Admission of debt

Bradford & Bingley plc v Rashid [2006] All ER (D) 145 (Jul); TLR 14 July

The claimants granted a mortgage to the defendant who fell into arrears with his payments, the last payment being made on 3 January 1991. A possession order was obtained and the property sold, resulting in a shortfall of £15,583. The 12-year period prescribed by s20(1) of the Limitation Act 1980 for recovering the principal mortgage debt began on 3 January 1991, the date of the last payment, and had expired. However, on 26 September 2001 an advice centre on behalf of the defendant wrote: ‘Please find attached Mr Rashid’s financial statement, which clearly indicates that at present he is not in a position to repay the outstanding balance, owed to you …’ On 4 October 2001, the advice centre wrote that Mr Rashid was willing to pay about £500 towards the outstanding amount as a final settlement. The letters were admissible as acknowledgements of the debt under s29(5) of the Act, which provides that ‘where any right of action has accrued to recover … any debt or any other liquidated pecuniary claim… and the person liable … for the claim acknowledges the claim … the rights shall be treated as having accrued on and not before the date of the acknowledgement …’. The correspondence was not expressed to be without prejudice and therefore to determine whether it was protected, it was necessary to decide whether the surrounding circumstances made it clear that the parties sought to compromise a dispute. There was no dispute about liability on the face of the correspondence. The without prejudice rule has no application to apparently open communication designed only to discuss the repayment of an admitted liability rather than to negotiate and compromise a disputed liability. Admissions of liability for the purposes of s29(5) are not confined to admissions of debts where quantum and liability are indisputable. If the correspondence had been without prejudice, it would only have been in exceptional circumstances, such as an ambiguous impropriety, that admissions made in the course of without prejudice communications are admissible.