Mortgages Flashcards
Alliance Leicester plc v Slayford [2001] 1 All ER
reposession - lender remedies
Held in favour of C, the mortgage lender; C was not prevented from pursuing a different remedy against D1 following its failure to realise its security through possession proceedings.
(Peter Gibson LJ, [20]):
“a mortgagee has a number of remedies all designed to enforce payment of what is due to him under the mortgage, which may be pursued concurrently as soon as the mortgagor is in default or successively, until payment in full is recovered….”
D1 granted a legal charge in respect of his residential property to C
C, a mortgage lender, brought a claim for possession of the property against D1 and his wife D2, for having consented to the legal charge
D2 argued that she had not understood the effect of the consent given by her and that her equitable interest in the property was not subject to the claimant’s legal charge
C, who could not get a possession order because D2 had an equitable defence, sought to claim a monetary judgment in respect of arrears owed by D1 and argued that the amended claim could not be regarded as an abuse of process
Abbey National Building Society v Cann [1990] UKHL 3
reposession - scintillia temporis
D did not have an overriding interest; she was never in actual occupation. there was no moment (scintillia temporis) between the transfer of a property and the execution of a mortgage in which the legal estate vested in the buyer free of the charge, the purchaser never acquires anything but the equity of redemption
(Lord Oliver)
= the HoL rejected the idea that there is a moment in time between the acquisition of the estate and the creation of the legal charge = an acquisition mortgage lender automatically has priority: “Of course, as a matter of legal theory, a person cannot charge a legal estate that he does not have…Nevertheless, I cannot help feeling that it flies in the face of reality. The reality is that, in the vast majority of cases, the acquisition of the legal estate and the charge are not only precisely simultaneous but indissolubly bound together.
D, together with her son, bought the house using mortgage from C
The son could not repay and C sought possession
D argued that she had an equitable proprietary right that arose before the charge was completed (based on her financial contribution and promises from her son) and that she moved in the carpets 35 minutes before the charge was completed and was thus in actual occupation
Ropaigealach v Barclays Bank [1998] EWCA Civ 1960
right to possessions - legal requirements
Held, dismissing the appeal, that it was not possible to be sure that Parliament, in enacting s.36, must have intended that a lender could only exercise its common law right to possession of a house where it had obtained a court order. That circumstance, together with the statutory context and the language employed, indicated that s.36 had not been intended to deal with the protection of a borrower against a lender who exercised his common law right to take possession by peaceable entry without seeking a possession order. It was also relevant that a borrower in occupation was protected by the Criminal Law Act 1977 s.6 .
On 8 October 1996, the bank informed Mr Ropaigealach by letter that it was taking steps to realise its security. A letter in the same terms was sent to Mrs Ropaigealach at a different address. The bank wrote again, on 7 November to Mr and Mrs Ropaigealach at their home, the security, 16 Windsor Esplanade. Before the end of the year the bank sold it at auction.[2]
The Ropaigealachs did not receive the last letter from Barclays (with final demand for payment, as earlier, warning the property would be sold but more imminently) because they were having it renovated and were away. They heard of the impending nature of the sale through a neighbour.
Four-Maids Ltd v Dudley Marshall Properties Ltd [1957] Ch 317 at 320 (Harman J)
possession claims - legal requirements
(Harman J):
“They all assumed that it involved some kind of default on the part of the mortgagor, but I said there, and I repeat now, that the right of the mortgagee to possession in the absence of some contract has nothing to do with default on the part of the mortgagor. The mortgagee may go into possession before the ink is dry on the mortgage…”
Held, the mortgagee was entitled to an order for possession; there would be such an order, but its operation would be postponed for two months.
Principle, The right of a mortgagee to possession in the absence of some specific contract has nothing to do with default on the part of the mortgagor. The mortgagor may go into possession at any time after execution of the mortgage unless by a term expressed or necessarily implied in the contract he has contracted himself out of that right. If there is an attornment clause, he must give notice.
Facts: A mortgagee took out a summons underRSC Ord.55 r.5a, asking for an order for possession of the mortgaged property. The mortgage contained a provision that so long as interest was punctually paid the mortgage money would not be called in before December 31, 1958. The mortgage interest had fallen into arrear, although the interest was not in arrear at the time of the hearing of the summons.
Quennell v Maltby
possesion claim- legal requirement
Order for possession was denied
Lord Denning MR
A mortgagee will be restrained from getting possession except when it is sought bona fide and reasonably for the purpose of enforcing the security and then only subject to such conditions as the court thinks fit to impose
Mr Q owed large house, rented out to group of students and property mortgaged to bank. Students have a leased and under the Rent Act, they had v strong security of tenure so very limited grounds for mr Q to evict them. He wanted them out, wanted to circumvent Rent Act.
