Экзамен зачет учебный год 2023 / Sparkes, A New Land Law

even if there is ample equity.269 Guaranteed rights of sale on default is precisely what makes mortgages attractive to the lender.270

Liability attaches only to a lender who sets out to harm the borrower271 or acts “with the object of cheating”,272 since an obligation to act in good faith has always been recognised.273 In Downsview Nominees v. First City Corporation,274 the first lender appointed a receiver in order to disrupt a receivership of a Fiat franchise in New Zealand instigated by the second lender and proceeded to reject offers to redeem the first mortgage with such persistence that a court order was eventually required. This particular lender had broken its duties to the borrower and to subsequent lenders.

2.Proper price

[29.37] Since subsequent lenders and the borrower are entitled to any surplus, and are liable for any shortfall, it is they who stand to lose heavily from negligent sales by prior lenders.275 Wise lenders protect themselves by getting the consent of later lenders and of the borrower to the terms of sale.276

Equity has long been in flux, swaying between unacceptable extremes without quite reaching a satisfactory equilibrium. When express powers of sale began to appear during the early 1800s,277 Chancery treated the lender as a trustee.278 Lenders were liberated from these onerous duties in the late nineteenth century279 leaving dishonesty or collusion280 as the only grounds for attack. Statute has long imposed greater duties on building societies,281 but a recognition of a generalised duty to obtain a proper price had to wait for a landmark case in 1971. This left law with an uneven weft.282 A lender must not sell in a cavalier fashion at a knockdown price.283

269Despite: Hodson v. Deans [1903] 2 Ch 647, 652, Joyce J; Quennell v. Maltby [1979] 1 WLR 318, CA.

270Kennedy v. De Trafford [1896] 1 Ch 762, 773, Lindley LJ.

271Or a judgment creditor: SS for Environment FRA v. Feakins [2002] BPIR 281, Penry Davey J.

272Bishop v. Bonham [1988] 1 WLR 742, 753, Slade LJ.

273Warner v. Jacobs (1882) 20 Ch D 220, 223, Kay J; Farrar v. Farrars (1888) 40 Ch D 395, CA; Tomlin

v.Luce (1888) 41 Ch D 573, 575, Kekewich J at first instance; Shamji v. Johnson Matthey Bankers Co [1991] BCLC 36, CA; Albany Home Loans v. Massey [1997] 2 All ER 609, 612–613, Schiemann LJ.

274[1993] AC 295, PC; R Grantham [1993] Conv 401; AGJ Berg [1993] JBL 213; Medforth v. Blake [2000] Ch 86; S Frisby (2000) 63 MLR 413; A Kenny [1999] Conv 434 (missed discounts on pig feed).

275American Express International Banking Corp v. Hurley [1985] 3 All ER 564.

276Mercantile Credit Co v. Clarke (1996) 71 P & CR D18, CA; Morgan v. Lloyds Bank [1998] Lloyds Rep 73, CA.

277Croft v. Powel (1738) Comyn’s Rep 603, 92 ER 1230; R v. Parish of Edington (1801) 1 East 288, 102 ER 112; Downes v. Grazebrook (1817) 3 Mer 200, 36 ER 77.

278Re Bloye (1849) 1 Mac & G 488, 41 ER 1354; Robertson v. Norris (1858) 1 Giff 421, 65 ER 983; Jenkins v. Jones (1860) 2 Giff 99, 108, 66 ER 43; Marriott v. Anchor Reversionary Co (1860) 2 Giff 457, 66 ER 191; Wolff v. Vanderzee (1869) 20 LT 353; Mayer v. Murray (1878) 8 Ch D 424.

279Warner v. Jacob (1882) 20 Ch D 220, 224, Kay J; Farrar v. Farrars (1888) 40 Ch D 395, CA; Martinson v. Clowes (1880) 52 LT 706, CA; Colson v. Williams (1889) 62 LT 71, Kekewich J.

280Hodson v. Deans [1903] 2 Ch 647, 652, Joyce J; Tomlin v. Luce (1888) 41 Ch D 573, 43 Ch D 191; Farrar at 410, Lindley LJ.

281Building Societies Act 1986 sch 4 para 1, re-enacting earlier provisions; Reliance v. Harwood-Stamper [1944] Ch 362, Vaisey J.

