Another twist to when Receivers can take possession of a property

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A county court has held that a fixed charge receiver can bring proceedings in the name of the borrowers against the borrowers, even though it then appeared that the borrowers were suing themselves.

Menon and Menon v Menon and Menon [2018] unreported was, on the face of it, a typical case involving receivers and the repossession of property. Mr & Mrs Menon owned a property in London which was worth approximately £5 million. Mr & Mrs Menon had borrowed the money to finance the acquisition of the property under two facility agreements and charged the property as security. The sums advanced under the facilities fell due to be repaid and when Mr & Mrs Menon defaulted on the repayment, fixed charge receivers were appointed by the lender under the terms of the charge. The charge included provisions conferring powers on the receivers, additional to those under section 109(2) of the Law of Property Act 1925 (the LPA), to take possession of and generally manage the property, as well as take, continue or defend any proceedings and do acts incidental to those powers.

Under the LPA, there are provisions dealing with the power to carry out certain acts in the name of the borrower or the lender. The LPA states that a receiver appointed under the powers conferred by that Act shall be deemed to be the agent of the mortgagor; and the mortgagor shall be solely responsible for the receiver’s acts or defaults unless the mortgage deed says otherwise.

The receivers sought to take possession of the property by issuing proceedings in the name of the borrowers and so seemingly the borrowers were suing themselves. The question for the court was whether the effect of the receivers’ powers and their agency was such that they could bring such proceedings.

It was argued by solicitors to the Menons that the receivers could not bring valid possession proceedings in the names of the borrowers as they were acting as the agents of the borrowers. It was further argued that the role of receiver as agent meant that it was illogical for such an agent to be able to sue their principal for possession of a property which the principal owns. Those arguments failed to persuade the Court which found that the receivers could bring proceedings in the name of the borrowers to effectively take possession of their own property.

The case was decided in the county court and so the decision cannot be taken as a binding authority. However, Counsel for the receivers are known for their expertise in this area of law and our view is that the decision is correct. Leave to appeal has been granted so we may not have to wait too much longer for further authoritative guidance on the issue.