Javed Ashrafi & Anor v Belmont Green Finance Limited

An occupier’s beneficial interest in registered land does not create an overriding interest unless it includes rights capable of being asserted against the transferee or mortgagee. Where the owner knowingly enables an agent to appear to have authority to mortgage the property, the Brocklesby principle may preclude reliance on the beneficial interest, even if the agent exceeded the authority given or committed fraud.

A mortgagee may pursue a money judgment and enforce its security concurrently. Beneficial owners who cannot assert ownership or possession against the mortgagee are not “mortgagors” for the purposes of section 36 of the Administration of Justice Act 1970. In any event, the statutory power requires that the relevant default be capable of remedy.

Mr and Mrs Ashrafi were the beneficial owners of a property. They asked Mr Shabir, Mrs Ashrafi’s brother, to obtain mortgage finance because they could not raise it themselves. He obtained a buy-to-let mortgage from Belmont Green Finance Limited, despite the Ashrafis occupying the property and the mortgage prohibiting occupation by family members.

Following arrears and continuing occupation, the Bank obtained a money judgment against Mr Shabir and an order for possession from HHJ Holmes in October 2024. The Ashrafis appealed the possession order, arguing that they had an overriding interest, that the mortgage security had merged in the money judgment, that they were “mortgagors” under section 36 of the Administration of Justice Act 1970, and that the Bank had acted unconscionably.

1. Appeal dismissed. The Ashrafis had no real prospect of defeating the possession claim on any proposed ground of defence.
2. An overriding interest under paragraph 2 of Schedule 3 to the Land Registration Act 2002 requires an interest coupled with rights capable of binding the transferee or mortgagee. The Ashrafis’ occupation and beneficial ownership therefore did not suffice by themselves.
3. The Brocklesby principle applied. The Ashrafis knowingly placed Mr Shabir in a position in which he could represent himself as owner and arrange mortgage finance, without communicating any limitation to the Bank. They were consequently precluded from asserting a beneficial interest with priority over the Bank’s security. It was immaterial that Mr Shabir may have exceeded his authority or misled the Bank.
4. HHJ Holmes had not treated the earlier findings of Recorder Jones as res judicata against the Bank. He was entitled to consider those findings when assessing whether the proposed defence had a real prospect of success.
5. The mortgage security did not merge in the money judgment. A mortgagee is entitled to exercise its remedies concurrently, as explained in Cheltenham & Gloucester Building Society v Guttridge (1993) 25 HLR 434. The Bank therefore could obtain judgment and possession in the same proceedings. The mortgage deed also secured all monies payable by the borrower, including sums due under a judgment.
6. The Ashrafis were not “mortgagors” under sections 36 and 39 of the Administration of Justice Act 1970. Although beneficial owners, they had no relevant title or right to ownership or possession assertable against the Bank. Section 205(1)(xvi) of the Law of Property Act 1925 could not control the construction of the later Act.
7. Even if section 36 had been available, the unauthorised occupation was a breach incapable of remedy except by leaving the property. The Bank’s refusal to deal with the Ashrafis directly and the contractual change from a fixed to a variable interest rate were not unconscionable.

The parties were invited to agree consequential matters and submit a draft order.

• High Court, Chancery Appeals: HHJ Holmes made a money judgment against Mr Shabir and an order for possession in October 2024. Mr and Mrs Ashrafi appealed the possession order. The appeal was dismissed.