Mortgage Arrears in UK Law

The principle, which Slade L.J. called "the Mobil Oil principle", can be stated thus. Contract and statute apart, a legal mortgagee's right to possession of the mortgaged property cannot be defeated by a cross-claim on the part of the mortgagor, even if it is both liquidated and admitted and even if it exceeds the amount of the mortgage arrears.

The court must consider all the circumstances including the documents relating to the agreement and may well have to ascertain objectively the purpose of the borrowing. For the reasons already given I reject Mr. Hodgkinson's submission that it is only permissible to look at the contractual documents. The purpose of the court's consideration is to arrive at what in reality is the true cost to the debtor of the credit provided.

I cannot accept the submission of Mr Malek that the power given to the Claimant by these loan agreements to set the interest rates from time to time is completely unfettered. If that were so, it would mean that the Claimant would be completely free, in theory at least, to specify interest rates at the most exorbitant level.

It is important to recognise at the outset what was the true nature of the plaintiff's application in 1993. He was not bringing an action upon the judgment debt which he had obtained in 1979. He was not even seeking to enforce execution of that judgment. He did that when he applied for and obtained the Charging Order in 1982. In 1993 he was a secured creditor with the statutory equivalent of an equitable charge.

I have already found that there was no concluded contract prior to 11 April 2013. In my view, the proper contractual analysis of what occurred on 11 April 2015 was that a contract was formed on the terms set out in the 8 April 2013 email for which part of the consideration was the actual execution of the declarations of trust. I agree with Mr Sims that it would not be right for me artificially to devise some collateral contract simply for the purpose of evading the 1989 Act.

The genesis of section 36 of the Administration of Justice Act 1970 is not in dispute. Since 1925 a mortgage of freehold land has taken effect as a demise for a term of years absolute, subject to proviso for redemption —see section 85 of the Law of Property Act 1925.