MORTGAGE: right of receivers to possession of mortgaged property

Are receivers appointed by a mortgagee entitled to claim possession against resident mortgagors?

Yes, although the mortgagors are protected by section 36 of the Administration of Justice Act 1970, said the High Court in Menon v Pask [2019] EWHC 2611 (Ch).
The appellant mortgagors granted a legal charge against their property. The charge enabled the mortgagee to appoint receivers as agents of the mortgagors with power to take possession of the property. The mortgagee appointed the respondent receivers, who sued the resident mortgagors for possession.

Although the receivers were deemed by the legal charge to be the mortgagors’ agents for all purposes, the court concluded that they nevertheless had a right to possession as against the mortgagors, their principals, due to the special nature of the agency relationship. On the true construction of the power to take possession, it was one which the receivers could assert against the mortgagors by possession proceedings taken in their own names. Given that the mortgagors were known to be in occupation of the property, this was the only solution that made business sense. The receivers’ right to sue for possession in their own names was an ancillary power impliedly given to them by the mortgage.

Section 36 of the Administration of Justice Act 1970 gives the court a statutory discretion in possession proceedings brought by a mortgagee against a mortgagor. For these purposes, a “mortgagee” includes “any person deriving title under the original … mortgagee” (section 39(1)). If the court is satisfied that the mortgagor is likely to be able within a reasonable time to pay any sums due under the mortgage or remedy any other breach of the mortgage terms, it may adjourn proceedings or stay or suspend any possession order or execution.

The receivers argued that section 36 did not apply to their possession proceedings, as they did not derive title from the mortgagee. The court accepted that in the traditional sense they did not. However, bearing in mind the nature and source of their rights, how they came to be appointed, and what their fundamental purpose was, it was right to say that they derive title from the mortgagee for the purposes of section 36. When receivers sue for possession, they make the claim for the mortgagee’s benefit. As a matter of principle, therefore, the mortgagors should have the same opportunities to resist possession as they would have had the mortgagee sued them for possession.


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