Fairmont Property Developers UK Ltd v Venus Bridging Ltd & Ors

This appeal from the High Court concerns the sale of mortgaged property.

The Appellant, Fairmont Property Developers UK Ltd (“Fairmont”), defaulted on a loan owed to the 1^st Respondent, Venus Bridging Ltd (“Venus”), which was secured by a second mortgage of an industrial/warehouse building let to commercial tenants (“the Property”). Venus appointed the 2^nd and 3^rd Respondents as receivers of the Property (“the Receivers”).

The Receivers proposed to sell. Fairmont disagreed with their marketing strategy and considered it would produce too low a price. Fairmont applied to the Court for an order that it be given the conduct of the sale in place of the Receivers, relying on s. 91 of the Law of Property Act 1925 (“s. 91” and “LPA 1925” respectively).

The application was heard by Ms Saira Salimi sitting as a Deputy Judge of the High Court (“the Judge”) on 25 February 2025. She dismissed the application for reasons given in an oral judgment on the same day.

Fairmont appealed with permission granted by Asplin LJ. We had the benefit of argument on its behalf from Mr Andrew Brooke, and on behalf of Venus and the Receivers from Mr Tom Morris.

Since there was no dispute between the parties that the Property should be sold, and the only question was who should have the conduct of the sale, it was desirable to let the parties know our decision as soon as possible. We were able to inform them at the conclusion of the hearing that the appeal would be dismissed with reasons to follow (and that an injunction which had been granted restraining the Receivers from selling pending the appeal would be discharged). I now give my reasons for agreeing to this course.

Fairmont is the registered freehold proprietor of theProperty, which consists of a warehouse/light industrial unit and associated offices on the outskirts of Milton Keynes. Fairmont, a special purpose vehicle formed for this purpose, acquired it along with two other warehouses in 2015, refurbished the units and sold two of them, retaining the Property. The Property was charged to Coutts & Co by way of first mortgage in January 2020 to secure a loan of £3.85m. Coutts has not yet called in its loan or enforced its security, and although notified of the proceedings preferred not to participate in them.

Following refurbishment the Property was let to a commercial tenant, Supreme Wheels Direct Ltd, which uses it to refurbish and manufacture alloy wheels for cars. The lease, dated 12 March 2020, was for a term of 10 years, with a break clause on the 5^th anniversary, at an annual rent of just over £360,000 payable quarterly in advance, rising for the second 5-year period to just over £370,000.

On 16 March 2023 Fairmont granted a second charge by way of legal mortgage to Pearl Bridging Ltd to secure a loan of £810,500 for a period of 12 months. The loan was also secured by a debenture granted by Fairmont and a personal guarantee from Mr Vitale, a director and the majority shareholder of Fairmont. The loan and charge were later assigned, first in early 2024 to a company called Neptune Funding Ltd and then in September 2024 to Venus.

The loan was extended for 3 months in March 2024. Fairmont did not repay it on the expiry of the 3 months, and terms for a further extension were not agreed. On 19 September 2024 Venus demanded payment of the loan and on 20 September 2024 appointed the Receivers. It has not been suggested that there is any doubt over the validity of their appointment.

The Receivers proceeded to market the Property. By then it was apparent that the tenant would not be exercising the break clause. The Receivers’ marketing material sought offers in excess of £4.75m. Mr Vitale considered that this was very low and believed that the Property could achieve a much better sale price; he had previously been in discussions with potential purchasers for sale at various prices over £6m. He was concerned that a sale at £4.75m would yield net funds of some £4.4m which would be insufficient to clear both the Coutts and Venus charges, whereas a sale at £6m or more would leave a substantial surplus for Fairmont.

In those circumstances Fairmont brought an application for an order under s. 91 LPA 1925 that it be given conduct of sale of the Property for a period.

The application was heard by the Judge on 25 February 2025. She first dismissed an application by Fairmont to adduce expert evidence. She then dealt with the substantive application. I will have to look at her reasons in more detail below but in summary she considered that the order sought should only be made in exceptional circumstances, which did not here exist; that there needed to be some identifiable unfairness to the mortgagor which in effect required the Court to be satisfied that the Property was likely to be sold at an undervalue; and that she could not find that that was the case. She therefore dismissed the application.