He decided wife would pay off mortgage and by doing that, she became mortgagee (subrogation process). Mrs Q paid off and thus become a mortgagee i.e. same rights the bank has etc. once paid off, she brought a claim for possession and as mortgage she would have priority over students.
Cheltenham and Gloucester v Norgan [1996] 1 WLR 343
s 36 AJA - defence to reposession claims - reasonable period
Waite LJ: “‘the court should take as its starting point the full term of the mortgage”.
(Evans LJ): However, this presumption can be rebutted, considerations that could justify a shorter reasonable period
(a)How much can the borrower reasonably afford to pay, both now and in the future?
(b)If the borrower has a temporary difficulty in meeting his obligations, how long is the difficulty likely to last?
(c)What was the reason for the arrears which have accumulated?
(d) How much remains of the original term?
(e) What are relevant contractual terms, and what type of mortgage is it i.e. when is the principal due to be repaid?
(f)Is it a case where the Court should exercise its power to disregard accelerated payment provisions (section 8 of the 1973 Act)?
(g)Is it reasonable to expect the lender, in the circumstances of the particular case, to recoup the arrears of interest (1) over the whole of the original term, or (2) within a shorter period, or even (3) within a longer period, i.e. by extending the repayment period? Is it reasonable to expect the lender to capitalise the interest, or not?
(h)Are there any reasons affecting the security which should influence the length of the period for payment?
Appeal allowed, case remitted to county court
The judge had erred in adopting a repayment period of 4 years unrelated to the outstanding term of the mortgage of 3 years
D bought her husband’s half share in their dwelling house for 90k by means of a mortgage with a building society
C, which bought over the building society, obtained a possession order in 1990 but was it repeatedly suspended, with the arrears remaining substantial
In 1993 to C applied to issue a possession warrant, the judge determined that 4 years is the reasonable period but since D was unlikely to make prepayments within that period, there should be no delay
D appealed, on the ground that the starting point for the reasonable period should be length of the mortgage
Southern & District Finance Ltd v Barnes (1995) 27 HLR 691 at 69
possession claims - defences - s 129 + s 135 CCA
(Leggatt LJ): “When a time order is applied for, or a possession order sought of land to which a regulated agreement applies, the court must first consider whether it is just to make a time order. That will involve consideration of all the circumstances of the case, and of the position of the creditor as well as the debtor.”
Held, that
(1) in considering whether to grant a time order the court should consider whether it was just to do so. This involved consideration of all the circumstances of the case including the position of the creditor, as well as the debtor;
(2) when a time order was made it should normally be for a stipulated period and on account of financial difficulty. No time order should be made where the debtor was unlikely to be able to resume payment of at least the contractual instalments. In such cases it would be more equitable to enforce the regulated agreement;
(3) for time orders made in relation to the non payment of money, the “sum owed” meant every sum which was due under the agreement; in the case of possession proceedings it comprised the total indebtedness. The court should consider what instalments would be reasonable both as to amount and timing, having regard to the debtor’s means;
(4) a time order could include any amendment of the agreement which the court considered just to both parties and which was a consequence of a term of the order. On amendment of the rate of interest, it was relevant that smaller instalments would result both in a liability to pay interest on accumulated arrears and in an extended period of repayment. The high rate of interest usually payable under regulated agreements to some extent took into account the risk of difficulties in repayment;
(5) where a time order was made and the debtor owed the whole outstanding balance due under the loan, this would have consequences for the term of the loan or the interest rate or both and (6) if justice required the making of a time order, the court should also suspend any possession order that it had made, for as long as the terms of the time order were complied with.
B and two others appealed against orders for possession of property on which a loan was secured. All three cases hinged on the interpretation of the Consumer Credit Act 1974 ss.129 and 130 . Section 129 gave the court a wide discretion in relation to the granting of time orders and s.130(6) gave the court the power to make an order amending any security in consequence of a term of the order. Each of the appeals concerned a “regulated agreement” which allowed the courts to vary or revoke a time order.
Equity Home Loans Ltd v Dolores Nancy Lewis
possession claims - defences - s 129 + s 135 CCA
In the same case as Southern & District Finance Plc v Barnes
powers used, court made a time order to reschedule a 17k debt over 15 years (3 years more than her mortgage term). Mrs L, given 6 months to get back on her feet where she would only to pay 25£ for the period and then less than 100£ slashed her interest rate - no interest applied to 17k under time order response to the fact that the interest rate was extortionate and court was angered by this.
