Lovers of Monopoly enjoy pocketing play money after picking up a ‘community chest’ card announcing that a bank error has been made in their favour. However, as a case concerning a high street bank’s mistaken discharge of thousands of mortgages showed, such glaring errors can, in the real world, be reversed.
Over an 11-month period, and at great expense, the bank embarked on a project to tidy up its mortgage books. It came up with what it believed to be an accurate list of many thousands of mortgages that had not been formally cancelled although the debts they were originally meant to secure had been paid off.
After the bank requested the Land Registry to discharge those mortgages, some borrowers asked if a mistake had been made in that, so far as they were concerned, they still owed money on their mortgages. By the time the error was identified, more than 25,000 mortgages had been discharged. Following a laborious checking process, the bank contended that more than 5,000 of those mortgages still secured outstanding debts and had been cancelled in error.
After the bank launched proceedings, the High Court found that it had made a clear and distinct mistake based on its positive belief that the borrowers concerned no longer owed it money and that the mortgages thus served no useful purpose. It had taken some care in producing the list but, due to the mistake, it had inadvertently turned itself from a secured into an unsecured creditor. It was plainly not the bank’s intention to make a gift of its security to its customers.
The Court thus had the power to reverse the mistake and instruct the Land Registry to reinstate relevant mortgages. To achieve that objective, however, the bank would further have to establish that it would be unconscionable for its customers to retain the benefit of the mistake. That would require consideration of the personal circumstances of each individual borrower in further proceedings.
The Court noted that the Land Registry had faithfully followed the bank’s instructions and bore no responsibility for what happened. At this stage of the proceedings, the bank pursued its case only against one named couple whose position was said to be typical of all the thousands of affected borrowers. They did not contend that it would be unconscionable to set aside the mistaken discharge of their mortgage and the bank was granted summary judgment against them.