282P Devonshire (1995) 46 NILQ 182.

283Palk v. Mortgage Services Funding [1993] Ch 330, 338F, Nicholls V-C.

Cuckmere Brick Co v. Mutual Finance284 concerned a mortgage of a development site which had the benefit of two planning permissions, one for 35 houses and one for 100 flats. Advertisements for the auction sale referred only to the less valuable houses permission. Land allegedly worth £65,000 was knocked down for £44,000. Assuming the pleaded facts were true, this was careless,285 even reckless. Salmon LJ preferred the line of cases286 imposing equitable obligations with respect to price over House of Lords authority287 and statute.288 When he described lender and borrower as “neighbours”, he was speaking the language of common law negligence,289 but ParkerTweedale v. Dunbar Bank (No 1) decided instead that the duty rested in equity.290 If the legal estate in the mortgaged property is vested in a wife, her husband is not able to take action as sole beneficiary.291 The decision appears faulty. Every other person interested in the equity of redemption is protected, including a second lender,292 so why not a beneficiary?

Quantification of damages is based on the diminution of market value attributable to the negligence of the lender,293 assessed at the time of trial.294 Exceptionally large divergences may speak for themselves.295 Lenders should employ appropriate professional agents,296 advertise properly,297 and expose the property to the market. In Predeth v. Castle Phillips Finance Co298 a bungalow in poor condition was subjected to a “crash sale” at £6,000, but was resold shortly afterwards for £10,000, and the evidence was that exposure to the market for three months would have yielded at least £8,500. The lenders were liable. Sales commonly occur at auction,299 but this is not necessarily sufficient.300 It is not wrong to tell the buyer that the property is repossessed,301 even though this may reduce offers. The lender has a considerable discretion

284[1971] Ch 949, CA; (1971) 87 LQR 303; Palmer v. Barclays Bank (1972) 23 P & CR 30 (planning permission unknown to lender, no duty).

285At 966B, Salmon LJ, 972G–H, Cross LJ, 977C–978A, Cairns LJ.

286Tomlin v. Luce (1889) 41 Ch D 573, CA; McHugh v. Union Bank of Canada [1913] AC 299, PC.

287Kennedy v. De Trafford [1887] AC 180, HL; Johnson v. Ribbins (1975) 235 EG 757, Walton J; Medforth v. Blake [2000] Ch 86, 92E.

288LPA 1925 s 101, 106; Bishop v. Bonham [1988] 1 WLR 742, 754, Slade LJ.

289Cuckmere Brick [1971] Ch 949, 966D.

290[1991] Ch 18, CA; China and South Sea Bank v. Tan [1990] 1 AC 536, 543H–544A, Lord Templeman; Medforth v. Blake [2000] Ch 86, 102E, Scott V-C. One consequence is that the limitation period is six years: Raja v. Lloyds TSB Bank [2001] 2 EGLR 78, Ch D; L McMurty [2001] Conv 423.

291Action via the wife as trustee was barred by a pre-suit compromise.

292Downsview Nominees v. First City Corp [1993] 1 AC 295, 311F–312C, Lord Templeman; Freeguard v. Royal Bank of Scotland (No 2) [2002] Times April 25th, Simon Berry QC.

293Tomlin v. Luce (1889) 41 Ch D 573, CA. No damages accrue if sale is at the correct price reached by the wrong means: Mount Banking Corp v. Brian Cooper & Co [1992] 2 EGLR 142.

294Adamson v. Halifax [2002] EWCA Civ 1134, [2002] 1 WLR 60.

295European Partners in Capital (EPIC) Holdings v. Goddard & Smith [1992] 2 EGLR 158, CA.

296Tse Kwang Lam v. Wong Chit Sen [1983] 1 WLR 1349, 1356–1357, Lord Templeman.

297Cuckmere Brick [1971] Ch 949, CA; Wolff v. Vanderzee (1869) 20 LT 353; Palmer v. Barclays Bank

(1971) 23 P & CR 30; Skipton BS v. Stott [2001] QB 261, CA; Struggles v. Lloyds TSB Bank [2000] EGCS 17, QBD.

