Neutral Citation No: [2025] NICA 31
Judgment: approved by the court for handing down (subject to editorial corrections)* |
Ref: HOR12586
ICOS No:
Delivered: 26/02/2025 |
IN HIS MAJESTY'S COURT OF APPEAL IN NORTHERN IRELAND
___________
ON APPEAL FROM 2021/64632
IN THE HIGH COURT OF JUSTICE IN NORTHERN IRELAND
CHANCERY DIVISION
Between:
PHILIP BOYD TRIMBLE
First Plaintiff/Respondent
and
JAMES WILLIAM TRIMBLE
Second Plaintiff/Respondent
and
JOHN PATRICK CASSIDY
First Defendant/Appellant
and
STEPHEN McKENNA
Second Defendant/Appellant
___________
Mr Adrian Colmer KC with Mr Andrew Brown (instructed by Thompson Mitchell Solicitors) for the Plaintiffs/Respondents
Mr A J S Maxwell (instructed by Roche McBride, Solicitors) for the First-named Defendant/Appellant
Rafferty & Donaghy Solicitors for the Second Defendant
___________
Before: Horner LJ, Colton J and Huddleston J
___________
HORNER LJ (delivering the judgment of the court and to which all members of the court have contributed)
Introduction
[1] This is an appeal from a decision of Madam Justice McBride, the learned trial judge ("the LTJ") in which she had to consider the nature and extent of the protection afforded to a purchaser buying from a mortgagee or a fixed charged receiver by section 21(2) of the Conveyancing and Law of Property Act 1881.
Background facts
[2] John Patrick Cassidy ("JPC") was the registered legal owner of a property of some 30 acres of farmland at Tullybroom Road, Clogher, Co Tyrone, BT6 0UW and comprised in Folio 26673 Co Tyrone ("the lands"). Stephen McKenna ("SM") resided at 26A Altadaven Road, Augher, Co Tyrone, BT77 0EN. SM purported to rent the lands from JPC although he has played no part in the appeal and has agreed to consent to judgment being entered in favour of Philip Boyd Trimble and James William Trimble ("the Trimbles") who had claimed a declaration that they are now the legal and beneficial owners of the lands.
[3] JPC was first registered as the legal owner of the lands on 11 December 2000. On 11 January 2001, he deposited the land certificate in respect of the lands with the Northern Bank ("the Bank") as security for monies advanced to him by the Bank. A Notice of Deposit was ultimately registered on 14 October 2011.
[4] JPC defaulted on the equitable mortgage and on 21 September 2013, the Bank obtained an order from the court for possession and sale of the lands. It appears that the said order for possession was on foot of a notice of demand made on 13 March 2013. However, by mortgage dated 14 August 2017, JPC legally charged the lands to the Bank and the mortgage was then registered on 17 August 2017. It seems likely that the legal mortgage replaced an equitable mortgage. Given the perspective from which the case was brought, neither of the parties explored this aspect of the history of the lands in any great detail during the application for summary judgment. Therefore, it may be that rather than give up possession on foot of the earlier proceedings that JPC entered into the legal mortgage of 14 August 2017 with the Bank by way of a compromise. The court simply does not know for definite in the absence of a schedule of agreed facts.
[5] The mortgage entered into was not the usual "repayment by instalments" mortgage. Its relevant provisions were:
(i) At paragraph 1 it was stated that in consideration of the Bank granting time to the mortgagor to discharge the amount of his liabilities to the Bank and forbearing from prosecuting legal proceedings against the mortgagor for so long as the Bank shall think fit upon the terms that the Bank shall be secured as hereinafter appearing.
(ii) JPC charged the lands to the bank, with the payment to the Bank "of all sums of money from time to time becoming payable under the covenants hereinafter appearing."
