Last month the Chancery Division of the High Court in Manchester considered a challenge to the continuing ap-pointment of LPA receivers in the case of (1) Jumani (2)Tariq v (1) Mortgage Express (2) Walker Singleton ( EWHC 1571 (Ch)).
The case sounds a warning of the uphill struggle that will be faced by borrowers seeking to challenge an LPA receiv-ership. The case highlighted the issue of agency under the LPA appointment. The case also raised an issue of an al-leged contractual variation to the terms of the mortgage in respect of the LPA appointment. This case is informative for the approach adopted by the court in analysing the al-leged variation of contract.
The case concerned borrowers who had a buy-to-let port-folio. The borrowers had 55 properties between them in two different portfolios. The properties were mortgaged. It was a term of the mortgage under Clause 15b of the condi-tions that stated:
"If you have more than one mortgage with us, and you want to pay off just one of those mortgages, we have the right ... to stop you paying off the mortgages separately and to insist that you pay them all off".
Following default on the mortgages LPA receivers were appointed by the lender. The receivers were the second defendant in the case.
The borrowers alleged that there had been a binding agreement with the lender to terminate the LPA appoint-ment and return the portfolio to them. The substance of the agreement was that if they were permitted to manage the properties and return the mortgage accounts to credit, the receivership would be terminated. The borrowers said that this was an oral agreement made with the receiver. They said that the receiver was struggling to manage the proper-ties so they agreed that if the borrowers managed them and cleared the arrears on some of the properties and maintained payments on the others, the receivership would be terminated. It was the borrowers case that if they had not been promised the return of the properties they would have walked away.
The borrowers said they acted on the agreement but when they asked that the receivership be terminated, the request was refused. The lender and borrower denied the agreement and refused to terminate the receivership. The lender claimed that the borrower had interfered with the receivership by re-fusing to authorise a transfer of funds between accounts. The borrower issued proceedings against the lender and receiver.
The court held that under the terms of the mortgage the lend-er was entitled to appoint the receivers and further there was no obligation on the lender to terminate the receivership even if the arrears were cleared. The lender retained the right to leave it to the receivers to realise their security. Any variation of the term of the contract contained in Clause 15(b) would require a variation of existing contractual rights. Such a varia-tion would only be established if a binding and enforceable agreement could be proved on the facts. The test to be ap-plied was an objective test and usual contractual principles would be applied.
The conditions provided that the receivers were agents for the borrowers not the lender which meant that the lender was not liable for the receivers’ actions despite their core duties being to the lender, unless it could properly be said that the lender had interfered in the receivership or the Receivers were acting at its direction – see Silven Properties Ltd v. Royal Bank of Scotland plc  1 WLR 997, cf Standard Chartered Bank Ltd v. Walker  1 WLR 1349.
The authorities recognise that an agency relationship be-tween an LPA Receiver and a mortgagor is no ordinary agen-cy relationship, but in reality a device to protect the mortga-gee, with the consequence that general agency principles are of limited assistance in identifying the duties owed by the re-ceiver to the mortgagor –see Gomba Holdings v. Homan  1 WLR 1301, at 1305B-D per Hoffmann J,and  1 WLR 1231, at 1232D-H per Fox L.J. It was important to note that there was no existing contractual relationship between the receiver and the borrower which might have been capable of variation.
In this case the borrower failed to establish an agreement capable of binding the lender. The terms alleged were too vague and the court found it was inherently unlikely that the lender would have made such an agreement.
This case demonstrates how difficult it is for borrowers to at-tempt to avoid the appointment of LPA receivers or terminate their appointment. The courts will adopt a strict contractual analysis where there is any claim that the terms have been varied. It is unlikely that any representations made by the re-ceivers will be binding on the lender unless it can be shown that that the lender took additional steps to assume responsi-bility for the actions of the receivers or the actions of the re-ceivers created a new binding contract between them and the borrower.