298[1986] 2 EGLR 144, CA; MP Thompson [1986] Conv 442; Routestone v. Minories Finance [1997] 1 EGLR 123, Jacob J; Meftah v. Lloyds TSB Bank [2001] EGCS 44, Lawrence Collins J; Cohen v. TSB Bank [2002] BPIR 243, Etherton J.

299LPA 1925 s 101(1)(i); Brouard v. Dumaresque (1841) 3 Moo PC 457, 13 ER 186 (express power).

300Tse [1983] 1 WLR 1349, 1357H, Lord Templeman; Davey v. Durrant (1851) 1 De G & J 535, 44 ER 830; Hodson v. Deans [1903] 2 Ch 647, 653, Joyce J; Johnson v. Ribbins (1975) 235 EG 757, Walton J.

301Bank of Cyprus v. Gill [1980] 2 Lloyds Rep 51, CA; HW Wilkinson (1982) 132 NLJ 883.

about whether to sell as a whole or in parts, and to sell a farm with or without its milk quota.302

3.Identity of the buyer

[29.38] Given the obvious conflict of interest,303 the lender may not buy the mortgaged property304 – either alone, with others,305 or through a nominee or fiduciary.306

In Williams v. Wellingborough Borough Council307 a public-sector home was sold to the sitting tenant subject to a mortgage back to the council. As lenders the council later purported to sell the property back to itself so that the house could be taken back into the stock of public housing, but this sale was invalid. A problem also arises where an employee of a building society arranged for a relative to buy a repossessed house at an undervalue.308

Too great a leniency is shown towards companies formed by the lender. In Farrar v. Farrars309 a company was floated specifically to purchase the mortgaged property, but the sale was allowed to stand. However, equity’s blindness to the separate corporate personality is only partial, because the lender has the burden of proving that the sale was at the best price reasonably obtainable, a task which proved beyond the lender in Tse Kwang Lam v. Wong Chit Sen.310 His wife had bid at auction on behalf of a company, whose shareholders included the lender (her husband) and other family members. This particular auction had not produced a true price. Although the sale is voidable, there is no point in upsetting the sale unless it was too cheap.311 The right to rescind (as opposed to the claim for damages) might be lost by delay, acquiescence,312 or ratification after full and frank explanation of the terms.313

4.Reform of duties of lenders

[29.39] Law Commission reform of mortgage law is proposed,314 though the Government has requested further work on the present report. Exercise for non-financial default would only be possible if there was a substantial threat to the

302Huish v. Ellis [1995] BCC 462; AIB Finance v. Alsop [1998] 2 All ER 929, CA (post office shut by borrower; no duty on lender to sell as a going concern); C Davies [1998] JHL 56.

303Re Bloy’s Trust (1849) 1 Mac & G 488, 495, 41 ER 1354.

304A second lender may buy from the first: Kirkwood v. Thompson (1865) 2 H & M 392, 71 ER 515.

305Downes v. Grazebrook (1817) 3 Mer 200, 36 ER 77; Robertson v. Norris (1858) 1 Giff 421, 65 ER 983.

306Nutt v. Easton [1900] 1 Ch 29, CA (solicitor); Hodson v. Deans [1903] 2 Ch 647 (solicitor); Nugent v. Nugent [1908] 1 Ch 546, CA (receiver); Martinson v. Clowes (1882) 52 LT 706, CA (secretary of building society); Whitcomb v. Minchin cited at (1888) 40 Ch D 395, 409, Lindley LJ.

307[1975] 1 WLR 1327, CA.

308Corbett v. Halifax BS [2002] EWCA Civ 849, [2003] 01 EG 68 (CS).

309(1888) 40 Ch D 395, CA.

310[1983] 1 WLR 1349, PC; P Jackson [1984] Conv 143.

311The lender can solve the problem by re-sale: Henderson v. Astwood [1894] AC 150, PC.

312Tse Kwang Lam [1983] 1 WLR 1349, PC; Nutt v. Easton [1900] 1 Ch 29, CA (9 years).

313Re Bloye’s T (1849) 1 Mac & G 488, 41 ER 1354.

314Law Com 204 (1991) part VII; P Jackson (1978) 94 LQR 571; AL Diamond (1989) 42 CLP 231; GH Griffiths [1987] Conv 191; HW Wilkinson [1992] Conv 69; GH Griffiths [1992] JBL 423; G Frost (1992) 136 SJ 267, 292.

security. Duties of lenders when selling would be tightened: all remedies should be limited to lenders acting in good faith and for the purposes of protecting or enforcing the security, a duty that would become statutory. There would also be a duty to sell as soon as is consistent with the lender’s duty to obtain the best price realisable.