Fairmont appeals with permission granted by Asplin LJ. There are three grounds of appeal against the Judge’s substantive decision:

In addition Fairmont appeals the Judge’s decision to refuse expert evidence on the ground that she was wrong to do so.

91 LPA 1925

It is convenient to set out next the terms of s. 91(1)-(2), as follows:

“91 Sale of mortgaged property in action for redemption or foreclosure

(1)

Any person entitled to redeem mortgaged property may have a judgment or order for sale instead of for redemption in an action brought by him either for redemption alone, or for sale alone, or for sale or redemption in the alternative.

(2)

In any action, whether for foreclosure, or for redemption, or for sale, or for the raising and payment in any manner of mortgage money, the court, on the request of the mortgagee, or of any person interested either in the mortgage money or in the right of redemption, and, notwithstanding that—

(a)

any other person dissents; or

(b)

the mortgagee or any person so interested does not appear in the action;

and without allowing any time for redemption or for payment of any mortgage money, may direct a sale of the mortgaged property, on such terms as it thinks fit, including the deposit in court of a reasonable sum fixed by the court to meet the expenses of sale and to secure performance of the terms.”

The power of the Court to direct a sale under what is now s. 91(2) LPA 1925 can be traced back to s. 48 of the Chancery Amendment Act 1852, which conferred a power on the Court to direct a sale instead of foreclosure in proceedings for foreclosure. This was replaced by s. 25(2) of the Conveyancing Act 1881, which was in all material respects in the same terms as s. 91(2) LPA 1925: see Palk v Mortgage Services Funding plc [1993] Ch 330 (“Palk”) at 335B-356E per Sir Donald Nicholls V-C, which contains an account of the history. As there explained, the practice grew up of not ordering a sale unless repayment of the mortgagee’s debt was fully secured: see for example Merchant Banking Company of London v London and Hanseatic Bank (Ltd) (1886) 55 L J Ch 479 where the first mortgagee of commercial property had shown in a foreclosure action that the security was insufficient, and Chitty J refused to order a sale at the instance of the second mortgagee where the value was speculative, as to do so might prejudice the first mortgagee if there were an abortive attempt to sell.

Foreclosure was formerly the mortgagee’s primary remedy but is now very rarely sought or granted: Fisher & Lightwood, Law of Mortgage (15^th edn, 2019) at §32.3. But in Palk a new use was found for s. 91. In that case Mr and Mrs Palk had defaulted in payment of a mortgage on their house and there was a significant shortfall between the value of the house and the outstanding amount secured. The mortgagee sought possession, not with a view to sale but with a view to retaining the property in the hope that the market would in due course recover, letting it out in the meantime. The disadvantage for Mrs Palk (Mr Palk had become bankrupt) was that the arrears on the mortgage debt would accumulate much faster than the anticipated rent from letting, so that her liability would inexorably continue to grow. In those circumstances this Court directed a sale against the mortgagee’s wishes despite the fact that there was no prospect of the mortgage debt being fully discharged. This was on the basis that it was manifestly unfair to Mrs Palk to be compelled to underwrite the risk the mortgagee wished to take, whereas the mortgagee could still obtain the benefit for itself of any improvement in house prices by taking over the property at its current value.

Palk therefore was a case where the contest between mortgagor and mortgagee was over whether there should be an immediate sale or not. Subsequently s. 91 has been invoked in cases where there was no dispute between mortgagor and mortgagee that there should be a sale but there was an issue as to who should have conduct of it. In Barrett v Halifax Building Society (1996) 28 HLR 634 (“Barrett”), the mortgagors had negotiated a sale, but at a price which would still leave a significant shortfall as compared with the mortgage debt. The mortgagee, Halifax Building Society, refused to permit the sale to be concluded but Evans-Lombe J held that there was no discernible advantage to the Halifax in doing so, and permitted the mortgagors to complete their sale.