(iii) By Clause 4(1) JPC covenanted with the Bank:
"That the Mortgagor will on demand pay the Bank all and every sum or sums of money at any time owing on any such account and/or will discharge the liabilities and engagements as aforesaid together with all such charges as hereinbefore mentioned And that all and every the said sum or sums of money shall together with such charges be capitalised and form an aggregate principal sum as from the date of demand and that such aggregate principal sum shall as from the date of demand bear interest until actual payment thereof at the same rate of interest which applied immediately before the date of such demand and that such interest shall stand charged and secured on the mortgaged property together with and in like manner as the said aggregate principal sum."
(iv) By Clause 5, JPC covenanted that:
"ALL moneys costs and expenses paid or incurred by the Bank in or in connection with or incidental to enforcing or exercising or attempting to enforce or exercise all or any of the rights or powers expressly or impliedly given to the Bank by these presents ... shall until repayment thereof respectively be charged on the mortgaged property and for the purposes of this clause all legal costs charges and expenses shall be ascertained as between solicitor and own client and by way of complete indemnity to the Bank."
(v) It was further provided in generic terms in the Deed that the "charge in this clause contained shall be in addition and without prejudice to any and every lien or other security which the Bank may have or but for such charge would have for the moneys secured by such charge or any part thereof" No reference was made to the previous equitable charge or the forbearance that had led to the specific legal charge - either at this point or elsewhere.
(vi) It was further provided that "until demand for payment of all the principal moneys and interest for the time being secured by this clause shall be made and complied with the Mortgagor shall pay to the Bank (in or towards satisfaction of the interest so to be paid on demand as aforesaid) interest at the rate aforesaid on the principal moneys for the time being secured by this clause or by any judgment recovered under this clause."
(vii) Clause 6(1) declared that:
"The moneys owing upon the security shall be deemed to have become due within the meaning of Section 19 of the Conveyancing and Law of Property Act 1881 and Section 4 of the Conveyancing Act 1911 immediately on demand for payment being made by the Bank or the solicitor to the Bank for the time being or upon the happening of any other event upon the happening of which the power of sale is exercisable And that such demand may be effectually made by notice in writing either left at or sent by post to the registered office for the time being of the Mortgagor or left upon any part of the mortgaged property ..."
The clause then continues with the following specific additional wording:
"And further that in addition to all other protection afforded by statute every purchaser or other third party dealing with the Bank shall be entitled and bound to assume without enquiry that some mortgage money is owing on the security hereof and that a demand thereof has been duly made hereunder and that the said mortgage money has accordingly become due."
All we say is that this is unusual wording and there wasn't sufficient debate between the parties as to its meaning or effect - given the nature of the summary proceedings brought.
(viii) Clause 6(2) declared that "the powers of sale and of appointing a Receiver conferred on mortgagees by the Conveyancing and Law of Property Act 1881 shall apply to these presents with this variation that the same shall be exercisable by the Bank at any time after a demand made by the Bank as hereinbefore provided and notwithstanding that the notice required by Section 20 of the said Act has not been given or either of the defaults therein mentioned made And that in addition, or as an alternative to selling any fixtures or machinery subject to these presents together with the lands or buildings to which the same are attached or fixed the Bank may sell the same separately or detached from such land or buildings and in any case may sell the same absolutely or for other the interest of the Mortgagor." [emphasis added]
(ix) Under Clause 6(3) a Receiver appointed by the Bank under the powers hereinbefore contained, shall in addition to the powers conferred on him by the Conveyancing and Law of Property Act 1881 have power (if the Bank so directs):
(a) to enter and take possession of the mortgaged property or any part thereof ...;
(b) to sell the property in such manner and generally upon such terms and conditions as he thinks fit and to convey the same in the name of and on behalf of the Mortgagor;
(c) to do all such acts and things as an absolute owner could do in the management of the property and in particular:
(i) to borrow from the Bank such moneys as he may require...;
(ii) to compromise or settle any claims arising out of or against the mortgaged property.
(x) Under Clause 6(4) it is provided that the security "shall be in addition to and shall not be in anywise prejudiced or affected by any collateral or other security now or hereafter held by the Bank for all or any part of the moneys hereby secured ..."
(xi) Under Clause 6(6) "neither the Mortgagor nor any of the Mortgagor's successors in title shall except by the written consent of the Bank "grant or agree to grant any lease or tenancy of the mortgaged property or any parts thereof ..."
