Horsham Properties Group Ltd v Clark and Another
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BRIGGS,Mr Justice Briggs |
| Judgment Date | 08 October 2008 |
| Neutral Citation | [2008] EWHC 2327 (Ch) |
| Docket Number | Case No: HC 07C0150 |
| Court | Chancery Division |
| Date | 08 October 2008 |
[2008] EWHC 2327 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
MR JUSTICE BRIGGS
Case No: HC 07C0150
Mr Tom Poole (instructed by S J Newman, 100 College Road, Harrow NA1 1EN) for the Claimant
Miss Victoria Williams (instructed by Neves Scott, Trinity House, 82 High Street, Dartford, DA1 1DE) for the Second Defendant
Mr Sam Grodzinski (instructed by Treasury Solicitors, One Kemble Street, London WC2B 4TS) for the Secretary of State
Hearing date: 19 th September 2008
Approved Judgment
I direct that pursuant to CPR PD 39A paragraph 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This judgment follows the trial of a claim by Horsham Properties Group Ltd (“Horsham”) of a claim for possession of premises known as 119 Walderslade Road, Chatham, Kent, of which the claimant is the present registered proprietor. The main issue which I have to decide, which has potentially wide-ranging implications, is whether section 101 of the Law of Property Act 1925 (“the LPA”), construed as it and its predecessors have been since 1860, infringes the Convention rights of mortgagors (and residential mortgagors in particular) by permitting mortgagees to overreach the mortgagor's rights in relation to the mortgaged property by selling it out of court, without first obtaining a court order for possession, or an order for sale.
The claim is made against the defendants Paul James Clark and Carol Ann Beech who, as former registered proprietors of the Property, charged it to GMAC RFC Limited (“GMAC”) by a deed of mortgage dated 23 rd January 2004 (“ the Mortgage”) as security for a loan.
It is not in dispute that the defendants fell into arrears with payments due under the Mortgage and on 24 th April 2006 GMAC appointed Jon Gershinson and Louisa Brooks as joint receivers over the Property, purporting to do so pursuant to a power to that effect contained both in section 101(1)(iii) of the LPA and clause 12 of the Mortgage Conditions to which the Mortgage was subject.
On 14 th September 2006 the receivers contracted to sell the Property at auction, relying for that purpose upon their power to do so conferred by clause 12 of the Mortgage Conditions, there being no equivalent power in the LPA. The purchaser was Coastal Estates Ltd (“Coastal”) and completion took place on 28 th September 2006. The purchase price was £123,000, and was sufficient to pay off the whole of the debt secured by the Mortgage.
The property was transferred by the receivers as agents for GMAC, pursuant to its powers of sale, conferred both by the Mortgage and by section 101. On the same day Coastal transferred the Property to Horsham, which became the registered proprietor of the Property in succession to the defendants.
Thereafter, Horsham issued these proceedings for possession of the Property on 20 th October 2006, claiming that the defendants were trespassing in the Property, on the basis that all their rights in relation to the Property had been overreached by the receivers' sale to Coastal.
There is no relevant dispute of fact. In particular, Miss Beech accepts that she and Mr Clark were in arrears with their mortgage payments, that the mortgage money had become due within the meaning of section 101(1)(iii) of the LPA, that the Mortgage contained the requisite power, in addition to section 101, for GMAC to appoint receivers and that the Mortgage contained the requisite power enabling the receivers to sell the Property free from the rights of the defendants as mortgagors.
Yet further, Miss Beech acknowledges that, prior to the coming into force of the Human Rights Act 1998, she would have had no defence to Horsham's claim for possession. In particular, and having regard to the implications of the decision of the Court of Appeal in Ropaigealach v. Barclays Bank [2000] 1 QB 263, Miss Williams who appeared for Miss Beech sensibly acknowledged that the traditional (pre- Human Rights Act) understanding of the relationship between section 101 of the LPA and section 36 of the Administration of Justice Act 1970 (“section 36”) enabled a mortgagee to sell without seeking a court order permitting him to do so, and enabled a purchaser from the mortgagee to obtain possession without thereby triggering the court's powers to adjourn the proceedings to stay or suspend execution of a judgment for possession or to postpone the date for the delivery of possession in circumstances where it appears that the mortgagor is likely to be able within a reasonable period to pay any sums due under the mortgage or remedy any other default or breach of obligation.