Thus, suspended possession was made to give effect to that time order
Silven Properties Ltd v RBS [2003] EWCA Civ 1409
power of sale
(Lightman J):
[13] “A mortgagee has no duty at any time to exercise his powers as mortgagee to sell…”
[14] “ In default of provision to the contrary in the mortgage, the power is conferred upon the mortgagee by way of bargain by the mortgagor for his own benefit and he has an unfettered discretion to sell when he likes to achieve repayment of the debt which he is owed: see Cuckmere Brick Co v. Mutual Finance Limited [1971] Ch 949 (“Cuckmere”) at 969G….It does not matter that the time may be unpropitious and that by waiting a higher price could be obtained: he is not bound to postpone in the hope of obtaining a better price…”
[16] “The mortgagee is entitled to sell the mortgaged property as it is. He is under no obligation to improve it or increase its value.”
[19] “When and if the mortgagee does exercise the power of sale, he comes under a duty in equity …to the mortgagor (and all others interested in the equity of redemption) to take reasonable precautions to obtain ‘the fair’ or the ‘true market’ value of or the ‘proper price’ for the mortgaged property at the date of sale”.
D was not under a duty to pursue planning applications. A mortgagee in possession has no duty to exercise his power of sale; he is required to take reasonable care of the property but is not required to improve it.
RBS (D), the mortgagee, obtained possession of a property after the borrower (C) defaulted
C alleged that D was under duties not to sell the properties as they were but to
pursue planning applications;
proceed with the grant of leases; and
defer a sale until these goals were achieved so as to obtain the best price obtainable
Downsview Nominees Ltd v First City Corp Ltd [1993] AC 295
power of sale
(Lord Templeman): “powers conferred on a mortgagee must be exercised in good faith for the purpose of obtaining repayment …”
Held: although a mortgagee and a receiver appointed by him owe no duty of care to subsequent encumbrancers generally, where they have acted in bad faith, as here, they will be liable.
Principle: A mortgagee owes no duty in negligence to a subsequent mortgagee, but will be liable for damages where he has acted in bad faith, to the detriment of the second mortgagee
. A debenture-holder sought to enforce the debenture, and appointed a receiver in order to prevent a second debenture-holder from enforcing his debenture over the company. The receivers appointed by the first debenture-holder allowed the company to continue trading, during which time it made considerable losses. The second debenture-holder brought an action claiming breach of duty by the first debenture-holder and the receive
Tse Kwong Lam v Wong Chit Sen ([1983] 1 WLR 1349, PC)
power of sale - privy council
(Lord Templeman): “[T]here is no hard and fast rule that a mortgagee may not sell to a company in which he is interested. The mortgagee and the company seeking to uphold the transaction must show that the sale was in good faith and that the mortgagee took reasonable precautions to obtain the best price reasonably obtainable at the time.”
On appeal from the Hong Kong Court of Appeal, the Privy Council declared that persons connected with the mortgagee could buy the mortgaged property. But in these circumstances the burden of showing that the mortgagee had used best endeavours to secure the best price reasonably obtainable was especially heavy. The mortgagee had not done enough to show that best endeavours had been used.
Principle: When a mortgagee sells to a connected person the burden of proving good faith and the use of best endeavours to secure the best price reasonably obtainable is especially heavy.
the mortgagee exercised the power of sale contained in the mortgage. It was bought at auction by a company connected with the mortgagee.
Meretz Investments v ACP Ltd [2007] 2 WLR 403
power of sale
Lewison J) at [315]:
“The cases do support the proposition that a power of sale is improperly exercised if it is no part of the mortgagee’s purpose to recover the debt secured by the mortgage. Where, however, a mortgagee has mixed motives (or purposes) one of which is a genuine purpose of recovering, in whole or in part, the amount secured by the mortgage, then in my judgment his exercise of the power of sale will not be invalidated on that ground. In addition I consider that it is legitimate for a mortgagee to exercise his powers for the purpose of protecting his security.”
Held: F had exercised its power of sale for a proper purpose and was not in breach of any equitable duty owed to M.
Principle: It would be an improper exercise of a mortgagee’s power of sale if no part of his motive for exercising that power was to recover the debt secured by the mortgage. However, if a mortgagee had mixed motives for exercising that power and one of the motives was to recover the debt secured by the mortgage, his exercise of the power of sale would not be invalidated.
The claimants (M and B) brought an action against the defendants (X, F and T) in connection with the purported sale by F to T of a long lease of a partially completed penthouse development on the roof of a block of flats. M and B were subsidiaries of the same parent company. B owned the freehold of the block of flats and M was the leaseholder of one of the flats. B had granted X a long lease of the roof so that X could develop it. X granted F, its parent company, a first charge over the development lease. F was therefore the mortgagee of the development lease and X was the leaseholder. F had purported to sell the lease to T, a private individual who was interested in acquiring one of the penthouses. The parties had fallen into dispute, and the issues for determination centred on (i) the transfer of the development lease to T; (ii) the lease-back option contained in the original agreement between B and X; (iii) whether economic torts had been committed by X, F and T.
