Category Archives: Execution of Deeds

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.

Estoppel did not save legal mortgage but it was still equitable

In the High Court case of Bank of Scotland Plc v Waugh & Ors [2014] a legal mortgage had been signed by trustees in favour of the bank but the signatures had not been witnessed.

The bank tried to argue that the trustees were estopped from denying that it had been properly executed.

It pointed to a letter the bank had received from a Mr Gray who was solicitor for the trustees, solicitor acting for the bank and one of the trustees.

This said:

“We have had the mortgage deed executed by the trustees and are now enclosing a certified copy of it.”

The bank said this was a clear representation that the legal mortgage had been validly executed.

The bank contended that the triple capacity in which Mr Gray was acting founded the estoppel and that it had relied on the representation by lending the funds on or about 8th August 2003. The bank said the case was on all fours with Shah v Shah [2001] where an estoppel claim was successful.

However the court said this case was indistinguishable from the unfavourable High Court case of Briggs v Gleeds (2014) which I blogged here a short while ago (See Category “Pension Schemes”). That case had given six powerful reasons for not allowing an estoppel where it is clear on the face of the “deed” that it had not been executed in accordance with the Section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 (“the 1989 Act”).

So the trustees were not estopped from relying on the fact that the legal mortgage was not validly executed as a deed.

However a document, which is otherwise valid, but which fails to take effect as a legal mortgage due to some defect of form may (subject to section 2 of the 1989 Act) still be a good equitable mortgage.

This is based on the court’s power to specifically perform a contract to create a legal interest in land.

Section 2 of the 1989 Act provides:

“(1) A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contract are exchanged, in each.

(2) The terms may be incorporated in a document either by being set out in it or by reference to some other document.”

In this case the mortgage was signed by both the trustees and on behalf of the bank. It expressly incorporated the bank’s Standard Terms.

These principles operated to grant the bank’s mortgage some salvation. It was not executed as a deed and thus did not take effect as a legal mortgage. However it was signed by the parties and did contain all the terms that had been agreed. So it took effect as an equitable mortgage.

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

No preventative representations could get round failure to execute deeds properly

Where documents were not in fact executed in accordance with the Law of Property (Miscellaneous Provisions) Act 1989 (“the 1989 Act”), does the fact that documents were described as deeds and meant to be such prevent (“estop”) the signatories from denying that the defective deeds were validly executed?

Briggs & Ors v Gleeds (Head Office) & Ors [2014] concerned a pension scheme (“the Scheme”) for employees of partnerships and companies within the Gleeds group (“Gleeds”).

As will be seen later the case is an important one on the 1989 Act and estoppel and deeds – all of which play an important role in property law.

The Scheme’s case that the signatories could be prevented (estopped) from denying that the defective pension deeds were validly executed failed on factual and legal grounds.

The Facts

Gleeds argued that:

1. By supplying the draft deeds and, perhaps, instructions as to how they should be executed, the Scheme’s Pension Adviser (“Aon”) impliedly represented to Gleeds and Scheme members that, legally speaking, execution in the manner indicated by the drafts would suffice; and

2. Gleeds and Scheme members relied on the representations to their detriment; and

3. Aon were acting on instructions from the Scheme trustees at the relevant times and so the representations should be attributed to the trustees; and

4. In the circumstances, an estoppel had arisen precluding both the trustees and Gleeds and Scheme members from challenging how the deeds were executed.

Fatally to Gleeds case the court found that Aon could not be said to have made such representations for the trustees, or on the trustees’ behalf, to the Gleeds and Scheme members in relation to the execution of the defective deeds.

Main Legal issue

The main legal issue was “how far could the principle of estoppel be invoked to prevent a party from asserting that the statutory requirements for a deed (under the 1989 Act) have not been satisfied?”

The court concluded that estoppel cannot be invoked where a document does not even appear to comply with the 1989 Act on its face or, in any event, could not be so invoked in the particular circumstances of that case. For the following reasons:

i) Parliament had imposed the evidential requirement that an individual must sign “in the presence of a witness who attests the signature” otherwise his deed was not validly executed as such; and

ii) The “deeds” at issue here were not “apparently valid”. It could be seen from each document that it had not been executed in accordance with the 1989 Act.

Had it been otherwise a person can sometimes be estopped (or prevented) from denying due attestation.

But if estoppel could be invoked in relation to documents that were not “apparently valid” people would not know where they stood with them and there would be uncertainty. The validity of a deed may remain important for many years. In relation to older “deeds” people without personal knowledge of the circumstances in which they were executed would not know whether they were valid or not.

A party to a “deed”, who had not himself executed the document in compliance with the 1989 Act, would have an election as to whether the document should be regarded as valid. If the document turned out inconvenient to him he could deny its status as a deed. But if it proved advantageous he could invoke estoppel.

So, if a “deed” provided for a pension scheme to change to money purchase instead of a final salary scheme, an employer who had not had his signature to the document witnessed could wait and see whether the change had actually been favourable to him; and

iii) if estoppel could be invoked in circumstances such as these Parliament’s and the Law Commission’s aims, behind the 1989 Act, to address those kinds of issues would be seriously undermined.

So, the members of the Scheme were not estopped (prevented) from refuting that the defective deeds had been validly executed since (a) Aon could not be said to have made representations on the Scheme trustees’ behalf to Gleeds or Gleeds Scheme members as to the execution of the defective deeds; and (b) estoppel could not be invoked to get around the 1989 Act in circumstances where it was quite apparent that the documents were not validly executed as deeds.

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