However in Cheltenham and Gloucester PLC v Krausz [1997] 1 WLR 1558 (“Krausz”) this Court expressed considerable doubt about Barrett. Phillips LJ said at 1564A-E that the consequences appeared to be far-reaching, and that the procedure followed and decision reached “tend fundamentally to undermine the value of the mortgagee’s entitlement to possession”. Millett LJ went further and said at 1567H-1568B:

“[Palk] was a case in which the mortgagee had no wish to realise its security in the foreseeable future, whether by sale or foreclosure. It established that in such a case the mortgagor might obtain an order for sale even though the proceeds of sale would be insufficient to discharge the mortgage debt. It does not support the making of such an order where the mortgagee is taking active steps to obtain possession and enforce its security by sale. Still less does it support the giving of the conduct of the sale to the mortgagor in a case where there is negative equity, so that it is the mortgagee who is likely to have the greater incentive to obtain the best price and the quickest sale. Both these steps were taken in [Barrett]. I have serious doubt whether that case was rightly decided. In fairness to the judge it should be said that it does not appear to have been argued as a matter of principle; the mortgagor’s application was resisted on purely pragmatic grounds, and somewhat feeble ones at that.”

Butler-Sloss LJ agreed with both judgments.

We were not shown any decision since then in which a mortgagor has been given conduct of the sale where the mortgagee wishes to realise its security and is taking active steps to do so. In GMAC-RFC Ltd v Pearson [2005] EWCA Civ 330 Neuberger LJ granted a stay of execution of an order for possession to enable mortgagors to apply under s. 91 to have conduct of a sale, expressing the view that the Court would have jurisdiction to grant them this. But this was a tentative view given in the absence of the mortgagee and in circumstances where the value of the property currently exceeded the amount secured by the mortgage, and in any event Neuberger LJ only decided that the mortgagors should have the opportunity to apply, not that such an application ought to succeed. Apart from that, the only other relevant decisions we were shown were two cases where applications by mortgagors to have conduct of a sale have been refused: Toor v State Bank of India [2010] EWHC 1097 (Ch) (HHJ David Cooke) and National Westminster Bank v Hunter [2011] EWHC 3170 (Ch) (Morgan J).

With that introduction I can now consider the Grounds of Appeal.

I will deal first with the appeal against the Judge’s refusal to allow Fairmont to rely on expert evidence, which logically comes first.

The chronology is as follows. On 5 December 2024, Fairmont issued its Part 8 claim form, supported by a witness statement of Mr Vitale of the same date. He had seen the Receivers’ marketing material which sought offers in excess of £4.75m, but had not been given any information as to what this was based on. He gave evidence of Fairmont’s own attempts to market the Property in the previous few years. This included “soft marketing” from 2017 to 2022 through a number of local agents, targeted at institutional investors, insurance or pension funds, which had not produced any serious offers, followed by marketing from 2022 onwards through a different agent which generated a number of approaches at or above £7m. Heads of Terms were indeed signed with one buyer at £7.2m, but in the end nothing came of this. In 2024 there were expressions of interest at above £6m, but again no sale was in the event achieved.

Evidence in answer was given by Mr Hinesh Varsani, one of the Receivers, in a witness statement dated 18 December 2024. He explained that the Receivers were fully aware of the duty owed by receivers to take reasonable care to obtain the best price reasonably obtainable at the time of sale; they had obtained comprehensive initial marketing advice from two agents, who advised putting the Property on the market at £4.8m and £4.75m respectively; both suggested opening prices slightly lower than what they considered the true market value to be, in order to drum up sufficient interest in the Property so as to drive up the price. The Receivers had then received two “Red Book” valuations from different chartered surveyors who had respectively valued the Property (i) at between £4.8m to £5.3m and (ii) at between £4.6m to £5m. Based on the valuations and the agents’ marketing advice the Receivers had chosen to market the Property on the basis that they were seeking offers in excess of £4.75m. That had generated a number of offers and Mr Varsani was of the opinion that the Property would ultimately sell for in excess of £5m. He expressed the view that the Receivers’ marketing strategy was thorough, comprehensive and in adherence with their duty; it was based on the marketing advice received and in line with the Red Book valuations and was aimed at obtaining the best price reasonably obtainable for the Property. This view was endorsed by Mr Matthew Perrett, the 3^rd Respondent and other Receiver, in a short witness statement of 19 December 2024.

