mortgages

MORTGAGE DEFINITION

• Santley v Wilde

  • A conveyance of land as a security for the payment of a debt or the discharge of some other obligation for which it is given.

‘Once a mortgage, always a mortgage’:

Thornborough v Baker

• Never for the mortgagee to go for the house instead of the money.

Mortgagor is entitled to the reconveyance of his property if he repays the full su under the mortgage even if the legal date of redemption has passed.

Grange Side Properties v Collingwoods Securities

Any clauses of the mortgage that destroys that right will be struck out as inconsistent with the essential nature of a mortgage. 

Jones v Morgan

Mortgagee’s remedies are cumulative. (can do more than 1)

Bristol & West plc v Bartlett

Secured creditors will take priority over secured creditors.

• Alliance & Leicester plc v Slayford

Mortgagee’s Delay may stop legal action

Wilkinson v West Bromwich Building Society

If mortgagee has fell below the market value, previously it was $1M but now its $50k. He can seek another remedy.

Palk v Mortgage Services Funding:.

: If there are conflicting third party rights over property, it may be better for mortgagee to seek personal remedy.

• William’s & Glyn’s Bank v Boland

: Foreclosure actions are almost unheard of today.

• Palk v Mortgage Services Funding Plc

Receiver owes duty of care to mortgagor to take care in looking after the property.

• Medforth v Blake

Four Maids Ltd v Dudley Marshall (Properties) Ltd

Mortgagee can go in possession as soon as mortgage is. Once mortgage is made, property is with the bank.

• Mortgagee is entitled to possession at anytime he choose. Generally, equity doesn’t allow these rights.

• Ropaigealach v Barcalys Bank Plc:

where mortgage has been defectively drafted, the court may find that hte mortgagee still has a right to possession if he has no other rights.

• Western Bank v Schindler

• Must account not only for the rent which they receieved, but also for the increased rent which they might have received uf they had let the public house as a free house. Mortgagee can either lease property or get the house ready to be sold.

White v City of London Brewery Co:

Temporary relief: Allowed application for possession proceedings to be adjourned for 28 days to allow the mortgagor to pay off the entire debt.

Birmingham Citizens Permanent Building Society v Caunt:

Temporary relief: COA found that the action was not to protect her security but he had bad faith

Quennell v Malty:

Protect the mortgagor of a dwelling house by giving the court powers to adjourn possession proceedings or to postpone the giving up of possession for such period as the court thinks reasonable. 

S36 of Administrative of Justice Act 1970 + S8 of AOJA 1972

REQUIREMENTS FOR TEMPORARY RELIEF OF DWELLING

REQUIREMENTS

1. Application by a mortgagee for possession of a dwelling house.

2. May be suspended, adjourned or postponed by the court, in its discretion

3. If it appears that the mortagogr would b likely to be able to pay within a reasonable period

4. Any sums due of the mortgage.

Temporary relief: No discretion to make order if there is no prospects of the mortgagor making a reasonable attempt actually to repay the accumulated arrears.

Bristol and West plc v Dace

Temporary relief: If prospect is merely speculative (lottery) it is unlikely to exercise discretion

Hastings & Thanet Building Society v Goddard

In granting postponement of possession, courts must take into account amongst others the hope that in the future, the mortgagor may secure highly paid employment.

• Town & Country BS v Julien:

Date for temporary relief: Period of time must be fixed and the date when the reasonable period ends must be specified.

Royal Trust Co of Canada v Markham:

Temp relief: Granted 1 year to get on his feet again.

Cheltenham and Gloucester Building Society v Grant:

Temp relief: Allowed 13 years

Cheltenham and Gloucester Building Society v Norgan

Automatic power of sale Requirements

• : S101 LPA 1925

  • The mortgagee must be by deed

  • The mortgage debt must be due

  • The mortgage deed does not expressly exclude the power of sale

When is power of sale EXERCISABLE

• • S103 LPA 1925

  • Anyone of these below:

    • Default in comloying with a notice to repay any of the mortgage money for 3 months

    • Interest is at least 2 months in arrears

    • Breach of some other condition

• If mortgagor wants to sell property?

• Palk v Mortgage Services Funding

  • Court has wide and unfettered discretion to order a sale.

  • Mortgagor wanted to sell property.

  • Mortgagee disagreed and wanted to retain possession of property to make rental income. (unable to pay off outstanding amount for long amount of time).

    • Order for mortgagor to sell under S.91 was mde, mortgagee wll not be allowed to act oppressively to prevent obtaining the best price for property.

