On 26 November 2025, the Court of Appeal handed down its judgment in Fairmont Property Developers UK Ltd v Venus Bridging and ors [2025] EWCA Civ 1513. This was the first time since 1996 that the Court of Appeal had substantively considered the operation of section 91 of the Law of Property Act 1925. The judgment clarifies the validity of obiter dicta in Cheltenham and Gloucester Plc v Krausz [1997] 1 WLR 1558 and sets out the threshold for the court’s intervention on an application by a mortgagor, in circumstances where the mortgagee is actively enforcing its security and seeking sale of the mortgaged property.
The Appellant mortgagor, Fairmont, was the freehold proprietor of industrial warehouses. The property had been let to a commercial tenant. Following the expiry of a bridging loan, the First Respondent Venus, which was the second-ranking mortgagee, appointed the Second and Third Respondents as receivers over the property.
The Receivers began marketing the property for sale. Fairmont found the minimum sale price to be at a steep discount. Based on previous valuations and market interest, it considered the market value to be substantially higher, entitling it, upon sale, to a large surplus as opposed to a deficit. Fairmont therefore applied by a Pt 8 claim under section 91 to have conduct of sale itself or alternatively for a minimum price to be imposed. It argued that Venus could be compensated for any resultant delay in the sale of the property by the rental income received from the tenant and a personal guarantee provided to it by the director.
The claim proceeded on an expedited basis. Trower J granted an interim injunction restraining the sale of the property by the Receivers. At the trial of the claim, Saira Salimi, sitting as a deputy High Court Judge, dismissed the claim.
Fairmont obtained permission to appeal and Trower J’s injunction was restored. Giving the judgment of the Court of Appeal, Nugee LJ (with whom Asplin and Lewis LJJ agreed) upheld the deputy Judge’s decision and dismissed the appeal.
In Palk v Mortgage Services Funding Plc [1993] Ch 330, section 91 had first been used to order the sale of a residential property at the request of the mortgagor and despite opposition from the mortgagee, at a price insufficient to redeem the mortgage. The mortgagee in Palk was proposing to hold unto the property until market conditions improved.
In Barrett v Halifax Building Society (1996) 28 HLR 634, Evans-Lombe J had gone a step further and ordered the sale of mortgaged property on the application of the mortgagor even though the mortgagee was itself taking steps to sell. At the proposed price, the mortgagee would not have been paid in full.
Cheltenham and Gloucester [1997] concerned the power of the county court to adjourn mortgage repossession proceedings. The mortgagor was seeking an adjournment in order to make an application under section 91 to have conduct of sale. In obiter dicta on section 91, Philips and Millett LJJ (with whom Butler-Sloss LJ agreed) casted doubt on the correctness of Barrett. Millett LJ distinguished Palk as a case where the mortgagee had no wish to realise its security. His Lordship stated that Palk did not support acceding to an application by a mortgagor under section 91 where the mortgagee was actively realising its security and in any event where there would be insufficient equity to repay the mortgagee in full.
Agreeing with Millett LJ, Nugee LJ in Fairmont emphasised English law’s reluctance to interfere with the essentially contractual scheme of a mortgage: [39]. ‘Unusual’ or ‘exceptional’ circumstances would be needed, especially where the mortgagee (unlike in Palk) is actively seeking to realise its security: [40], [44].
Nugee LJ rejected Fairmont’s submission that when the risk of a possible sale at an undervalue and its consequences for it were weighed against the potential prejudices (or lack thereof) to Venus, the court would be justified in giving it conduct of sale. Nugee LJ held that before the court could engage in such weighing-up exercise, it had to have a ‘substantial reason’ to interfere with the mortgagee’s rights under the mortgage: [52]
Adopting Sir Donald Nicholls V-C’s terminology in Palk, in order to justify the court’s intervention, Fairmont had to show that ‘leaving the Receivers to conduct the sale would be demonstrably or manifestly unfair’: [53]. ‘[W]hat was required was a likelihood of a sale at an undervalue. That did not require [the deputy Judge] 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’: Ibid. Because Fairmont was held at most to have shown a possibility that the proposed sale would be at an undervalue, the high threshold for the court’s intervention had not been met.
Although a mortgage is a complex bundle of contractual and equitable rights and obligations, authority stretching as far back as Warner v Jacob (1882) 20 ChD 220 and more recently, Silven Properties Ltd v RBS [2004] 1 WLR 997, has emphasised that the discretion that a mortgagee has in exercising its powers to enforce the security are subject to only limited and well-defined fetters. Fairmont reaffirms English law’s reluctance to interfere with the exercise of those powers.
The judgment still leaves the door open for the court’s intervention under section 91, notwithstanding the mortgagee’s opposition or its actively taking steps to enforce its security. Sufficiently exceptional circumstances need to exist. As recognised by the Court, one such exceptional circumstance could be the likelihood of sale at a discount leading to manifest or substantial unfairness to the mortgagor.
A mortgagee or his receiver is under an equitable duty, if he decides to sell the mortgaged property, ‘… to take reasonable precautions to obtain “the fair” or “the true market” value of or the “proper price” for the mortgaged property at the date of the sale, and not … the date of the decision to sell’: per Lightman J in Silven Properties at [19]. Breach of such duty can sound in an account (i.e. damages) at the suit of the mortgagor. The threatened breach of such duty should in principle be capable of being restrained by a quia timet injunction.
It is at least conceptually possible that in some circumstances, a threatened sale at an undervalue would not be in breach of the equitable duty described above, but still amount to manifest unfairness to the mortgagor justifying the court’s intervention under section 91. Furthermore, the remedies available under section 91 are more flexible than a mere injunction restraining sale, and the court can have regard to a wider set of circumstances in such an application.
It should however be noted that even if a mortgagor succeeds in establishing potential unfairness that meets the high threshold for intervention under section 91, the court could still decline to make an order in its favour. As Sir Michael Kerr stated in Palk at 343G, if the prospects between the mortgagor and mortgagee are fairly evenly balanced, the mortgagee’s wishes should be given preference.
Andrew Brooke instructed by Michael Abraham of Simons Rodkin Solicitors appeared for the Appellant.
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