit claim.
17.	In relation to set off, the judge held (paras 45 and 58) that anti-set off clauses were part of the contractual arrangements between the claimants and the bank and could be relied on in relation to the deceit claim, unless the clauses were unreasonable pursuant to the Unfair Contract Terms Act 1977 or under regulations under the Unfair Terms in Consumer Contracts Regulations 1999 (“the regulations”).  He held it was arguable that it was unreasonable to seek to apply the anti-set off provisions to a deceit claim.
Claimants’ Grounds of Appeal
18.	There are 3 grounds of appeal:-
1)	the claims for declarations are not time-barred but can be pursued as heads of equitable relief ready to be used as defences as and when the need arises (“the Limitation point);
2)	there are arguable grounds that the bank (by Mr Uppal) deliberately concealed facts relevant to the claims in negligence and breach of statutory duty, as well as deceit (“the Concealment point”); and
3)	the bank did not but should have drawn the claimants’ attention to the no-set off clauses and explained their effect and, by virtue of the application of Interfoto Picture Library v Stiletto [1989] QB 433, the no set-off clause cannot be relied on (“the Interfoto point”).
The Limitation Point
19.	The claimants attack the judge’s conclusion on limitation by submitting in their skeleton argument:-
1)	the judge should not have decided the limitation point before it had been pleaded;
2)	it would be unfair to allow the bank to enforce its security without taking into account the claimants’ supposed entitlement to equitable set off;
3)	the declarations sought are an integral part of taking the account between the parties and cannot be time-barred; and
4)	the judge should not have relied on obiter remarks of Colman J in P & O Nedlloyd BV v Arab Metals Co [2005] 1 WLR 3733 to conclude that the claims were time-barred because that learned judge was wrong to say that declarations were creatures of the Judicature Acts, that the function of the Limitation Act was to identify periods within which a claimant is permitted to invoke the court’s jurisdiction and the Limitation Act does not take away the court’s jurisdiction to entertain any claim.
20.	It is difficult to understand the first submission when it is the claimants who have themselves invoked the court’s jurisdiction before limitation has been pleaded.  It cannot now be open to them to object to their own chosen procedure.  Nor can the second submission have any traction now that the receivers have enforced the security by obtaining an order for possession and this court has refused permission to appeal.  
21.	The fourth submission cannot be accepted in the broad way in which it is put.  A court should not entertain a claim for a declaration that a defendant owes a debt or is liable for damages in tort or contract if such claim is made once the debt or damages claim is statute-barred.  That is effectively the point Colman J made in Nedlloyd and is, with respect, plainly right.
22.	In National Bank of Commerce v National Westminster Bank [1990] 2 Lloyds Rep 514 the claimant bank complained that the defendant bank had wrongly debited its account in response to unauthorised requests.  Webster J held that any cause of action accrued when a demand was made for the true amount which ought to have been recorded in the claimant’s account.  There was therefore no time bar problem.  The claimant’s prayer had also sought declarations that the defendant was not entitled to debit the claimant’s account and that the defendant was indebted to the claimant in the amount (wrongly) debited together with interest.  Addressing (obiter) an argument that limitation applied to those claims for a declaration, the judge said:-
“As to the declarations, although action can be brought simply for a declaration, a declaration in itself is not a cause of action and there is no period within which by statute a claim for a declaration must be brought.  But I cannot think of a situation in which a Court in this country would make a declaratory judgment of a right which could not be enforced here because a claim to enforce it would be statute barred.”
23.	These observations were criticised by Professor McGee in the 4th edition (2002) of his book Limitation Periods, who took the view that a declaration could be or become time-barred if “the basis of the action” was itself time-barred.  A declaration that a sum was payable by way of debt or damages would therefore be time-barred if the underlying cause of action was itself time-barred.
24.	In P & O Nedlloyd (paras 20-21) Colman J seems to have agreed with this criticism and set out the way he saw it:-
“The function of the Limitation Act 1980 is to identify those periods of time within which a claimant is permitted to invoke the jurisdiction of the court to grant relief.  Those periods of time vary according to the nature of the grounds for relief.  Those grounds comprise both the factual foundation and the assertion of a legal or equitable right consequential upon those grounds.  A claim for a declaration that a contractual right has accrued or that a breach of contract has occurred is thus a claim, or, in the words of section 5 of the Limitation Act 1980, an action, for relief founded on grounds an essential part of which is a simple contract.