I.REDEMPTION AND DISCHARGE

[29.40] Redemption315 by the borrower will operate to remove the burden of the mortgage from the land, leaving it as an empty shell, signifying nothing. Formal proof is required on the title.

1.Procedure where redemption occurs on sale

[29.41] Most mortgages are redeemed on sale of the mortgaged house using the proceeds of sale. Theoretically the lender could insist upon completion at the offices of its solicitors,316 but this would be impossibly cumbersome. Instead, the borrower’s solicitor is appointed to act for the lender, and is sent the charge certificate or title deeds in advance of completion. An undertaking will be required that the borrower’s solicitor will not part with title documents317 until he has received the redemption monies by banker’s draft (a form of cheque which cannot be stopped). Following completion the discharge form is sent to the lender with the redemption money.318 The buyer’s title is completed by the discharge,319 forwarded first to the seller’s solicitor and then on to the buyer’s solicitor. Until then the buyer has to rely on an undertaking by the seller’s solicitor to carry out the redemption.320 This should be carefully worded so as to relate only to events within the control of the borrower’s solicitor – that is to forward the discharge on its receipt from the lender, rather than within any specific period.321

2.Registered charges

[29.42] Substantive registration of a legal charge has to be cancelled after an appropriate form of discharge and application to the land registry.322

315Megarry & Wade (6th ed), [19.125–19.154].

316Graham v. Seal (1918) 88 LJ Ch 31, 36, Swinfen Eady MR.

317Crickmore v. Freeston (1870) 40 LJ Ch 137; Rourke v. Robinson [1911] 1 Ch 480, Warrington J; Walker v. Jones (1866) LR 1 PC 50.

318LR Form DS1 or a vacating receipt endorsed on an unregistered land mortgage deed.

319As a result the existence of a legal charge is not a defect in the seller’s title: Herkanaidu v. Lambeth LBC [2000] Times February 28th, Ch D.

320JE Adams (1973) 70 LSG 1346.

321Sloppy undertakings are a major cause of claims on the solicitors’ indemnity fund: HW Wilkinson [1993] NLJ 1344.

322LRA 2002 s 56 (a simplified version of LRA 1925 s 32); DLRR 2003 rr 112–114; DLRR CD ch 7, [3]; LR Form DS1 (whole) or DS3 (part) accompanied by an application in AP1. LPA 1925 s 115(10) is amended by LRA 2002 sch 11.

The lender acknowledges that the property is no longer charged as security for payment of sums due under the charge.

Figure 29-1 Discharge of a registered charge

This must be executed as a deed by the registered proprietor of the mortgage, the survivor of joint lenders or the personal representative of the last survivor. Lenders who are individuals need only to sign the receipt323 but corporate lenders, who are far more numerous, must execute formally as a deed. Special arrangements are often made with the land registry by large corporate lenders.324 The registrar may act on the basis of any other sufficient evidence that a loan is repaid.

Tentative steps are being taken towards the development of a system for electronic discharges, which will be treated the same as a paper discharge.325

3.Unregistered land

[29.43] A discharge of a mortgage over an unregistered title is in the form of a vacating receipt. Careful scrutiny is needed to ensure that it is indeed a discharge and not a transfer of the mortgage debt.326 Discharge occurs on repayment by the person entitled to the ultimate equity of redemption – usually the original borrower, but possibly someone to whom he has transferred the land subject to the mortgage. The mortgage is removed completely and other charges move up.

Suppose B borrows £50,000 from L1 and £25,000 from L2 on the security of a house worth £60,000. B discharges the first loan. L2 will hold the only charge on the property for £25,000 and is now fully secured.

When the last mortgage is discharged, the borrower regains the property free from incumbrances.

Redemption is evidenced by execution of a receipt acknowledging that the money due under the mortgage has been paid.327 The receipt can be given by “the person in whom the mortgaged property is vested”, an inapt term obviously intended to point to the current lender.328 The receipt is “endorsed on, written at the foot of, or annexed to” the original mortgage deed.329 Printed mortgages often have a blank form ready printed. The statutory form is equally appropriate for legal charges and true mortgages, can be varied, or adapted,330 and is modified for use with equitable mortgages.331

323LPA 1925 s 52(1)(e).

