Rose & Ors v Creativityetc Ltd & Ors

On an application to restrain a mortgagee’s power of sale, the court must first identify a serious question to be tried concerning the mortgagor’s rights. The American Cyanamid approach then requires consideration of the strength of the claim, the adequacy of damages and the balance of convenience. A settlement agreement giving the mortgagee liberty to sell after a payment deadline does not necessarily extinguish the equity of redemption unless that consequence is expressed in clear and unambiguous terms. Interim relief may nevertheless be refused, or confined to a short protective period, where the mortgagor has made no unconditional offer to redeem, paid no money into court, provided no security, and has only marginal prospects of success.

The claimants were mortgagors of properties at Lower Hillgate, Stockport. The first defendant held charges over the properties and had agreed, under a Tomlin Order and Deed of Settlement, not to sell while the claimants paid a settlement sum. The agreement was varied on 28 February 2020, fixing a longstop date of 28 May 2020.

The claimants alleged that the defendant had failed to take necessary steps concerning the termination of receivers appointed over companies connected with the properties. They contended that this failure prevented refinancing and caused the settlement sum not to be paid. They sought an interim injunction restraining sale pending trial, relying also on the principle in Alghussein v Eton College, [1988] 1 WLR 587.

The central issues were whether the claimants retained an equity of redemption, whether the defendant could rely on the contractual longstop and its power of sale, and what interim relief was proportionate.

1. Serious question. The claimants had shown a serious question to be tried. The settlement arrangements appeared to provide a temporary opportunity to redeem, but they did not clearly and unambiguously extinguish the equity of redemption. The claimants therefore arguably retained that equity, subject to their contractual undertaking not to commence fresh redemption proceedings and the proviso concerning causative acts or omissions.
2. Contractual issues. The 28 February agreement arguably extended the sale restriction to the longstop date but did not expressly remove the proviso in clause 2.5. There was also an arguable distinction between the obligation to take steps to terminate the receivers’ appointments and the separate obligation, where necessary, to make applications for termination. These issues were sufficient to satisfy the threshold, although the case was narrow and the prospects of success were marginal at best.
3. Own-breach principle. The principle in Alghussein v Eton College, [1988] 1 WLR 587, applies where a party specifically relies on its own breach to obtain a contractual benefit. It did not assist here. The alleged breaches were relied on as explaining why refinancing had failed, not as the contractual basis for exercising the power of sale.
4. Balance of convenience. Neither side was adequately protected by damages or the cross-undertaking. Nevertheless, the claimants had made no unconditional offer to redeem, paid no money into court, and provided no satisfactory security for the outstanding debt or their cross-undertaking. The evidence also did not establish that they could raise the required funds. A full injunction pending trial would therefore be disproportionate.
5. The court refused longer-term relief, including a right of pre-emption and an order securing sale proceeds. It continued the existing injunction for 28 days, until 4.00 pm on 23 November 2020, to give the claimants a final opportunity to raise funds or arrange a purchase through a nominee. The court was minded also to require seven days’ written notice before sale, subject to further submissions.

First-instance decision. The court continued the interim injunction for a limited period but refused the broader injunction sought pending trial.