Evidence in reply was given by Mr Vitale on 10 January 2025. He exhibited to his witness statement a report, also dated 10 January 2025, from Mr Giles Ferris, a chartered surveyor, describing it as “an expert report into the valuation of the Property”. The report was drafted as an expert report complying with CPR Part 35. It was mainly concerned with Mr Ferris’s opinion of the value of the freehold; indeed he summarised his instructions as being to provide an Expert Valuation Report, and said that its purpose was to update previous valuations. His valuation was £7.23m, which repeated a valuation he had given Fairmont in November 2024 before proceedings were issued (and which had been exhibited to Mr Vitale’s first witness statement). The January report did however contain some additional comments by Mr Ferris on the Receivers’ marketing strategy. He said that the strategy of marketing at a low guide price to stimulate interest was not one that he would consider a standard method for disposing of an investment of this nature; he thought it could be quite detrimental. He said that the standard procedure to sell an investment of this nature by way of private treaty would be to advise the client of the value and then market in excess of that level to allow scope for negotiations.

The reaction of the Defendants’ solicitors was to write to the Court on 13 January 2025, copying in Fairmont’s solicitors, objecting to the report as one for which no permission had been given and submitting that Fairmont should not be allowed to rely on Mr Ferris’s evidence either in writing or orally until such time as the Court gave such permission.

The hearing of the claim was listed for a half to one day hearing in a trial window of 24 to 26 February 2025. On 18 February 2025 Fairmont applied for permission to rely on Mr Ferris’s report. That was opposed by the Defendants.

On 20 February 2025 Mr Varsani also made a further witness statement to update the Court. The amounts then owing to Coutts and Venus amounted to in excess of £5.3m (not including fees and costs). He summarised the result of the marketing campaign which had culminated in a deadline for best and final bids of 31 January 2025. Five such bids had been received of which the highest was £5.025m, which the Receivers proposed, subject to the outcome of the proceedings, to accept.

The Judge dealt with Fairmont’s application to adduce Mr Ferris’s report at the outset. It was common ground that the relevant test was that in British Airways plc v Spencer [2015] EWHC 2477 (Ch), [2015] Pens LR 519 at [68]. There Warren J identified three questions, namely (i) whether expert evidence was necessary to resolve an issue; (ii) whether it would be ofassistance to the Court in resolving an issue; and (iii) whether it was reasonably required to resolve an issue. Both parties accepted that Mr Ferris’s report was not necessary. The Judge was not persuaded that it would assist her; nor that it was reasonably required. She gave weight to the fact that if it were admitted, the Defendants would wish to cross-examine Mr Ferris; Fairmont did not suggest it should simply be accepted as true but, said the Judge, “it was not clear to me what value it would add to the case.”

Mr Brooke said that the report would have assisted the Judge. The Judge was not being invited to make a finding as to the value of the Property. But the purpose of the report was to counter the suggestion that because the highest bid received was just over £5m, that was a reliable indication of the Property’s value. In those circumstances the report was reasonably required because it would have given an alternative view.

But I agree with Mr Morris that the Judge was entitled to come to the view she did. This was a late application made at the hearing itself. Mr Brooke said that having served the report as part of Mr Vitale’s reply evidence, it had been assumed that it would be sufficient to ask at the hearing for permission to adduce it. But I think the Defendants were entitled to take the point that they had immediately objected that permission was required and had not been given (or even sought), and that asking for permission at the hearing put them at a disadvantage.