[6] We have set out the provisions of the mortgage in some detail because it seems to us that there was a failure on both parties to focus on the mortgage and in particular the issue of whether the power of sale had arisen under the terms of this particular mortgage in light of the overall chronology of events. When the case came to this court McBride J found that there was no evidence of a demand having been made under its terms and expresses the view that if the case were to have proceeded upon the validity of the FCR's appointment she would have refused to hear it under Order 14 - see [22][25] of her judgment. JPC fell into arrears still owing moneys to the Bank which were secured by the mortgage. The Bank by a Deed of Appointment dated 4 April 2018 appointed Robert Pollock as a fixed charged receiver ("FCR"). This provided as follows:
"WHEREAS:
(1) By the Mortgage listed in the schedule hereto and made between (i) John Patrick Cassidy ("the Mortgagor") and (ii) the Bank
the property also listed in the Schedule hereto ("the Property") was charged to the Bank to secure the payment to the Bank of all the liabilities of the Mortgagor to the Bank.
(2) The Mortgagor has defaulted in payment of his liabilities to the Bank.
(3) The Bank made demand for payment on the Mortgagor on 12 March 2013. [emphasis added]
(4) The amount due and owing to the Bank on foot of the Mortgage remains unpaid.
(5) The Bank is desirous of appointing the Receiver pursuant to the powers in that behalf contained in the Mortgage and conferred on mortgagees by virtue of the Conveyancing and Law of Property Act 1881 and the Receiver has agreed to act as such.
NOW THIS DEED WITNESSES as follows:
The Bank in exercise of powers conferred upon it by the Mortgage and by the Conveyancing and Law of Property Act 1881 appoints the Receiver to be the receiver of the Property and all the income of the Property, if any, and to exercise the powers of receiver given by the Mortgage or by statute or otherwise."
[7] The lands were marketed by the FCR. The Trimbles decided to purchase them. They instructed their solicitors to act in or around November 2018. The Trimbles' solicitors were sent a "title pack" which included the Deed of Appointment.
[8] The FCR entered into a contract for the sale of the lands to the Trimbles in the sum of £280,000 on 15 January 2019. There was a deposit of £28,000 paid and a balance of £252,000 which had to be paid by the 31 January 2019 or earlier by agreement. The agreement for sale was subject to various special conditions which included:
"(3) The title to the Property shall commence with and consist of the copy Land Registry folios relating to folio 26673 Co Tyrone ... whereupon John Patrick Cassidy is registered as owner subject to a charge dated 14 August 2017 and made between the said John Patrick Cassidy and Northern Bank Ltd.
(4) Pursuant to the Charge the Bank has regularly appointed the Vendor as receiver of the Property...
(6) The Vendor is acting as agent of the registered owners of the Property and shall have no personal liability under or in connection with the contract nor in relation to any related matter or claim howsoever ...
(7) The Vendor is selling the Property as Receiver by virtue of the powers of sale contained in the Charge and the provisions of the Land Registration (Northern Ireland) Act 1970 under the provisions of the Charge and the Purchaser shall not raise any requisition or objection on:
(i) Whether due notice or any demand has been given or validly made; or
(ii) Whether the vendors' power of sale is otherwise being properly or regularly exercised;
(iii) The application for the proceeds of sale; or
(iv) Any matter or thing comprised in any document not in the possession of the vendors;
but shall instead rely upon the protection afforded by statute. [emphasis added]
(13) The Purchaser admits that:
(i) he has inspected the Property and purchased it with full knowledge of its actual state and condition and shall take the Property as it stands;
(ii) he enters into this agreement solely as a result of his own inspection and on the basis of the terms of this agreement and not on reliance upon any representation or warranty either written or oral or implied made by or on behalf of vendor;
(14) The agreement contains the entire agreement.
(15) This agreement is stated to contain the entire agreement between the parties."
