Borrower estopped from challenging mortgage witnessing and Mortgagee’s right to dispose of goods

In the High Court case of Campbell v Redstone Mortgages Ltd [2014] the claimant (“Miss Campbell”) had executed a mortgage over her property, Milkup Bank Farm, Willington, Crook, County Durham, DL15 0RN (“the Property”). Her signature on the mortgage was apparently witnessed. Following recent cases on the point Miss Campbell now said that the witness was not present when she signed the mortgage.

The respondents (“Redstone”) were now the lender under the mortgage.

Clauses G6.1 and 6.2 of the mortgage conditions said:

“6.1 If we [ie Redstone] or a receiver take possession of the Property, you [ie Miss Campbell] must, on Notice, remove all of your furniture and belongings. If you have not done so within 7 days of the Notice, we may as your agent remove, store or sell any items left behind.

6.2 Neither we nor the receiver will be responsible for any resulting loss or damage to your possessions. You must reimburse us for all the expenses of dealing with your furniture and goods. If we sell any of them we will pay you what’s left after deducting those expenses. …”

The main issues were:

1. Was Miss Campbell entitled to have the mortgage set aside because the witness was not in fact present when she signed the mortgage meaning that the mortgage did not comply with s.1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 (“the mortgage issue”)?

The High Court said Miss Campbell’s claim on the mortgage issue was hopeless. It was far too late now to be challenging the mortgage. There was the undisputed fact that she had been lent £500,000. There had been extensive proceedings since then. There had been an action for possession. Whatever fresh evidence Miss Campbell might have wished to rely upon could have been obtained with reasonable diligence before the Possession Order was made. In fact possession had been granted.

Miss Campbell would in any event be estopped from asserting that the mortgage was not properly executed as a deed because Redstone had throughout the original possession proceedings accepted mortgage arrears from Miss Campbell, resulting in the dismissal or suspension of many warrants of possession.

The case was easily distinguishable from the recent cases Miss Campbell now tried to rely on as saying she could not be estopped and that the mortgage had to be set aside.

Briggs v Gleeds [2014] and Bank of Scotland Plc v Waugh & others [2014] were cases where the deeds were not even superficially properly executed as deeds.

This case was similar to the Court of Appeal case of Shah v Shah [2002], in that it at least appeared that Miss Campbell’s signature was attested by a witness. In Shah the signatories had also been estopped from denying the validity of deeds even though the relevant witness had not been in the room when they signed.

2. Was Redstone liable to pay Miss Campbell damages as a result of the steps it took when it was involuntary bailee of her chattels (“the damages issue”)?

When Redstone repossessed the Property, and became mortgagee in possession of the Property, it became an involuntary bailee of those chattels left at the Property.

As involuntary bailee, Redstone had to do what was right and reasonable in the circumstances of the case.

In disposing of the chattels was what Redstone did right and reasonable in all the circumstances of the case including:

– the relevant mortgage conditions; and
– warnings given by Redstone that it intended to dispose of the chattels and three successive additional time orders made by the court)?

On 12 February 2014, 28 February 2014 and 14 March 2014 the court had ordered Redstone to afford access to Miss Campbell and others to remove their goods from the Property.

On the occasion of the third order the Judge told Miss Campbell it would be the last chance for her and others to collect their goods. Nevertheless they did not remove their chattels from the Property.

At no time had Redstone or its agents interfered with or hindered their rights to collect their chattels. In fact Redstone made every attempt to facilitate the removal of those chattels.

Accordingly, Redstone had been entirely justified in commencing to clear the Property and dispose of the goods on 1 April 2014.

Furthermore given the amount and different nature of goods left at the Property, the fact that they appeared to have no intrinsic value, and that the deficit on the mortgage account was over £730,000, the most sensible appropriate and cost effective way for Redstone to deal with the goods had been to dispose of them as opposed to putting them into storage or selling them.

What Redstone did with the goods left at the Property when it took possession was right and reasonable, in the circumstances. So Redstone had no liability to pay Miss Campbell, or other owners of chattels left on the Property, damages.

This blog has been posted as matter of general interest. It does not replace the need to get bespoke legal advice in individual cases.