In those circumstances I think the Judge was right to be cautious about admitting the evidence and to consider whether the evidence was either reasonably required or would really assist in the resolution of the issues. She was not being asked to admit it as a basis for finding that the Receivers’ marketing strategy was flawed. If she had been asked to do that, then I think she would have had to give further directions for the resolution of that issue as she could not have safely reached any conclusion to that effect on the basis of the written evidence alone. The Defendants would have had to be given at the very least an opportunity to cross-examine Mr Ferris, and would quite probably have wished to adduce further evidence of their own, and possibly even convert the proceedings to a Part 7 claim.

But if she was not being asked to conclude that the Receivers’ strategy was flawed, then what assistance would admitting Mr Ferris’s evidence provide? All that she would be left with is his somewhat muted suggestion that the marketing strategy that the Receivers had been advised to follow was not standard and could in his view be quite detrimental. That would no doubt tend to show that it was possible that the Receivers’ strategy was flawed, but it is not clear how that would provide any real assistance with resolving the question before her, namely whether the conduct of the sale should be taken away from them. For reasons given below, I consider that that required rather more.

In those circumstances I think her decision was one that she could quite reasonably come to. It is well established that this Court will not lightly interfere with case management decisions in the absence of any error of principle, and the decision by the Judge here, involving as it did an evaluative exercise, seems to me a classic example of one which this Court will be very slow to disturb unless demonstrably flawed. I do not think the Judge committed any error of principle or reached a flawed decision, and there is no basis for overturning it.

Ground 1 of the substantive appeal is that the Judge was wrong to accept the proposition that where the mortgagee is actively exercising its power of sale the Court would only exceptionally exercise its discretion under s. 91 in favour of the mortgagor.

In her judgment the Judge noted various authorities to which she had been referred, including Palk and Krausz, and said that based on the authorities she considered that although s. 91 provides an unfettered discretion, it should be exercised only in exceptional circumstances. That was for the policy reasons identified by Phillips LJ and Millett LJ in Krausz; and also for a reason identified by Mr Morris in his submissions, namely that Part 8 proceedings were not well adapted to the consideration of competing assertions about value. That increased the risk of injustice because not all the facts were before the Court. She added:

“10.

I should, it seems to me, be very cautious about enabling large numbers of claims concerning commercial property in which the mortgagors consider that the property is being sold at an undervalue. I should (and I think this is well supported by the authorities) be slow to interfere with the statutory and contractual rights of a mortgagee in a case where all parties accept that the mortgagor was in default, receivers have been appointed and the mortgagee is entitled to exercise its rights over the property.

11.

Although I have sympathy with the position that the claimant and Mr Vitale find themselves in, I am not persuaded that such exceptional circumstances exist here. This is an ordinary case in which a mortgagor of a commercial property has defaulted on a mortgage and all parties are in agreement that the property should be sold. The receivers have taken steps accordingly to market the property.”

I think she was entirely right both in her conclusions and her reasoning. Fairmont had granted a second charge which was now vested in Venus. That contained the usual powers for the mortgagee to realise its security in the event of default, among other things by appointing receivers with power to sell. The charge secured a short term loan, and Fairmont had failed either to sell the property, or otherwise repay or extend the loan, with the result that it was in default. Receivers were duly appointed and had taken steps to sell. It is well established that the primary duty of receivers, although appointed as agents for the mortgagor, is to try and bring about a situation in which the secured debt is repaid, and that they are “not managing the mortgagor’s property for the benefit of the mortgagor, but the security, the property of the mortgagee, for the benefit of the mortgagee”: Silven v Royal Bank of Scotland plc [2003] EWCA Civ 1409, [2004] 1 WLR 997 at [27] per Lightman J (giving the judgment of the Court).

In those circumstances where Fairmont has contractually agreed that if it defaulted receivers could be appointed to sell the Property for the benefit of the mortgagee, it is in principle difficult to see why the Court should override the well-understood contractual scheme which Fairmont has agreed to and take away from the Receivers the right to sell the Property which Fairmont has (via Venus) conferred on them. Even in the absence of authority, one would think that it would require something out of the ordinary before the Court would do that.