[9] On 23 January 2019, the FCR's solicitors forwarded to the Trimbles' solicitors various documents including the executed Land Registry Transfer Form 11 by which the FCR purported to transfer the legal title to the Trimbles and the mortgage deed. The sale was completed by 23 January 2019 with the payment of the balance purchase monies and the Trimbles then applying to register the transfer in the Land Registry.
[10] Meanwhile, JPC had purportedly sought to rent the lands to SM and in response SM had moved his cattle onto the lands. The gates had been padlocked to prevent access to the lands and rubble had been dumped by JPC, it would appear, for the purpose of preventing access to the lands. Injunctive proceedings ensued.
[11] JPC entered a caveat in the Land Registry in April 2019 which prevented the Trimbles being registered as the full owners of the lands. Inevitably proceedings followed with the Trimbles issuing a writ on 12 August 2021, this was followed by a Statement of Claim to which JPC entered a defence. SM has not served a defence, and as noted earlier, is consenting to judgment being entered in favour of the Trimbles. The Trimbles brought the case before the court seeking summary judgment against JPC under Order 14 of the Rules of the Supreme Court (NI).
[12] Much time in the summary application was spent in looking at the protection afforded by section 21(2) of the Conveyancing Law of Property Act 1881. In the court's view, however, there was a failure to concentrate on another salient issue, namely whether under the mortgage and its particular terms, the power of sale had actually arisen. If it was arguable that the power of sale had not arisen then the statutory protection provided by section 21(2) is not engaged. Given the way in which the case came before the court at first instance the issue of whether the power of sale had arisen was not adequately addressed by the parties before the LTJ and, indeed, this court. This prompted a request (by this court) for further submissions on the point after the hearing which, although answered by the parties also showed that there was an issue which more properly required full and open debate - with potentially submissions from the Bank - rather than proceeding summarily.
[13] The circumstances in which the demand relied on is dated 12 March 2013 and obviously pre-dates the mortgage by some 4½ years deserved to be explored in some detail. This was a summary judgment application and there was an obligation to show all the material facts of the cause of action; see Valentine on Civil Proceedings - The Supreme Court at 11.45-11.54.
Judgment of the LTJ
[14] In a careful and comprehensive judgment, the LTJ set out the relevant principles for obtaining an Order 14 summary judgment. She noted that under Order 14 Rule 3, if JPC satisfies the court "that there is an issue or question in dispute which ought to be tried or that there ought for some other reason to be a trial" then the court may refuse to grant summary judgment to the Trimbles. She highlighted the decision of Carswell J in Re Savage [1991] NI 103 and, in particular, at page 107 where he said:
"If the result of the action depends on an issue of pure law, even if complex or highly debatable, it should be fully investigated and determined under Order 14."
[15] It was agreed by counsel that the two issues before this court were:
(i) Was the appointment of the FCR regular or irregular?
(i) If it was irregular, was the title of the Trimbles unimpeachable by reason of the provision of section 21(2) of the 1881 Act?
[16] The LTJ determined that taking JPC's case at its height the appointment of the FCR was irregular and invalid. She made it clear that this was not a final or binding determination in respect of this issue as she would have needed to hear further evidence, particularly from the Bank.
[17] However, the LTJ did find that the Trimbles were entitled to rely on the protection afforded by section 21(2) of the 1881 Act. She determined having considered the relevant case law that a wide meaning should be given to the word "professed" used in section 21(2) and that this could include "alleged" or "ostensible."
[18] She found that the appointment of the FCR was made in respect of the "professed exercise of the contractual powers of sale conferred by the mortgage and the 1881 Act." She highlighted the fact that the Deed of Appointment expressly provided that the appointment by the Bank was made "in exercise of the powers conferred upon it by the mortgage and by the Conveyancing and Law of Property Act 1881." There was further support in the Recitals to the Deed. She, therefore, concluded at paragraph [34]:
"[34] I am satisfied that the appointment of the fixed charge receiver was made in professed exercise of contractual powers of sale conferred by the mortgage and the 1881 Act."