324Proved by a certified copy of the LR facility letter.

325DLRR 2003 rr 113–114; LR Form END.

326A confusion made impossible by the distinctive LR forms.

327JE Adams (1971) 68 LSG 175.

328LPA 1925 s 115(1); ie the person in whom the mortgage is vested. After a change of lender or corporate identity, proof of the right to give the receipt is essential: Edwards v. Marshall-Lee [1975] 2 EGLR 149.

329LPA 1925 s 115(1).

330S 115(5)–(8), sch 3.

331S 115(11). It is general practice to accept a letter of release from an equitable charge: RG Rowley (1962) 26 Conv (NS) 445.

I, [lender] hereby acknowledge that I have this [date] received the sum of £[xxx] representing the principal money secured by the within written mortgage together with all interest and costs, the payment having been made by [the borrower]. As witness [signature of lender].

Figure 29-2 A vacating receipt

It must be signed, though a deed will act as a receipt anyway without statutory support.332

The burden on the title is discharged by the receipt without any reconveyance, surrender or release.333 The pre-1926 rigmarole of dealing with bare legal estates, retransferring them to the borrower or passing them on to second lenders is redundant.

4.Building society receipts

[29.44] Building society receipts do not name the person making the redemption payment,334 so the mortgage is always discharged.

5.Vacating receipts acting as a transfer

[29.45] The problem considered here relates specifically to unregistered titles. Vacating receipts may either discharge the mortgage or transfer it, making a difference to the priority of later lenders.335 Payment by the borrower or a nominee336 effects a discharge of the debt. Where it is a person who has bought the land subject to the mortgage,337 there probably ought to be a discharge, though the possibility of a transfer remains open in the Lords.338

Any other person interested in the equity of redemption may redeem,339 and takes a transfer by doing so. This includes an original borrower who is sued for debt,340 later lenders,341 equitable lenders,342 tenants,343 a beneficiary entitled in remainder,344

332Firth & Sons v. CIR [1904] 2 KB 205; Simpson v. Geoghegan [1934] WN 232, Clauson J; Erewash BC

v.Taylor [1979] CLYB 1831.

333Any person may insist on these means: LPA 1925 s 115(4). A mortgage by demise becomes a satisfied term: ss 5, 116; if part of the land is freed from the mortgage, a new term is created affecting that part: s 5(3).

334Building Societies Act 1986 s 6C, sch 2A, inserted by Building Societies Act 1997 s 7, sch 2; SI 1997/2869 (prescribed forms); receipts operate under LPA 1925 s 115(1)–(8) but s 115(9) does not apply.

335Cotterell v. Price [1960] 1 WLR 1097, 1102.

336LPA 1925 s 115(3).

337Toulmin v. Steere (1817) 3 Mer 210, 36 ER 81, Grant MR.

338Liquidation Estates Purchase Co v. Willoughby [1898] AC 321, HL; Manks v. Whiteley [1912] 1 Ch 735, 755–756, Fletcher Moulton LJ dissenting; Whiteley v. Delaney [1914] AC 132, HL; LPA 1925 s 95(1).

339LPA 1925 s 116.

340Kinnard v. Trollope (1888) 39 Ch D 636.

341Halifax Mortgage Services v. Muirhead (1997) 76 P & CR 418, 428, Evans LJ.

342Mason v. Rhodes (1885) 53 LT 322. If they pay off a first legal mortgage they will be subrogated to the rights under that first mortgage: Eagle Star Insurance v. Karasiewicz [2002] EWCA Civ 940.

343Hunter v. Macklew (1846) 5 Hare 238, 67 ER 902; Tarn v. Turner (1888) 39 Ch D 456, CA.

344Re Chesters [1935] Ch 77, Bennett J; (1935) 51 LQR 433.

a spouse in relation to the matrimonial home,345 and a judgment creditor with a charging order,346 or a person without an interest in the land who is allowed to redeem.347 All these categories avoid repossession, but preserve their right to reimbursement from the current borrower.

