Swift 1st Ltd v Colin & Ors

Factual and Procedural Background

The Plaintiff is a lender who advanced £348,148 secured by a charge dated 16th November 2007 against a property known as The Ford House, located in The City, Worcestershire, owned by Mr and Mrs Riley. The property consists of two titles. A prior mortgage provider had a restriction on one title and did not timely consent to the Plaintiff's charge being substantively registered, despite its own charge having been redeemed. Consequently, the Plaintiff's charge was noted but not substantively registered on the Land Register.

A subsequent registered charge was granted to the third Defendant, a foreign ceramics importer with commercial dealings with the Rileys. Additionally, an interim charging order was made against the Rileys by the fourth Defendant, relating to a judgment debt under £7,000.

The first two Defendants, Mr and Mrs Colin, purchased the property from the Plaintiff exercising its power of sale. Although a Form TR2 was executed transferring the property to the Defendants, the Land Registry refused to register them as proprietors due to the Plaintiff’s unregistered charge. This issue is not isolated, affecting many loans in the Plaintiff's portfolio with similar registration problems.

The current application seeks to compel registration of the first two Defendants as registered proprietors. Neither the Defendants nor the Land Registry oppose the application, although the Land Registry has explained its reasons for refusal. The Rileys’ interest is considered academic due to their indebtedness exceeding the sale price.

Legal Issues Presented

1. Whether the Plaintiff, despite its charge being unregistered, had full power of sale over the freehold property under the Law of Property Act 1925.
2. Whether the execution of the Form TR2 by the Plaintiff in exercise of its power of sale effectively transferred the legal estate to the purchasers free of subsequent interests.
3. Whether the Land Registry was correct to refuse registration of the purchasers due to the Plaintiff’s charge not being substantively registered.
4. The effect of an unregistered legal charge on the mortgagee's power of sale and the ability to convey the legal estate.

Arguments of the Parties

Plaintiff's Arguments

• The Plaintiff's mortgage was created by a deed expressed to be a legal mortgage, satisfying section 85 of the Law of Property Act 1925.
• Section 101 of the Act confers powers on the mortgagee, including the power of sale, exercisable where the mortgage is by deed.
• The power of sale under section 104 overrides subsequent interests and enables conveyance free of those interests.
• The fact that the charge was not substantively registered does not negate the legal power of sale, which derives from the Law of Property Act rather than Land Registration legislation.
• Section 88 of the Act applies, allowing the purchaser to take the fee simple subject only to prior interests, extinguishing the mortgage and subsequent charges.
• Precedent from Re White Rose Cottage supports the proposition that an equitable mortgagee exercising a power of sale can convey the legal estate.
• The Plaintiff does not need to rely on a power of attorney to convey since section 88 applies directly.

Land Registry's Position

• The Land Registry contended that, because the Plaintiff’s charge was unregistered and therefore took effect only in equity, the power of sale did not arise.
• This position was challenged by the court as erroneous, given the statutory provisions conferring power of sale upon a mortgagee by deed.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the statutory framework under the Law of Property Act 1925, particularly sections 85, 88, 101, and 104. It held that the Plaintiff's mortgage, created by deed and expressed to be a legal mortgage, conferred a statutory power of sale independent of registration status under Land Registration legislation.

Section 101 grants the mortgagee powers including sale; section 104 provides that a mortgagee’s sale conveys the property free of subordinate interests; and section 88 governs the realisation of freehold mortgages, extinguishing the mortgage and subsequent charges upon sale. The court rejected the Land Registry’s argument that an unregistered charge was only equitable and thus incapable of conferring power of sale.

The court relied on Re White Rose Cottage to support the proposition that an equitable mortgagee exercising a power of sale can convey the legal estate, and noted that the statutory power arises from the deed itself, not from registration. The court found that the Plaintiff had full power to sell and that the executed TR2 deed effectively transferred the legal estate to the purchasers, overriding subsequent charges and interests.

It was unnecessary for the Plaintiff to rely on any power of attorney or seek a vesting order, as the statutory provisions sufficed to validate the transfer and extinguish subordinate interests.

Holding and Implications

The court’s final decision was to ORDER the registration of the first and second Defendants as proprietors of the legal estate in the property, free from the interests of the third and fourth Defendants.

This decision confirms that a mortgagee’s statutory power of sale under the Law of Property Act 1925 is effective notwithstanding non-registration of the legal charge at the Land Registry. The ruling directly resolves the dispute between the parties without setting new precedent beyond the application of established statutory principles and binding case law.