[19] She went on to hold that section 21(2) did not provide protection for a purchaser who has actual knowledge or "blind eye" knowledge of any impropriety. To hold otherwise would be to permit the 1881 Act to be used as an instrument of fraud which is something no court could countenance.
[20] Her conclusion was that the Trimbles had neither actual nor constructive notice "of any irregularity as to the appointment of the fixed charged receiver and who has power to sell the mortgaged lands." She did not consider it was obvious in the face of the Deed of Appointment that there was any irregularity in the appointment of the fixed charged receiver. It was only possible to have discovered there was a problem by ascertaining the date of his appointment and cross‑referencing this back to the date of demand referred to in the recitals which appear on the Deed of Appointment. The LTJ said:
"There is no evidence the plaintiffs carried out such investigations and I am satisfied, therefore, that they did not have actual knowledge of any irregularity in the appointment of the fixed charge receiver." [see paragraph [39]]
[21] The LTJ considered that it was possible for the Trimbles to have acquired such knowledge if they had made enquiries, but none were conducted. She also concluded, having looked at the authorities in some detail, that "a purchaser from a mortgagee or fixed charged receiver is under no obligation to make inquiries and will not be fixed with constructive knowledge of irregularities in circumstances where he has made no inquiries. He would only be fixed with such knowledge if there is fraud or mala fides." However, there was no evidence, whatsoever, of either being present. The purpose of the statutory provisions was "to simplify conveyancing by reducing the enquiries a purchaser could be expected to make." All the purchaser needed to do was satisfy himself that the power of sale has arisen. She went on to refer to Stirling J's decision in Life Interest and Reversionary Securities Corporation v Hand‑in-Hand Fire and Life Insurance Society [1898] Ch D 230 at page 238 when he had stated:
"A purchaser without notice of any impropriety or irregularity would be well advised to abstain from making any such requisition due to the efficacy of the protection afforded to the purchaser by section 21(2)."
[22] Given the prism through which the case was brought - ie the provision of statutory protection for the purchasers - the critical issue of whether a power of sale had arisen under the particular circumstances of this mortgage was not fully explored. This prompted this court to invite submissions on that point but, notwithstanding, those this court feels that the issue did not mend itself to summary determination on the facts. The LTJ looking at it from the prism of the purchasers concluded that there could be no question of the Trimbles being fixed with constructive notice of any irregularity in the appointment of the FCR "because of the provisions of Clause 6 of the Mortgage Deed and Clauses 4 and 7 of the memorandum of sale." In accordance with these provisions the purchaser was bound to assume without enquiry the money was owing and demand had been made, and "they were specifically prohibited from raising any requisition or objection on whether any demand had been validly given or whether the power of sale was being properly exercised and were expressly entitled to rely on the statutory protection contained in section 21(2)." The LTJ was satisfied that the Trimbles were able to call in aid the protection of section 21(2) as they had "neither actual nor constructive knowledge of any defect and their title is, therefore, unimpeachable."
Relevant statutory provisions
[23] Section 19(1) of the 1881 Act provides:
" (1) A mortgagee, where the mortgage is made by deed, shall, by virtue of this Act, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed, but not further (namely):
(i) A power, when the mortgage money has become due, to sell, or to concur with any other person in selling, the mortgaged property, or any part thereof, either subject to prior charges, or not, ...
(iii) A power, when the mortgage money has become due, to appoint a receiver of the income of the mortgaged property, or of any part thereof; ..."
[24] Section 20 of the 1881 Act provides that:
"A mortgagee shall not exercise the power of sale conferred by this Act unless and until
(i) Notice requiring payment of the mortgage money has been served on the mortgagor or one of several mortgagors, and default has been made in payment of the mortgage money, or of part thereof, for three months after such service; or
(ii) Some interest under the mortgage is in arrear and unpaid for two months after becoming due; or
(iii) There has been a breach of some provision contained in the mortgage deed or in this Act, and on the part of the mortgagor, or of some person concurring in making the mortgage, to be observed or performed, other than and besides a covenant for payment of the mortgage money or interest thereon."