• Court takes into account that the mortagogr may attempt to delay matters

• Cheltenham & Gloucester plc v Krausz 

Once mortgagee enters contract, mortgaogr cannot stop the sale. If mortgagor has not fulfilled conditions, mortgagee sues for damages

• Lord Waring v London and Manchester Assurance Co:

When mortgagee sells property;

• Mortgagee had to account for difference in price and should exercise reasonable care to obtain the true price of the property. Mortgagee must act in their own best interest or the mortgager.

Cuckmere Brick Co v Mutual Finance Co

• when mortgagee sells property

  • Property must be exposed to parket and attempts ot get best price (more marketing undertaken)

• Bishop v Blake

1. Mortgagee must not sell to himself or his nominees.

• Tse Kwong Lam v Wong Chit Sen

  • As long as house was sold in best price possible and in good faith its ok.

Tortious duty of care to attempt to get the best price possible only in equity

Parker Tweedale v Dunbar Bank

Must sell at best price available at that time

China & South Sea Bank v Tan Soon Gin

Mortgagee who sold at discounted rate for quick sale has breached his duty

Predeth v Castle Phillips Finance & Co

No duty for mortgagee to wait till there is a likely increase in value, purely up to discretion of receiver

Silven Properties Ltd v Royal Bank of Scotland

Need not obtain a proper price if the sale price is in a reasonable bracket of estimate of market value at that time

Michael v Miller

• Any provision inserted to prevent redemption on payment or performance of the debt or obligation for which the seucityy was give is what is meant by a clog or fetter on the equity of redemption and is therefore void.

• Santley v Wilde: 

Right to redeem: The mortgage exposes to the possibility that the option may be exercised forcefully (which may exclude redemption)

Samuel v Jarrah Timber and Wood Paving Corp

Right to redeem: If mortgager decides to go into a separate agreement for option to purchase:

Reeve v Lisle

• Cannot be in mortgage contract but it can be in a separate contract due to freedom of contract

Right to redeem: Mortgage agreement purported to give lender right to buy a half share in the mortgaged land

1. Jones v Morgan

Unenforceable as it infringes on equitable principle: clogs on the equity of redemption.

Right to redeem: Courts examine substance of the transaction to ascertain the true nature of the bargain, which the parties have made and whether in light of the bargain there was unconscionable dealings.:

Warnborough Ltd v Garmite

• If in the mortgage contract and unfair into the mortgagor then it shows that mortgagor may have felt pressured in order to get the money.

• Equity will not allow rights of mortgagor to be postponed to such an extent that the right would be rendered illusory.

• Fairclough v Swan Brewery Ltd

• Mortgage stipulated and agreed that loan sum should not be repaid before expiry of 40 years from granting of mortgage.

  • Courts focuses on situations of the case. 

• Knightsbridge Estates v Bryne HELD: This was a valid commercial bargain.

  • There was no clog or fetter, because the borrower still had a valuable equity of redemption

• Mortgage stipulated and agreed that loan sum should not be repaid before expiry of 40 years from granting of mortgage.

• Courts focuses on situations of the case.  

• Knightsbridge Estates v Bryne

  • HELD: This was a valid commercial bargain.

    • There was no clog or fetter, because the borrower still had a valuable equity of redemption

1. Unfair and unconscionable collateral agreements

• Biggs v Hoddinott

  • As long as such collateral advantages are neither unconscionable or oppressive, they are enforceable if designed to cease with redemption.

Clogging the equity of redemption

• Noakes v Rice

  • A mortgage is supposed to secure repayment of a debt.

  • Once the debt is repaid, the borrower should be completely free from any obligations tied to the mortgage.

• • Mortgage was attached to a separate agreement and mortgagor intended to redeem the mortgage and commitment to offer the skins.

  • 5 year term was reasonable and valid. + separate agreements.

• G & C Kreglinger v New Patagnia Meat and Cold Storage

• Interest rate at high level that it renders the equity of redemption valueless:

• Cityland Properties v Dabrah 

  • Usual market rate of interest is 7% and a rate of 10% is considered oppressive and unconscionable. 

• If legal advice was sought, mortgage itself was not unconscionable:

• Jones v Morgan

• Terms agreed in Swiss Franc but Swiss Franc’s currency increased and it was much more than British Pounds:

• Multiservice Bookbinding Ltd v Marden

Undue influence:

• Wife did not know the real situation and trusted her husband’s word about the mortgage documents and accompanying letter.

Barclay’s Bank v O’Brien

Ensure there was proper independent advice or contract will be void.

• Royal Bank of Scotland v Etridge

  • Concerned wives who had charged their matrimonial homes to secure husbands liability.