A number of recent High Court decisions demonstrate an increase in the number of repossession proceedings being brought by receivers.
A common thread in these proceedings is that the borrower had purported to grant a leasehold interest in the secured asset to a lessee without the prior written consent of the bank, contrary to the terms of the bank’s security.
The bank-appointed receivers argued that such a lease was in breach of the security and therefore “null and void”. The occupier of the mortgaged properties was, in the absence of a valid leasehold interest, effectively a ‘trespasser’.
In one such case, it was not disputed that the lease had been created without the prior written consent of the bank. The Court found that the receiver had set out a strong case and that the landlord and his tenant had not established an arguable defence, so the orders sought by the receiver were granted. The Court found that in any event, the balance of convenience lay in favour of the bank on the basis of the money owing to it and the difficulty facing the bank in selling the property in the current climate.
While the facts of this case are unique, the broad findings of the Court are consistent among the growing number of similar cases coming before the courts.