[25] Section 21(2) provides:
"Where a conveyance is made in professed exercise of the power of sale conferred by this Act, the title of the purchaser shall not be impeachable on the ground that no case has arisen to authorise the sale, or that due notice was not given, or that the power was otherwise improperly or irregularly exercised; but any person damnified by an unauthorised, or improper, or irregular exercise of the power shall have his remedy in damages against the person exercising the power."
[emphasis added]
Section 5(1) of the Conveyancing Act 1911 provides an amendment to section 21(2) which we have set out in full at paragraph [28] below.
[26] Section 24(1) deals with the appointment of receivers and says that:
"A mortgagee entitled to appoint a receiver under the power in that behalf conferred by this Act shall not appoint a receiver until he has become entitled to exercise the power of sale conferred by this Act, but may then, by writing under his hand, appoint such person as he thinks fit to be receiver."
[27] It will be noted that by section 24(2):
"The receiver shall be deemed to be the agent of the mortgagor; and the mortgagor shall be solely responsible for the receiver's acts or defaults, unless the mortgage deed otherwise provides."
[28] Section 5 of the Conveyancing Act 1911 provides an amendment of section 21 which states:
"Upon any sale made in professed exercise of the power conferred on mortgagees by the Act of 1881, a purchaser is not, and never has been, either before or on conveyance, concerned to see or enquire whether a case has arisen to authorise the sale, where due notice has been given, or the powers otherwise properly and regularly exercised."
Grounds of Appeal
[29] The grounds of appeal relied upon by JPC can be briefly summarised as follows, namely that the LTJ erred in law in the following respects:
(i) In finding that the FCR was appointed in the professed exercise of contractual powers of sale conferred by the mortgage and the Conveyancing and Law of Property Act 1881.
(ii) In finding that the Trimbles did not have actual notice of irregularity in appointment of the FCR.
(iii) In finding that the Trimbles could not be fixed with constructive notice of irregularity in the appointment of the FCR.
(iv) In finding that the Trimbles could rely on section 21(2) of the Conveyancing and Law of Property Act 1881 to avoid the consequences of irregularity in the appointment of the FCR.
(v) In finding that the Trimbles were bound by the provisions of the mortgage deed.
(vi) In finding that JPC had no defence to the Trimbles' claim.
[30] As indicated above we sought submissions on a number of various issues which the parties had not explored or fully explored before the LTJ or, indeed, at the appeal hearing itself - largely because of the route the case came before these courts. We wanted to investigate the parties' respective positions on the distinction between when a power of sale arises under a mortgage and when it becomes exercisable. All that has done is to emphasise to us that the case was never suited to summary determination - simply on its facts.
The case made on appeal by JPC
[31] JPC argued that section 21(2) did not apply because on the face of the deed this was not a professed exercise of a statutory power. Further, and in the alternative, the terms of the Deed did put the purchasers on notice that the appointment of the FCR was defective and the power of sale had not yet arisen. Thus, the Trimbles did have notice and, could not therefore, avail of the protection offered by section 21(2) of the 1881 Act.
The case made on appeal by the Trimbles
[32] The Trimbles claimed that they were entitled to rely on the protection afforded by section 21(2) of the 1881 Act for the following reasons:
(i) The conveyance of the lands to them by the FCR was made in the professed exercise of the power of sale conferred by the Act because "professed" should be given a wide meaning.
(ii) The Trimbles did not have actual (or constructive) knowledge of any irregularity in the appointment of the FCR because when the Deed of Appointment is read as a whole, it is not obvious on its face that there is any irregularity. It is only by making further inquiries that the Trimbles could have acquired the necessary knowledge and they did not make any such inquiries.
(iii) The effect of section 21(2) of the 1881 Act taken together with section 5 of the 1911 Act is that the Trimbles were under no obligation to make any further inquiries and therefore, cannot be fixed with any knowledge, actual or otherwise, of any irregularity of which they were ignorant.