When one looks at the authorities, they provide no support for the proposition that this can be done except in unusual circumstances. They establish that in certain circumstances the Court will order a sale where the mortgagee is not proposing to sell, either (historically) because it is seeking to foreclose, or, as in Palk, where it intends to retain the property; but they provide very little encouragement to the proposition that where a mortgagee is proceeding to sell the Court can give the conduct of the sale to the mortgagor instead. In Barrett Evans-Lombe J was persuaded to allow the mortgagors to have conduct of the sale but that was an unusual case where the mortgagors already had a sale lined up to which the mortgagee had no objection; its opposition was purely based on a policy of not permitting sales by mortgagors in negative equity without proposals for discharging the shortfall. And in any event it must now be read subject to the reservations expressed by Phillips LJ and Millett LJ in Krausz, as the Judge rightly said. Mr Brooke said that these were obiter as the actual decision was about the power of the County Court to suspend a possession order, and that is no doubt technically correct; but that does not undermine what they said, and I see no reason to disagree with them. In particular I agree with Millett LJ that there is nothing in Palk which supports the making of an order under s. 91 where the mortgagee is taking active steps to realise its security by sale, and a fortiori where there is negative equity. As the Judge correctly pointed out, in the present case there was a dispute whether there was negative equity but on the Defendants’ case there clearly was.

Turning to Palk itself, Sir Donald Nicholls V-C justified the exercise of the power under s. 91 as follows (at 340A):

“Section 91(2) gives the court a discretion in wide terms. The discretion is unfettered. It can be exercised at any time. Self-evidently, in exercising that power the court will have due regard to the interests of all concerned. The court will act judicially. But it cannot be right that the court should decline to exercise the power if the consequence will be manifest unfairness.”

He then explained why there would be injustice and unfairness on the facts of the case if a sale were refused.

Sir Michael Kerr gave a concurring judgment. At 343F-H he said:

“I accept, of course, that it must be only in exceptional circumstances that the power will be exercised against the mortgagee’s wishes when a substantial part of the mortgage debt will nevertheless remain outstanding. Whenever a mortgagee can demonstrate a real possibility, let alone a probability, that a refusal or postponement of a sale would be financially beneficial, because of the property’s likely increase in value or because of the extent of the revenue which it would generate in the interim, then the mortgagor’s request for a sale will no doubt be refused out of hand, even though either of these events would also pro tanto inure to his financial benefit. The reason is that when the financial prospects are fairly evenly balanced, let alone when the balance of the argument favours the mortgagee, his wishes should be given preference. An order for sale would deprive him of contractual rights without any fault on his part, and would confer a benefit on the mortgagor to which he is not contractually entitled.”

But he agreed that on the facts a sale would be fair to both sides as it would greatly reduce the mortgagors’ outstanding debt while the mortgagee could acquire the property if it wished to.

It is no doubt Sir Michael Kerr’s judgment that is the source of the word “exceptional”, and I accept that the situation he was addressing was rather different, namely whether the Court should direct a sale when the mortgagee did not wish an immediate sale. Nevertheless the thrust of this part of his judgment is that there must be something which justifies the Court in depriving the mortgagee of his contractual rights. Nor is there anything in Sir Donald Nicholls’ judgment which suggests he took a different view: what he identified as justifying the Court exercising its power was manifest unfairness. But for a mortgagee (or receivers that it has appointed) to proceed to sell after the mortgagor has defaulted is not something that can in the ordinary case be characterised as involving manifest unfairness.

So I think the authorities do justify the conclusion that there needs to be something out of the ordinary before the Court will exercise its discretion under s. 91. That I think justifies the Judge’s conclusion that “exceptional circumstances” were required before she exercised the discretion conferred on her, as this simply means that the circumstances must be (in the words of Lord Bingham of Cornhill CJ in R v Kelly (Edward) [2000] QB 198 at 208C):

“out of the ordinary course, or unusual, or special, or uncommon. To be exceptional a circumstance need not be unique, or unprecedented, or very rare; but it cannot be one that is regularly, or routinely, or normally encountered.”

