Property Finance

In this case we acted for the Claimant and successfully recovered substantial damages against a high street bank in respect of a sale by them at undervalue. The Bank had failed to follow its own voluntary sale procedure, and failed to identify that a voluntary sale by its borrower had been arranged with a connected party and that the sale was not at market value. Glenmore, as second mortgagee suffered significant loss as well as the loss of its security which was overreached on sale.

The Chancery Division dismissed the appellant’s application against a decision of the deputy master to dismiss the appellant’s application to give evidence remotely, relief from sanctions, and for permission to rely on his witness statement. By that decision, the deputy master had given judgment in absence of the appellant in favour of the claimant for the requested sum plus compound interest continuing under costs overrun guarantee. Further, the appellant had been ordered to pay costs subject to detailed assessment on the indemnity basis. The appellant had appealed on grounds that by not permitting him to attend by remote attendance pursuant to CPR 52.21(3)(a) he had not been given a fair trial. Furthermore, that the court’s decision not to grant relief from sanctions to allow the appellant’s witness statement had been both wrong and wholly inconsistent. The court considered the deputy master’s reasons for dismissing the applications, including that it had been noted that the appellant had been unable to secure counsel and would be conducting his defence himself from Nigeria. The court held, among other things, that the factual basis for the application had not been made and that it had been fair for the deputy master to proceed with the trial in the appellant’s absence. Moreover, that the appellant’s defence had been struck out with no reasonable prospect of success at trial so accordingly the application for relief from sanctions would not be successful.

A case which effectively extended LPA Receivers power such that on the facts the Receivers rights of sale of livestock as agents for the borrower, which livestock the borrower would not remove to provide vacant possession on sale, was affirmed by the court, notwithstanding that the mortgage deed did not provide any security over anything other than the land.

The case concerned a finance company that had provided a bridging loan to a borrower secured over a renovation property. The borrower had failed to repay the loan and the finance company then issued possession proceedings. The borrower, a qualified solicitor, compromised that claim by way of a consent order on terms providing for a delayed possession order, but then subsequently sought to set aside the consent order when he failed to refinance the loan. In dismissing the appeal against the decision not to set aside the consent order, the Court of Appeal rejected the borrower’s arguments that the act of entering into the consent order was itself the regulated activity of administering a regulated mortgage contract within the meaning of Article 61(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, which would have been in breach of the general prohibition in section 19 of FSMA 2000.

An important High Court judgment on secret commissions and enforceability, where notwithstanding the absence of documented disclosure as to fact or amount of commission paid to a broker, in a commercial transaction where the borrowers knew or ought to have known that a commission was to be paid, but made no enquiry in that regard.

A leading case, where the High Court examined the duty of a bridging loan company had fulfilled its obligations to take reasonable care to obtain the best price reasonably obtainable when selling the property against which the loan was secured. His decision confirms that the duty of a mortgagee when exercising its power of sale is to take reasonable care to sell the security property for the best price reasonably obtainable. The mortgagee’s duty is not to sell at the best price reasonably obtainable. Further, the mortgagee will not be in breach of this duty unless they are plainly on the wrong side of the line. The mere fact that a higher sale price may have been achievable will not necessarily mean that a mortgagee is in breach of its duty. The decision also clarifies the factors which the Court will review when assessing a mortgagee’s compliance with its obligations.

An interesting case where the lender faced multiple actions and injunctions restraining sales of properties in LPA Receivership based upon connected purported sales. Injunction was dismissed with costs, with the Applicant placed into liquidation, releasing the properties for sale, and protecting both lender and receivers from future litigation.