Legal Principles and Key Points
- In the case of Bank of Ireland Home Mortgages Ltd v Bell  2 F.L.R. 809, it was that in exceptional circumstances, the matters relevant to an application for an order of sale under the Trusts of Land and Appointment of Trustees Act 1996 section 15 can prevent a successful application. However, these factors will still be weighed against the interests of the creditors, who generally will succeed.
Facts of the Case
- On 17th November 1988, the sale of a property as a long joint lease to D and her husband was completed and the charge over the property executed.
- The property acted as the matrimonial home for D, her husband and their son. In 1991, D’s husband left to work in Czechoslovakia and never returned. D and her son were left in mortgage arrears.
- On 1st May 1992, C gave formal notice of default. C sought an order of sale for the property and was granted this by a District Judge on 8th September.
- On appeal, D contested that she and her son had beneficial interest in the property, and exceptional circumstances were present as it would cause her son great distress to vacate the property.
- At trial in 1998, the judge upheld D’s appeal and declined to order the sale.
- Were the present circumstances sufficiently exceptional under the 1996 Act to reject C’s order of sale?
Held by the Court of Appeal (Civil Division)
- Finding for C, that an order for sale should be granted. The emotional distress of the now 17-year old son had to be balanced against the fact that the mortgage had gone unpaid for several years, the debt now exceeding the value of the property. It would be a greater inequity to deny C any chance of repayment.
Peter Gibson L.J.
- C has contested that the judge’s finding that D’s signature on the mortgage document was forged should be challenged. As this is an appellate court, we are not entitled to interfere with a lower judge’s findings of fact.
- Under section 15 of the 1996 Act, the court must have consideration for the following matters before making an order of sale under section 14:
- The intentions of the persons who created the trust,
- The purposes the which the property subject to the trust is held,
- The welfare of any minor who occupies or might reasonably be expected to occupy any land subject to the trust as his home,
- The interests of any secured creditor of any beneficiary.
- On well-established principles, we can only interfere with the exercise of the judge’s discretion if they erred, either by considering irrelevant factors or omitting relevant considerations, or by being plainly wrong in their conclusion. The judge here is guilty of all three.
- Before referring to the other considerations, the judge said it was clear that C was entitled to the protection of its advance. This referred to an earlier remark that there was nothing to prevent C from registering its equitable charge in substitution for the legal charge. This was an incorrect notion, although C could lodge a caution.
- The finding that the property was held as a matrimonial and family home was incorrect. This purpose ceased to be operative once D’s husband left the property, and therefore the judge should not have considered it so strongly. The son’s occupation, being nearly 18, and D’s upcoming operation were reasons to postpone an order for sale but did not justify denying it outright.
- “The 1996 Act, by requiring the court to have regard to the particular matters specified in section 15, appears to me to have given scope for some change in the court’s practice. Nevertheless, a powerful consideration is and ought to be whether a creditor is receiving proper recompense for being kept out of his money, repayment of which is overdue (see The Mortgage Corporation v Shaire, a decision of Neuberger J on 25th February 2000). In the present case it is plain that by refusing sale the judge has condemned the bank to go on waiting for its money with no prospect of recovery from D and her husband and with the debt increasing all the time, that debt already exceeding what could be realised on a sale. That seems to me to be very unfair to the bank” .