(This was not cited to us, but as an explanation of the ordinary meaning of the phrase “exceptional circumstances” I do not think it can be bettered).

I am not therefore persuaded by this ground of appeal. And I agree with the Judge that she was right to be cautious about permitting s. 91 to be invoked by any mortgagor who asserted that a sale by a mortgagee would be at an undervalue, as I suspect that it is far from uncommon for mortgagors (residential as well as commercial) to believe that a proposed sale by their mortgagee (or receivers) would fail to realise the true value of their properties.

Ground 2 is that the Judge was wrong to hold that Fairmont had failed to demonstrate that it would suffer unfairness, and erred in requiring it to prove on a balance of probabilities that the price at which the Receivers proposed to sell would be an undervalue.

What the Judge said was that both sides accepted that there must be some identifiable and more than trivial unfairness for the test in Palk to be met; that the mere fact that the sum realised from the sale is likely to leave a shortfall is not in itself sufficient unfairness to found an order under s. 91; and that:

“There is unfairness, therefore, in this case only if Mr Brooke’s submissions that the property is likely to be sold at an undervalue is correct.”

She then considered various strands of evidence before her and concluded:

“I cannot find on the balance of probabilities that the proposed sale is likely to be a sale at an undervalue.”

Mr Brooke submits that this imposed too demanding a test. She should have held on the evidence that there was at least a real risk of a sale at an undervalue, and that that was enough to justify an order.

I accept that since the Judge was not asked to resolve, and was in no position to resolve, the actual value of the Property, there was a possibility that the proposed sale by the Receivers would be at an undervalue. Unless the Court proceeds to hear expert evidence of value, and no doubt of the effect of the marketing strategy adopted, it will seldom be in a position to rule out the possibility that a proposed sale will fail to achieve the best price reasonably obtainable. But, as Mr Brooke himself accepted below, in an application under Part 8 intended to produce a swift resolution, it is unlikely that the Court will be able to make substantial findings of fact on such matters. So there will almost always be some uncertainty. But this cannot be enough to justify an order under s. 91.

Mr Brooke said that if there was a risk of an undervalue, that was sufficient to justify the Court making an order under s. 91 giving Fairmont conduct of the sale for a limited period. That, he said, would be fair to both parties. The potential prejudice to Fairmont of leaving the sale in the hands of the Receivers outweighed the potential prejudice to Venus of giving Fairmont an opportunity to try and achieve a sale.

The difficulty I have with that submission is that it treats the s. 91 power as if the Court had a free hand to decide who should have conduct of the sale by weighing up the respective potential prejudice and potential benefit to both parties. That I think significantly underplays the weight to be given to the rights given to a mortgagee by the mortgage, which I have already referred to above. For reasons already given there must be some substantial reason for the Court to interfere in the contractually agreed scheme and override the mortgagee’s contractual rights. In Palk that was found in the manifest unfairness of the mortgagee choosing to retain the property unsold and the inevitable consequences that that would have on the liability of the mortgagors.

In the present case I do not think the Judge was wrong to say that what was required was a likelihood of a sale at an undervalue. That did not require her to find what the actual value was, but it did require her to be satisfied that a sale by the Receivers was likely to realise too low a price. I think the Judge was perfectly entitled to take the view that unless that were shown the threshold for intervention would not be met, as it would not be possible to conclude that leaving the Receivers to conduct the sale would be demonstrably or manifestly unfair. I would therefore reject the criticism of the Judge for adopting the wrong test.

Mr Brooke also made specific criticisms of her analysis. He said that it was not clear whether the Judge had put any weight on Mr Ferris’s evidence of value from November 2024 (£7.329m) at all. But the Judge did refer to a January 2023 valuation at £7.2m and make the point that the figures being discussed in 2024 (which had in any event not resulted in firm offers) were substantially lower than that. It is well established that judges are not obliged to recite every piece of evidence they have before them and are assumed, unless the contrary is demonstrated, to have taken all the evidence into account, and I do not think reference to Mr Ferris’s November 2024 valuation would have added anything of substance to her analysis.

