Swift 1st Ltd v Colin and Others

The claimant is a lender who provided an advance of £348,148, secured by a charge dated 16 ^th November 2007 against a property known as The Ford House, Pershore, Worcestershire, of which the registered freehold proprietors were a Mr and Mrs Riley.

There are two titles making up Ford House. There was a prior mortgage provider which had a restriction on one of the titles. That mortgage provider did not consent timeously to the claimant's charge being substantively registered, even though its own charge had been redeemed. In the result, the claimant's charge was not substantively registered, but it was noted on the register.

There was a subsequent charge to the third defendant, Intervo Dis Ticaret Ve Mumessillik Ltd STI, a Turkish ceramics importer with whom the Rileys had commercial dealings. That was a registered charge. Whilst Mr and Mrs Riley were still registered proprietors of the property, an interim charging order was made against them by the fourth defendant, Capex Securities Limited, in respect of a judgment debt of something under £7,000.

The first two defendants are Mr and Mrs Colin, who have purchased the property from the claimant acting under its power of sale. A Form TR2 was executed in that respect, but the Land Registry have declined to register Mr and Mrs Colin as registered proprietors because of the non-registration of the claimant's charge. There are apparently many other cases (a figure of 1,733 was mentioned) within the claimant's portfolio of secured loans which encountered similar problems with registration and where the charge is merely noted on the register.

The application before me is to require registration of Mr and Mrs Colin as registered proprietors, and is not opposed by either of the defendants. Nor is the application actively opposed by the Land Registry, who have been invited to intervene but who have declined to do so. The Land Registry have however explained their reasons for declining to register Mr and Mrs Colin as freehold proprietors. So far as the Rileys are concerned, they seem to have disappeared from under the radar, but as, on the evidence before me, their indebtedness substantially exceeded the sale price of the property, their interest is academic only.

The mortgage was by deed and was in standard form. It was expressed to be a legal charge, though Condition 18 provided that, if the legal charge could not act as a legal charge of the property, then it would act as an equitable charge. Condition 1 of the same conditions stated as follows:

"You charge the property to us by way of legal mortgage with full title guarantee. This means that we have a legal right if you do not keep to any of the terms of this legal charge and the agreement to apply to a court for an order that we could repossess and sell the property. This also means that we have an interest in any of the proceeds from selling the property."

Section 85 of the Law of Property Act 1925 provides that one of the only two ways in which a mortgage can now be created is by the use of a "deed expressed to be by way of legal mortgage". This is such a deed.

Section 101 of the Law of Property Act 1925 confers upon a mortgagee (that is to say, the claimant in this case), where the mortgage is made by deed, various powers, including a power of sale, "to the like extent as if they had been in terms conferred by the mortgage deed, but not further". I need not consider the circumstance in which the power of sale becomes exercisable under the Act because there is no doubt that the power arose in this case.

As the Rileys were the registered proprietors of the freehold estate, they had power to confer upon the mortgagee full power to sell that freehold. The effect of the exercise of the power of sale is set out in section 104 of the same Act. In subsection (1) it is provided as follows:

"A mortgagee exercising the power of sale conferred by this Act shall have power, by deed, to convey the property sold, for such estate and interest therein as he is by this Act authorised to sell or convey or may be the subject of the mortgage, freed from all estates, interests, and rights to which the mortgage has priority, but subject to all estates, interests, and rights which have priority to the mortgage."

The TR2 which was executed in this case transferring the property to Mr and Mrs Colin was executed by the claimant in exercise of its power of sale. It is evident that, as the mortgage was by deed, section 104 is engaged, the claimant's authority to sell deriving from section 101. It seems to me, therefore, that the claimant had full power to sell and that the effect of that sale was to override all subsequent interests and the claimant's own interest. This follows also from section 88 of the Law of Property Act, which is effectively incorporated by reference by section 101(6), which provides as follows:

"The power of sale conferred by this section includes such power of selling the estate in fee simple or any leasehold reversion as is conferred by the provisions of this Act relating to the realisation of mortgages."

Section 88 relates to the realisation of freehold mortgages and provides in subsection (1):

"(1) Where an estate in fee simple has been...