The mortgagors, two individuals, guaranteed a bank loan to a company by taking out a mortgage on their home. The legal charge gave any receiver appointed by the bank the right to take possession of and generally manage the property, to bring proceedings, and stated that the receiver was the agent of the mortgagors. The bank made demands on the mortgagors for the sum due, which they failed to pay. The bank appointed joint fixed charge receivers, who brought possession proceedings. The judge held (1) that the receivers had a right to make a claim for possession as against the mortgagor-occupiers, and (2) the court did not have a discretion under the Administration of Justice Act 1970 to postpone any possession order to allow time for payment, since by sections 36 and 39 the discretion only operated when a mortgagee or a person deriving title under it sought possession.
On the appeal—
Held, (1) while it was not easy to see conceptually how powers derived from the mortgagor via an agency could be turned on the mortgagor him or herself, the relationship between a receiver and a mortgagor was of a special nature that could not be treated as a normal agency. The receiver’s power of sale with vacant possession of a dwelling house in the occupation of the mortgagor only made business sense if the receiver had a power of possession against the mortgagor, the most likely person against whom possession would be needed. Accordingly, the receivers were able to claim possession as against mortgagors in possession and, if necessary, sue, which, since they could not do in the name of the mortgagors, they had to do in the own name (paras 17, 20, 26–27, 34, 45).
(2) Appeal allowed in part. It was true that in a traditional sense the receivers did not derive title under the mortgagee. However, receivers were appointed by the mortgagee to enforce its security, and where they sued for possession, they did so for the benefit of the mortgagee. Bearing in mind the close identity of purpose, and who appointed them, it would be right to say that receivers derived title from the mortgagee for the purposes of section 36 and 39 of the Administration of justice Act. Accordingly, in principle, the claimants could invoke the court’s discretion under section 36 to postpone any possession order (paras 42–43, 45).
Per curiam. If the receivers cannot rely on the power to take possession in the mortgage then they are entitled to the benefit of and to enforce an implied term, necessary in order to make the contract work as a matter of business efficacy, that the mortgagors will give up possession to the receivers if they are required to do so (paras 28, 33).
Michael Walsh (instructed by RadcliffesLeBrasseur) for the mortgagors.
Francis Moraes (instructed by Mishcon de Reya llp) for the receivers.