Civil procedure – Summary judgment — Mortgage – First defendant mortgagee appointing second defendant receivers under Law of Property Act 1925 – Claimant seeking injunctive relief on ground that receivers appointed unlawfully – Defendants applying for summary judgment – Whether receivers being validly appointed – Whether claim amounting to abuse of process – Application granted
The claimant owned six buy-to-let properties which were mortgaged to the first defendant. The claimant sublet the properties to another company connected to it which, in turn, sublet the properties. The first defendant appointed the second defendants as receivers over all the properties under the Law of Property Act 1925. The receivers obtained possession orders over all but one of the properties.
The claimant had made unsuccessful applications in the county court to stop execution of the warrant for possession and seeking, among other things, a declaration that the appointment of the second defendants was unlawful and an injunction to stop all actions of the second defendants in exercising their alleged rights under the mortgage. It subsequently brought proceedings in the High Court seeking similar declaratory and injunctive relief.
The defendants applied for summary judgment under CPR, rule 24(2) and/or to strike out the claim under rule 3.4(2)(a) and (b), as showing no real prospect of success. They argued that the second defendants had been properly appointed since the claimant was in arrears of rent and had breached the terms of the mortgage agreement by granting tenancies of the properties without the consent of the first defendant; and that the second defendants had acted within their powers.
Held: The application was granted.
The receivers had been validly appointed on the basis of arrears of rent. Since each mortgage had been at least two months in arrears at the date of their appointment and there was no basis for attacking the mechanics of the appointment.
If the mortgage offer did not authorise and require the claimant to let the property, then it was a breach to do so without consent. Even if the first defendant had contemplated that there would be a letting, it nevertheless had a real interest in knowing, and having the right to vet, the terms of any tenancy. The first defendant in its defence expressly denied that any consent had been sought or obtained in relation to the tenancies. The burden of proof was on the mortgagor to show that consent had been granted but the claimant had made no attempt to discharge that burden. If, in the alternative, the mortgage offer had authorised and required the claimant to let, the court would not expect the permitted letting to include a letting to a company, let alone a company connected with the borrower. Either way, there was no evidence that the first defendant had consented to the actual form of the tenancy: Taylor v Ellis [1960] Ch 368 applied.
The first defendant had been entitled to consolidate the mortgages. The right to combine mortgages was not restricted by section 93 of the 1925 Act and the mortgagee had the right to stop the borrower from paying off one mortgage in isolation. The consolidation of the mortgages did not affect the claimant’s legal rights or responsibilities. The power of consolidation was, from the claimant’s perspective, a restriction rather than a right or responsibility. Further the exercise by the first defendant of its power of consolidation might have a commercial effect on the borrower but did not affect his legal rights: Pledge v White [1896] AC 187 applied.
Although the various county court proceedings did not all relate to the same properties and gave rise to slightly different considerations, all of them related to one or more of the six properties which were the subject of the current proceedings and all were predicated upon the defendants having been improperly appointed or improperly exercising their powers. The court was satisfied that the current proceedings were an abuse of process in attempting to relitigate hopeless allegations that had previously been struck out and were totally without merit. The entire claim disclosed no reasonable cause of action and there was no other compelling reason for a trial. Accordingly the court would exercise its discretion by granting summary judgment to the defendants: Johnson v Gore Wood [2002] 2 AC 1 referred to.
Stewart Patterson (instructed by Direct Access) appeared for the claimant; Francis Moraes (instructed by Walker Morris LLP) appeared for the first defendant; Jonathan Lewis (instructed by RPC LLP) appeared for the second defendants.
Eileen O’Grady, barrister