• In the case of Quennell v Maltby [1979] 1 WLR 318, the Court of Appeal held that where possession proceedings are brought for a mortgaged property, they must be brought bona fide and reasonably for the purpose of enforcing the security.

Facts of the case:

  • Landlord (L) let a house to D1 for one year expiring on December 21, 1974.
  • On August 13, 1974, L mortgaged the house to his bank to secure a laon of £2,500.
  • The mortgage contained a prohibition on any lettings without the consent of the bank during the continuance of the security.
  • On December 1, 1974, L relet the house for a further year to another two students, and then did the same in 1975, to two defendants, D1 and D2.
  • L then wished to sell the house with vacant possession, but the bank refused his request to take proceedings against D1 and D2 for possession.
  • Sometime after, L’s wife, C, paid off the money owing to the bank, and in January 1978, the bank transferred the benefit to C.
  • C then claimed possession of the property as the successor in title of the bank, and the judge made an order for possession against D.

Issues in the case:

  • The issue in the case was whether C could enforce possession against D1 and D2.

Court of Appeal held:

  • The Court of Appeal allowed the appeal from D1, the tenant.
  •  The CA said that because C was not exercising her powers as a mortgagee in order to protect or enforce the security but in order to obtain possession on the behalf of her husband so that the house could be sold with vacant possession, she was to be treated as acting on behalf of her husband. Since the husband, as landlord, could not obtain an order for possession against D1 and D2 under the Rent Acts, C was not entitled to possession.
  • C was not seeking possession for the bona fide and reasonable purpose of enforcing the security.

Lord Denning MR:

  • [320] “If the judgement of the judge below is right, it will open a gap in the protection which is offered to tenants by the Rent Acts.”
  • [322] “So the objective is plain. It was not to enforce the security or to obtain repayment or anything of that kind. It was in order to get possession of the house and to overcome the protection of the Rent Acts. Is that permissible? It seems to me that this is one of those cases where equity steps in to mitigate the rigour of the law.”
  • [322] “A mortgagee will be restrained from getting possession except when it is sought bona fide and reasonably for the purpose of enforcing the security and then only subject to such conditions as the court thinks fit to impose. When the bank itself or a building society lends the money, then it may well be right to allow the mortgagee to obtain possession when the borrower is in default.”