Moreover, a declaration, although a discretionary remedy, is not an equitable remedy but is a creation of the Judicature Acts 1873 (36 & 37 Vict c 66) and 1875 (38 & 39 Vict c 77): see Chapman v Michaelson [1909] 1 Ch 238.  Accordingly, the claims for declaratory relief in this case do not engage section 36(1)(b) of the Limitation Act 1980.”
I agree with this approach and would hold that the claimants’ cross-claims in the present case have as their “basis”, to use Professor McGee’s word, claims in tort and breach of statutory duty which must be brought within 6 years of the accrual of the cause of action.  The claimants’ position cannot be improved by making claims for declarations rather than for damages and the claims must, therefore, be regarded as time-barred unless time can be extended by virtue of the bank’s deliberate concealment.
25.	In his oral submissions on behalf of the claimants, Mr Guy Adams for Mr and Mrs Woodeson did not present any sustained argument to the effect that Colman J’s analysis in the Nedlloyd case was wrong.  He instead sought to develop the third argument in his skeleton namely that a mortgagor is always entitled to seek an account from his mortgagee of what is truly owing by way of the mortgage debt.  If, therefore, a cross-claim can be used as a defence of equitable set-off to any money claim brought by the bank (even if, were it a free-standing claim, it would be time-barred as the judge accepted in paras 31-33 of the judgment), so also it ought to be capable of being used in any claim against the bank for an account of what is properly due under the mortgage.
26.	The short (and to my mind conclusive) answer to that submission is that neither the claim form nor the particulars of claim seek an account of what is due by way of the mortgage debt.  The more substantive answer is that, insofar as a claimant mortgagor may wish to rely on a claim that any account should reflect claims for negligence, breach of statutory duty or deceit, such claims cannot, in fact, be reflected if they are time-barred because they would be pursued as claims in their own right and not as a defence to any claim by the bank (which has, in any event, not been made).
27.	The submission is also inconsistent with what Gloster LJ in Spencer Day v Tiuta International [2014] EWCA Civ 1246 (para 11) called the well-known principle that
“a mortgagor cannot unilaterally appropriate the amount of a cross-claim which is unliquidated and not admitted (whether a mere counterclaim, or a cross-claim for unliquidated damages which, if established, would give rise to a right of equitable set-off) in the discharge of the mortgage debt.  It follows that, even where the quantum of the asserted, unliquidated cross-claim exceeds the amount of the mortgage debt, the mortgagee cannot be restrained from exercising his right to take possession of, and sell, the mortgaged property or, if appropriate, appointing receivers to sell the property, and applying the proceeds of sale in payment of his mortgage debt,”
a principle for which she cited four previous authorities which she analysed at paras 57-62 of the judgment.
28.	Mr Adams sought to submit that the principle was not as well established as Gloster LJ said and he relied on the fourth authority to which she referred, National Westminster Bank Plc v Skelton [1993] 1 WLR 72 in which Slade LJ (sitting, as we are, in a two judge court) emphasised (77A) that that case was a simple claim for possession by the bank not for the payment of any sum.  Slade LJ then applied Keller and Mobil Oil (the first two cases relied on by Gloster LJ) saying (78C) that the Mobil Oil principle was applicable both where the cross-claim is a mere counterclaim and where it is a cross-claim for unliquidated damages which, if established, would give rise to a right by way of equitable set off.  Mr Adams sought to submit that the principle was therefore confined to claims for possession and did not extend to cases where the bank had a money claim or to cases where the mortgagor sought an account of what was truly due to the bank after considering any cross-claims.
29.	That submission cannot, however, be correct in the light of Barclays Bank v Tennet (unreported 6th June 1984) which was analysed by Gloster LJ in para 61 of her judgment.  The passages she italicised in the judgments of all three members of the court in that case (including Slade LJ) make it clear that the bank is entitled to the proceeds of sale without regard to any cross-claim.  I do not read Skelton as being in any way inconsistent with that principle.  That does not, of course, preclude a free-standing claim if such claim is not time-barred; but in the present case it is time-barred, unless time can be extended under section 32 of the 1980 Act, to which I now turn.
The Concealment point
30.	Section 32 of the 1980 Act provides:-
“(1) … where in the case of any action for which a period of limitation is prescribed by this Act, either –
a)	the action is based upon the fraud of the defendant; or
b)	any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendants; …
the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it. …
(2) For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.”