Mr Brooke said that the Judge had placed undue weight on comments made by potential bidders; one could not expect purchasers to tell the vendor that a property is being sold at a discount, and these hearsay comments were not evidence of market value. In fact what the Judge said was that the Receivers had received a significant number of inquiries “many of which seem to indicate that even at £4.75m the price is still too high”. The evidence indeed showed that of those interested enough to participate at the best and final bids stage two put in bids below £4.75m.

Mr Brooke said that the Judge gave no consideration to the size of the gap between the Receivers’ proposed sale price and Mr Vitale’s view of value, and hence the significance of the potential prejudice to Fairmont, being the difference between a sizeable deficit and a substantial surplus. The question however was not whether there would be prejudice to Fairmont if Mr Vitale was right, something of which the Judge cannot have been unaware as she referred to the figures. The question was whether it had been shown that there was a likelihood that he was right.

Finally Mr Brooke said that she failed to take into account the lack of alternative remedy for Fairmont if Mr Vitale was right. In fact the Judge accepted that even though there was in principle a remedy for a sale at an undervalue after the event, litigation was expensive and uncertain and it was preferable to avoid a sale at an undervalue in the first place. But, she continued, the burden was on Fairmont to make out its case. I do not see any flaw in that.

In conclusion on this ground, I consider that the Judge was not only entitled to adopt the test that she did, but was entitled to conclude that Fairmont had not established that the proposed sale was likely to be at an undervalue.

Ground 3 is that the Judge was wrong to hold that restraining the imminent sale of the Property would cause Venus prejudice.

What the Judge said was that Venus was being asked to give up the possibility of a sale that was then clearly available and take the risk that no sale materialised from Fairmont’s attempts. If so, the Receivers would have to begin the marketing process again until a further sale could be found. She continued:

“I accept that I do not have the evidence before me to quantify any loss, and therefore I do not take into account the possibility that the sale may eventually be at a still lower value than the present £4.75 million, it is right to note that there would be additional costs associated with the sale if the Claimant were unsuccessful in its attempts to sell it and the Defendants had to engage in a further marketing campaign. That is a real detriment to the mortgagee and I reject Mr Brooke’s submission that there is no tangible benefit to the mortgagee in proceeding now to a sale of the property. They have buyers who appear ready to proceed and without a sale of the property they cannot recoup any of their capital or their accrued interest.”

Mr Brooke said that it was unlikely that Fairmont would simply leave the Property unsold; it had every incentive to find a buyer. The most tangible loss to Venus would be the extra accrual of interest on the loans, but these would almost be covered by rental income held by the Receivers and rent that would fall due, and Mr Vitale had offered to make up any loss. The costs of a new attempt at sale in any event would not be significant.

There is a short answer to this ground which is that in the absence of sufficiently manifest unfairness to displace Venus’s rights under the mortgage, the question of prejudice does not in fact arise. But in any event I do not think the Judge was wrong. The Receivers had a buyer who was ready to proceed. If the order were made and Fairmont were given the opportunity to find a buyer at a higher price then there would be no guarantee that that buyer would remain available, and there was a real risk that the Receivers would have to start again. There would be costs involved with that, not only the Receivers’ own fees, but also the net increase in liabilities; I also think that if anything the Judge underplayed the possible effect on the market of the Property being marketed three times (once by the Receivers culminating in a best and final bid process, then by Fairmont, and a third time by the Receivers again). It is not difficult to suppose that this might put some purchasers off with a resulting effect on the price ultimately realisable.

But it is not necessary to consider this, or a number of other points raised by Mr Brooke, further, as one does not get to the question of potential prejudice to the mortgagee unless a sufficient case is made out for interfering with their rights, and I agree with the Judge that this had not been done.

Those are the reasons why I agreed that the appeal should be dismissed.

I agree with the reasons given by Nugee LJ for dismissing the appeal.

I agree that the appeal should be dismissed for the reasons set out by Nugee LJ.