Calvin Jeremy Swaby v KHK One Limited

A mortgagee may exercise a contractual or statutory power of sale without first issuing court proceedings where the mortgage and loan documents confer no such requirement. A clause stating that the lender may institute enforcement proceedings gives a discretion, not a condition precedent to enforcement. An unregistered legal charge may still support the power of sale. An injunction will not be maintained where there is no serious issue to be tried, damages are an adequate remedy, and the claimant has provided no sufficient cross-undertaking. A claim based on an alleged sale at undervalue must be properly pleaded and supported by evidence. Unarguable claims may be struck out.

The defendant lent £590,000 secured by legal mortgages over two properties. The claimant defaulted, and the defendant exercised its power of sale by auction. The claimant obtained a without-notice injunction restraining completion, then issued Particulars of Claim alleging that the defendant had breached the loan agreement by selling without first commencing proceedings or obtaining the claimant’s consent.

The defendant applied to set aside the injunction and strike out the claim. The central issues were whether the loan agreement required prior court proceedings, whether the defendant had a power of sale despite the pending Land Registry registration, and whether any remaining pleaded or suggested grounds justified injunctive relief.

1. Injunction. The without-notice injunction was set aside. There was no proper basis for proceeding without notice: the dispute was known to both parties, there was no secrecy, and completion was not sufficiently imminent. Allowance was made for the claimant’s status as a litigant in person, so the application was also considered on its merits.
2. Contractual enforcement. Clause 9.3 of the loan agreement stated that the lender may institute proceedings in its absolute discretion after the debt became repayable. It created a discretion, not a requirement to issue proceedings before enforcement. Nothing in the loan agreement made a sale without prior proceedings unlawful or unfair.
3. Power of sale. The mortgagee had a power of sale under section 101 of the Law of Property Act 1925. The charge expressly referred to that power, and provided that section 103, which regulates its exercise, did not apply. The pending registration of the legal charge did not remove the power of sale: Swift 1st Limited v Colin and Others [2012] Ch 206 was applied.
4. Other grounds. The claimant had not clearly offered full repayment, and the redemption statement’s validity date did not override repeated warnings that the properties would be auctioned unless the loan was repaid in full before the auction. Allegations concerning an unfair relationship, failure to provide a settlement figure, lack of authority to auction, and sale at undervalue were either abandoned, unpleaded, unsupported, or unarguable.
5. Balance of convenience and strike-out. Damages would be an adequate remedy for any improper exercise of the power, such as a sale at a substantial undervalue. No sufficient cross-undertaking in damages was provided, and the prejudice to the defendant outweighed the claimant’s unparticularised losses. The pleaded claim had no real prospect of success and disclosed no reasonable basis, so it was struck out.