Various Mortgagors v Various Mortgagees and Another

JurisdictionEngland & Wales
CourtChancery Division
JudgeHis Honour Judge Behrens
Judgment Date19 November 2010
Neutral Citation[2010] EWHC 2991 (Ch)
Docket NumberCase No: CH 32. 75, 76. 87, 88. 93, 95, 119, 133. and 144 of 2009
Date19 November 2010

[2010] EWHC 2991 (Ch)




The Court House Oxford Row Leeds LSI 3BG


His Honour Judge Behrens

sitting as a Judge of the High Court in Leeds

Case No: CH 32. 75, 76. 87, 88. 93, 95, 119, 133. and 144 of 2009

Various Mortgagors

(as set out in Appendix 1)

(1) Various Mortgagees
(2) Various Occupiers

(as set out in Appendix 1)


Clifford Payton, James Shirley, Nicole Sandells, Daniel Gatty(instructed as set out inAppendix 1) for the Claimants Jonathan Small QC, James Stark and Phillip Barber(instructed as set out in Appendix 1) for the Defendants

Hearing dates: 19, 20 October 2010


In this case the Court is asked to determine three preliminary issues in 9 test cases. In each case the Claimant is a mortgagee seeking possession of mortgaged residential property pursuant to the terms of its security. In each case the mortgagor is or is assumed to be a nominee for North East Property Buyers ("NEPB"). In each case the nominee is a Defendant to the relevant proceedings but has taken no part in them. It is not in dispute that there are substantial arrears under the mortgages and that the mortgagor Defendants have no defence to the claims. The mortgagors are not. however, in possession of the properties. They are in fact occupied by the former registered proprietors1 of the property. The occupiers have been joined as Defendants and the dispute between the parties is as to the priority between the rights of the mortgagees and the assumed rights of the occupiers.


In each case the occupiers as registered proprietors have sold their properties to nominees of NEPB. In most (but not all) of the cases the price paid under the contract was or was assessed as the market value but the occupiers have paid back to NEPB a significant part of the completion monies ("the lump sum payment"). In every case the occupiers allege that promises were made to them by NEPB or their agents as to their right to occupy the properties. The precise nature of the promises varies from case to case. In all cases the occupiers contend that they were offered a tenancy of their property. In some cases the tenancies were to be at what was assessed as the market rent; in some cases the rent was to be below the market rent and in one case the occupation was to be rent free. Differing representations were also made as to the length of the tenancies that were to be granted to the occupiers. In many cases it was that the occupiers could stay at their property for as long as they liked provided they complied with the terms of their tenancy.


In many of the cases NEPB offered to repay to the occupiers part of the lump sum payment if they remained in occupation and paid the rent for a period of 10 years. The amount to be repaid was less if the occupiers were paying less than the market rent for the property. In one case (Wood) where no rent was to be payable for the life of the occupier, the price paid was significantly less than the market value, and there was to be no money paid back by NEPB.


In each case the nominee purchaser 2 applied for a loan from the mortgagees. The application form disclosed that the property was being purchased on a "buy to let" basis and that the tenancies granted would be Assured Shorthold Tenancies (AST) of 6 months duration. The applications were successful and secured loans were made to the nominees of NEPB. It is the mortgagees' case that the conveyancing transactions were unexceptional


In each case exchange of contracts between the occupiers and the nominee of NEPB and completion of the contracts by the execution of the Transfers of the properties and the execution of the Mortgage by the purchaser all took place on the same day


Subsequent to completion NEPB did purport to grant ASTs to the occupiers. The period for which the AST was granted varies from case to case from 6 months in one case to 10 years in two cases. There are a number of 2 year leases. In one case the AST purports to be for the life of the occupier. There are arguments as to the validity of these documents but those arguments are not the subject of the preliminary issues.


The cases before me are, as I have indicated, test cases. I am told that there are something like 100 cases in all where mortgagees have commenced possession proceedings against occupiers who have sold their

homes to NEPB under a sale and lease back scheme. In addition there are a substantial number of other cases where mortgagees are awaiting the outcome of these proceedings.


