Freeman v Bank of Scotland: BOS can sell its interest in mortgaged property without registration of charge

Here, the Supreme Court followed its decision in Kavanagh v McLaughlin (post) in holding that Bank of Scotland (BOS) could exercise its contractual right to appoint a receiver to mortgaged properties even though BOS was not registered as owner of the charge over those properties. The Court held that the Receiver could sell BOS’s interest in the properties without BOS being registered as owner of the charge.

Background

Freeman took out a mortgage from BOS Ireland giving  BOSI a charge over five buy-to-let properties. Under a cross-border merger, BOSI’s assets were transferred to BOS, and BOSI ceased to exist.Freeman went into arrears on the mortgage, and BOS appointed a receiver over the properties. Freeman issued High Court proceedings challenging the appointment of the Receiver. McGovern J (here) dismissed that challenge. Freeman appealed to the Supreme Court. The Receiver sold the properties.

Supreme Court

Freeman challenge the appointment of the Receiver on grounds that, as BOS was not registered as owner of the charge, it could not transfer ownership of the properties to the purchasers. That, it was argued, could give rise to a liability by Freeman towards the purchasers in relation to the title. That such a liability could arise, Freeman argued, caused the charge to be void under the doctrine of “non est factum“, as that potential liability was not contemplated by Freeman or BOSI prior to the mortgage agreement.

Dismissing Freeman’s appeal, Dunne J stated that BOS could sell its interest in the properties without being registered as owner of the charge. Although the purchasers in those circumstances will have problems perfecting their title, the sale is binding between the purchasers and BOS. Even if the purchasers did seek a remedy against Freeman for any deficiency in their title, it is inconceivable that Freeman would not have a remedy against BOS for that liability. And the remote possibility of such a liability arising does not affect the validity of the appointment of the Receiver.

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