Kavesseri Veetil Pradeep Menon v Nathan Pask and Rosalind Goode (as Joint Fixed Charge Receivers)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 07 October 2019 |
| Neutral Citation | [2019] EWHC 2611 (Ch) |
| Date | 07 October 2019 |
| Court | Chancery Division |
| Docket Number | Case No: CH-2018-000333 |
[2019] EWHC 2611 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY APPEALS
ORDER OF HHJ DIGHT CBE
DATED 10TH DECEMBER 2018
COUNTY COURT CLAIM NO E1PP8171
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Mann
Case No: CH-2018-000333
Michael Walsh (instructed by RadcliffesLeBrasseur) for the Appellants
Francis Moraes (instructed by Mishcon de Reya LLP) for the Respondents
Hearing date: Thursday, 9 th May 2019, 29 th July 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 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.
Introduction
This is an appeal from a decision of HHJ Dight in which (in substance) he granted possession in favour of LPA receivers of property known as 43 Porchester Terrace, London W2. Two significant questions arise on this appeal – can a receiver appointed under a mortgage of property owned by individuals (not a company) claim possession of the property occupied by the mortgagors by suing in his or her own name as receiver (or at all); and if so, does the court have the usual discretion to postpone possession on terms under section 36 of the Administration of Justice Act 1970. There is no direct authority on either point. The judge below decided the former point (when the action was differently constituted, as will appear) against the defendant property owners, and decided that on the terms of the 1970 Act no discretion was available because the action was being brought by receivers and not by mortgagees. The result was that he made a possession order. Both main points arising are significant points of principle.
History 1
The defendants, Mr and Mrs Menon, charged the property to Bank of Singapore Ltd by a legal charge dated 14 th March 2014. It secured the payment on demand of the liabilities of a company known as Silky Way Investments Ltd to the bank, which was also a party to the charge as borrower, and was in a familiar form. Clause 5.3 provided for the appointment of a receiver, and for the receiver to be treated as being the agent of the borrower:
“5.3. The Bank may under the hand of any official or manager or by deed appoint or remove a receiver or receivers of the Property and may fix and pay the fees of a receiver but any receiver shall be deemed to be the agent of the Borrower and the Borrower shall be solely responsible for the receiver's acts or defaults and remuneration.
5.4 All or any of the powers conferred on a receiver by clause 8 may be exercised by the Bank without first appointing a receiver or notwithstanding any appointment.”
Clause 8 deals with the powers of a Receiver:
“ Receiver
8.1 Any receiver appointed by the Bank shall (in addition to all powers conferred on him by law) have the following powers which in the case of joint receivers may be exercised jointly or severally:
8.1.1 to take possession of and generally manage the Property
8.1.2 [power to carry out works]
8.1.3 [power to purchase or acquire land and release rights]
8.1.4 to sell lease surrender or accept surrenders of leases or charges or otherwise deal with and dispose of the Property without restriction including (without limitation) power to dispose of any fixtures separately from the Property.
8.1.5 to carry into effect and complete any transaction by executing deeds or documents in the name of or on behalf of the Mortgagor Borrower
8.1.6 [continuation and defence of proceedings and to compromise]
8.1.7 [power to insure]
8.1.8 [employment of advisers consultants etc]
8.1.9 [borrowing money]
8.1.10 [power to do other incidental acts]
…
8.3 A receiver shall apply all money he receives first in repayment of all money borrowed by him and his expenses and liabilities and in payment of his fees and secondly towards the remaining matters specified in Section 109(8) of the Law of Property Act 1925.
…
8.5 Any receiver appointed hereunder shall so far as the law allows be deemed to be the agent of the Mortgagor and Borrower for all purposes and the Mortgagor and Borrower shall be solely responsible for its acts and omissions defaults and remuneration and the Bank shall not be under any liability for his remuneration or otherwise.” (my emphasis)
The borrower defaulted and demand was made of the mortgagors on 24 th October 2017, following which receivers (Nathan Pask and Rosalind Goode of GVA Grimley) were appointed on 9 th November 2017 in exercise of all available powers under the Law of Property Act 1925 and the legal charge. The receivers were appointed in respect of “all of the Property (and any related rental income)”, and paragraph 3 provided for delegation:
“3. The Lender further delegates to the Receivers all powers on the part of the Lender and/or the Receivers referred to in the Legal Charge.”
