Mortgages cases

Santley v Wilde [1899]

• ‘A mortgage is a conveyance of land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given; the security is redeemable on the payment or discharge of such debt or obligation.’

• held a mortgagee may stipulate in a mortgage deed for a collateral advantage beyond the repayment of the loan and interest

Noakes & Co Ltd v Rice [1901]

• held collateral advantage was a clog on equity of redemption, therefore unenforceable

• considered unconscionable because the mortgagor would be unable to borrow again, as no brewer would lend money on a house tied to another brewer

Kreglinger v New Patagonia Meat [1913]

• held there is no rule in equity that a mortgagee cannot stipulate in the mortgage deed for a collateral advantage to endure beyond redemption date, provided that it is not either unfair or unconscionable, clogs the equity of redemption, or is repugnant to the contractual right to redeem

• there was an additional condition in the mortgage, but court said this was separate to the mortgage, so not a clog or fetter (okay as long as it was not unfair or unconscionable)

Samuel v Jarrah & Wood Paving Corp Ltd [1904]

• a mortgagee is not allowed at the time of the loan to enter into a contract for the purchase of the mortgaged property

Four Maids Ltd v Dudley Marshall (Properties) Ltd [1957]

Harman J: ‘A mortgagee has the right of immediate possession as the ink dries on the mortgage deed’

Palk v Mortgage Services Funding plc [1993]

• mortgagee must act fairly toward the mortgagor and must demonstrate good faith when exercising power of sale

Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971]

• mortgagee must act with reasonable care and ‘take reasonable precautions to obtain the true market value of the mortgaged property at the date on which he decides to sell it’

• mortgagee has freedom to decide when to sell, but was required to advertise properly

Silven Properties v RBS [2004]

• mortgagee has control over when to sell, and they do not have to improve the property

• they however must ensure that the property is fairly exposed to the market, including making use of advertisements

• (receivers: may exercise power of sale on behalf of the mortgagee)

Medforth v Blake [2000]

• any appointed receiver owes a duty of care to the mortgagee, mortgagor, and others with an interest in the equity of redemption

Cheltenham & Gloucester Building Society v Grant (1994)

• application of s36 AJA

• ‘the power is a discretionary power which can be exercised only if it appears to the court that the mortgagor is likely to be able within a reasonable period to pay the arrears due under the mortgage together with the current installments accruing thereafter’

• court should take starting point as the full term of the mortgage

Zinda v Bank of Scotland PLC [2011]

• application of s36 AJA

  court has a wide discretion based on the evidence before it:

• mortgage had 23yrs left to run

• a possession order was made but suspended on payment of all continuing installments alongside consistent payment to clear the arrears within 9.5yrs

• both requirements had to be met to prevent enforcement of the order

• installments could not be missed - missed = breach of order

Royal Trust Co of Canada v Markham [1975]

• application of s36 AJA

• must be ‘likely’ to pay the arrears within a reasonable period

Bristol and West Building Society v Ellis [1996]

• application of s36 AJA

f the property is to be sold the court must have:

• evidence of the adequacy of the asset and;

• of the likely time required

National and Provincial Building Society v Lloyd (1996)

• application of s36 AJA

• confirms that suspension of an order for possession can be granted to allow sale

• evidence required: of planned completion date and that proceeds from sale will discharge the debt in full

Ropaigealach v Barclays Bank Plc [2000]

• S36 AJA only applies when an application of possession is made to the court

Palk v Mortgage Services Funding Plc [1993] - s91 LPA 1925

• court has unrestricted power to override mortgagee’s dissent to sale

• in exceptional circumstances the power of sale will be exercised against the mortgagee’s wishes even when a substantial part of the mortgage debt will remain outstanding

Cheltenham and Gloucester PLC v Krausz [1997]

• application of s91 LPA 1925

• in negative equity cases, it is not justified to grant an order in favour of the mortgagor under s91, where mortgagee is taking active steps to obtain possession and enforce security by sale

• no power to suspend under s36 where arrears will not be cleared by sale and'/or other funds

• where there is negative equity, mortgagee has a greater incentive to obtain the best price and the quickest sale

Barclays Bank v O’Brien [1994]

classification of undue influence

1. actual undue influence

2. presumed undue influence - automatic presumption with certain relationships, and requirement for a relationship of trust and confidence to be proven

   • presumed there was undue influence in this situation (husband and wife, and Mrs trusted Mr with finances and was dependent on him)

RBS v Etridge (No 2) [2002]

creation of Etridge protocol:

• laid down clear guidelines for lenders (most important thing)

• reasonable steps to take to protect potentially vulnerable parties in non-commercial transactions

• allows lenders to continue to enforce mortgage debt provided guidelines followed

Abbey National plc v Stringer (2006)

had the mother been unduly influenced to consent to the second mortgage?

• relationship was one of trust and confidence - mother relied upon son to understand financial matters, and she was vulnerable because of her age and lack of English - son had influence over her

• this was a transaction that required an explanation - mother stood to lose everything - questionable transaction

• undue influence established

O’Brien - lender placed on enquiry

where the transaction:

• is not to (the wife’s) advantage

• the transaction was at substantial risk of being procured by committing a legal wrong (such as here acting as surety for debt)

Etridge - lender placed on enquiry

• in any non-commercial transaction where a person in a relationship of trust and confidence acts as surety for another’s debts

• where the money is being advanced jointly but the lender is aware that it is for one party’s sole benefit

Etridge - independent advice

vulnerable party should attend a private meeting with a representative of the bank at which they are told about:

1. the extent of their liability as surety

2. warned of the risk they are running

3. urged to take independent legal advice