The test of a discharge is that the person named as making payment in the receipt must be entitled to the estate subject to the mortgage.348 It will act as a transfer if stated to be such,349 but also if the person named as making payment is not the ultimate estate owner. There is a danger of an accidental transfer if a seller is named in a receipt dated a few days after completion of a sale – since the buyer has then become entitled to the equity of redemption, but this unfortunate accident is avoided by an estoppel if the conveyance recites that sale is free from incumbrances.350

J.DISPUTED REDEMPTION

1.Redemption by agreement

[29.46] Redemption will almost always occur by agreement after the borrower has given notice that he intends to pay off the loan. There is no right to redeem a part of a mortgage.351 A borrower who wishes to redeem after the contractual redemption date must give notice – either six months352 or some other period stated in the mortgage – or pay interest in lieu of notice.353 Long ago this was to give the lender time to find an alternative investment for his money,354 reasoning that scarcely seems appropriate today. The borrower will call for a redemption statement from the lender, stating the principal together with interest and costs that have accrued, but set against repayments and receipts of rent. Interest accumulates on the balance until actual repayment. Redemption by agreement only binds other lenders if they are not parties to the agreement.355

2.Tender to preclude dispute about redemption

[29.47] If the quoted redemption figure is disputed, the simplest approach for the borrower is to tender what he believes to be owing. Interest is stopped if the tender is

345FLA 1996 s 30(3); Hastings & Thanet BS v. Goddard [1970] 1 WLR 1544, CA.

346Irani Finance v. Singh [1971] Ch 59, CA.

347Eg a statute barred lender: Pearce v. Morris (1869) LR 5 Ch App 227; Cotterrell v. Price [1960] 1 WLR 1097, 1102, Buckley J.

348A discharge may arise in a transfer type case if the receipt expressly provides for it: Pyke v. Peters [1943] 1 KB 242; also if money is paid from a fund properly applicable to discharge of the mortgage.

349Simpson v. Geoghegan [1894] WN 232.

350Cumberland Court (Brighton) v. Taylor [1964] Ch 29, Ungoed-Thomas J; JE Adams [1985] Conv 10.

351Carroll v. Manek (2000) 79 P & CR 173, Ch D.

352Cromwell Property Investment Co v. Western & Toovey [1934] Ch 322; Centrax Trustees v. Ross [1979] 2 All ER 952, Goulding J.

353Smith v. Smith [1981] 3 Ch 550, Romer J (not if the lender calls in the loan); Bovill v. Endle [1896] 1 Ch 648, Kekewich J (possession).

354Browne v. Lockhart (1840) 10 Sim 420, 59 ER 678.

355The amount of the loan becomes an issue if the mortgage is transferred; see below [29.48].

correct and the necessary money is set aside.356 What is owed should be paid into court after which the borrower may seek an order for execution of a vacating receipt.357 Improper refusals will be penalised in costs358 and possibly by loss of interest.359 A tender made and rejected is not equal to actual payment – the charge is removed from the land only on payment.360

3.Disputed redemption

[29.48] Court action is rarely necessary to settle the terms of a redemption. Disputed redemptions used to involve settling accounts between all parties potentially affected; it was necessary to “redeem up, foreclose down”.361 This is because the value attached to a single mortgage affects the equity available to all later lenders. However, this inconvenient rule is reversed by section 95 of the Law of Property Act 1925, consolidating earlier legislation but still much misunderstood. In 1881362 a borrower was given the right to find an outside person (X) to pay off his debt, in which case the lender was bound to accept redemption from X and to transfer the mortgage to him. Teevan v. Smith363 held that later lenders had to consent – which there were unlikely to do – but that perverse decision was immediately reversed by legislation.364 Under the current legislation, the right to require transfer belongs to each lender and to the ultimate borrower irrespective of the existence of intermediate mortgages.

All other people affected can be embroiled by seeking an account,365 and “redeem up, foreclose down” also continues to apply after the lender has taken possession.366 All intermediate mortgages must be redeemed and (if redemption is used as a defence to foreclosure) all subsequent mortgages foreclosed.367

4.Foreclosure

[29.49] Foreclosure is a judicial remedy requiring an order of the Chancery Division,368 but sale out of court is simpler, quicker and cheaper.369 Foreclosure

356 Edmondson v. Copland [1911] 2 Ch 301, Joyce J; Barratt v. Gough-Thomas [1951] 2 All ER 48, Danckwerts J.

357Bank of New South Wales v. O’Connor (1889) 14 App Cas 273, PC; Re Uplands [1948] WN 165, Vaisey J (lender disappeared).

