One of the greatest – and previously unresolved – challenges for receivers had concerned the question of their ability to take possession of a mortgaged property despite being the deemed agent of the borrower, said Cecily.

Without the certainty of case law to offer guidance, the inevitable result was that fixed charge receivers had not been clear for a long time on how best to deal with such a situation. The outcome of the proceedings in Menon v Pask had therefore been much awaited.

Cecily – who co-authored Mortgage Receivership Law and Practice with Stephanie Tozer QC, also of Falcon Chambers – first looked at the central questions of the case, identified as:

• If the receiver is the agent of the borrower, how can they make a claim for possession against their own principal?
• Could a receiver take a claim for possession against the borrower in the name of the borrower, since it would seem that the defendant and the claimant were not separate parties?
• Can the borrower ask the court to postpone possession under s36 of the Administration of Justice Act 1970 (AJA)? This is assuming the property was residential and this Act would have applied to a lender's claim for possession.

In October 2019, Mr Justice Mann handed down judgement on the Menon v Pask case, addressing those fundamental issues.

"A receiver can now sue the borrower for possession, in an owneroccupier mortgage, despite the agency, which is a very practical decision. However, they must sue in their own names, not the borrower's, to solve the problem of the borrower appearing to sue themselves," said Cecily.

"However, Mr Justice Mann found that a residential borrower in a claim by the receiver was entitled under s36 of AJA 1970 to seek an order from the court to adjourn the claim, or postpone or suspend possession, if he could make proposals to repay the underlying debt."

"It is, of course, very common in lender claims that if a borrower can pay down arrears over the lifetime of a mortgage, that they would get an adjournment or possession suspended on terms, and not have to pay very much (every year). This outcome is now possible in a receiver’s claim."

Behind the judgement

Cecily then analysed the core rationale underpinning each aspect of the judgement in greater detail:

"In this case, the mortgage was owneroccupier, so the judge said that the person you'd expect to have to take possession against would be the borrower. Then there were additional receivership powers, the power of sale and others, where the judge said you would expect vacant possession," said Cecily, "If we take that all together, the conclusion of the judge is that the power to take possession that was being given to the receiver in that mortgage must be a power to take possession against the borrower."

"To me, Mr Justice Mann was saying that a receivership would not work if the receiver could not take possession against a borrower in this owner occupier context."

"The second aspect of the case was taking possession in the receiver's name. The judge said it did not make sense for the receiver to claim in the name of the borrower, and hence got the parties to the appeal to agree that the receivers be substituted as claimant, so they claimed in their own names."

"Turning to the application of AJA, receivers don’t have title, as that word is traditionally understood in property law, but the judge decided that it's appropriate to regard the right to appoint receivers as a right of the mortgagee, arguing 'title' means their right to possession."

Since the judgement was made, there had been no indication from the Court of Appeal that any,or all, aspects would be appealed. However, Cecily felt an appeal was likely to be heard by the Court of Appeal, if either party sought permission.

Potential for appeal

She said: "The outcome of this case was well received as it related to possession. The judge came to a conclusion that the ability to take possession from the borrower was necessary to make receivership work. That followed the approach in other recent cases, including McDonald v McDonald, in 2016 – where the judgement was that receivers could take possession against the tenant of a borrower to make the receivership work. And, although Northern Ireland has different court procedures, the court’s reasoning in the Colin Jennings and Michael Skinner case in 2018, was very much along the same lines of practicality."

"To me, the arguments related to the application of the AJA and Mr Justice Mann's rationale about title and possession seem more difficult to sustain. They are more open to a successful appeal than the decision on whether a receiver can take possession against a borrower."

"Now, at least we have clear guidance on how receivers can address possession in owneroccupier challenges, though we remain without clear guidance on whether they can take possession against the owner, where there is a buy-to-let mortgage or against other occupiers whom the borrower could not evict."

"Depending, on the practical and commercial realities behind the scenes, I think we might discover that, as we move deeper into 2020, these issues have some way to run."