Zaman v Zoha

An order for the sale of jointly owned property must be construed in its procedural and factual context. Where the order directs payment of the net proceeds of sale into court, and the mortgage and charge were fully in issue, the order may require sale free of the charge without redemption being a condition precedent. A party cannot later rely on a different case concerning the charge where that matter should have been raised in the earlier proceedings. Alternatively, mortgage rights may be extinguished under the Limitation Act 1980 where the applicable limitation period for recovering land has expired.

The claimant and the defendant’s late husband had been partners and had jointly acquired business premises subject to a mortgage in favour of Lloyds Bank. The mortgage charge was later assigned by the bank to the defendant’s late husband. Following proceedings concerning the winding-up of the parties’ interests, Master Bragge ordered that the property be sold and that the net proceeds be paid into court. The order was later implemented, and the claimant sought to purchase the property.

The defendant resisted releasing the charge unless the claimant first paid the alleged mortgage debt and accrued interest. The issues were whether the sale order required an unencumbered title and, alternatively, whether any right to enforce the charge was time-barred.

1. Construction of the sale order. The court examined the pleadings, the history of the proceedings and the documents before Master Bragge. The mortgage and charge had been fully raised, including in the late Mr Zoha’s evidence supporting his claim for a greater share of the sale proceeds. The contention that the charge had been retained as separate property was inconsistent with the case advanced at that time.
2. The order’s purpose was the orderly winding-up of the parties’ interests. Its reference to the net proceeds of sale indicated that the property was to be sold free of the charge, subject to proper sale costs and expenses. The defendant was therefore not entitled to require redemption as a condition precedent to releasing the charge.
3. In the alternative, the court held that the issue should have been raised in the earlier proceedings. The principles in Henderson v Henderson, as developed in Johnson v Gore Wood [2002] 2 AC 1, would have prevented reliance on the new case concerning the charge.
4. Limitation. If it had been necessary to decide the alternative limitation issue, the relevant provision would have been section 17 of the Limitation Act 1980. The expiry of the period prescribed for an action to recover land extinguishes title to the land. The reasoning in Kibble v Fairthorne [1895] 1 Ch 219 and Lewis v Plunkett [1937] Ch 306 supported the conclusion that the rights under the mortgage had been extinguished.
5. The questions were answered in the claimant’s favour. The defendant had to release the charge so that the property could be sold with unencumbered title.

First-instance decision. No prior appellate decision is stated in the judgment.