The receivers then started proceedings to obtain possession of the property. The proceedings were first brought by “Silky Way Investments Ltd, acting by Nathan Pask and Rosalind Goode as joint fixed charge receivers of [the property]”. That was a mistake. They were not appointed over the assets of the borrower company, they had no authority to act in its name and the company had no rights at all which they could enforce anyway. That mistake was appreciated and they therefore sought to amend to change the claimants. The amendment they chose to make was to substitute the names of the Menons, acting by the receivers. The action was thus constituted as the Menons suing the Menons for possession, with the claimant Menons acting by their agents.
Having pleaded once without taking a point on the identity of the claimants, shortly before trial of the action the defendants sought permission to amend their Defence to take that point in the form of an averment (as described by the judge) that the receivers did not have a right to make the claim for possession, and pleading reliance on section 36. That amendment application came before the judge at the trial, and he regarded the principal question before him was whether to allow that amendment. It was in the context of that application that he decided the first question that arose, namely the ability of receivers to claim possession.
The judge did not consider whether or not it was too late to amend (a point which was taken by the receivers) but instead refused permission to amend on the footing that the point, if pleaded, would still not give the Menons an arguable defence (judgment paragraph 29). On that footing he refused permission to amend (he did not expressly say so, but that is implicit in his judgment and is reflected in paragraph 1 of his order of 10 December 2018). Basically he held that receivers had a right to possession. He took some trouble to consider the nature of their agency and the rights flowing from it and said:
“17. Therefore the analysis if one looks at both the Silven Properties case and the Re [Satoris] case is that the receivers do not get title as such, they make their title as deemed agents of the mortgagor. The property does not vest in them but they can prevent the mortgagors from exercising the rights which the mortgagors have agreed that the receivers can exercise. That in my judgement is the true effect of section 109 [of the Law of Property Act 1925] …
18. That right must also be construed in the light of the fact that the right of the mortgagors to possession of the property is postponed to the right of the receivers to exercise control of the property. According to Lord Justice Lindley's analysis the mortgagor would, in my judgement, be restrained by the appointment of a receiver from exercising their right to possession in the face of a claim by the receivers to exercise that right to possession themselves. If one stands back and asks, in the same way that the matter was analysed by Lady Justice Arden in McDonald v McDonald [2014] EWCA Civ 1049, what is the purpose behind the provisions that are being construed and how should they be given effect the answer is, in my judgement, obvious. The receivers are intended to get in the property to enable it to be sold at the proper market price in accordance with the receivers' equitable duties to enable the sums due under the charge to be repaid. The receivers themselves cannot give title to the property but they will make title through the mortgagors.
…
20. The existence of the right of the receivers to seek possession from their principals does not affect the duties of the receivers to the mortgagors which arise in equity. It is merely that the mortgagors' own rights to deal with the property have been postponed to the rights that they have conferred effectively on their deemed agents. Those rights necessarily include the right to possession of the mortgaged property. In my judgment there is no real arguable case for suggesting that the defendants can defeat the claim to possession in the way suggested in the amended Defence.”
Thus the judge dealt with the amendment application. He then went on to deal with section 36 and concluded that since the receivers did not derive title from the mortgagee, and since the section only operated when a mortgagee or a person deriving title under it was seeking possession, then section 36 did not apply and he had no statutory (or other) discretion to postpone any possession order to allow time for payment. He therefore ordered possession be given.
The Menons sought to appeal and permission was granted by the High Court (by me, as it happened). The form of the appeal was such that the Menons did not seek to appeal the paragraph of the judge's order which refused...
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