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Further important developments to when Receivers can take possession of a property

Terrace houses Print publication

17/10/2019

We reported in our April edition of Receivership Matters that a County Court had held that a Fixed Charge Receiver could bring proceedings in the name of the borrowers against the borrowers to recover possession of their own property. Again as reported, leave to appeal the decision was granted and the appeal has now been heard by the High Court and its judgment has been published (Kavesseri Veetil Pradeep Menon & Beena Menon v Nathan Pask & Rosalind Goode (as Joint Fixed Charge Receivers) [2019] EWHC 2611 (Ch)).

Two questions were put before the appeal judge, Mr Justice Mann, in the High Court:

  1. Can a borrower (mortgagor) sue itself for possession acting by its Receiver as deemed agent?
  2. Does section 36 of the Administration of Justice Act 1970 apply to Receivers?

On the first point, the Judge found that Receivers cannot sue mortgagors occupying the mortgaged property in the mortgagor’s own name. The court did however confirm that Receivers can sue a mortgagor for possession even if the mortgagor is in occupation. To do so, the proceedings must be brought by the Receivers personally in their name. The court stated that the right to possession comes from the agency relationship between receiver and mortgagor i.e. by consenting to Receivers being appointed in the mortgage agreement, the mortgagor cannot interfere with the exercise of their powers. The Court also stated that it could imply a term into the mortgage that the mortgagors would give up possession to the Receivers.

In relation to section 36 of the Administration of Justice Act 1970 (Section 36), the court held that the provisions do apply to Receivers when suing for possession against a mortgagor in occupation of the mortgaged property. This is a dramatic departure from existing law. Section 36 gives the court a wide discretion in mortgage possession proceedings for example to either adjourn proceedings, stay, suspend or postpone the possession. This ruling is a significant development as previously it was understood that Section 36 did not apply to Receivers seeking possession against a mortgagor in occupation.

Based on the High Court’s decision, mortgagors can now ask the court to exercise its discretion under Section 36, if Receivers have initiated possession proceedings, in the same way they can if the mortgagee commences proceedings.

WM Comment

The High Court’s decision provides some welcome clarity in terms of how such possession claims should be brought. However, the introduction of the Section 36 discretion means that there is an element of uncertainty with regard to the outcome of such proceedings and may give some Judges too much creative licence. Receivers will also want to check that they have sufficient indemnity in place when embarking on proceedings brought in their own name.

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