31.	It was held in Johnson v Chief Constable of Surrey (unreported, 19th October 1992) 1992 WL 895624 that the words “any fact relevant to the plaintiff’s right of action” means “any fact which the plaintiff has to prove to establish a prima facie case” (per Neill LJ).  “Facts which improve prospects of success are not, as it seems to me, facts relevant to his right of action” (per Rose LJ).  “Whilst I acknowledge that the new facts might make the plaintiff’s case stronger or his right to damages more readily capable of proof they do not in my view bite upon the “right of action” itself” (per Russell LJ).
32.	In this case the claim form was issued on 19th February 2016.  The claimants accordingly have to show that there were facts relevant to the cause of action which they did not know until after 19th February 2010.  For this purpose they rely on the bank’s internal documents disclosed in 2014 pursuant to the Subject Access Request referred to in paragraph 10 above.  But as the judge held, while those documents may arguably extend time for the deceit claim, they are not relevant to the rights of action for negligent advice (or failure to advise) and breach of statutory duty which depend essentially on the allegation that Mr Uppal recommended an unsuitable mortgage, did not satisfactorily explain the risks of a Swiss Franc mortgage and said that the currency risk was roughly no more than 1% of the cost of a hedge, see paras 31-35 of the particulars of claim.
33.	The unsuitability of the mortgage and its associated risks were apparent well before February 2010 in as much as the exchange rate of 2.43 Francs to the £ in 2007 had fallen to below 2 Francs after Lehman Brothers’ collapse in 2008 and was 1.63 in February 2010.  At this level, the sterling value of the mortgage was £480,000 more than it had been at the outset.
34.	These were the relevant facts for the claimants’ right of action and were apparent by February 2010.  The documents revealed as a result of the Subject Access Report might perhaps improve the claimants’ case but are in no sense essential to it.  Mr Woodeson’s own evidence, moreover, in para 11 of his witness statement of 22nd June 2016, is that when he discussed the question of a possible extension of the mortgage with “various Independent Financial Advisers” in 2012, they each “independently and unsolicited” suggested that the product had been mis-sold.  Those IFA did not have access to (or know about) any of the documentation revealed in 2014, before being able to express the opinion that they did and Mr Woodeson had knowledge of the relevant facts on which that opinion was based before February 2010.
35.	Mr Adams suggested that, if it was arguable that, if relevant facts had been concealed for the purpose of the deceit claim time should be extended for that claim, it should follow that they were concealed for the purpose of claims for negligence and breach of statutory duty.  But the requirements of the cause of action are different in each case and “a prima facie case”, to use the words of Neill LJ in Johnson, is much easier to establish in negligence and breach of statutory duty than it is for deceit.
(3) Set Off (the Interfoto point)
36.	If Gloster LJ’s statement of principle in Spencer Day is correct and the bank can appropriate the proceeds of the sale by the receivers to the mortgage debt without set off in any event, it may be queried whether it can matter whether the bank should have drawn the existence of the anti-set off clause in the contract and indeed whether (as the judge held was arguable) the clauses can be regarded as unreasonable and so of no effect under the 1977 Act and the regulations.
37.	The fact is, however, that the bank did not rely on what I will call the Spencer Day principle before the judge and had served no respondent’s notice on this appeal.  The authority only surfaced during argument after judgment in connection with a claim which the claimants might have (but had not made) for an injunction against the bank to restrain it from applying the sale proceeds in reduction of the mortgage debt.  The judge said that Spencer Day was undoubtedly a hurdle in the way of any such application for an injunction but declined in his short Addendum judgment to hold that it was an insuperable hurdle.
38.	It may well be that the existence of the Spencer Day principle will render any argument about the set off clauses academic but that was not a point pursued before us; so I should deal with the Interfoto point, albeit briefly.
39.	Mr Adams’ argument began with the undoubted principle that, if a party is to contract out of the common law position, that must be done by clear words (see Modern Engineering Ltd v Gilbert Ash (Northern) Ltd [1974] A.C. 689 at 717H per Lord Diplock) and proceeded to the proposition that the bank in the current case could only show that the common law position had been departed from, if it had specifically brought the attention of the claimants to the presence of the anti-set off clauses in the contract.  That they had not done.  Mr Adams relied on Interfoto both for the existence of the principle and as an example of it.
