Those giving unqualified undertakings to redeem existing charges on a property on sale must pay whatever sum is necessary to ensure performance of the undertaking.

In Angel Solicitors (a firm) v Jenkins O'Dowd & Barth (a firm) and Barclays Bank and others, the claimant acted for the purchaser of a property and the defendant acted for the vendor. The property was mortgaged to the bank by way of an all monies charge. The amount owed to the bank exceeded the value of the property. The defendant gave the usual undertaking to redeem the mortgage on completion although it had not obtained a statement from the bank as to the sum it would accept to release the property from the security. Completion took place but the bank received no sale proceeds. The claimant sought summary enforcement of the undertaking and summary judgment against the defendant. The defendant sought to join the bank in to the proceedings to determine what the real redemption figure was. It argued that had redemption taken place when intended, the bank would have accepted a lesser sum than it was subsequently seeking to recover. It also sought to join in the seller in order to obtain an indemnity from it.

The court held that the purpose of the undertaking had to be achieved i.e. the discharge of the mortgage over the property. What the bank might have originally accepted to discharge the security was irrelevant where there had been delay in performing the undertaking. It was unfortunate for the defendant that the breach of the undertaking meant a greater sum had to be paid subsequently, but neither the claimant's position nor the legal and equitable entitlement of the bank could be detrimentally affected. That being the case, the bank should not be joined into the proceedings. The undertaking should be performed and the defendant had no real prospect of defending the application for summary enforcement. That was an end to the matter and the defendant should pursue the vendor in a separate action.

Things to consider

Undertakings have to be complied with and a lender cannot be forced to accept a sum that it might have accepted by way of discharge had there not been a breach and delay. Those giving the undertaking must be sure when giving it of the amount involved and that there will be sufficient sums available to ensure that the undertaking is complied with. Failure to do so can be costly for those giving the undertaking despite the fact that it might prove to be a bit of a windfall for the holder of the charge to be redeemed.