358Smith v. Green (1844) 1 Coll CC 555, 63 ER 541; Chilton v. Carrington (1855) 16 CB 206, 139 ER 735.

359Cliff v. Wadworth (1843) 2 Y & C Ch 598, 63 ER 268; Hughes v. Williams (1853) Kay App iv, 69 ER

313.

360Bank of New South Wales v. O’Connor (1889) 14 App Cas 273, PC; query the result in Graham v. Seal (1918) 88 LJ Ch 31, 39, Duke LJ.

361Pearce v. Morris (1869) 5 Ch App 227, 229, Lord Hatherley.

362Conveyancing Act 1881 s 15.

363(1882) 20 Ch D 724, CA.

364Conveyancing Act 1882 s 12. Incorrect decisions are: Alderson v. Elgey (1884) 26 Ch D 567; Smithett

v.Hesketh (1890) 44 Ch D 161, 166; Corbett v. National Provident Institution (1900) 17 TLR 5; Re Magneta Time Co (1915) 113 LT 986.

365Watts v. Driscoll [1901] 1 Ch 294, CA; Mainland v. Upjohn (1889) 41 Ch D 126; Bentley v. Bates

(1840) 4 Y & C Ex 182, 160 ER 971.

366LPA 1925 s 95(3); Hall v. Heward (1886) 32 Ch D 430, 436; Re Pytheck (1889) 42 Ch D 590.

367Johnson v. Holdsworth (1845) 1 Sim NS 106, 61 ER 41; Moore v. Martin (1886) WN 196.

368Megarry & Wade (6th ed), [19.048–19.055].

369Palk v. Mortgage Services Funding [1993] Ch 330, 336E, Nicholls V-C; HE Markson (1979) 129 NLJ 33.

originated as a counter-balance for the lender to the equitable right of a borrower to a late redemption. Termination of the borrower’s interest in the property by a successful foreclosure was a potent threat against a borrower in default or slow to repay his loan. Since 1925, lenders have an adverse charge on the legal estate, so a foreclosure order absolute now transfers the borrower’s legal estate to the lender.370 If, say, a house is worth £100,000 and the borrower owes £15,000, the lender’s undeserved bonus is a serious prejudice to the borrower and to all later lenders.371 An intricate procedure was evolved to give the borrower372 and all others affected ample time to redeem the mortgage instead. Accounts were taken after a foreclosure order nisi, and at least six months was allowed for the borrower or any lender to redeem before the order could be made absolute,373 a period during which there is invariably a defence request for sale.374

5.Consolidation – unregistered land

[29.50] Mortgages of different properties create distinct contracts with distinct equities of redemption.375 They are redeemable separately, but “only if and so far as a contrary intention is not expressed in the mortgage deeds or one of them.”376 Hence it is possible for a lender to consolidate two mortgages377 by reserving the right to do so in either of them. A lender holding two separate mortgages on estates of the same borrower may refuse to accept redemption of one estate without the other.378 Its greatest practical significance is where the value of one piece of land is deficient as a security, a shortfall that can be made good out of a surplus on the other property.379

Consolidation operates fairly and without difficulty by the original lender against the original borrower.380 The essential requirements are:

(1)reservation of the right;381

(2)debts secured by mortgages, possibly by deed;382 and

(3)both contractual redemption dates having passed, since consolidation is an equitable principle.383

370If title is registered the charge is cancelled, as are all interests over which the charge had priority, and the foreclosing lender will be entered as proprietor: DLRR 2003 r 111.

371Guarantors gain a discharge: Lloyds & Scottish Trust v. Britten (1982) 44 P & CR 249.

372Mexborough Urban DC v. Harrison [1964] 1 WLR 733.

373LPA 1925 s 95; the borrower must give 7 days notice: Practice Direction [1955] 1 WLR 36.

374See above [29.30].

375Willie v. Lugg (1761) 2 Eden 78, 80, 28 ER 825, Northington LC.

376LPA 1925 s 93(1).

