Mortgage – Possession order – Procedure – Claimant mortgagee seeking possession order in respect of mortgaged properties – Whether claimant estopped from asserting breach relied on as ground for possession – Whether mortgaged property including residential property such that possession order precluded for failure of claimant to comply with procedure in CPR 55.10 – Summary judgment given in part
The claimant held a legal charge over several properties as security for a loan facility granted to the first defendant in the sum of £9.3m. At the time of the loan, the claimant understood that the first defendant had let the properties to a substantial company with good covenants. It subsequently discovered that the first defendant had accepted a surrender of those leases and relet the properties to the second defendant company. The claimant considered that the first defendant had breached the terms of the charge by granting occupation rights without its consent. It called in the loan, appointed receivers in respect of the properties, under the Law of Property Act 1925, and brought possession proceedings against the defendants. The third defendant, a company in administration, was joined to those proceedings with the consent of its administrators because it was believed to occupy some of the properties. However, it played no part in the proceedings.
The first and second defendants contended that: (i) the claimant had consented to the surrender and reletting of the properties; (ii) it was estopped from objecting to the reletting since the receivers had invited the second defendant to refurbish and remain in the properties and the claimant had, by that invitation together with the acceptance of rent, waived the original breach; and (iii) some of the properties were not wholly commercial but contained residential parts, such that the claimant’s failure to comply with the procedural requirements of CPR 55.10 for possession claims relating to residential property, including the requirement to send notice of the proceedings to the premises in question, precluded the making of a possession order. Although the properties had been exclusively commercial at the date of the facility agreement and charge, evidence showed that the defendants had since taken steps to covert some of them to residential. However, an investigation and report commissioned by the claimants indicated that earlier residential occupiers had vacated and that there was no residential occupation at the time of that report. The claimant applied for summary judgment on the claim in its favour.
Held: Summary judgment was given for the claimant on part of its claim.
(1) There was no evidence to support the defendants’ contention that the claimant had consented to the surrender and reletting of the properties and that contention could not succeed. Furthermore, the defendants’ estoppel argument was misconceived and unsupported by the facts. Under section 109(2) of the 1925 Act, receivers were the agents of the mortgagor, not the mortgagee: Gomba Holdings (UK) Ltd v Minories Finance Ltd [1988] 1 WLR 1231 applied. The defendants had established that the claimant had authorised the receivers to act as its agent or allowed the second defendant to refurbish or remain in the properties. Nor was there any evidence that it had accepted rent. Moreover, an invitation to the second defendant to remain and the acceptance of rent would not, in any event, amount to a waiver of the first defendant’s original breach in failing to obtain the claimant’s consent.
(2) The court could not conclude without a trial that some of the properties did not have a residential element. CPR 55.10 applied where the land in respect of which possession was sought comprised, or included, residential property on an objective view and was not confined to cases where the claimant knew or believed that someone was in residential occupation. It was designed to ensure that such persons, even those not known or believed to be in residential occupation, were notified of the claim in time to enable them to assert their rights or to apply to the local authority for rehousing. In the instant case, notwithstanding the report obtained by the claimant, there was a risk of residential occupiers if, for instance they had been allowed into occupation since the report was obtained.
Accordingly, the appropriate course was to grant a possession order to the claimant in respect of those properties that were not alleged to have a residential element and, in respect of the others, to adjourn the proceedings to enable the claimant to follow the CPR 55.11 procedure. That deferral was not intended to benefit the defendants, but was for the benefit of any other persons who might be in occupation.
Sonia Tolaney (instructed by DLA Piper UK LLP, of Leeds) appeared for the claimant; Martin Rodger QC (instructed by Key2Law) appeared for the defendants.
Sally Dobson, barrister