40.	The judge did not accept this submission and neither can I.  Interfoto was a very different case because the clause was considered by the court to be an unreasonable clause on its face and was contained in a document which had not been signed by the person the claimant sought to hold liable.  It was therefore necessary to examine the well-known ticket cases at the end of the 19th century when a ticket was handed to the defendant with a reference to conditions.  The courts held (in broad terms) that in those circumstances the defendant had to have proper notice of the conditions before he was bound.
41.	In Interfoto itself the claimants delivered 47 photographic transparencies to the defendants together with a delivery note containing nine printed conditions one of which stated that if the transparencies were not returned within 14 days of delivery, the defendant would be charged a fee of £5 per day plus VAT for each transparency retained.  The ratio of the decision in favour of the defendant was that if a clause said to be incorporated was “particularly onerous or unusual”, as the Interfoto clause was, the claimant had to show it had been brought fairly and reasonably to the other party’s attention; since that had not happened, the defendant was not bound.
42.	In the present case there was evidence that the anti-set off clauses were by no means unusual in mortgage transactions, even if not universal.  They may operate harshly on a consumer or indeed a business who has a genuine cross-claim but it is impossible to say that such a clause is onerous in the Interfoto sense of almost being a penalty.  In any event questions of reasonableness are now determined by a consideration of the relevant statute or regulations, which the judge has permitted to go ahead.
43.	Mr Adams submitted that a no set-off clause operated as a clog on the equity of redemption and should be regarded as either void, or at least onerous, by analogy with Kreglinger v New Patagonia Meat and Cold Storage Co. Ltd [1914] A.C. 25.  But the concept of a “clog on the equity” is that it prevents the redemption of the mortgage.  A no-set off clause does not prevent redemption; it merely requires the mortgagor to bring his own proceedings rather than to hold up enforcement of the security.  If he brings his own proceedings in time and the claim is a good one, he will be fully compensated.
44.	It is, moreover, clear in the present case that Mr Woodeson signed the relevant documentation containing both the Mortgage Offer accepting the accompanying General Terms and Conditions including clause 8.1
“All payments to be made hereunder … shall be made 
8.1.1 on the due date in cleared funds and without set-off;”
and the “Private Banking Terms and Conditions” which by clause 4 provided for payment without set off as set out in para 45 of the judgment.
45.	He was also told of the need to take independent advice and indeed had solicitors at the time whom he no doubt consulted.
46.	In any event, when the contractual documentation is signed, the Interfoto principle has no, or extremely limited, application, see Peekay v Australia and New Zealand Bank [2006] EWCA Civ 386, para 43 per Moore-Bick LJ.
47.	For all these reasons the Interfoto case can have no relevance to the facts of the present case.
Stay?
48.	Lastly Mr Adams applied for a stay because the Supreme Court had accepted Mr and Mrs Woodeson’s application for permission to appeal in the possession action “de bene esse” (whatever that may precisely mean) and therefore this court should grant a stay while that application was being considered.
49.	The claimants commenced the present action on 18th February 2016 as a form of counter-attack after the bank appointed receivers to enforce its rights.  We decided that the application for a stay must be refused; not only had no notice of any such application been given to the bank but there was no evidence in support of the application.  In those circumstances even if we were seized of the proceedings of the possession action (which we are not) it would not be right to grant a stay.  We add that we have now been informed that the Supreme Court on 15th May 2018 refused permission to appeal.
Conclusion
50.	For these reasons we would uphold the judge’s order, dismiss this appeal and refuse a stay.  
Lord Justice Leggatt: 
51.	I agree with all of Longmore LJ’s judgment.  I wish, in addition, to explain why I think it unfortunate that the judge was not referred (until after he had given his judgment) to the decision of this court in Spencer Day v Tiuta International Ltd [2014] EWCA Civ 1246, nor to any other case in what Gloster LJ (at para 11 of the Spencer Day case) rightly described as “a long line of binding decisions of the Court of Appeal”.  Had any of those decisions been cited to the judge, significant time and cost might have been saved as it would then have been clear that the mis-selling claims asserted in this action cannot, as a matter of law, be set off against the mortgage debt (irrespective of whether the claimants’ contract with the bank contains a “no set-off” clause).  Those claims can only be pursued as freestanding claims for damages, and then only in so far as they are not time-barred – which depends entirely on the Concealment issue.