The Preliminary Issues


By Order dated 2 nd June 2010 I ordered a determination of the following preliminary issues:

1. With reference to the section 29 of the Land Registration Act 2002 ("the 2002 Act") are any of the interests alleged by the Defendants capable of being interests affecting the estates immediately before and/or at the time of the disposition, namely the transfer and/or charge of the property in question, sufficient to be an overriding interest under paragraph 1 and/or 2 of Schedule 3 of the 2002 Act. For the avoidance of doubt this encompasses (but is not limited to) arguments arising out of Abbey National v Cann [1991] AC 56 ("Cann"), City of London Building Society v Flegg [1988] AC 54 ("Flegg"), the Law of Property (Miscellaneous Provisions) Act 1989 and section 63 of the Law of Property Act 1925

2. Can any of the tenancy agreements alleged by the Defendants have obtained priority over the Claimants' charges under section 29(4) of the 2002 Act if (a) the Claimants did not have the benefit of a priority search at the relevant time or (b) if the Claimants did have the benefit of such a search.

3. Is it possible for the Claimants' priority to be adversely affected by notice of such promises as were made and the circumstances of the transaction by virtue of their agent's knowledge:

a) If passed on, or

b) If not passed on to the Claimant mortgagee.


Those issues were agreed by Counsel at the Case Management Conference on that day in the hope that the resolution would significantly shorten the time necessary to determine all of the 100 or so cases that have been issued.


At the hearing before me the majority of the argument was devoted to the first issue. Mr Small QC sought to argue that the occupiers' interests were overriding interests with priority over the interests of the mortgagees. He made his submissions on two fronts. First he submitted that the interests arose at the time of the contracts which necessarily must have been exchanged before completion. He drew an analogy with an unpaid vendor's lien. Consequently the interests existed immediately before completion. As the occupiers were in actual occupation the interests were overriding interests which thus had priority over the interests of the mortgagees.


Second he sought to apply the decision in Cann in the manner suggested by Judge Worster in Redstone v Welch & Jackson [2009] EG 98. He submitted that following Cann and the later decision of the Court of Appeal in Whale v Viasystems [2002] EWCA Civ 480 ("Whale") the Court should look at the reality of the situation. The reality of this situation is that there was here a sale and leaseback to the occupiers. The leaseback was created as a result of the promises of NEPB. In those circumstances NEPB's nominee never had more than a title to the property subject to the occupiers' equitable rights and that is all that was charged to the mortgagees. He accepted that Judge Worster was sitting in the Birmingham County Court and that the decision in Redstone is not binding on me. It was however a carefully considered decision after full argument by experienced Counsel and he invited me to follow it. He pointed out that it had been approved by Judge Purle QC in Delanev v Chen [2010] EWHC 6 (Ch) ("Chen").


All four Counsel representing the mortgagees made detailed written submissions on the first issue. The main oral submissions were presented by Miss Sandells on behalf of MEX. However Mr Payton on behalf of RML, Mr Shirley on behalf of SPML and Mr Gatty on behalf of TMB all made oral submissions on various aspects of the issue.


Counsel for the mortgagees submitted that Mr Small QC's submissions that the interests arose at the time of the contract could be answered in a number of ways. First it was not accepted that NEPB had any interest in the land sufficient to create a proprietary estoppel prior to completion. The analogy with an unpaid vendor's lien is a false one. Such a lien is sui generis and not comparable to the rights suggested by the occupiers in this case. Second they do not accept that there is the necessary time interval between contract and completion. The reality is that contract and completion were all part and parcel of the same transaction. They rely on the judgment of Aldous LJ in Nationwide v Ahmed [1995] 70 P & C R 381 ("Ahmed"). Third, they rely on section 63 of the Law of Property Act 1925 the "implied all estates clause". They contend that by virtue of this section the whole of the estate passed on Transfer notwithstanding the equitable interests alleged. Finally in cases where there is more than one vendor they rely on the overreaching provisions of section 2 of the Law of Property Act 1925.


They contend that Judge Worster's decision in Redstone is, with respect, both unorthodox and wrong. It goes beyond the decisions in both Cann and Whale and is inconsistent with principle. It is also inconsistent with the decision in Cann itself, the decision of the Court of Appeal in Ahmed and the decision of John Randall QC in Hardy v Fowle [2007] EWHC 2423 (Ch) ("Fowle"). Whilst it is true that Judge Purle QC expressed approval of Redstone in Chen, Chen was not a case...

To continue reading

Request your trial
1 cases
  • Southern Pacific Mortgages Ltd v Scott (Mortgage Business Plc intervening)
    • United Kingdom
    • Supreme Court
    • 22 October 2014
    ...sitting as a High Court judge in the Chancery Division at Leeds District Registry (sub nom Various Mortgagors v Various Mortgagees [2010] EWHC 2991 (Ch)) and on appeal before Lord Neuberger MR, and Rix and Etherton LJJ, with Etherton LJ giving the only reasoned judgment: sub nom Cook v Mor......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT