Order for possession of mortgaged property – Defendants, husband and wife, having different interests – Judge exercising discretion to refuse order for sale under Law of Property Act 1925, section 30 – Order made on basis that plaintiff entitled to exercise rights of subrogation rights – Whether order for possession wrongly made in absence of figures establishing sums due under previous mortgage
The freehold of a property was owned by the first and second defendants, a husband and wife, and subject to a charge to the Halifax Building Society, the Halifax mortgage. The Halifax Building Society was then independent of the plaintiff, HMSL, although they subsequently became members of the same group.The leasehold of a part of the property was owned by the husband, but held beneficially for him and his wife in equal shares. The husband arranged a remortgage over the leasehold to secure a loan of £129,000 from HMSL. The proceeds of the remortgage were used to discharge the Halifax mortgage. The husband defaulted and in 1991 HMSL obtained an order for possession against the husband. The husband and wife remained in occupation. By 1996 the wife had been joined as second defendant, and on December 17 1996 the judge made an order for possession and sale on the basis that HMSL was entitled to exercise rights of subrogation in respect of the Halifax mortgage. He refused, in the circumstances of the case, to exercise his discretion under section 30 of the Law of Property Act 1925 to order a sale of the leasehold interest. The wife appealed contending that the judge had been wrong to make an order for possession or sale without first establishing whether and if so what sums were due under the Halifax mortgage.
Held The appeal was allowed in so far as the order for possession and sale was based upon the plaintiff’s subrogation rights.
1. The principle that a third party who paid off a mortgage was presumed, unless the contrary appeared, to intend that the mortgage be kept alive for his own benefit (see Ghana Commercial Bank v Chandiram [1960] AC 732, at p745) extended to cases where the proceeds of a remortgage were used to discharge an existing mortgage: see Boscawen v Bajwa [1996] 1 WLR 328, at p334.
2. The plaintiff’s rights which were transferred to the third party were those which existed immediately before the discharge took place. The extent to which they might be exercised by the third party thereafter by virtue of subrogation depended also upon the terms on which the money was advanced to the borrower by the new lender. Those rights might also be affected by subsequent events. Those issues had not been developed before the judge who had expressly left open the question whether any and if so what sums were due in respect of the Halifax mortgage. In those circumstances he had been wrong to order possession and sale by reference to the plaintiff’s subrogated rights under that mortgage without first determining what those rights were.
3. The judge’s decision, in the circumstances of the case, not to order a sale of the leasehold property under the court’s power under section 30, assuming such a power existed, was to be upheld.
Araba Taylor (instructed by Russell Jones & Walker) appeared for the appellant; Thomas Putnam and Sheelagh Putnam (instructed by Glenisters, of Ruislip) appeared for the respondent.