52.	In his oral submissions on this appeal Mr Adams on behalf of the claimants accepted that the Spencer Day line of cases shows that a mortgagee cannot be restrained from exercising its right under the mortgage to take possession of the mortgage property (or to appoint receivers to do so) by the fact that the mortgagor has asserted a cross-claim for damages which satisfies the test for an equitable set-off.  But Mr Adams submitted that the authorities do not go so far as to show that the mortgagee is entitled to sell the property and apply the sale proceeds to pay the mortgage debt without giving credit for the cross-claim.
53.	That submission cannot be accepted.  It is clear on examination of this line of cases that they do indeed show this.  
54.	In Samuel Keller (Holdings) Ltd v Martins Bank Ltd [1971] 1 WLR 43 a bank which had a mortgage over properties owned by a company exercised its power of sale.  After the company’s debt to the bank had been discharged out of the sale proceeds, there remained in the bank’s hands a balance of £36,000.  The properties were subject to a second mortgage in favour of a party referred to in the judgments as “the mortgagee”.  The mortgagee had brought proceedings against the company in the Queen’s Bench Division of the High Court claiming payment of a debt of £12,000.  In that action the company counterclaimed for damages which exceeded the amount of the debt and asserted a right of equitable set-off.  The mortgagee also brought a second action in the Chancery Division claiming as against the bank an account of the sum in the bank’s hands which was due to the mortgagee and payment of that sum.  The company intervened in the Chancery action laying claim to the full £36,000 on the ground that its debt to the mortgagee was extinguished by its counterclaim.   The company then applied for the Chancery action to be stayed until the action in the Queen’s Bench Division had been decided.  
55.	Megarry J refused to stay the Chancery action.  He said (at 47-48):
“Unless and until the mortgage in this case is discharged in the appropriate way upon actual payment and acceptance of the sum due, I think that the mortgage remains a mortgage, and that the mortgagee is entitled to any surplus proceeds of sale in the hands of the bank up to the amount properly due under the mortgage.  A doctrine of the discharge of a mortgage debt by the existence or unilateral appropriation of an unliquidated claim is one to which I give no countenance: I regard it as neither convenient nor just. …”
Megarry J further observed (at 48):
“I bear in mind the consideration that, so far as any claim against the £36,000 is concerned, the mortgagee has a secured claim to what is due under the mortgage and the mortgagor has a secured claim as to any surplus. The mortgagor's counterclaim for unliquidated damages was never a claim which was secured on the mortgaged properties or the proceeds of sale thereof, and I do not see why the court should strain to give it what in effect would be a secured position. The counterclaim may fail or it may succeed: to the extent of its success the mortgagor will have the ordinary rights of a judgment creditor against the mortgagee: and I see no injustice in saying that the mortgagor must be content with that.”
56.	The decision of Megarry J was affirmed by the Court of Appeal.
57.	In Mobil Oil Co Ltd v Rawlinson [1981] P&CR 221 the plaintiffs brought proceedings claiming possession of mortgaged property and payment of sums secured by the mortgage.  The mortgagor defended the claim on the ground that he was entitled to set off against the mortgage debt a counterclaim for damages for breaches of contract.  The master made an order for possession but subject to a proviso that the order was not to be enforced if the defendant paid into court such part of the mortgage debt which would be still due even if a set-off was allowed.  Nourse J set aside this proviso on the ground that the master had lacked jurisdiction to impose it in the light of the principle established by the Samuel Keller case.
58.	National Westminster Bank plc v Skelton [1993] 1 WLR 72 was another case in which the plaintiffs sought an order for possession of mortgage property.  The defendant filed a defence and counterclaim for damages which exceeded the mortgage debt.  The defence asserted that the defendant was entitled to set off the damages so that there was no sum due to the bank.  This part of the defence was struck out on the ground that it disclosed no defence in law.  An appeal by the defendant against that decision was dismissed by the Court of Appeal.
59.	Mr Adams submitted that the Skelton case was only concerned with a claim to obtain possession of the mortgage property.  It is true that, in explaining his reasons for dismissing the appeal, Slade LJ (at 77A) began by “stressing that the bank’s claim is one simply for possession, not payment”.  But the part of the defence which was struck out included the assertion of a right to set off the counterclaim against the mortgage debt.  Mr Adams also relied on an observation of Slade LJ (at 78) that:
“I say nothing about the case where a mortgagor establishes that he has a claim to a quantified sum by way of equitable set-off.  Possibly such a claim might have the effect of actually discharging the mortgage debt.”
