Menon & Anor v Pask & Ors

A fixed charge receiver appointed under a mortgage may claim possession from an individual mortgagor in occupation, despite being described as the mortgagor’s agent. The receivership agency is a special relationship, whose purpose is to enable enforcement and realisation of the mortgage security. The receiver therefore has an ancillary power to sue in their own name where possession is not given up.

For the purposes of section 36 of the Administration of Justice Act 1970, such receivers derive title under the mortgagee. The mortgagor is therefore entitled to the same statutory opportunity to seek postponement or suspension of possession as would have been available if the mortgagee had brought the claim directly.

The appellants charged their owner-occupied property to a bank as security for a company’s liabilities. Following default, the bank appointed fixed charge receivers, who sought possession.

The proceedings were initially brought in the company’s name and were later amended to name the mortgagors as claimants acting by the receivers. On appeal, the receivers were substituted as claimants and the mortgagors were permitted to challenge their standing and the application of section 36 of the Administration of Justice Act 1970.

The central questions were whether the receivers could claim possession against the mortgagors in occupation and whether section 36 applied to their claim.

1. The appeal failed on the receivers’ entitlement to claim possession but succeeded on the section 36 issue in principle.

2. A receiver appointed under a mortgage is technically the agent of the mortgagor, but that agency is unconventional. The mortgagor cannot control the appointment, the receiver’s primary function is to realise the security for the mortgagee’s benefit, and the receiver’s powers must be construed purposively.

3. The power to take possession therefore includes power to demand possession from the mortgagor, and, if necessary, to bring possession proceedings in the receiver’s own name. This conclusion was supported by the commercial purpose of the receivership and by the receiver’s better right to retain possession against the mortgagor.

4. Alternatively, an implied contractual term required the mortgagors to give up possession when required by the receivers. The receivers could enforce that term under section 1(1)(b) of the Contracts (Rights of Third Parties) Act 1999, since it conferred a benefit on receivers as the persons responsible for enforcing the security. The receivers were sufficiently identified as a class under section 1(3).

5. Section 36 of the Administration of Justice Act 1970 applied. Although the receivers acted technically as agents of the mortgagor, they were appointed by the mortgagee to enforce the mortgagee’s security and stood in the mortgagee’s place for enforcement purposes. They therefore derived title under the mortgagee within section 39.

6. The mortgagors were consequently entitled to invoke the court’s discretion under section 36. Whether they could satisfy the statutory test on the facts remained to be determined at the consequential hearing. The precise order, including whether the issue should be remitted, was left for further submissions.

• High Court (Chancery Division): Allowed the appeal in part from the order of HHJ Dight CBE dated 10 December 2018. The receivers’ standing to claim possession was upheld, but the appellants were held entitled in principle to rely on section 36 of the Administration of Justice Act 1970. Consequential directions were reserved.