Discussion
[33] The LTJ recorded that the Deed of Appointment recites that the Bank made a demand for payment on 12 March 2013. However, the Mortgage scheduled to the Deed of Appointment is dated 14 August 2017, and, as we have already observed the demand thus relied upon (and cited within the Deed) quite clearly predates the date of the later legal mortgage. Accordingly, it was argued that there was no valid demand under the mortgage and in the absence of valid demand, the right of appoint an FCR had not accrued to the Bank and, therefore, the appointment of the FCR was irregular, invalid and void. Further, in the absence of a valid and lawful demand, the obligation to repay the money borrowed did not arise under the provisions of this particular mortgage. If the appointment of the FCR was invalid then it followed that any sale he made would be void.
[34] After detailed and careful analysis, the LTJ noted that Fisher and Lightwood on the Law of Mortgages (15th Edition) at page 608 commented as follows:
"The validity of the acts of the receiver depend upon the validity of his appointment, so that if he is invalid, he will be at risk against the mortgagor, mortgagees, Trustee in Bankruptcy or Liquidator as appropriate and other interested parties such as other mortgagees."
[35] The LTJ then went on to conclude that as this was an Order 14 judgment it had to be accepted that the case was made out that the appointment of the FCR was irregular and invalid. She found that there was no evidence of a later demand. Obviously, this was only a finding on the material before the LTJ and she expressly recorded that the Bank was:
(a) not a party;
(b) had not given evidence; and
(c) had not had the opportunity to make submissions.
[36] However, the Trimbles submitted that even if there was an "irregularity in the appointment of the Fixed Charge Receiver they are nonetheless protected as bona fide purchasers without notice by virtue of the provisions of section 21(2) of the 1881 Act." This required the court to consider what protection, if any, is provided by section 21(2).
[37] At this point, it is important to recognise the important distinction that the 1881 Act makes between:
(a) when the Mortgagee's power of sale arises; and
(b) when it becomes exercisable.
[38] Wylie says at 13.028 of the (3rd Edition):
"The distinction drawn in the 1881 Act between when the mortgagee's power of sale arises and when it becomes exercisable is crucial from the point of view of a purchaser of the mortgaged land. The significance of the distinction is this. If the power of sale has not arisen, the mortgagee has no statutory power at all and, unless he has an express power of sale under the mortgage instrument, he can only transfer his interests under the mortgage, still subject to the mortgagor's equity of redemption. On the other hand, if the power has arisen and the mortgagee purports to exercise it, even though it is not yet exercisable, the purchaser nevertheless obtains a good title because, as section 21(2) of the 1881 Act provides:
'Where a conveyance is made in professed exercise of the power of sale conferred by this Act, the title of the purchaser shall not be impeachable on the ground that no such case has arisen to authorise the sale, where the due notice was not given, or that power was otherwise improperly or irregularly exercised; but any person damnified by an unauthorised, or improper, or irregular exercise of the power shall have his remedy in damages against the person exercising the power.'" (Emphasis added).
[39] To this, section 5(1) of the Conveyancing Act 1911 adds:
"Upon any sale made in professed exercise of the power conferred on mortgagees by the Act of 1881, a purchaser is not, and never has been, either before or on conveyance concerned to see or enquire whether a case has arisen to authorise a sale, where due notice has been given, where the power is otherwise properly and regularly exercised."
[40] At 13.029 Wylie goes on to explain that these provisions are designed to simplify conveyancing by reducing the enquiries which a purchaser in such circumstances is expected to make. A purchaser need only satisfy himself that the power of sale has arisen, ie, that the legal date for redemption is passed, and this can usually be done very easily by reading the terms of the mortgage deed.
[41] There is no obligation on the proposed purchaser to make further enquiries which in some cases could be extremely complicated and would involve looking into the detailed relations between the mortgagor and mortgagee during the currency of the mortgage:
"In particular, he does not have to look at the accounts, if any, kept by the mortgagor and mortgagee as to payments made and received in respect of the mortgage. However, as is the practice with such a statutory provision, the courts will not allow it to be used as an instrument of fraud and it has been stated that a purchaser with knowledge or any impropriety or irregularity about the exercise of the power will not obtain a good title. This does not require of a purchaser from a mortgagee the standard of care in conveyancing matters imposed by the doctrine of notice, but it has been said that he must not shut his eyes to suspicious circumstances: see Bailey v Barnes [1894] 1 Ch 25 at page 30."