This observation was, however, obiter and was immediately followed by the statement that:
“In my judgment, however, the Mobil Oil principle is applicable both where the cross-claim is a mere counterclaim and where it is a cross-claim for unliquidated damages which, if established, would give rise to a right by way of equitable set off.”
60.	This decision therefore reaffirms the principle that, at least where the cross-claim said to give rise to a right of equitable set-off is a claim for unliquidated damages, the existence of such a claim cannot be relied on to prevent the mortgagee from enforcing the mortgage without giving credit for the claim.   I would add that, for reasons that I will explain shortly, I think it clear that establishing “a claim to a quantified sum” could only result in the discharge of the mortgage debt if the mortgagor’s entitlement to be paid the sum is established by agreement or by a judgment.  
61.	The same principle was once again affirmed by the Court of Appeal in Barclays Bank plc v Tennet (unreported, 6 June 1984), cited at length by Gloster LJ in the Spencer Day case.  In this case the bank obtained an order for possession of mortgage property and a judgment against the defendants for the amount of the debt secured by the mortgage (subject to a proviso that the judgment was not to be enforced otherwise than by execution of the mortgage without further order of the court).  The defendants appealed on the ground that these orders should not have been made before the court had decided whether a counterclaim for damages asserted by the defendants was valid.  The Court of Appeal rejected that contention and dismissed the appeal.
62.	In the Spencer Day case itself Mr Day brought proceedings against Tiuta asserting an unliquidated claim for damages and a right to set off this claim against a debt owed to Tiuta secured by a legal charge over property so as to release the property from the charge and invalidate the appointment of receivers.  At first instance, Sales J struck out the paragraphs of the particulars of claim which raised the set-off argument.  The claimant’s appeal was dismissed by the Court of Appeal.  
63.	In some of these cases the mortgagor sought to argue that the assertion of a claim for damages which was sufficiently connected with the mortgage debt to satisfy the general test for an equitable set-off had the effect of discharging or reducing the mortgage debt.  That argument was in each case rejected.  It is worth noting, however, that it would have been a bad argument even in the absence of any mortgage, as it based on a misconception of the nature of an equitable set-off.  Where a right of equitable set-off exists, the assertion of the right (reasonably and in good faith) prevents either party from enforcing its claim except in so far as its claim exceeds the value of the other.  But neither claim is extinguished or reduced by the assertion of an equitable set-off.  That can only be done by agreement or by judgment: see e.g. Fearns v Anglo-Dutch Paint & Chemical Co Ltd [2010] EWHC 2366, [2011] 1 WLR 366; Equitas Ltd v Walsham Bros & Co Ltd [2013] EWHC 3264 (Comm), paras 173-185. 
64.	The further principle established by the Spencer Day line of cases is that a mortgagor cannot by asserting an equitable right of set-off prevent the mortgagee from enforcing its security by taking possession of and selling the mortgage property and recovering the mortgage debt (without giving credit for the mortgagor’s claim) from the proceeds of sale.     
65.	This means that in the present case the claimants have no right to prevent the property from being sold and the proceeds used to repay their debt to the bank without giving credit for any damages which they are claiming.  This is so even if and in so far as their claim for damages for mis-selling is not time-barred and whether or not the contract between the claimants and the bank contained a “no set-off” clause.  
66.	The only circumstance in which a right of equitable set-off could arise would be if the bank, rather than enforcing its rights under the mortgage, were to bring an action against the claimants making a personal claim under the loan agreement (for example, in the event that the proceeds of sale proved insufficient to repay the loan).  In that case the claimants could in principle defend the claim by asserting a right to set off their claim for damages (unless prevented from doing so by a term of their contract with the bank).  However, no such personal claim has been made or threatened by the bank.  In these circumstances no possibility of any equitable set-off arises. 
67.	It follows that: (i) the claimants have no reasonable grounds for claiming the first and third declarations sought in this action; and (ii) the only claim capable of being maintained by the claimants is a freestanding claim for damages for mis-selling, to the extent that the claim is not time-barred.   

ORDER

1.	Appeal dismissed.
2.	Stay granted by Lewison LJ and extended by Floyd LJ, be discharged.
3.	Appellant to pay respondent’s costs of the appeal summarily assessed at £40,000 inclusive of VAT.
4.	Permission to appeal to Supreme Court is refused.

Dated 17th May 2018