377Cases involving three or more mortgages must be analysed in pairs: LPA 1925 s 93(1); Re Salmon [1903] 1 KB 147; Pledge v. White [1896] AC 187, 191, Lord Davey.

378Jennings v. Jordan (1881) 6 App Cas 698, 700, Selborne LC; Griffith v. Pound (1890) 45 Ch D 553, 561, Stirling J; Pledge v. White [1896] AC 187, 191, Lord Davey.

379Barrow v. Manning [1880] WN 108; Jennings v. Jordan (1881) 6 App Cas 698, 703, Lord Selborne.

380Baker v. Gray (1875) 1 Ch D 491, 494, Hall V-C; Jennings at 700, Selborne LC; Harris v. Tubb (1889) 60 LT 699, Kekewich J.

381LPA 1925 s 93(1) (mortgages made after 1881); Hughes v. Britannia PBBS [1906] 2 Ch 607, 611, Kekewich J.

382LPA 1925 s 93(1); Crickmore v. Freeston (1870) 40 LJ Ch 137.

383Windham v. Jennings (1683) 2 Rep Ch 247, 21 ER 669; Cummins v. Fletcher (1880) 14 Ch D 699, CA; Jennings v. Jordan (1881) 6 App Cas 698, 700; Pledge v. White [1896] AC 187, 191, Lord Davey.

Where consolidation occurs against a single current borrower (who is not the original borrower) easily intelligible limits also apply. They are:

(1)the mortgages all made by the same original borrower;384 and

(2)a single lender seeking to consolidate.385

The greatest problem arises where the borrower’s interests have separated, that is where two different borrowers are now involved. Considerable controversy was provoked right up until the Conveyancing Act 1881 which marked the end of litigation about the right to consolidate. The law was settled by two House of Lords decisions386 but some of the results are monstrous.387 Consolidation is not possible where the borrower sells his interest in the first property before the second mortgage is created, since new burdens cannot attach after sale.388 Nor is there any consolidation if the borrower sells one property before the same lender holds both the mortgages. There must be a simultaneous union of mortgages and equities.389 However, if there was once a simultaneous union, the right to consolidation survives a later split in ownership. B1 appears to own an independent property subject to a mortgage, but he can only repay the mortgage by paying off another mortgage on a different property now owned by B2. There was some moment when a borrower held both pieces of land and a lender held both loans. When one piece of land was sold subject to its mortgage,390 the purchaser bought subject to that mortgage and also subject to consolidation of the other mortgage against his land.391 Consolidation has virtually killed the trade in mortgaged land.

6.Consolidation – registered land

[29.51] The proprietor may apply for entry of a notice on the register that the mortgages have been consolidated.392 The entry is made against each individual register affected.

384Sharp v. Rickards [1909] 1 Ch 109 (A and bare trustee for A); Cummins v. Fletcher (1880) 14 Ch D 699, CA.

385Beevor v. Luck (1867) LR 4 Eq 537; Riley v. Hall (1898) 79 LT 244; Jennings v. Jordan at 707.

386Jennings v. Jordan (1881) 6 App Cas 698, HL; Pledge v. White [1896] AC 187, HL; Megarry & Wade (6th ed), [19.096–19.110].

387Chesworth v. Hunt (1881) 5 CPD 266, 271, Lindley J.

388Jennings v. Jordan (1881) 6 App Cas 698, HL; Harter v. Colman (1882) 19 Ch D 630, Fry J; Andrews

v.City Permanent Benefit BS (1881) 44 LT 641 (obiter).

389Fosbrooke v. Walker (1832) 2 LJ Ch 161; Minter v. Carr [1894] 3 Ch 498, CA; Re Walhampton Estate

(1884) 26 Ch D 391; Pledge v. White [1896] AC 187, 195–196, Lord Davey.

390After 1925, it is believed, a person who buys property subject to a mortgage which does not itself reserve a right to consolidate may be a protected purchaser of a legal estate.

391Vint v. Padget (1858) 1 Giff 446, 65 ER 994; Pledge v. White [1896] AC 187, 198; Minter v. Carr [1894] 3 Ch 498, 501, 502.

392LRA 2002 s 57; Law Com 271 (2001), [7.44]; DLRR 2003 r 109; LR Form CC; LPA 1925 s 97 is amended by LRA 2002 sch 11.