[42] It seems to us that given that this is a "demand" mortgage it is, at least, arguable that until there is a valid and lawful demand under the mortgage itself, there can be no obligation to repay the money borrowed and consequently the power of sale cannot arise. It appears to us that the court must hear and take a decision on the interplay between the pre-existing equitable mortgage, the status of the mortgage account, the demands made for repayment both before but importantly after the creation of the legal mortgage. The reality is that the only demand relied upon in the present application is one that was issued before the mortgage was entered into between the parties and, accordingly, it is arguable "at the very least" that it cannot be a valid or lawful demand under the mortgage upon which the Bank (and thus the FCR) sought to rely. In those circumstances, and in particular, in the absence of what appears to be a lawful demand under this demand mortgage, there is an argument that no power to sell the land had arisen in the absence of an express power of sale in the mortgage deed. There is no such express power. Therefore, there remains an important legal issue to be resolved which this court is unable to do so on the basis of the present information and, importantly on what is an application for summary judgment. The evidence before us strongly suggests that the Bank's power of sale, although exercisable, has not yet arisen. Therefore, on the present information, we do not consider this to be a suitable case for summary judgment to be given to the Trimbles.
[43] We have to stand back and understand that this is an Order 14 application. It seems to us that important issues peculiar to this case were not adequately explored before the LTJ. Further they were not suited for resolution on a summary basis unless the facts were agreed. W, therefore, consider that:
(a) This is not a suitable case for summary judgment because of its unique facts;
(b) The result of approaching the case in that way focussed the prism (not unreasonably) on the protections sought by the Trimbles rather than the wider issues; and
(c) The hearing would benefit from input from the Bank who undoubtedly will have greater knowledge and information as to the exact chronology and operation of the mortgage account.
The application for summary judgment in the absence of an agreed set of facts has turned out to be a "treacherous shortcut."
[44] Further, it is claimed by Mr Maxwell that there is a problem because under the second proviso of clause 5, the interest rate is said to be aforesaid "and no rate is specified." This means, it is asserted, that the mortgage creates a demand loan with an additional obligation to pay an unspecified amount of interest "which is in itself unenforceable for uncertainty." We do not need to decide this point given our conclusion on the issue of whether the power of sale has arisen. However, in fairness to the parties we think it better to shortly state our conclusion. We do not consider that there is any uncertainty. It is quite clear that the interest aforesaid is the interest which has accrued due on the current interest account (and/or on any other account). This will necessarily change from time to time. JPC should be under no doubt or should have been in no doubt, that the interest being referred to is the interest payable from time to time as secured by the charge. We find no uncertainty and neither on a fair reading should JPC or his legal advisers. Accordingly, we do not see this as a reason to have refused summary judgment.
Conclusion
[45] We are not satisfied that the Trimbles are entitled to summary judgment because there is a legal argument which remains unresolved namely whether the power of sale under this particular mortgage has arisen in the absence of a lawful and valid demand made under it. Certainly, the power of sale will arise once a valid and lawful demand has been made under the mortgage and that demand has not been satisfied within the requisite period.
[46] Again, in fairness to the parties, on the specific question of the statutory protection available to the Trimbles (or indeed any purchaser in such circumstances) who seek to avail of the statutory protections under section 21 we do not find any fault with the analysis and conclusions reached by the LTJ on that specific aspect of the case. The LTJ's reasoning and conclusion reached at [47] of her judgment is correct on the law when looked at solely on the interpretation and application of section 21 but does not consider the anterior issue of whether that statutory protection is in play where the power of sale and/or appointment may not have arisen on the actual facts. It is regrettable that given the specific nature of the Trimbles' application for summary judgement that the wider aspects of the case as indicated above were not fully considered and it is on that basis alone that we remit the matter to the trial judge.