Horsham Properties Group Ltd v Clark & Anor

The exercise of a mortgagee’s statutory power of sale after default does not, in itself, deprive the mortgagor of possessions for the purposes of Article 1 of the First Protocol. The statutory power implements the parties’ mortgage bargain and is subject to contrary intention in the mortgage deed. It therefore differs from legislation which overrides or extinguishes privately acquired rights.

Even if Article 1 were engaged, the statutory scheme would be justified in the public interest. Section 36 of the Administration of Justice Act 1970 does not require a court order before sale, and cannot ordinarily be invoked by a purchaser who has acquired the property free of the mortgage.

The claimant acquired a residential property after receivers appointed by the mortgagee sold it following the defendants’ mortgage default. The claimant sought possession on the basis that the sale had overreached the defendants’ equity of redemption.

The defendants argued that the operation of section 101 of the Law of Property Act 1925 was incompatible with Article 1 of the First Protocol because it permitted an out-of-court sale without a prior possession or sale order. They alternatively relied on Articles 6 and 8 and sought a declaration of incompatibility. The central issue was whether the statutory power of sale involved State intervention amounting to a deprivation of possessions.

1. Claim succeeded. The claimant was entitled to possession. The defendants’ Human Rights Act defence failed.

2. The defendants’ equity of redemption was a possession for Article 1 purposes. However, on the facts, it was lost when the receivers contracted to sell under contractual powers in the mortgage. The receivers had no statutory power of sale. The subsequent transfer did not cause the relevant loss.

3. The court nevertheless held more broadly that even a sale exercised purely under section 101 would not constitute a relevant deprivation. Section 101 supplied conveyancing machinery which implemented, rather than overrode, the private bargain between mortgagor and mortgagee. Its operation was subject to contrary intention under section 101(4), and the mortgage expressly provided for sale and possession following default.

4. The statutory scheme was neither rigid, arbitrary nor discriminatory. It reflected the long-established commercial basis on which secured lending was made available. Accordingly, no case-by-case proportionality discretion was required before a mortgagee could realise its security.

5. The court was bound by Ropaigealach v Barclays Bank to conclude that section 36 of the Administration of Justice Act 1970 had no wider purpose than restoring a discretion which arose when a mortgagee chose to seek possession through the court. Extending that discretion to every realisation of security was a matter for Parliament.

6. The alternative argument that section 36 could be invoked by a purchaser also failed. After the sale, the mortgage had been discharged and there was no continuing instalment obligation or arrears against which the statutory discretion could operate. A successor in title to the mortgage was different from a successor in title to the mortgaged property taking free of the mortgage.

7. The arguments under Articles 6 and 8 failed consequentially. Article 6 created no substantive civil right, and Article 8 did not prevent enforcement of an unqualified right to possession. The court left open the different question whether a sale in breach of the mortgage terms might engage Article 1.