The essence of Miss Beech's defence is that the traditional understanding which I have described is not compatible with the Convention rights of residential mortgagors. The statutory framework would, so Miss Williams submits, only be compatible if either:
i) Section 101 was construed as requiring a mortgagee first to obtain a court order for possession or to make an application for an order permitting sale, and giving the court on such an application a discretion similar to that conferred by section 36; or
ii) Section 36 was construed so as to confer upon the court the discretionary powers to adjourn or suspend the making of a possession order where the application was made, not by the mortgagee, but by the mortgagee's purchaser.
Alternatively, if the statutory framework cannot be so construed, Miss Beech seeks a declaration of incompatibility in relation to section 101.
The unusual nature and potentially far reaching consequences of Miss Beech's defence led H. H. Judge Cox to order these proceedings to be transferred from the Medway County Court to the Chancery Division, on 24 th May 2007, and in due course led to the intervention of the Secretary of State for Justice and to the joinder of GMAC as third party. GMAC took no active part in the trial.
Since I was concerned when the matter came first before me that the relief sought by the claimant fell within the exclusive jurisdiction of the county court, I arranged for myself to be appointed as a judge of the Medway County Court by the Lord Chief Justice with the concurrence of the Lord Chancellor pursuant to section 5 of the County Courts Act 1984, so as to enable at one and the same time a hearing both of the claim for possession and the application, in the alternative, for a declaration of incompatibility.
Although Miss Beech's defence was originally based upon Articles 6 and 8 of the Convention and upon Article 1 of the First Protocol (“A1FP”) Miss Williams both in her supplemental skeleton argument and her oral submissions very sensibly in my judgment confined her case to an alleged infringement of A1FP, conceding that her case under Art 6 was parasitic upon her main case, and that her case under Art 8 could not succeed if her main case failed.
Miss Williams usefully identified four issues or, as she put it, hurdles for her client to surmount. They are as follows:
i) Did the sale of the Property by the receivers deprive Miss Beech of one of her possessions in such a way as to engage A1FP?
ii) If so, can the conditions imposed for a lawful deprivation of possessions by A1FP be satisfied otherwise than by subjecting the mortgagee's power of sale in section 101 to a prior application to the court for permission, at which the court is vested with a discretion to adjourn or stay broadly equivalent to that conferred in possession cases by section 36;
iii) if not, is it possible for section 101 to be read and/or given effect in such a way as to require the mortgagee to make such an application before selling the mortgaged property;
iv) if not, should there be a declaration of incompatibility.
Without much enthusiasm Miss Williams advanced an alternative case that compatibility with A1FP might be achieved if section 36 was construed so as to impose upon any purchaser from a mortgagee an obligation to seek a court order for possession, and to confer upon the court in such circumstances the same discretion as it plainly has on an application for possession by the mortgagee itself.
Before addressing those issues in turn, it is necessary in my judgment to address with some precision the nature of Miss Beech's rights in relation to the Property following the grant of the Mortgage by her and Mr Clark to GMAC. A useful general description of the consequences of the grant of a legal mortgage since 1925 is set out in the following passage in the judgment of Chadwick LJ in Ropaigealach (supra) at page 271g to 272b:
“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. A charge by deed expressed to be by way of legal mortgage takes effect as if a mortgage term of 3,000 years had been created in favour of the mortgagee - see section 87(1) of that Act and, where the land is registered land, section 27(1) of the Land Registration Act 1925. The effect, as a matter of legal analysis, is that the mortgagor demises his immediate estate to the mortgagee; who thereupon becomes entitled to possession by virtue of the estate which he has acquired. The position is described in Halsbury's Laws of England, 4 th ed., vol 32 (1980), p. 308, para. 672:
“Where a legal [mortgage] has been created, whether by demise or by legal charge, and no provision is made for retention of...
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