Swift 1st Ltd v Colin & Ors

A mortgage created by deed and expressed to be a legal mortgage remains a charge by way of legal mortgage for the purposes of the Law of Property Act 1925, even if it was not substantively registered. The statutory power of sale therefore arises under section 101. On a sale by the mortgagee, sections 88 and 104 operate to vest the legal estate in the purchaser and extinguish or overreach subsequent charges and interests. The power of sale derives from the statutory mortgage provisions, rather than from the technical effect of registration under land-registration legislation.

The claimant lender’s charge over Ford House was created by deed but was not substantively registered because a prior restriction was not removed in time. The charge was noted on the register. The claimant subsequently exercised its power of sale and executed a TR2 transferring the property to the first and second defendants. The Land Registry declined to register them as proprietors because the claimant’s charge had not been substantively registered.

The application sought a declaration that the transfer was effective and directions for registration free of subsequent interests held by the third and fourth defendants. The central issue was whether an unregistered charge created by deed gave the claimant a statutory power of sale and enabled it to convey the freehold legal estate.

1. Statutory power of sale. Section 85 of the Law of Property Act 1925 permits a mortgage to be created by a deed expressed to be by way of legal mortgage. The claimant’s mortgage satisfied that requirement. Under section 101, a mortgage made by deed carries the statutory powers, including a power of sale. The power had arisen in this case.
2. Effect of non-registration. The fact that the charge was not substantively registered did not prevent it being a charge by way of legal mortgage within the 1925 Act. The power of sale derived from the Act and not from the technicalities of land-registration legislation. The Land Registry’s contention that the charge operated only as an equitable mortgage, so that no power of sale arose, was erroneous.
3. Effect of the sale. Section 101(6) incorporated the provisions relating to the realisation of mortgages, including section 88. Section 88(1) provided that a conveyance by a mortgagee exercising a statutory or express power of sale vested the fee simple in the purchaser, subject to prior legal mortgages, while the mortgage and subsequent mortgage terms or charges merged or were extinguished in respect of the land conveyed. Section 104(1) produced the same relevant consequence by permitting conveyance free from interests to which the mortgage had priority and subject to prior interests.
4. Authorities. The reasoning of Wilberforce J and the Court of Appeal in Re White Rose Cottage [1964] Ch 483 was held to be impeccable and compelling. Although section 88 had not applied on those facts, the case supported the conclusion that a mortgagee under a deed could convey the legal estate. Re Hodson & Howes’ Contract (1887) 35 Ch 668 concerned differently worded predecessor legislation and was not authoritative under the 1925 Act.
5. The claimant was entitled to a declaration that the TR2 transferred the freehold legal estate to the first and second defendants and overreached the subsequent interests of the third and fourth defendants. The Land Registrar was directed to register them as proprietors free of those interests.

First-instance decision. No earlier judgment or appeal is stated in the judgment.